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Congress's contempt power is the means by which Congress responds to certain acts that in its view obstruct the legislative process. Contempt may be used either to coerce compliance, punish the contemnor, and/or to remove the obstruction. Although any action that directly obstructs the effort of Congress to exercise its constitutional powers may arguably constitute a contempt, in recent decades the contempt power has most often been employed in response to the refusal of a witness to comply with a congressional subpoena—whether in the form of a refusal to provide testimony, or a refusal to produce requested documents. Congress has three formal methods by which it can combat noncompliance with a duly issued subpoena. Each of these methods invokes the authority of a separate branch of government. First, the long dormant inherent contempt power permits Congress to rely on its own constitutional authority to detain and imprison a contemnor until the individual complies with congressional demands. Because the contemnor is generally released once the terms of the subpoena are met, inherent contempt serves the purposes of encouraging compliance with a congressional directive. Second, the criminal contempt statute permits Congress to certify a contempt citation to the executive branch for the criminal prosecution of the contemnor. Criminal contempt serves as punishment for noncompliance with a congressional subpoena, but does not necessarily encourage subsequent acquiescence. Once convicted, the contemnor is not excused from criminal liability if he later chooses to comply with the subpoena. Finally, Congress may rely on the judicial branch to enforce a congressional subpoena. Under this procedure, Congress may seek a civil judgment from a federal court declaring that the individual in question is legally obligated to comply with the congressional subpoena. If the court finds that the party is legally obligated to comply, continued noncompliance may result in the party being held in contempt of court. Where the target of the subpoena is an executive branch official, civil enforcement may be the only practical means by which Congress can effectively ensure compliance with its own subpoena. This report examines the source of Congress's contempt power, analyzes the procedures associated with inherent contempt, criminal contempt, and the civil enforcement of subpoenas, and discusses the obstacles that face Congress in enforcing a contempt action against an executive branch official. A more fully developed and detailed version of this report, complete with sources and references, can be found at CRS Report RL34097, Congress's Contempt Power and the Enforcement of Congressional Subpoenas: Law, History, Practice, and Procedure , by [author name scrubbed] and [author name scrubbed]. The power of Congress to punish for contempt is inextricably related to the power of Congress to investigate. Generally speaking, Congress's authority to investigate and obtain information, including but not limited to confidential information, is extremely broad. While there is no express provision of the Constitution or specific statute authorizing the conduct of congressional oversight or investigations, the Supreme Court has firmly established that such power is essential to the legislative function as to be implied from the general vesting of legislative powers in Congress. The broad legislative authority to seek and enforce informational demands was unequivocally established in two Supreme Court rulings arising out of the 1920s Teapot Dome scandal. In McGrain v. Daugherty , which arose out of the exercise of the Senate's inherent contempt power, the Supreme Court described the power of inquiry, with the accompanying process to enforce it, as "an essential and appropriate auxiliary to the legislative function." The Court explained: A legislative body cannot legislate wisely or effectively in the absence of information respecting the conditions which the legislation is intended to affect or change; and where the legislative body does not itself possess the requisite information—which not infrequently is true—recourse must be had to others who possess it. Experience has taught that mere requests for such information often are unavailing, and also that information which is volunteered is not always accurate or complete; so some means of compulsion are essential to obtain that which is needed. All this was true before and when the Constitution was framed and adopted. In that period the power of inquiry—with enforcing process—was regarded and employed as a necessary and appropriate attribute of the power to legislate—indeed, was treated as inhering in it. Thus there is ample warrant for thinking, as we do, that the constitutional provisions which commit the legislative function to the two houses are intended to include this attribute to the end that the function may be effectively exercised. In Sinclair v. United States, a different witness at the congressional hearings refused to provide answers, and was prosecuted for contempt of Congress. The witness had noted that a lawsuit had been commenced between the government and the Mammoth Oil Company, and declared, "I shall reserve any evidence I may be able to give for those courts ... and shall respectfully decline to answer any questions propounded by your committee." The Supreme Court upheld the witness's conviction for contempt of Congress. The Court considered and rejected in unequivocal terms the witness's contention that the pendency of lawsuits provided an excuse for withholding information. Neither the laws directing that such lawsuits be instituted, nor the lawsuits themselves, "operated to divest the Senate, or the committee, of power further to investigate the actual administration of the land laws." The Court further explained that "[i]t may be conceded that Congress is without authority to compel disclosure for the purpose of aiding the prosecution of pending suits; but the authority of that body, directly or through its committees to require pertinent disclosures in aid of its own constitutional power is not abridged because the information sought to be elicited may also be of use in such suits." Subsequent Supreme Court rulings have consistently reiterated and reinforced the breadth of Congress's investigative authority. For example, in Eastland v. United States Servicemen's Fund , the Court explained that "[t]he scope of [Congress's] power of inquiry ... is as penetrating and far-reaching as the potential power to enact and appropriate under the Constitution." In addition, the Court in Watkins v. United States , described the breadth of the power of inquiry. According to the Court, Congress's power "to conduct investigations is inherent in the legislative process. That power is broad. It encompasses inquiries concerning the administration of existing laws as well as proposed or possibly needed statutes." The Court did not limit the power of congressional inquiry to cases of "wrongdoing." It emphasized, however, that Congress's investigative power is at its peak when the subject is alleged waste, fraud, abuse, or maladministration within a government department. The investigative power, the Court stated, "comprehends probes into departments of the Federal Government to expose corruption, inefficiency, or waste." "[T]he first Congresses" held "inquiries dealing with suspected corruption or mismanagement by government officials" and subsequently, in a series of decisions, "[t]he Court recognized the danger to effective and honest conduct of the Government if the legislature's power to probe corruption in the Executive Branch were unduly hampered." Accordingly, the Court now clearly recognizes "the power of the Congress to inquire into and publicize corruption, maladministration, or inefficiencies in the agencies of Government." Congress's inherent contempt power is not specifically granted by the Constitution, but is considered necessary to investigate and legislate effectively. The validity of the inherent contempt power was upheld in the early Supreme Court decision Anderson v. Dunn and reiterated in McGrain v. Daugherty . Under the inherent contempt power, the individual is brought before the House or Senate by the Sergeant-at-Arms, tried at the bar of the body, and can be imprisoned or detained in the Capitol or perhaps elsewhere. The purpose of the imprisonment or other sanction may be either punitive or coercive. Thus, the witness can be imprisoned for a specified period of time as punishment, or for an indefinite period (but not, at least by the House, beyond the end of a session of the Congress) until he agrees to comply. One commentator has concluded that the procedure followed by the House in the contempt citation challenged in Anderson is typical of that employed in the inherent contempt cases: These traditional methods may be explained by using as an illustration Anderson v. Dunn .... In 1818, a Member of the House of Representatives accused Anderson, a non-Member, of trying to bribe him.... The House adopted a resolution pursuant to which the Speaker ordered the Sergeant-at-Arms to arrest Anderson and bring him before the bar of the House (to answer the charge). When Anderson appeared, the Speaker informed him why he had been brought before the House and asked if he had any requests for assistance in answering the charge. Anderson stated his requests, and the House granted him counsel, compulsory process for defense witnesses, and a copy, of the accusatory letter. Anderson called his witnesses; the House heard and questioned them and him. It then passed a resolution finding him guilty of contempt and directing the Speaker to reprimand him and then to discharge him from custody. The pattern was thereby established of attachment by the Sergeant-at-Arms; appearance before the bar; provision for specification of charges, identification of the accuser, compulsory process, counsel, and a hearing; determination of guilt; imposition of penalty. When a witness is cited for contempt under the inherent contempt process, prompt judicial review appears to be available by means of a petition for a writ of habeas corpus. In such a habeas proceeding, the issues decided by the court might be limited to (a) whether the House or Senate acted in a manner within its jurisdiction, and (b) whether the contempt proceedings complied with minimum due process standards. While Congress would not have to afford a contemnor the whole panoply of procedural rights available to a defendant in criminal proceedings, notice and an opportunity to be heard would have to be granted. Also, some of the requirements imposed by the courts under the statutory criminal contempt procedure (e.g., pertinency of the question asked to the committee's investigation) might be mandated by the due process clause in the case of inherent contempt proceedings. Although many of the inherent contempt precedents have involved incarceration of the contemnor, there may be an argument for the imposition of monetary fines as an alternative. Such a fine would potentially have the advantage of avoiding a court proceeding on habeas corpus grounds, as the contemnor would never be jailed or detained. Drawing on the analogous inherent authority that courts have to impose fines for contemptuous behavior, it appears possible to argue that Congress, in its exercise of a similar inherent function, could impose fines as opposed to incarceration. Support for this argument appears to be contained in dicta from the 1821 Supreme Court decision in Anderson . The Court questioned the "extent of the punishing power which the deliberative assemblies of the Union may assume and exercise on the principle of self preservation" and responded with the following: Analogy, and the nature of the case, furnish the answer—"the least possible power adequate to the end proposed;" which is the power of imprisonment. It may, at first view, and from the history of the practice of our legislative bodies, be thought to extend to other inflictions . But every other will be found to be mere commutation for confinement; since commitment alone is the alternative where the individual proves contumacious. Moreover, in Kilbourn v. Thompson , the Court suggested that in certain cases where the Congress had authority to investigate, it may compel testimony in the same manner and by use of the same means as a court of justice in like cases. Specifically, the Court noted that "[w]hether the power of punishment in either House by fine or imprisonment goes beyond this or not, we are sure that no person can be punished for contumacy as a witness before either House, unless his testimony is required in a matter into which that House has jurisdiction to inquire.... " While the language of these cases and the analogous power possessed by courts seem to suggest the possibility of levying a fine as punishment for contempt of Congress, we are not aware of, and could not locate, any precedent for Congress imposing a fine in the contempt or any other context. In comparison with the other types of contempt proceedings, inherent contempt has the distinction of not requiring the cooperation or assistance of either the executive or judicial branches. The House or Senate can, on its own, conduct summary proceedings and cite the offender for contempt. Furthermore, although the contemnor can seek judicial review by means of a petition for a writ of habeas corpus, the scope of such review may be relatively limited, compared to the plenary review accorded by the courts in cases of conviction under the criminal contempt statute. There are, however, certain limitations of the inherent contempt process. Although the contemnor can be incarcerated until he agrees to comply with the subpoena, imprisonment may not extend beyond the end of the current session of Congress. Moreover, inherent contempt has been described as "unseemly," cumbersome, time-consuming, and relatively ineffective, especially for a modern Congress with a heavy legislative workload, which would be interrupted by a trial at the bar. Because of these drawbacks, the inherent contempt process has not been used by either body since 1935. Proceedings under the inherent contempt power might be facilitated, however, if the initial fact-finding and examination of witnesses were to be held before a special committee—which could be directed to submit findings and recommendations to the full body—with only the final decision as to guilt being made by the full House or Senate. Although generally the proceedings in inherent contempt cases appear to have been conducted at the bar of the house of Congress involved, in at least a few instances proceedings were conducted initially or primarily before a committee, but with the final decision as to whether to hold the person in contempt being made by the full body. Between 1795 and 1857, 14 inherent contempt actions were initiated by the House and Senate, 8 of which can be considered successful in that the contemnor was meted out punishment, agreed to testify, or produced documents. Such inherent contempt proceedings, however, involved a trial at the bar of the chamber concerned and, therefore, were seen by some as time-consuming, cumbersome, and in some instances ineffective—because punishment could not be extended beyond a house's adjournment date. In 1857, a statutory criminal contempt procedure was enacted, largely as a result of a particular proceeding brought in the House of Representatives that year. The statute provides for judicial trial of the contemnor by a United States Attorney rather than a trial at the bar of the House or Senate. It is clear from the floor debates and the subsequent practice of both houses that the legislation was intended as an alternative to the inherent contempt procedure, not as a substitute for it. A criminal contempt referral was made in the case of John W. Wolcott in 1858, but in the ensuing two decades after its enactment most contempt proceedings continued to be handled at the bar of the house, rather than by the criminal contempt method, apparently because Members felt that they would not be able to obtain the desired information from the witness after the criminal proceedings had been instituted. With only minor amendments, those statutory provisions are codified today as 2 U.S.C. Sections 192 and 194. Under 2 U.S.C. Section 192, a person who has been "summoned as a witness" by either house or a committee thereof to testify or to produce documents and who fails to do so, or who appears but refuses to respond to questions, is guilty of a misdemeanor, punishable by a fine of up to $100,000 and imprisonment for up to one year. 2 U.S.C. Section 194 establishes the procedure to be followed by the House or Senate if it chooses to refer a recalcitrant witness to the courts for criminal prosecution rather than try him at the bar of the House or Senate. Under the procedure outlined in Section 194, the following steps precede judicial proceedings under [the statute]: (1) approval by committee; (2) calling up and reading the committee report on the floor; (3) either (if Congress is in session) House approval of a resolution authorizing the Speaker to certify the report to the U.S. Attorney for prosecution, or (if Congress is not in session) an independent determination by the Speaker to certify the report; [and] (4) certification by the Speaker to the appropriate U.S. Attorney for prosecution. The criminal contempt statute and corresponding procedure are punitive in nature. It is used when the House or Senate wants to punish a recalcitrant witness and, by doing so, deter others from similar contumacious conduct. The criminal sanction is not coercive because the witness generally will not be able to purge himself by testifying or supplying subpoenaed documents after he has been voted in contempt by the committee and the House or Senate. Consequently, once a witness has been voted in contempt, he lacks an incentive for cooperating with the committee. However, although the courts have rejected arguments that defendants had purged themselves, in a few instances the House has certified to the U.S. Attorney that further proceedings concerning contempts were not necessary where compliance with subpoenas occurred after contempt citations had been voted but before referral of the cases to grand juries. Under the statute, after a contempt has been certified by the President of the Senate or the Speaker, it is the "duty" of the U.S. Attorney "to bring the matter before the grand jury for its action." It remains unclear whether the "duty" of the U.S. Attorney to present the contempt to the grand jury is mandatory or discretionary. The case law that is most relevant to the question provides conflicting guidance. In Ex parte Frankfeld , the District Court for the District of Columbia granted petitions for writs of habeas corpus sought by two witnesses before the House Committee on Un-American Activities. The witnesses were charged with violating 2 U.S.C. Section 192, and were being held on a warrant based on the affidavit of a committee staff member. The court ordered the witnesses released since the procedure, described as "mandatory" by the court, had not been followed. The court, in dicta , not central to the holding of the case, observed that Congress prescribed that when a committee such as this was confronted with an obdurate witness, a willful witness, perhaps, the committee would report the fact to the House, if it be a House committee, or to the Senate, if it be a Senate committee, and that the Speaker of the House or the President of the Senate should then certify the facts to the district attorney. It seems quite apparent that Congress intended to leave no measure of discretion to either the Speaker of the House or the President of the Senate, under such circumstances, but made the certification of facts to the district attorney a mandatory proceeding, and it left no discretion with the district attorney as to what he should do about it. He is required, under the language of the statute, to submit the facts to the grand jury. Similarly, in United States v. United States House of Representatives , a case that involved the applicability of the Section 192 contempt procedure to an executive branch official, the same district court observed, again in dicta , that after the contempt citation is delivered to the U.S. Attorney, he "is then required to bring the matter before the grand jury." Conversely, in Wilson v. United States , the U.S. Court of Appeals for the District of Columbia Circuit concluded, based in part on the legislative history of the contempt statute and congressional practice under the law, that the "duty" of the Speaker when certifying contempt citations to the U.S. Attorney during adjournments is a discretionary, not a mandatory, one. The court reasoned that despite its mandatory language, the statute had been implemented in a manner that made clear Congress's view that, when it is in session, a committee's contempt resolution can be referred to the U.S. Attorney only after approval by the parent body. When Congress is not in session, review of a committee's contempt citation is provided by the Speaker or President of the Senate, rather than by the full House or Senate. This review of a committee's contempt citation, according to the court, may be inherently discretionary in nature. In Wilson , the defendants' convictions were reversed because the Speaker had certified the contempt citations without exercising his discretion. From this holding it may be possible to argue that because the statute uses similar language when discussing the Speaker's "duty" and the "duty" of the U.S. Attorney, that the U.S. Attorney's function is discretionary as well, and not mandatory as other courts have concluded. Nevertheless, it should be noted that the courts have generally afforded U.S. Attorneys broad prosecutorial discretion, even where a statute uses mandatory language. Where the use of inherent or criminal contempt is unavailable or unwarranted, Congress may appeal to the authority of the judicial branch in an effort to enforce a congressional subpoena. Civil enforcement entails a single house or committee of Congress filing suit in federal district court seeking a declaration that the individual in question is legally obligated to comply with the congressional subpoena. If the court finds that such an obligation exists and issues an order to that effect, continued noncompliance may result in contempt of court—as opposed to contempt of Congress. Although the Senate has existing statutory authority to pursue such an action, there is no corresponding provision applicable to the House. However, the House has previously pursued civil enforcement pursuant to an authorizing resolution. As an alternative to both the inherent contempt power of each house and the criminal contempt statutes, in 1978 Congress enacted a civil enforcement procedure, which is applicable only to the Senate. The statute gives the U.S. District Court for the District of Columbia jurisdiction over a civil action to enforce, secure a declaratory judgment concerning the validity of, or to prevent a threatened failure or refusal to comply with, any subpoena or order issued by the Senate or a committee or subcommittee. Generally such a suit will be brought by the Senate Legal Counsel, on behalf of the Senate or a Senate committee or subcommittee. Pursuant to the statute, the Senate may "ask a court to directly order compliance with [a] subpoena or order, or they may merely seek a declaration concerning the validity of [the] subpoena or order. By first seeking a declaration, [the Senate would give] the party an opportunity to comply before actually [being] ordered to do so by a court." It is solely within the discretion of the Senate whether or not to use such a two-step enforcement process. Regardless of whether the Senate seeks the enforcement of, or a declaratory judgment concerning a subpoena, the court will first review the subpoena's validity. Because of the limited scope of the jurisdictional statute and the Speech or Debate Clause immunity for actions taken as part of congressional investigations, "when the court is petitioned solely to enforce a congressional subpoena, the court's jurisdiction is limited to the matter Congress brings before it, that is whether or not to aid Congress in enforcing the subpoena." Even if the court finds that the subpoena "does not meet applicable legal standards for enforcement," it does not have jurisdiction to enjoin the congressional proceeding. The court can only refuse to issue an order instructing compliance with the subpoena. However, if the court does order compliance with the subpoena and the individual still refuses to comply, he may be tried by the court in summary proceedings for contempt of court, with sanctions being imposed to coerce his compliance. Civil enforcement, however, has limitations. Most notable is that the statute granting jurisdiction to the courts to hear such cases is, by its terms, inapplicable in the case of a subpoena issued to an officer or employee of the federal government acting in their official capacity. While the House of Representatives cannot pursue actions under the Senate's civil enforcement statute discussed above, past precedent suggests that the House may authorize a committee to seek a civil enforcement action to force compliance with a subpoena. The 2008 dispute over the refusal of former White House Counsel Harriet Miers to testify in connection to a House Judiciary Committee investigation into the resignations of nine U.S. Attorneys represented the first congressional attempt to seek civil enforcement of a subpoena in federal court authorized solely by resolution of a single house. Prior to this case, a number of threshold questions, including whether the federal courts would have jurisdiction over such a claim, remained unresolved. However, following the federal district court decision in Committee on the Judiciary v. Miers , it appears that the current statutory basis is sufficient to establish jurisdiction for a civil action of the type contemplated if the representative of the congressional committee is specifically authorized by a house of Congress to act. In 2012, the House again authorized a congressional committee to pursue a civil action in federal court to enforce a subpoena issued to an executive branch official. On June 28, 2012, in addition to holding Attorney General Eric Holder in contempt of Congress for his failure to comply fully with subpoenas issued pursuant to the House Oversight and Government Reform Committee investigation of Operation Fast and Furious, the House also approved a resolution authorizing the committee to initiate a civil lawsuit on behalf of the committee to enforce the outstanding subpoenas. The lawsuit, which seeks a declaratory judgment directing the Attorney General to comply with the committee subpoenas, was filed on August 13, 2012. On September 30, 2013, the court issued its opinion rejecting the Department of Justice's (DOJ's) motion to dismiss based on jurisdictional and justiciability arguments. The court largely adopted the reasoning laid out in Miers , in a detailed discussion that addressed federal court jurisdiction, standing, causes of action, and separation-of-powers concerns. Since that decision, the court has denied motions for summary judgment from both parties and ordered the DOJ to provide the court with a list of documents withheld that describes why each document is privileged and protected from disclosure. The court has yet to reach the merits of the executive privilege question. Following Miers and Holder , it appears that all that is legally required for House committees, the House General Counsel, or a House-retained private counsel to seek civil enforcement of subpoenas or other orders is that authorization be granted by resolution of the full House. Absent such authorization, it appears that the courts will not entertain civil motions of any kind on behalf of Congress or its committees. While some may still argue that a measure passed by both houses and signed by the President conferring jurisdiction is required, it appears that—at least with respect to claims filed in the U.S. District Court for the District of Columbia—if an authorizing resolution by the House can be obtained, there is a likelihood that the court will find no legal impediment to seeking civil enforcement of subpoenas or other committee orders. Although the DOJ appears to have acknowledged that properly authorized procedures for seeking civil enforcement provide the preferred method of enforcing a subpoena directed against an executive official, the executive branch has consistently taken the position that Congress cannot, as a matter of statutory or constitutional law, invoke either its inherent contempt authority or the criminal contempt of Congress procedures against an executive branch official acting on instructions by the President to assert executive privilege in response to a congressional subpoena. Under such circumstances, the Attorney General has previously directed the U.S. Attorney to refrain from pursuing a criminal contempt prosecution under 2 U.S.C. Sections 192, 194. This view is most fully articulated in two opinions by the DOJ's Office of Legal Counsel (OLC) from the mid-1980s, and further evidenced by actions taken by the DOJ in the contempt proceedings against Environmental Protection Agency Administrator Anne Gorsuch Burford, former White House Counsel Harriet Miers, White House Chief of Staff Josh Bolten, and Attorney General Eric Holder. In each case the House approved a contempt citation against the official and forwarded the citation on to the U.S. Attorney, only to see the DOJ decline to bring a prosecution for criminal contempt. As a result, when an executive branch official is invoking executive privilege at the behest of the President, the criminal contempt provision may prove ineffective, forcing Congress to rely on other avenues to enforce subpoenas, including civil enforcement through the federal courts. The 2014 controversy surrounding former Internal Revenue Service (IRS) official Lois Lerner may suggest that the executive branch has broadened its position on the use of criminal contempt against an executive official. In that case, the House held Ms. Lerner in contempt, passing a criminal contempt citation after she refused to provide testimony relating to her role in the allegations that the IRS targeted politically active conservative groups for increased scrutiny in assessing applications for tax exempt status. Appearing before the House Committee on Oversight and Government Reform, Lerner invoked the Fifth Amendment privilege against self-incrimination as the basis for her refusal to testify. The committee rejected her assertion, concluding that she had waived her Fifth Amendment privilege by voluntarily making an opening statement in which she declared her innocence. Although the House approved the contempt citation, the DOJ has remained silent and has taken no action to pursue a criminal case against Lerner. As noted, the DOJ's past refusals to prosecute for contempt of Congress have involved situations in which the executive branch official refused to comply with a subpoena on the grounds that the documents or testimony sought were protected by executive privilege. Unlike these past controversies, the dispute surrounding Ms. Lerner did not involve executive privilege or institutional interests in the confidentiality of executive branch communications. Rather, Lerner's justification for noncompliance with the committee subpoena relates to her personal constitutional privilege against self-incrimination under the Fifth Amendment. As such, the DOJ's exercise of prosecutorial discretion in apparently declining to pursue a criminal contempt of Congress charge against executive branch officials would appear to extend beyond those situations in which the official is asserting executive privilege. The lessons to be gleaned from the Burford, Miers, Holder, and Lerner disputes appear to be twofold. First, Congress faces a number of obstacles in any attempt to enforce a subpoena issued against an executive branch official through the criminal contempt statute. Although the courts have reaffirmed Congress's constitutional authority to issue and enforce subpoenas, efforts to punish an executive branch official for noncompliance with a subpoena through criminal contempt will likely prove unavailing in many, if not most circumstances. Where the President directs or endorses the noncompliance of the official, such as where the official refuses to disclose information pursuant to the President's decision to assert executive privilege, past practice suggests that the DOJ will not pursue a prosecution for criminal contempt. The U.S. Attorney would likely rely on prosecutorial discretion as grounds for not forwarding the contempt citation to the grand jury pursuant to 2 U.S.C. Section 194. In other scenarios, however, where the conduct of the executive branch official giving rise to the contempt citation was not endorsed by the President, for example where an official disregards a congressional subpoena to protect personal rather than institutional interests, the criminal contempt provision may remain an effective avenue for punishing executive officials. Even in these situations, however, the executive branch may choose not to prosecute the official, either because the executive branch views the contempt citation as without merit or to avoid establishing a precedent for Congress's authority to use the criminal contempt statute to punish an executive branch officer. Second, although it appears that Congress may be able to enforce its own subpoenas through a declaratory civil action, relying on this mechanism to enforce a subpoena directed at an executive official may prove an inadequate means of protecting congressional prerogatives due to the time required to achieve a final, enforceable ruling in the case. This shortcoming was apparent in the Miers case, where the committee received a favorable decision from the district court, but was unable to enforce that decision prior to the expiration of the 110 th Congress and the conclusion of the Bush Administration. Given the precedential importance of any civil action to enforce a congressional subpoena, the resulting litigation would likely include a protracted appeals process. The Miers litigation, which never reached a decision on the merits by the D.C. Circuit, was dismissed at the request of the parties after approximately 19 months. Although the committee gained access to much of the information the Bush Administration had refused to disclose, the change in administrations and the passage of time could be said to have diminished the committee's ability to utilize the provided information to engage in effective oversight. In light of these practical realties, in many situations Congress likely will not be able to rely on the executive branch to effectively enforce subpoenas directed at executive branch officials, nor will reliance on the civil enforcement of subpoenas through the judicial branch always result in a prompt resolution of the dispute. Although subject to practical limitations, Congress retains the ability to exercise its own constitutionally based authorities to enforce a subpoena through inherent contempt.

Congress's contempt power is the means by which Congress responds to certain acts that in its view obstruct the legislative process. Contempt may be used either to coerce compliance, punish the contemnor, and/or to remove the obstruction. Although arguably any action that directly obstructs the effort of Congress to exercise its constitutional powers may constitute a contempt, in recent times the contempt power has most often been employed in response to noncompliance with a duly issued congressional subpoena—whether in the form of a refusal to appear before a committee for purposes of providing testimony or a refusal to produce requested documents. Congress has three formal methods by which it can combat noncompliance with a duly issued subpoena. Each of these methods invokes the authority of a separate branch of government. First, the long dormant inherent contempt power permits Congress to rely on its own constitutional authority to detain and imprison a contemnor until the individual complies with congressional demands. Second, the criminal contempt statute permits Congress to certify a contempt citation to the executive branch for the criminal prosecution of the contemnor. Finally, Congress may rely on the judicial branch to enforce a congressional subpoena. Under this procedure, Congress may seek a civil judgment from a federal court declaring that the individual in question is legally obligated to comply with the congressional subpoena. A number of obstacles face Congress in any attempt to enforce a subpoena issued against an executive branch official. Although the courts have reaffirmed Congress's constitutional authority to issue and enforce subpoenas, efforts to punish an executive branch official for noncompliance with a subpoena through criminal contempt will likely prove unavailing in many, if not most, circumstances. Where the official refuses to disclose information pursuant to the President's decision that such information is protected under executive privilege, past practice suggests that the Department of Justice (DOJ) will not pursue a prosecution for criminal contempt. In addition, although it appears that Congress may be able to enforce its subpoenas through a declaratory civil action, relying on this mechanism to enforce a subpoena directed at an executive official may prove an inadequate means of protecting congressional prerogatives due to the time required to achieve a final, enforceable ruling in the case. Although subject to practical limitations, Congress retains the ability to exercise its own constitutionally based authorities to enforce a subpoena through inherent contempt. This report examines the source of Congress's contempt power, analyzes the procedures associated with inherent contempt, criminal contempt, and the civil enforcement of subpoenas, and discusses the obstacles that face Congress in enforcing a contempt action against an executive branch official. A more fully developed and detailed version of this report, complete with sources and references, can be found at CRS Report RL34097, Congress's Contempt Power and the Enforcement of Congressional Subpoenas: Law, History, Practice, and Procedure, by [author name scrubbed] and [author name scrubbed].

Hypoxia refers to a depressed concentration of dissolved oxygen in water. While definitions vary somewhat by region, it is generally agreed that hypoxia in a marine environment occurs seasonally when dissolved oxygen levels fall below 2-3 milligrams per liter. Normal dissolved oxygen concentrations in nearshore marine waters range between 5 and 8 milligrams per liter, and many fish species begin having respiratory difficulties at concentrations below 5 milligrams per liter. In extremely low oxygen environments, less tolerant marine animals cannot survive and either leave the area or die. Mortality is especially likely for sedentary species. In addition, spawning areas and other essential habitat can be destroyed by the lack of oxygen. If these conditions persist, a so-called "dead zone" may develop in which little marine life exists. The recovery of marine ecosystems following a hypoxic event has not been extensively studied. Decreased concentrations of dissolved oxygen result in part from natural eutrophication when nutrients (e.g., nitrogen and phosphorus) and sunlight stimulate algal growth (e.g., algae, seaweed, and phytoplankton), increasing the amount of organic matter in an aquatic ecosystem over decades and centuries. As organisms die and sink to the bottom, they are consumed (decomposed) by oxygen-dependent bacteria, depleting the water of oxygen. When this eutrophication is extensive and persistent, bottom waters may become hypoxic, or even anoxic (no dissolved oxygen), while surface waters can be completely normal and full of life. Hypoxia is more likely to occur in coastal waters where the water column is stratified (i.e., layered) because of differences in temperature or salinity or both. Marine dead zones become most noticeable when and where natural eutrophication has been accelerated by human-influenced increases in nutrient loads. Hypoxia often develops as a result of upwelled ocean waters, particularly along the western coast of the Americas. In many instances, cool, nutrient-rich, deep marine waters rise along the coastal margin and support massive algal blooms that lead to hypoxia. In other instances, upwelled deep water is simply devoid of oxygen. Eutrophication as a result of human activities usually results from non-point sources of nutrients (e.g., runoff from lawns and various agricultural activities including fertilizer use and livestock feedlots), point-source discharge from sewage plants, and emissions from vehicles, power plants, and other industrial sources. Hypoxic zones frequently occur in coastal areas where rivers enter the ocean (e.g., estuaries). Rivers deliver fresh waters that are rich in nutrients to the saltier estuaries and coastal oceans. The fresh water is less dense than the salt water and typically flows across the top of the sea water. The fresh surface water effectively caps the more dense, saline bottom waters, retarding mixing, creating a two-layer system, and promoting hypoxia development in the lower, more saline waters. In the northern Gulf of Mexico, the greatest algal growth in surface waters occurs about a month after maximum river discharge, with hypoxic bottom water developing a month later. Hypoxia is more likely to occur in estuaries with high nutrient loading and low flushing (i.e., low freshwater turnover). Human activities that increase nutrient loading can increase the intensity, spatial extent, and duration of hypoxic events. Storms and tides may mix the hypoxic bottom water and the aerated surface water, dissipating the hypoxia. Although the extent of effects of hypoxic events on U.S. coastal ecosystems is still uncertain, the phenomenon is of increasing concern in coastal areas. Several federal agencies are involved in analyzing the problem, including the U.S. Geological Survey (USGS), the National Oceanic and Atmospheric Administration (NOAA), and the U.S. Environmental Protection Agency (EPA). Legislation was enacted by the 105 th Congress to provide additional authority and funding for research and monitoring to address these concerns. This authority was extended by the 108 th Congress. Hypoxic episodes have been recorded in all parts of the world, notably in partially enclosed seas and basins where vertical mixing is minimal, such as the Gulf of Mexico, Chesapeake Bay, the New York Bight, the Baltic Sea, and the Adriatic Sea. In March 2004, the U.N. Environment Program's (UNEP's) Global Environment Outlook (GEO) Year Book 2003 reported 146 dead zones where marine life could not be supported due to depleted oxygen levels. In 2006, UNEP's Global Programme of Action for the Protection of the Marine Environment from Land-based Activities reported that the frequency and intensity of coastal dead zones is rapidly increasing and could reach 200 sites when a full list of newly identified sites is released in early 2007. Hypoxia has become more frequent and widespread in shallow coastal and estuarine areas. In addition, permanently hypoxic water masses (i.e., oxygen minimum zones) occur in the open ocean, affecting large seafloor surface areas along the continental margins of the eastern Pacific, Indian, and western Atlantic Oceans. About 21% to 43% of the area of the United States' estuaries have experienced a hypoxic event; more than half of the affected area is in the Mississippi/Atchafalaya River plume. In the Mid-Atlantic region, 13 of 22 estuaries have experienced hypoxic/anoxic events. Of these, the Long Island Sound, Chesapeake Bay, Choptank River, and the New York Bight experience the most serious annual episodes. In the South Atlantic region, hypoxic/anoxic episodes are generally brief, with nearly two-thirds of this region's 21 estuaries experiencing some hypoxia/anoxia. The Gulf of Mexico region experiences the highest rate of hypoxic/anoxic events, with almost 85% of this region's 38 estuaries experiencing episodes of hypoxia (including the Mississippi/Atchafalaya River plume). The North Atlantic region is not as prone to hypoxic/anoxic events due to the generally low nutrient input (the result of lower population density) and high tidal flushing. However, areas adjacent to high population density (e.g., Cape Cod Bay and Massachusetts Bay) do experience oxygen depletion. In the Pacific region, hypoxia also occurs near population centers (e.g., San Diego Bay, Newport Bay, Alamitos Bay) or in areas of limited circulation, even where water temperatures are cold (e.g., Hood Canal, Whidbey Basin/Skagit Bay). The hypoxic zone in the northern Gulf of Mexico is the largest observed in the estuarine and coastal regions of the western hemisphere. First recognized in the early 1970s, it is the largest and most hypoxic area in the United States. The area of hypoxia extends westward from the mouth of the Mississippi River to the upper Texas coast. The seasonal shape and extent of the dead zone are mostly a function of the Mississippi/Atchafalaya River plume, the combined outflow from these two major rivers, and the biological processes it influences. The most reliable predictor of the size of the hypoxic zone is the nitrate-nitrogen load in the two months before the mid-summer mapping cruise. This hypoxic zone generally occurs from May to September, but varies from year to year. In summer 1993, following massive Mississippi River flooding, the dead zone covered more than 18,000 square kilometers (an area as large as the state of New Jersey); it reached its largest size in summer 2002—22,000 square kilometers (an area as large as the state of Massachusetts). Variation in size can be substantial between years—after reaching a maximum size of 20,000 square kilometers in 1999, the dead zone covered a much smaller 4,400 square kilometers in 2000. Although initially predicted to be the largest in size since measurements began, the hypoxic zone in 2007 covered about 20,500 square kilometers. However, a second smaller hypoxic zone of about 4,500 square kilometers also developed off Texas in 2007. This second dead zone was located near Galveston south to Matagorda Bay, and formed after runoff from heavy rains in the Brazos River drainage discharged into the Gulf. Low velocity winds during the summer result in calm seas that maintain the stratified barrier between surface and bottom water layers. Only during weather disturbances, such as frontal passages, tropical storms, and hurricanes, does vertical mixing of these stratified layers occur. Increased winds and frontal storms in autumn vertically mix the water column, dissipating the hypoxia. In the summer of 1998, this dead zone extended from very near shore (about 10-15 feet water depth) to deeper waters than are normally hypoxic (as much as 160 feet deep off the Mississippi River delta). Nutrient enrichment is the primary cause of eutrophication, of some algal blooms, and of hypoxia, and is believed to be a major factor in areas such as the northern Gulf of Mexico. The Mississippi watershed drains 41% of the land area of the contiguous 48 states, including most of the farmbelt. Studies of the Mississippi and Atchafalaya Rivers indicate that dissolved nitrogen levels have tripled and phosphorus levels have doubled since 1960, fueling algal growth and the resultant dead zone. Research suggests that fertilizer leaching and runoff from upriver agricultural sources may be the main sources of nutrients. For example, USGS states that 56% of the Mississippi River's nutrient loading results from fertilizer runoff, with an additional 25% of the Mississippi River nitrogen coming from animal manure (municipal and solid wastes account for 6%, atmospheric deposition for 4%, and unknown sources for 9%). Analysis of cores of sediments underlying the hypoxic area reveals historic information on the Mississippi River watershed, indicating that surface water productivity has increased and bottom water oxygen stress has worsened since the early 1900s, with the most dramatic changes occurring since the 1950s—a change strongly correlated with increased use of commercial fertilizers in the watershed. Hypoxia in the northern Gulf of Mexico was not an obvious or widespread phenomenon prior to the early 1970s, but became so since then with the advent of heavy use of artificial fertilizers and changed agricultural practices. Several studies show a direct relationship between river-born nutrients, the high rates of phytoplankton production, and subsequent Gulf of Mexico hypoxia. However, questions remain as to how much of the river's nitrogen might come from natural soil mineralization, what effects floods have on nutrient transport, and how much nitrogen may be contributed by coastal land loss, estimated at 25 square miles per year. Although studies have found that more than 70% of the total nitrogen transported to the Gulf of Mexico by the Mississippi River originates above the confluence of the Ohio and Mississippi Rivers, focusing on nitrogen runoff per unit area identifies other areas where more concentrated nutrient runoff occurs. Although the lower Mississippi basin (which drains parts of Tennessee, Arkansas, Missouri, Mississippi, and Louisiana) is responsible for only 23% of the nitrogen delivered to the Gulf, some scientists believe that nitrogen removal and/or runoff prevention strategies should focus on this area because of its much greater relative nitrogen contribution and likely more economically efficient nitrogen removal. Researchers estimate that the benefits of nutrient controls in this lower basin could be twice as effective as implementing them in upstream basins. Others dispute that approach, believing that nitrogen removal is much more effective in small streams (i.e., headwaters in drainages) than in large rivers. They contend that, while an area with higher yield per area may seem like a suitable place to focus management attention, focus should be directed to upstream areas where the total yield (regardless of the yield per area) is greater. Workshops and conferences have identified strategies for implementing nutrient controls in the lower Mississippi basin. Many farming interests maintain that evidence has not proven that agricultural practices are the primary contributors to the development of the Gulf of Mexico dead zone. Some farmers dispute that they contribute substantially to creating a dead zone that is as much as 1,000 miles away. They argue that their goal is to keep as much as possible of the applied nutrients on their land, since any nutrients that wash away represent wasted money. On the other hand, it is estimated that as much as half of the applied nutrients are lost to surface or ground water and to the air, resulting in approximately $750 million in excess nitrogen (calculated as fertilizer cost) entering the Mississippi River each year. The Gulf of Mexico supports important, easily accessible commercial and recreational fisheries, bringing in almost $2.9 billion annually in retail sales to Louisiana and supporting almost 50,000 jobs. These highly productive fisheries are the direct result of the input of nutrients from the Mississippi River watershed. Several studies have linked fishery effects, including declines in shrimp yields, with hypoxic episodes and areas in the Gulf. Evidence suggests that the dead zone forces fish and shrimp further offshore as well as into shallow nearshore areas, and reduces the area of essential habitat. Hypoxia increases stress on aquatic ecosystems and may decrease biological diversity in areas experiencing repeated and severe hypoxia. Crowding of marine life into restricted habitat also may lead to indirect consequences through altered competition and predation interactions. In addition, hypoxia may delay or impede the offshore migration of older, larger shrimp, preventing shrimp trawlers from selectively targeting larger shrimp for harvest. While it is unclear what specific effects the dead zone has on Gulf fisheries, the occurrence of this dead zone may force fishing vessels to change their normal fishing patterns, possibly expending more time and fuel to harvest their catch. One study has concluded that any increase in fishing expenses could drive marginal operators out of business. Other potential impacts on Louisiana fisheries include concentration of fishing effort in other areas, resulting in localized overfishing; damage to essential habitat, and possible decreased future production; shellfish mortality, if hypoxic conditions impinge on barrier island beaches and coastal bay waters; localized mortality of finfish and shellfish in shoreline areas; and decreased growth due to reduced food resources in the sediments and water column. The National Oceanic and Atmospheric Administration, Center for Sponsored Coastal Ocean Research, initiated a series of research projects in the northern Gulf of Mexico in 2003 to better understand the effects of hypoxia on fishery resources. Because the relationship between hypoxic dead zones and populations of commercially and recreationally important living resources is the single most significant scientific barrier to informed management of the hypoxia problem nationally, NOAA's Center for Sponsored Coastal Ocean Research convened a symposium and workshop in March 2007. This meeting focused on the effectiveness of existing approaches for evaluating the effects of hypoxia on ecologically, commercially, and recreationally important fish and shellfish populations in three coastal systems noted for seasonally recurring hypoxic zones—Chesapeake Bay, the Gulf of Mexico, and Lake Erie. Hypoxic conditions have been recognized in Chesapeake Bay for many years. In 2003, Virginia Institute of Marine Science (VIMS) scientists found a 250-square-mile area of hypoxic water in upper Chesapeake Bay at depths below about 20 feet, from north of Annapolis nearly to the mouth of the Potomac River. The low oxygen levels were attributed to large nitrogen and phosphorus nutrient inputs, likely carried into the bay by runoff from above-average winter snowfall and spring rains. This runoff was able to pick up nutrients that had accumulated in surrounding soils during four consecutive years of dry weather. These nutrients stimulate large summertime algal blooms in the bay, reducing dissolved oxygen in bay waters when these organisms sink to the bottom and decompose. In 2006, the total hypoxic area in the bay was smaller than in previous years, possibly because spring rainfall was close to the lowest on record, resulting in less runoff and reduced nutrient input to the bay. Although permanently hypoxic water masses (oxygen minimum zones) affect large seafloor surface areas along the continental margin of the eastern Pacific Ocean, no dead zone events had been reported in the nearshore waters off the Oregon coast prior to 2002. Unlike the dead zones in estuarine systems that are caused, in large part, by excessive nutrient runoff from land, the Oregon dead zone forms along the open coast. Coastal winds drive ocean currents that upwell nutrient-rich, but oxygen-poor, waters from the deep sea onto the shallow reaches of the continental shelf. This upwelling of nutrients fuels phytoplankton blooms that eventually sink and decompose to further reduce oxygen levels in the already low-oxygen waters along the seafloor. Hypoxic zones along the Oregon coast form seasonally and can begin in late spring/early summer in response to the onset of upwelling-favorable winds from the north. This hypoxia can persist through the summer and ultimately recedes during the fall when winds again shift direction and promote ocean currents that flush low-oxygen water off the continental shelf. In 2006, the Oregon coastal dead zone was significantly larger (more than 3,000 square kilometers), thicker, longer lasting, and lower in oxygen concentration than in previous years, extending along the ocean floor from Cape Perpetua (Florence) in the south to Cascade Head (Lincoln City) in the north, as close to shore as the 50-foot depth. Underwater surveys of the 2006 event revealed complete disappearance of fish from important habitats in addition to near-complete mortalities of benthic invertebrates that are important in coastal food-webs. The appearance and growth of this dead zone is attributed to fundamental, but not well understood, changes in ocean conditions off the Oregon coast. The severity of the 2006 dead zone appears to reflect (1) changes in ocean and atmosphere conditions that include the strongest declines in offshore source-water oxygen content on record, (2) an exceptional shift in coastal wind patterns that has greatly enhanced upwelling currents, and (3) the persistence of low-oxygen water and phytoplankton blooms along the coast. The extent of the developing hypoxic event in 2007 has not been determined. An analogous dead zone along the open coast of Washington State may also be developing. While controlling upwelling-caused hypoxic zones is unlikely, increasing the ability to predict and understand the severity and consequences of future hypoxic events will be necessary for managing and ameliorating the social and economic effects of ecosystem changes along the Oregon coast and beyond. Since a temporary, yet severe, hypoxic event could result in significant mortality or injury to marine mammals, fish, and other aquatic species, many have deemed better understanding and consistent monitoring of hypoxic phenomena necessary. NOAA initiated the Nutrient Enhanced Coastal Ocean Productivity (NECOP) program in 1989 to study the effects of nutrient discharges on U.S. coastal waters. This study found a clear link between nutrient input, enhanced primary production (i.e., algal and plant growth), and hypoxic events in the northern Gulf of Mexico. In response to a January 1995 petition from the Sierra Club Legal Defense Fund (currently known as Earthjustice Legal Defense Fund) on behalf of 18 environmental, social justice, and fishermen's organizations, the Gulf of Mexico Program held a conference in December 1995 to outline the issue and identify potential actions. Following that conference, Robert Perciasepe, Assistant EPA Administrator for Water, convened an interagency group of senior Administration officials (the "principals group") to discuss potential policy actions and related science needs. Subsequently, this "principals group" created a Mississippi River/Gulf of Mexico Watershed Nutrient Task Force. Additionally, the White House Office of Science and Technology Policy's Committee on Environment and Natural Resources (CENR) conducted a Hypoxia Science Assessment at the request of EPA. The CENR assessment was peer-reviewed, made available for public comment, and submitted to the task force to assist in developing policy recommendations and a strategy for addressing hypoxia in the northern Gulf of Mexico. In response to an integrated scientific assessment of hypoxia in the northern Gulf of Mexico by the multi-agency Watershed Nutrient Task Force, a Plan of Action for addressing hypoxia was released in January 2001. This plan's environmental objective is to reduce the five-year running average of the dead zone's area to 5,000 square kilometers or less by the year 2015. Estimates based on water-quality measurements and streamflow records indicate that a 40% reduction in total nitrogen flux to the Gulf is necessary to return to average loads comparable to those during 1955-1970. Model simulations suggest that, short of this 40% reduction, nutrient load reductions of about 20%-30% would result in a 15%-50% increase in dissolved oxygen concentrations in bottom waters. Strategies selected focus on encouraging voluntary, practical, and cost-effective actions; using existing programs, including existing state and federal regulatory mechanisms; and following adaptive management. A reassessment of progress on implementing this action plan was initiated in 2005. A key consideration is the level and duration of the necessary reduction in excess nutrients from watersheds. Many agricultural lands have been saturated with nutrients for many years, and it may take a long time to "cycle out" excess nitrogen and phosphorus, even if application rates are reduced. While some believe this problem may have no fast solutions and any management regime considered will need to recognize that progress or improvement may not be apparent for years or even decades, others suggest that improved agricultural practices in efficient application of chemical fertilizers and prevention of soil erosion could yield immediate and measurable benefits. One model suggests that a 12% to 14% reduction in the use of fertilizer on croplands in the Mississippi River basin would reduce the net anthropogenic nitrogen inputs by about 30%, without any loss in crop production. Various policy options for modifying agriculture practices continue to be discussed. Because nonpoint sources are major contributors to the problem at the mouth of the Mississippi River system, many believe the Clean Water Act is the appropriate legal framework for addressing future nutrient inputs. Under §319 of the Clean Water Act, Louisiana and other states have initiated nonpoint-source control programs. These programs seek to combine local, state, and federal agency resources to address pollution from nonpoint sources within each state. To effectively address concerns, however, nonpoint-source programs would need to be encouraged, funded, and implemented throughout the Mississippi River watershed. Under §303 of the Clean Water Act, states must identify water-quality-limited segments of their waters that are not meeting standards, and then establish total maximum daily loads (TMDLs) for each listed water and each pollutant (e.g., nutrients) that is not meeting current water quality standards. In addition, agricultural research and educational outreach/assistance to farmers might complement regulatory efforts. Congress took note of the hypoxia problem in 1997 when the conference report on FY1998 Department of the Interior appropriations ( H.Rept. 105-337 ) directed the USGS to give priority attention to hypoxia in its FY1999 budget. Near the end of the 105 th Congress, provisions of the Harmful Algal Bloom and Hypoxia Research and Control Act of 1998 were incorporated into the Coast Guard Authorization Act of 1998. This measure was signed into law as P.L. 105-383 on November 13, 1998; Title VI authorized appropriations through NOAA to conduct research, monitoring, education, and management activities for the prevention, reduction, and control of hypoxia, harmful algal blooms, Pfiesteria , and other aquatic toxins. In 2004, Title I of P.L. 108-456 , the Harmful Algal Bloom and Hypoxia Amendments Act of 2004, expanded this authority and reauthorized appropriations through FY2008. Legislation has been introduced in the 110 th Congress to reauthorize and amend the Harmful Algal Bloom and Hypoxia Research and Control Act. Hypoxia research is regularly funded through appropriations to the National Ocean Service—part of the National Oceanic and Atmospheric Administration in the Department of Commerce—in their Extramural Research account under National Centers for Coastal Ocean Science . For FY2008, NOAA has requested $8.9 million for extramural research grants related to harmful algal bloom and hypoxia, including forecasting. In the last few years, the U.S. Department of Agriculture's Cooperative State Research, Education, and Extension Service has provided a special research grant of around $220,000 annually to Iowa State University's Leopold Center for Sustainable Agriculture for a project to define and implement new methods and practices in farming that reduce impacts on water quality and the hypoxia problem in the Gulf of Mexico. In the last few years, the Environ-mental Protection Agency's Environmental Programs and Management account has provided a specific authorization of around $125,000 annually for the Missouri Department of Agriculture's Hypoxia Education and Stewardship Project. This effort seeks to educate Missouri producers about hypoxia and encourage use of practices that will reduce the amount of nitrogen lost through leaching and/or evaporation. The EPA has also funded research on Gulf of Mexico hypoxia through its Gulf Breeze Laboratory.

An adequate level of dissolved oxygen is necessary to support most forms of aquatic life. While very low levels of dissolved oxygen (hypoxia) can be natural, especially in deep ocean basins and fjords, hypoxia in coastal waters is mostly the result of human activities that have modified landscapes or increased nutrients entering these waters. Hypoxic areas are more widespread during the summer, when algal blooms stimulated by spring runoff decompose to diminish oxygen. Such hypoxic areas may drive out or kill animal life, and usually dissipate by winter. In many places where hypoxia has occurred previously, it is now more severe and longer lasting; in others where hypoxia did not exist historically, it now does, and these areas are becoming more prevalent. The largest hypoxic area affecting the United States is in the northern Gulf of Mexico near the mouth of the Mississippi River, but there are others as well. Most U.S. coastal estuaries and many developed nearshore areas suffer from varying degrees of hypoxia, causing various environmental damages. Research has been conducted to better identify the human activities that affect the intensity and duration of, as well as the area affected by, hypoxic events, and to begin formulating control strategies. Near the end of the 105th Congress, the Harmful Algal Bloom and Hypoxia Research and Control Act of 1998 was signed into law as Title VI of P.L. 105-383. Provisions of this act authorize appropriations through NOAA for research, monitoring, education, and management activities to prevent, reduce, and control hypoxia. Under this legislation, an integrated Gulf of Mexico hypoxia assessment was completed in the late 1990s. In 2004, Title I of P.L. 108-456, the Harmful Algal Bloom and Hypoxia Amendments Act of 2004, expanded this authority and reauthorized appropriations through FY2008. Legislation has been introduced in the 110th Congress to reauthorize and amend the Harmful Algal Bloom and Hypoxia Research and Control Act. As knowledge and understanding have increased concerning the possible impacts of hypoxia, congressional interest in monitoring and addressing the problem has grown. The issue of hypoxia is seen as a search for (1) increased scientific knowledge and understanding of the phenomenon, as well as (2) cost-effective actions that might diminish the size of hypoxic areas by changing practices that promote their growth and development. This report presents an overview of the causes of hypoxia, the U.S. areas of most concern, federal legislation, and relevant federal research programs. This report will be updated as circumstances warrant.

The issue of restricting plantings of fruits, vegetables, and wild rice on base acres in the farm commodity programs is a topic of debate in the 2007 farm bill. Following a brief background discussion of the legislative history and policy options for dealing with the planting restrictions on fruits, vegetables, and wild rice, this report provides a side-by-side comparison of five academic and industry studies on the effects of removing these restrictions. The five studies reviewed in this report include analyses by (1) the U.S. Department of Agriculture's (USDA's) Economic Research Service; (2) Michigan State University; (3) Arizona State University; (4) Texas A&M University; and (5) Informa Economics, a private consulting group. For the purposes of this discussion, program crops (or crops grown on base acres) refers to commodities that receive direct payments authorized in Title I of the 2002 farm bill (those eligible for direct and counter-cyclical payments). These commodities include corn and other feed grains, soybeans and other oilseeds, wheat, cotton, rice and peanuts. Also, the phrase "specialty crops" is used to mean fruits, vegetables, and wild rice. Restrictions on planting fruits, vegetables, and wild rice are a constraint within a broader policy that allows planting flexibility on program crop base acreage. Planting flexibility allows program crop farmers to respond to market signals when making planting decisions, rather than being required to grow a particular crop to receive subsidies. The purpose of the targeted restriction is to protect growers of unsubsidized fruits and vegetables from competing production on subsidized land. As reasonable as this justification may appear, there have been problems with the policy (see below). Planting flexibility is viewed positively from an economic theory and world trade agreement perspective because it helps separate production decisions from government subsidies, and makes "decoupled" subsidies minimally distorting to commodity markets. Restrictions on planting fruits and vegetables are viewed positively by fresh fruit and vegetable growers, mostly negatively by growers of processing fruits and vegetables, and negatively in the context of world trade rules. Officials are concerned that continuation of planting restrictions could undermine the U.S. position at the World Trade Organization (WTO) that the annual direct payments of roughly $5 billion are minimally trade-distorting ("green box"). The United States wants direct payments to qualify as a green box expenditure, which is not subject to the annual WTO cap of $19.1 billion for "amber box" subsidy payments. Planting flexibility was first initiated in the 1990 farm bill, which designated 25% of base acres as "flex acres," meaning producers could grow certain crops other than the base crops on those acres ( P.L. 101-624 , Sec. 1101). The 1990 farm bill also created the restriction on planting fruits and vegetables on program crop base acreage. The 1996 farm bill expanded planting flexibility to all of a farm's base acres (7 U.S.C. 7218; P.L. 104-127 , Sec. 118), and the 2002 farm bill continued this policy (7 U.S.C. 7916; P.L. 107-171 , Sec. 1106). Specifically, planting flexibility refers to the ability to receive direct and counter-cyclical payments for a base crop (such as corn) and simultaneously grow a different program crop on those base acres (such as soybeans, but not fruits and vegetables). Farmers who violate the planting restriction on fruits and vegetables do not receive direct and counter-cyclical payments on acres in violation, and they must pay an additional financial penalty based on the market value of the fruits and vegetables planted (7 C.F.R. 1412.601). Exceptions in statute allow certain farmers with a history of planting fruits and vegetables to continue to plant such crops by giving up subsidies on base acres that are planted to fruits and vegetables, but without additional penalties (7 U.S.C. 7916(c)). The specific fruits, vegetables, and wild rice that are included in the restriction are itemized in 7 C.F.R. 1412.407(h). Two policy issues have arisen about planting flexibility and the related restrictions on planting fruits and vegetables. First, some midwestern producers who grew primarily vegetables for processing (canned and frozen) have reduced their plantings since soybeans became a program crop in 2002. Prior to 2002, these producers sometimes grew fruits and vegetables instead of soybeans in crop rotations with corn. Landowners typically now stipulate that no fruits and vegetables can be grown on base acres, either to maximize soybean planting history in case base acres are ever again updated, or to receive the soybean direct payments. Processors for canning and freezing have reported short supplies and difficulty contracting new growers. Companion bills have been introduced in the House and Senate of the 110 th Congress that would allow any producer to use base acres to grow fruits and vegetables for canning and freezing as long as they give up program payments on those acres for one year, but without additional penalties (Farming Flexibility Act of 2007— H.R. 1371 , Baldwin, and S. 1188 , Lugar). Similar bills were introduced in the 108 th and 109 th Congresses. Second, in a high-profile case brought to the WTO by Brazil against the United States regarding its cotton program, a settlement panel found that the current restriction on planting specialty crops makes direct payments ineligible for treatment as a nondistorting (green box) subsidy payment for international trade purposes. If this finding is enforced, it could affect the United States' ability to meet WTO subsidy payment limit commitments during years when other farm commodity payments are high. The Administration proposes that the 2007 farm bill eliminate the fruit and vegetable planting restriction, largely to meet WTO obligations. While H.R. 1371 / S. 1188 could satisfy processors and growers of fruits and vegetables for processing, it likely would not go far enough to satisfy the WTO rules since it would only relax the restriction for processing and not for fresh fruits and vegetables. If the restriction is lifted, fruit and vegetable growers may seek some type of compensation in return, possibly in the form of direct payments, but more likely through support for research, trade promotion, and use of fruits and vegetables in nutrition programs. Several policy options exist for handling the issue of planting restrictions on fruit and vegetables. Retain the current restrictions (status quo). This option would not satisfy concerns in the WTO cotton case and could subject the direct payments program to expenditure limits applied to highly distorting amber box subsidies. Nor does it address the concerns of midwestern fruit and vegetable growers for processing. It could, however, satisfy fresh fruit and vegetable growers who prefer to keep the restriction as compared with simply lifting the restriction. Allow fruits and vegetables for processing on base acres, without additional penalty, if growers give up government payments when they plant such crops. This option likely would not satisfy WTO rules because it basically keeps the current planting restriction while creating a smaller penalty for a select group of fruits and vegetables (those for processing). Legislation, such as H.R. 1371 / S. 1188 , could appease midwestern growers for processing, but likely not fresh produce growers. Eliminate the restriction on planting fruits and vegetables. This option could remedy violations identified in the WTO cotton case, and it would exceed what is proposed by midwestern growers of fruits and vegetables for processing. Farmers would not have to give up their government payments (nor face additional penalties as they do now) should they grow fruits and vegetables on base acres. However, this action, by itself, likely would not satisfy fresh growers who may want some other form of protection or compensation because of new competition from subsidized growers. Transition out of direct payments. If direct payments are eliminated, the planting restriction issue is irrelevant. Some are calling for an end to direct payments in the 2007 farm bill, either to score budget savings for other farm bill priorities, or to recognize the inconsistency of making payments to farmers even when farm income is high. Direct payments were intended to be decoupled and eligible for green box treatment. Planting restrictions have become a barrier to this goal. Thus, the fruit and vegetable planting restriction is seen by some as another reason to reconsider the future of direct payments. If the planting restriction is eliminated and direct payments are retained (in the second or third bullets above), several additional options exist to respond to the concerns of existing fruit and vegetable growers who may perceive additional and unfair competition from new growers who would continue to receive direct and counter-cyclical payments on base acres. Direct compensation. Provide some type of direct payment to existing fruit and vegetable growers who do not have base acres on which they plant their fruits and vegetables. The amount of the payment could be based on the level of direct payments received by program crop growers. Research assistance. Increase federal funding for university and government research on growing, processing, and distributing fruits and vegetables. Implementation of research findings could lower production costs, increase quality or output, and/or increase demand. Increase demand for fruits and vegetables. To the extent that eliminating the planting restriction increases fruit and vegetable production—which could depress prices and revenue as some existing growers fear—federal efforts to increase demand could offset potential revenue shortfalls. Increasing demand could be accomplished in several ways: market promotion (including healthy diet standards, and farmers markets), foreign trade assistance (negotiating trade agreements to export U.S. produce), and government purchases of produce (for feeding and nutrition assistance programs such as Section 32, school lunch programs, and fresh fruit and vegetable snacks for children). Following is a side-by-side comparison of five academic and industry studies on the effects of removing the restriction on planting fruits and vegetables on base acres under the 2002 farm bill. The studies include: USDA Economic Research Service (by Demcey Johnson, Barry Krissoff, Edwin Young, Linwood Hoffman, Gary Lucier, and Vince Breneman), Eliminating Fruit and Vegetable Planting Restrictions: How Would Markets Be Affected? ERR-30, November 2006, at http://www.ers.usda.gov/Publications/ERR30 ; Michigan State University (by Suzanne Thornsbury, Lourdes Martinez, and David Schweikhardt), Michigan: A State at the Intersection of the Debate Over Full Planting Flexibility , CCR-29, February 2007, at http://www.ers.usda.gov/publications/ccr29/ccr29.pdf ; Arizona State University (by Paul Patterson and Timothy Richards), Farm Bill Flex Acre Provisions and Fruit, Vegetable, and Nut Production, July 2006, at http://cissc.calpoly.edu/farmbill/farmbillflexacreprovisionsandfruit2.pdf ; Texas A&M University (by Roland Fumasi, James Richardson, and Joe Outlaw), Lifting the Fruit and Vegetable Cropping Restriction: Potential Impacts on Cropping Preference in the Lower Rio Grade Valley, Texas, February 2006, at http://agecon.lib.umn.edu/cgi-bin/pdf_view.pl?paperid= 19484&ftype=.pdf ; and Informa Economics (for the Specialty Crop Farm Bill Alliance), An Analysis of the Effect of Removing the Planting Restrictions on Program Crop Base , February 2007, at http://www.competitiveagriculture.org/images/FinalReport2007.pdf . The studies reviewed in this report take very different approaches to measuring the potential effects of lifting the planting restriction. Table 1 provides a comparison of some of the key differences between these five studies. A more detailed review of these studies is provided in Appendixes A-E. Of the five studies, three are national in scope (USDA, Arizona State, and Informa), while the other two address potential regional impacts only (Michigan State and Texas A&M). The Texas A&M and Arizona State studies use economic modeling approaches to determine potential effects. The USDA, Michigan State, and Informa studies use mostly a descriptive approach with objective judgements to evaluate potential effects, but using very different methodologies. Both the USDA and Michigan State studies take a narrowly focused approach using detailed county-level data in an attempt to precisely identify the producing counties and crops that may be affected, proceeding through a series of analytical steps and data review. The Informa study also proceeds in a step-wise construction, but instead builds upon limited state-level data and aggregates the potential results to the national level. As a result, these studies provide very different conclusions. The studies differ in terms of their available input data. Most use either state- or county-level production and acreage data. Michigan State supplemented its published data with survey or interview information. The economic modeling approaches used by Texas A&M allowed it to directly examine the role of expected costs and returns, as well as risk and uncertainty in planting decisions. (The Arizona State study provided no detailed information about its underlying model, which makes it difficult to evaluate.) The Texas A&M and Arizona State studies also examined simultaneous market interactions across a range of crops. In contrast, the approach used in the USDA and Michigan State studies only indirectly considered the role of expected costs and net returns as part of its analysis. The Informa study did not take into account net returns or cost information. As indicated by these studies, eliminating the current planting restriction could have an economic effect on certain crops within certain producing areas. However, differences in research approach and scope (e.g., regional versus national; plantings of permanent, perennial crops versus easily rotated, annual crops) complicate a direct comparison across all five studies. Such differences also make it difficult to generalize about the possible economic effects of lifting the current restriction. The studies also vary in that not all take into account certain production and market factors in the U.S. fruit and vegetable sectors as part of their analysis—in particular, the importance of barriers to entry when examining the mobility of production between crops, especially for fruits and vegetables (see " Production and Market Factors " for more detailed information). As a result, the studies differ in whether they consider the possibility that permanent, perennial crops would be planted, or whether only easily rotated, annual crops would be planted. Most of the studies did not attempt to quantify the potential price, revenue, and market impacts, making a strict comparison of the potential impacts difficult. Only the Informa and Arizona State studies attempted to quantify the potential market effects on existing fruit and vegetable growers. They reported estimated revenue losses to existing fruit and vegetable growers ranging from about $1.7 billion to $4.0 billion, respectively, in the first year of lifting the restriction. The Arizona State study went a step further and considered effects on all growers, including new entrants, and multi-year effects that account for adjustments beyond the first year. The Informa study's high-end estimated effects, however, are questionable since the study did not account for barriers to entry for fruit and vegetable production. Also questionable is the likelihood of planting base acres to long-maturing tree crops, and plantings by producers without a history of growing fruits and vegetables. The other three studies did not provide quantitative estimates of the market impacts. However, both the USDA and Michigan State studies indicate that the effects of removing the current restriction likely would be limited to individual producers, commodities, and regions, and that the total industry effects of removing the restriction would be low. The USDA and Michigan State studies largely conclude that industry impacts would generally be focused on a narrow range of crops with a greater likelihood of conversion from program crops to fruits and vegetables (below). The Texas A&M study also indicates that the effect of lifting the restriction would be limited to certain crops (below). Nevertheless, these studies do indicate that lifting the planting restriction could have a sometimes substantial adverse effect on certain crops within select producing areas. The USDA and Arizona State studies, which are more national in scope, indicate that the potential economic effects could be greatest for producers of potatoes and processed vegetables. The USDA study suggests particular impacts in certain areas, including dry beans in North Dakota. The Arizona State study shows greater economic impacts and eventual new entrants in some fruit and vegetable sectors. The Michigan State and Texas A&M studies, which are more regional in scope, note possible adverse effects to producers of dry beans, squash, and processed tomatoes in parts of Michigan, and to watermelon and cabbage in parts of Texas. Given that even small acreage shifts in fruit and vegetable plantings can have large price-depressing effects, especially if concentrated within certain growing regions, the localized effect to specialty crop producers in some areas could be great. Most of the studies take into account specific production and market factors in the U.S. fruit and vegetable sectors as part of their analysis, except for the Informa study. In particular, both the USDA and Michigan State studies emphasize the importance of barriers to entry when examining the mobility of production between crops, especially for fruits and vegetables. The Michigan State study summarizes the types of barriers to entry that could influence an expansion of specialty crop acres from program acres as (1) capital investment (e.g., equipment and machinery purchases, cultivation, irrigation needs, etc.); (2) rotational requirements (e.g., growing patterns and pest pressures); (3) market accessibility (e.g., difference between fresh and processed crops, marketing channels, contractual arrangements, etc.); and (4) labor and management requirements (e.g., labor-intensive versus capital-intensive production). As already noted, the Informa study did not take into account the possible role of entry barriers to fruit and vegetable production. It also considered the possibility that program crops may be switched to permanent crops, such as orchard and tree crops that often require high planting expenditures and longer establishment periods. Consequently, the study reports sizeable economic effects to specialty crop producers from lifting the current planting restriction. However, the study's underlying approach and assumptions potentially raise some question about the reliability of its reported estimated quantitative effects. The fact that fruit and vegetable production differs substantially from commodity crop production also might influence the likelihood of conversion. Compared to program crops, fruit and vegetable production often has different machinery and technology needs, typically higher costs (but also higher returns), additional labor and management requirements, and different types of purchasing arrangements and marketing channels. In addition, substantial differences often exist within the fruit and vegetable sectors depending on whether crops are grown for the fresh market versus grown for processing. Most fresh produce is sold under arrangements with packers, distributors, and retailers; most fruits and vegetables for processing are grown under contract. Current market trends also might influence the likelihood of conversion. For example, Informa, Arizona State, and USDA predict large increases in potato production, despite recent declines in planted acreage due to lower market prices. Given these production and market factors, making assumptions about the potential likelihood to convert from a program crop to a specialty crop is not straightforward. For this reason, most of the studies reviewed in this report (except for the Informa study) assume a greater likelihood of conversion to specialty crops that can be easily rotated year to year (e.g., vegetables, beans). These studies examine only crops that may be planted and harvested in a single year, thereby excluding permanent crops, such as nut and tree fruit crops, grapes, and perennial vegetables such as asparagus. These studies assume it will be unlikely that program crop producers would convert to crops that require lengthy cultivation before becoming commercially viable (e.g, orchard crops, berries). Also, to a varying degree, each of the studies uses historical data for farms that grow both program crops and specialty crops, and assumes that the areas that may be potentially affected by lifting the planting restrictions will be on cropland owned by farmers that historically have grown both program and specialty crops. Because the Informa study does not take into account the full range of market-based factors that may influence planting decisions of specialty crops, the market effects reported by the analysis may likely be overstated. In particular, the analysis likely overstates the number of new entrants into specialty crop production since it predicts large acreage increases in specialty crops on farms producing program crops only, with no history of specialty crops, based simply on a weighted percentage increase. The other four studies, however, could be understating the potential market effects of eliminating the planting restrictions since they each exclude consideration that program crop acres would be converted to permanent or perennial crops. Finally, none of the studies specifically addresses current market demand and trends that may limit marketability of the specialty crops converted from program crops. Only the Arizona State University study projected its analysis over an eight-year period in order to capture market adjustment over time in response to changing market prices and supply; it found that the effects diminish greatly after the first year. None of the studies explicitly differentiated between fresh and processed fruits and vegetables, and so they do not directly address the potential effects of partially lifting the planting restrictions as proposed under H.R. 1371 / S. 1188 . As proposed under these bills, relaxing the planting restriction would only apply to producers that grow for canning and freezing, and would not apply to plantings of fresh market fruits and vegetables. Appendix A. USDA's Economic Research Service Scope: National (identification of potentially affected counties). Crops: 8 product groupings: citrus, strawberries, grapes, principal fresh and processing vegetables, apples, potatoes, and dry edible beans. States: All U.S. counties (where further expansion of fruits and vegetables may be limited by lack of land or by planting restrictions on base acres, and where the relative land availability for fruits and vegetables could change the most). Approach: Identifies U.S. counties that may be affected by lifting the planting restrictions based on a series of county-level maps showing the geographic intersection of crop production and base acreage, illustrating competition for land between program and specialty crops. Identifies fruits and vegetables that could be limited by base acreage restrictions based on an analysis of computed ratios that measure the share of base acreage in areas producing selected fruits and vegetables, weighted by state shares of planted acreage. Includes a detailed case study for dry beans, which could be the most affected. Input Data: County-level production and acreage data (2002). Assumptions: Considers production and economic barriers to expanded specialty crop production: (1) diversity of fruit and vegetable production, (2) market considerations; (3) costs considerations; (4) per-acre net returns and costs; and (5) seasonality. Estimated Effects: USDA's report concludes that market effects of eliminating planting restrictions are likely to be limited and confined to specific regions and commodities. However, impacts could be significant for individual producers, commodities, and regions. Affected counties: Counties where further expansion of fruit and vegetables may be limited by lack of total land or by planting restrictions on base acres are in eastern ND, southern MN, central WI, northern IL, western MI, western NY, eastern coastal plains (SC, GA), southern ID, central WA, and also CA and FL. Counties where the relative availability of land for fruits and vegetables could change the most are located in ND, CA, WI, MN, MI. Impacts are considered less likely in Florida, given limited base acres. Affected commodities: Dry edible beans, vegetables for processing, and potatoes could be most affected by lifting planting restrictions (based on a calculated share of more than 50%). Apples/fresh vegetables have a calculated share of >40%. Program crop producers are likely to benefit since they can realize additional revenue from harvesting fruit and vegetables, while still receiving benefits for program crops, depending on expected net returns, startup costs, and potential market conditions. Program crop farmers are more likely to switch to less capital-intensive crops, such as dry beans or processing vegetables, rather than fresh produce with higher growing costs. Considerations/Comments: Potential Strengths: Uses detailed county data to identify counties/commodities most likely to be affected. Addresses barriers to entry/mobility to convert to specialty crops. Potential Shortcomings: Examines selected crops only. Does not quantify price or revenue impacts. Does not specifically address production interaction effects among crops or market demand and trends for specialty crops. Appendix B. Michigan State University Scope: Regional (Michigan State) for select crops. Crops: 6 commodities: Dry beans, pickling cucumbers, processing tomatoes, fresh market tomatoes, squash, and blueberries. Approach: Conducted field interviews to select commodities and counties where the potential effects of lifting the planting restrictions might occur. Assessed the likelihood of conversion from program crops to specialty crops using a ranking system (Low, Medium, High) across five criteria, including barriers to entry for selected specialty crop production and financial inducements to Direct and counter-cyclical Program (DCP) growers. Barriers to Entry: Factors affecting entry and mobility of production include capital investment, rotational requirements, market access, and labor and management needs. Financial Inducement: Measured by the ratio of DCP crop benefit per acre and net returns per acre for select specialty crops. Input Data: County-level production and acreage data, including: Barriers to Entry: Primary survey/interview information on business activity, size, investment in machinery and equipment, production practices (e.g., harvesting, irrigation), contracts, farm management, labor and markets) from Michigan-based food processors, farmers, extension agents, financial advisors, fresh produce shipper-distributors, and commodity representatives. Financial Inducement: DCP crop payments and market revenue per acre minus variable costs per acre (corn, wheat, soybeans, barley, oats), versus specialty crop revenue minus contract violation penalty and variable acre costs for select specialty crops. Assumptions: Commodities with high expected barriers to entry were excluded (orchard crops or crops with a lag time before becoming commercially viable, highly specialized or costly crops, and some processing crops where it takes time to generate a return on investment). Counties likely to be affected are those with the most vegetable production (given the likelihood for potential in terms of soil and climate to increase specialty crop production) and counties with current high acreage of both program and specialty crops, as well as land with a history of producing both, although currently not growing both. Estimated Effects: Commodities with the highest likelihood of conversion are dry beans, with some likelihood of conversion for squash and processed tomatoes. For most other crops, lifting planting restrictions would result in small (or no) positive incentives for DCP crop producers to grow specialty crops, and therefore likely low number of new entrants. Barriers to entry are likely to limit or prohibit crop conversion. Results identify Michigan's 12 largest vegetable producing and program crop counties. Considerations/Comments: Potential Strengths: Addresses barriers to entry and likelihood of conversion to specialty crop acres. Conducts a thorough selection of potentially affected commodities and counties, using interview and survey information. Potential Shortcomings: Regional in scope and examines select annual crops only. Does not quantify price or revenue impacts. Does not specifically address production interaction effects among crops or market demand and trends for specialty crops. Appendix C. Arizona State University Scope: National (county-level) for select crops. Crops: 8 fresh commodities: broccoli, cantaloupe, fresh carrots, onions, head lettuce, potatoes, tomatoes, watermelon. (Initially, these commodities along with sweet corn and sweet potatoes were identified as potentially affected by lifting planting restrictions; however, the available model does not support analysis of sweet corn and sweet potatoes, and these two crops were excluded.) States: 205 counties located in AZ, CA, OR, ID, WA, CO, TX, LA, MS, GA, NC, NJ, NY, PA, MI, MN, WI, ND, and MA, among other states. These counties were identified as areas where specialty crop and program commodities potentially compete for the same land (about 72% of harvested acres for selected crops). Approach: Market simulation model developed by the National Food and Agricultural Policy Project (NFAPP). Examines two scenarios assuming 1% of program crop acreage (about 182,000 acres) and 5% of program crop acreage (about 910,000 acres) converts to fresh produce production. Market impacts projected over an eight-year period (2008-2015). The study provided no information on its underlying model, making it difficult to evaluate. Input Data: County-level production and value data (2002). Assumptions: Analysis included only crops that could be planted and harvested in a single year, and excluded permanent crops, such as nut and tree fruit crops, grapes, and perennial vegetables, such as asparagus. Sweet corn and sweet potatoes also were not examined because NFAPP available model does not support analysis of these two crops. New specialty crop acreage for each scenario is allocated according to current cropping patterns within each county starting in 2008 (an exogenous shock imposed on the model to force change). Production is expected to adjust over time to expected returns. Estimated Effects: Two scenario results Scenario A (1% acre conversion): New acreage across all commodities is estimated to result in total industry revenue losses of $1.3 billion (2008). Losses to incumbent specialty crop producers are projected to be greater at $1.7 billion. As specialty crop producers adjust to lower prices, industry revenue losses are projected to be $120 million by 2015. Short-term value losses are projected to be greatest for potatoes and onions. In the long-term, value losses are projected to be greatest for broccoli. Scenario B (5% acre conversion): New acres for 5 commodities is projected to result in industry revenue losses of $1.7 billion (2008) (excludes watermelon, onion, potatoes). Losses to incumbent specialty crop producers are projected at $2.4 billion. Industry revenue losses are projected at $204 million (2015), as producers adjust to lower prices. Considerations/Comments: Potential Strengths: Identifies crops that could likely be affected by lifting planting restrictions. Uses a simulation model to examine interaction effects for a range of crops over an eight-year period (2008-2015). Estimates price and quantity changes and revenue loss. Potential Shortcomings: Examines a subset of the identified potential range of affected crops. Assumes a flat 1% and 5% rate of acreage conversion. Reported results are expressed in terms of market change and not acreage changes (making comparison across studies difficult). Does not specifically address market demand and trends. Appendix D. Texas A&M University Scope: Regional (Lower Rio Grande Valley, Texas) for select crops. Crops: Green cabbage, cantaloupe, corn and sorghum for grain, upland cotton, honeydew, spring onions, and watermelon. Approach: Stochastic simulation model (one that allows probabilities for different outcomes) to empirically estimate the per-acre income distributions for alternative crops (comparing scenarios with and without planting restrictions on corn, cotton, and sorghum base acreage). Simulated probability distributions of net income under each scenario for 2006 as an indicator of risk and profitability. Input Data: (for the Lower Rio Grande Valley, Texas) Annual per-unit prices, yields, and harvested acreage per crop (1992-2004). Weekly (during season) prices for each crop (1998-2004). Other annual U.S. crop program data, including prices (1970-2004), loan rates, target prices, and direct payment rates (used with other production data to estimate Direct and counter-cyclical Program (DCP) payments per are for 2006). Itemized crop budget cost data. Assumptions: Absent planting restrictions, DCP payments will influence production and land use decisions. Analysis excluded permanent crops, such as citrus, and only examined crops that could be rotated easily on a year-to-year basis. Estimated Effects: (for the Lower Rio Grande Valley, Texas) If planting restrictions are lifted, acreage increases are predicted for watermelon and cabbage based on expected risk-adjusted net returns. Accounting for risk and variability: (1) among risk-preferring producers, watermelon is preferred over cotton (cotton base), and cabbage is preferred over corn (corn and cotton base); (2) among risk-neutral producers, watermelon is preferred over cotton, and cabbage is preferred over grain sorghum (cotton base); and (3) among risk-averse producers, watermelon is preferred over all crops (cotton base). Program commodities with government payments are preferred over the risks to planting onions, cantaloupe, or honeydew. Considerations/Comments: Potential Strengths: Addresses risk and uncertainty in planting decisions. Uses detailed price and cost input data in its estimation. Potential Shortcomings: Regional in scope and examines select annual crops only. Does not specifically address likely downward price impact of increased specialty crop supplies, or market demand and trends that may limit marketability of the specialty crops converted from program crops. Appendix E. Informa Economics Scope: National, for nearly all fruits, vegetables, and tree nuts. Crops: 25 commodities (more than 90% of total specialty crop acreage), including potatoes, peas, pears, sweet corn, snap peas, apples, onions, berries, cherries, pumpkins, cabbage, cucumbers, asparagus, squash, carrots, lettuce, cantaloupe, watermelon, peaches, grapes, broccoli, citrus, tree nuts, tomatoes, and plums. States: Focuses on 15 states (CA, WA, ID, WI, OR, MN, MI, NY, CO, AZ, GA, TX, ND, IL, and PA), excluding Florida where there are few farms with specialty crop acreage that also grow program crops. Approach/Assumptions: The two components of the analysis are: Cross-subsidization Effects. Measures the potential to cross-subsidize specialty crop production among program crop producers who receive Direct and counter-cyclical Program (DCP) benefits. Assumes the presence of a "wealth effect" and reduced planting risk that may indirectly affect production decisions. Calculates average annual fixed direct payments ($23.49 per eligible acre) Calculates three-year average counter-cyclical payments ($10.07 per eligible acre) Adjusts average DCP benefits by calculated state "weights" (ratio of average per-acre commodity program subsidy to the share of each state's specialty crop acres). Multiplies the weighted average combined DCP benefit ($76.04/acre) by total U.S. fruit, nut, and vegetable acres in 2002 (10.6 million acres). Market Impact Effects. Assuming planting restrictions are lifted, measures the potential revenue reduction of existing specialty crop producers (assuming increases in specialty crop acreage and production, and subsequent price reduction). Increased specialty crop acreage is estimated on two farm categories: (1) farms producing program crops only, with no history of specialty crops (i.e., new entrants), and (2) farms that produce both specialty and program crops. For category (1) acreage, increases are estimated from calculated state "weights" (ratio of specialty crop acreage to total program acreage) from data on farms with only specialty or program crops, and farms with both. For category (2) acreage, increases are estimated assuming a flat 5% increase. Acreage increases by state are allocated to 25 specialty crop groupings by state. For the 25 specialty crop groupings, price and revenue reductions are determined using the calculated acreage increase and an assumed price response of -1.11. Input Data/Calculations: Cross-subsidization Effects Direct payments: Payment acres, annual direct payment, and calculated average direct payment per acre for 8 commodity groupings (corn, wheat, other feed grains, rice, cotton, peanuts, soybeans, other oilseeds), averaged across all groupings. Counter-cyclical payments: Actual payments per acre, averaged over a three-year period (2002-2004) for 7 commodity groupings (corn, wheat, other feed grains, rice, cotton, peanuts, soybeans), averaged across all groupings. Fruit, nut, and vegetable acres, total U.S. and by 15 top-producing states (2002). Market Impact Effects USDA data tabulation (2002), U.S. and by state, planted acres on farms with (1) specialty crops only, (2) program crops only, and (3) specialty and program crops. U.S. and state production and production value data (2002-2004). Price response estimate is based on reported demand elasticities for 10 individual crops (potatoes, lettuce, tomatoes, onions, celery, cabbage, carrots, a grouping of other vegetables, apples, and grapefruit) from three different studies by USDA and Georgia College. Estimated Effects: Total Financial Effect: Estimated combined financial effects to existing specialty crop producers is estimated at $4 billion/year, made up of two components: Cross-subsidization Effects: $806 million/year to compensate for subsidies that would continue to growers with base acres who could use subsidies to compete (unfairly). Market Impact Effects: $3.1 billion/year (lost revenue) to existing F&V growers. U.S.: An increase of 1.03 million acres of specialty crop acres (10% increase). This increase represents less than 1% of all program crop acres. Largest acreage increases in specialty crops are at farms producing program crops only, with no history of specialty crops (i.e., new entrants). CA: Greatest acre increase (230,000 acres or +6%), mostly from rice and cotton. ID, CO: Greatest percent acre increase (nearly 30%); most ID gains are for potatoes. Crops with >10% acre increases: potatoes, peas, pears, sweet corn, snap peas, apples, onions, berries, cherries, pumpkins, cabbage, cucumbers, asparagus, squash. Considerations/Comments: Potential Strengths: Estimates price and quantity changes and revenue loss. Potential Shortcomings: Cross-subsidization Effects. Effects are likely overstated since the analysis assumes a weighted average combined DCP benefit ($76.04/acre) across all U.S. fruit, nut, and vegetable acres in 2002 (10.6 million acres), although many of these operations may already be growing both specialty and program crops (and already may be receiving DCP benefits). In addition, counter-cyclical payments are based on 2002-2004 data and not on lower baseline estimates applicable to the 2007 farm bill. Overall, this analysis does not consider other market-based factors that may influence planting decisions. Market Impact Effects. This analysis likely overstates the number of new entrants since it concludes large acreage increases in specialty crops at farms producing program crops only, with no history of specialty crops (i.e., new entrants), based simply on a weighted percentage increase, without consideration of other market-based factors that influence planting decisions including: (1) barriers to entry, such as differing machinery and technology needs, typically higher production costs and more intensive labor and management requirements for specialty crops, and differing marketing arrangements/access to market channels; (2) likelihood for conversion; specifically, it applies same level of likelihood to converting to crops that can be easily rotated year-to-year (e.g., vegetables, beans) and crops that often require lengthy cultivation for development before becoming commercially viable (e.g, orchard crops, berries); (3) differences between fresh market versus for processing, given that most fresh produce is sold under arrangements with packers, distributors, and retailers; most crops for processing are grown under contract; and (4) consideration of current market trends; specifically, it predicts large increases in potato production, despite recent declines in planted acreage, but does not consider potential effects on dry beans, which could be most affected without the restriction.

Owners of cropland with a history of growing "program crops" receive federal subsidy payments without regard to what crops are currently being produced on these base acres. In other words, these "direct payments" are decoupled from crop planting decisions. While the direct payments program is characterized as giving producers the flexibility to make planting choices based on actual market conditions instead of subsidy rules, there are restrictions. There is a prohibition on planting fruits, vegetables, and wild rice on program crop base acres. This planting restrictions policy is now under challenge as Congress debates a 2007 farm bill. The purpose of the fruit and vegetable planting restriction is to protect growers of unsubsidized fruits and vegetables from competing production on subsidized cropland. As reasonable as this justification may appear, there have been problems with the policy. First, producers primarily of processing vegetables (canned and frozen) in the Midwest sharply curtailed production after soybeans became a program crop in the 2002 farm bill. Second, in a high-profile case by Brazil against the U.S. cotton program, the World Trade Organization (WTO) determined that the prohibition on planting fruits and vegetables was not consistent with the rules required of a minimally distorting subsidy. This determination jeopardizes the "green box" classification of direct payments for all program crops. Largely to meet WTO obligations, the Administration proposes that the 2007 farm bill eliminate the fruit and vegetable planting restriction. Companion bills have been introduced in the House and Senate that would allow any producer to use base acres to grow fruits and vegetables for canning and freezing as long as they give up program payments on those acres for one year, but without additional penalties (Farming Flexibility Act of 2007—H.R. 1371, Baldwin, and S. 1188, Lugar). This partial approach likely would not satisfy WTO concerns. Other options include retaining the status quo, eliminating the restrictions entirely, or eliminating the underlying direct payment. Most fresh fruit and vegetable growers oppose eliminating the restriction without some type of compensation. This report summarizes and examines five academic and industry studies on the economic effects of removing the fruit and vegetable planting restrictions. These studies indicate that lifting the planting restriction could have an economic effect on certain crops within certain producing areas. However, differences in approach and scope (e.g., regional versus national; plantings of permanent, perennial crops versus easily rotated, annual crops) complicate a direct comparison across all five studies, and make it difficult to generalize about the possible economic effects of lifting the planting restriction. Only two of the studies provide estimates of revenue losses to existing fruit and vegetable growers (ranging from about $1.7 billion to $4.0 billion in the first year of lifting the current restriction). The other three studies do not make quantitative estimates of the impacts, but indicate that adverse effects of removing the restriction likely would be small relative to the overall industry, although there could be larger impacts on individual producers, commodities, and regions.

Part of the debate over the Bush Administration decision to use military action to overthrow the regime of Saddam Hussein centers on whether or not that regime was allied with Al Qaeda. In building an argument that the United States needed to oust Saddam Hussein militarily, the Administration asserted that Iraq constituted a gathering threat to the United States because it continued to develop weapons of mass destruction (WMD) that it could potentially transfer to international terrorist groups, including Al Qaeda, with which Iraq was allied. This combination produced the possibility of a catastrophic attack on the United States, according to the Administration. The first pillar of the Administration argument for ousting Saddam Hussein—its continued active development of WMD—has been researched extensively. After the fall of the regime in April 2003, U.S. forces and intelligence officers in an "Iraq Survey Group" (ISG) searched Iraq for evidence of WMD stockpiles. A "comprehensive" September 2004 report of the Survey Group, known as the "Duelfer report," said that the ISG found no WMD stockpiles or production but said that there was evidence that the regime retained the intention to reconstitute WMD programs in the future. The formal U.S.-led WMD search ended December 2004, although U.S. forces have found some chemical weapons caches left over from the Iran-Iraq war. The UNMOVIC work remained formally active until U.N. Security Council Resolution 1762 terminated it on June 29, 2007. The second pillar of the Administration argument—that Saddam Hussein's regime had links to Al Qaeda—is relevant not only to assess justification for the invasion decision but also because an Al Qaeda affiliate (Al Qaeda in Iraq, or AQ-I) became a key component of the post-Saddam insurgency among Sunni Arabs in Iraq. The Administration has maintained that the Al Qaeda presence in Iraq, fighting alongside Iraqi insurgents from the ousted ruling Baath Party, members of former regime security forces, and other disaffected Iraqi Sunni Arabs, demonstrates that there were pre-war linkages. On the other hand, most experts believe that Al Qaeda and other foreign fighters entered Sunni-inhabited central Iraq after the fall of Saddam Hussein, from the Kurdish controlled north and from other Middle Eastern countries. These foreign fighters are motivated by an anti-U.S. ideology and a target of opportunity provided by the presence of U.S. forces there, rather than longstanding ties to the former Iraqi regime, according to this view. On March 17, 2003, in a speech announcing a 48-hour deadline for Saddam Hussein and his sons to leave Iraq in order to avoid war, President Bush said: ...the [Iraqi] regime has a history of reckless aggression in the Middle East. It has a deep hatred of America and our friends. And it has aided, trained, and harbored terrorists, including operatives of Al Qaeda." The Administration argument for an Iraq-Al Qaeda linkage had a few major themes: (1) that there were contacts between Iraqi intelligence and Al Qaeda in Sudan, Afghanistan, and Pakistan dating from the early 1990s, including Iraq's assistance to Al Qaeda in deployment of chemical weapons; (2) that an Islamist faction called Ansar al-Islam (The Partisans of Islam) in northern Iraq, had ties to Iraq's regime; and (3) that Iraq might have been involved in the September 11, 2001 plot itself. Of these themes, the September 11 allegations are the most widely disputed by outside experts and by some officials within the Administration itself. Some Administration officials, including President Bush, have virtually ruled out Iraqi involvement in the September 11 attacks while others, including Vice President Cheney, have maintained that the issue is still open. Secretary of State Powell presented the Administration view in greater public detail than any other official when he briefed the United Nations Security Council on Iraq on February 5, 2003, although most of that presentation was devoted to Iraq's alleged violations of U.N. requirements that it dismantle its weapons of mass destruction (WMD) programs. According to the presentation: Iraq and terrorism go back decades.... But what I want to bring to your attention today is the potentially more sinister nexus between Iraq and the Al Qaeda terrorist network, a nexus that combines classic terrorist organizations and modern methods of murder. Iraq today harbors a deadly terrorist network headed by Abu Musab Al-Zarqawi, an associate and collaborator of Osama bin Laden and his Al Qaeda lieutenants. Going back to the early and mid-1990s, when bin Laden was based in Sudan, an Al Qaeda source tells us that Saddam and bin Laden reached an understanding that Al Qaeda would no longer support activities against Baghdad.... We know members of both organizations met repeatedly and have met at least eight times at very senior levels since the early 1990s.... Iraqis continued to visit bin Laden in his new home in Afghanistan [after bin Laden moved there in mid-1996].... From the late 1990s until 2001, the Iraqi embassy in Pakistan played the role of liaison to the Al Qaeda organization ... Ambition and hatred are enough to bring Iraq and Al Qaeda together, enough so Al Qaeda could learn how to build more sophisticated bombs and learn how to forge documents, and enough so that Al Qaeda could turn to Iraq for help in acquiring expertise on weapons of mass destruction. Secretary Powell did not include in his February 5, 2003, briefing the assertion that Iraq was involved in the September 11 plot. Some analysts suggest the omission indicates a lack of consensus within the Administration on the strength of that evidence. In a January 2004 press interview, Secretary Powell said that his U.N. briefing had been meticulously prepared and reviewed, saying "Anything that we did not feel was solid and multi-sourced, we did not use in that speech." Additional details of the Administration's argument, as well as criticisms, are discussed below. Post-Saddam analysis of the issue has tended to refute the Administration argument on Saddam-Al Qaeda linkages, although this issue is still debated. The report of the 9/11 Commission found no evidence of a "collaborative operational linkage" between Iraq and Al Qaeda. In his book "At the Center of the Storm" in May 2007 (Harper Collins Press, pp. 341-358), former CIA Director George Tenet indicated that the CIA view was that contacts between Saddam's regime and Al Qaeda were likely for the purpose of taking the measure of each other or take advantage of each other, rather than collaborating. Others note, however, that some of Tenet's pre-war testimony before Congress was in line with the prevailing Administration view on this question, contrasting with the views in his book. In March 2008, a study by the Institute for Defense Analyses, written for the U.S. Joint Forces Command, and based on 600,000 documents captured in post-Saddam Iraq, found that Iraq during the early to mid-1990s actively supported Egyptian Islamic Jihad, which in 1998 formally merged with Al Qaeda, but that the documents do not reveal "direct coordination and assistance between Saddam Hussein's regime and Al Qaeda." Some of the intelligence information that the Bush Administration relied on to judge linkages between Iraq and Al Qaeda was publicized not only in Secretary of State Powell's February 5, 2003, briefing to the U.N. Security Council, but also, and in more detail, in an article in The Weekly Standard . Vice President Cheney has been quoted as saying the article represents the "best source of [open] information" on the issue. The article contains excerpts from a memorandum, dated October 27, 2003, from Undersecretary of Defense for Policy Douglas Feith to Senators Pat Roberts and Jay Rockefeller, the then chairman and vice chairman of the Senate Intelligence Committee. The memorandum reportedly was based on research and analysis of intelligence and other information by the "Office of Special Plans," an Iraq policy planning unit within the Department of Defense set up in early 2002 but disbanded in the fall of 2002. The following sections analyze details of the major themes in the Administration argument. The "DOD memorandum," as well as other accounts, include assertions that Iraqi intelligence developed a relationship with Al Qaeda in the early 1990s, brokered by the Islamist leaders of Sudan. At the time, Osama bin Laden was in Sudan. He remained there until Sudan expelled him in mid-1996, after which he went to Afghanistan. According to the purported memo, the Iraq-Al Qaeda relationship included an agreement by Al Qaeda not to seek to undermine Saddam's regime, and for Iraq to provide Al Qaeda with conventional weapons and WMD. The Administration view is that Iraq was highly isolated in the Arab world in the early 1990s, just after its invasion of Kuwait in August 1990, and that it might have sought a relationship with Al Qaeda as a means of gaining leverage over the United States and a common enemy, the regime of Saudi Arabia. From this perspective, the relationship served the interests of both, even though Saddam was a secular leader while Al Qaeda sought to replace regional secular leaders with Islamic states. The purported DOD memorandum includes names and approximate dates on which Iraqi intelligence officers visited bin Laden's camp outside Khartoum and discussions of cooperation in manufacturing explosive devices. It reportedly discusses subsequent meetings between Iraqi intelligence officers and bin Laden and his aides in Afghanistan and Pakistan, continuing until at least the late 1990s. The memorandum cites intelligence reports that Al Qaeda operatives were instructed to travel to Iraq to obtain training in the making and deployment of chemical weapons. Secretary of State Powell, in his February 5, 2003, U.N. briefing, citing an Al Qaeda operative captured in Afghanistan, stated that Iraq had received Al Qaeda operatives "several times between 1997 and 2000 for help in acquiring poison gases." According to press accounts, some Administration evaluations of the available intelligence, including a reported draft national intelligence estimate (NIE) circulated in October 2002, interpreted the information as inconclusive, and as evidence of sporadic but not necessarily ongoing or high-level contacts between Iraq and Al Qaeda. Some CIA experts reportedly asserted that the ideological differences between Iraq and Al Qaeda were too large to be bridged permanently. For example, bin Laden reportedly sought to raise an Islamic army to fight to expel Iraqi troops from Kuwait following the Iraqi invasion in August 1990, suggesting that bin Laden might have viewed Iraq as an enemy rather than an ally. According to some accounts, the Saudi royal family rebuffed bin Laden's idea as unworkable, deciding instead to invite in U.S. forces to combat the Iraqi invasion. The rebuff prompted an open split between bin Laden and the Saudi leadership, and bin Laden left the Kingdom for Sudan in 1991. Ideological differences between Iraq and Al Qaeda were evident in a February 12, 2003, bin Laden statement referring to Saddam Hussein's regime—dominated by his secular Arab nationalist Baath Party—as "socialist and infidel," although the statement also gave some support to the Administration argument when bin Laden exhorted the Iraqi people to resist impending U.S. military action. As noted above, Iraq had an embassy in Pakistan that the Administration asserts was its link to the Taliban regime of Afghanistan. However, skeptics of a Saddam-Al Qaeda link note that Iraq did not recognize the Taliban as the legitimate government of Afghanistan when the Taliban was in power during 1996-2001. It was during the period of Taliban rule that Al Qaeda enjoyed safehaven in Afghanistan. Of the 12 Al Qaeda leaders identified by the U.S. government in 2003 as either "executive leaders" or "senior planners and coordinators," none was an Iraqi national. This suggests that the Iraqi nationals did not have the sanction of Saddam Hussein to join Al Qaeda when he was in power. An alternate explanation is that very few Iraqis had the opportunity to join Al Qaeda during its key formative years - the years of the anti-Soviet "jihad" in Afghanistan (1979-1989). Young Iraqis who might have been attracted to volunteer in Afghanistan were serving in Iraqi units during the 1980-88 Iran-Iraq war, and were not available to participate in regional causes. Another major theme in the Administration assertions was the presence in Iraq of a group called Ansar al-Islam (Partisans of Islam). This aspect of the Administration's argument factored prominently in Secretary of State Powell's U.N. presentation, and is the most directly relevant to analysis of the Al Qaeda presence in Iraq today. Ansar al-Islam is considered the forerunner of Al Qaeda in Iraq (AQ-I). Ansar al-Islam formed in 1998 as a breakaway faction of Islamist Kurds, splitting off from a group, the Islamic Movement of Iraqi Kurdistan (IMIK). Both Ansar and the IMIK were initially composed almost exclusively of Kurds. U.S. concerns about Ansar grew following the U.S. defeat of the Taliban and Al Qaeda in Afghanistan in late 2001, when some Al Qaeda activists, mostly Arabs, fled to Iraq and associated there with the Ansar movement. At the peak, about 600 Arab fighters lived in the Ansar al-Islam enclave, near the town of Khurmal. Ansar fighters clashed with Kurdish fighters from the Patriotic Union of Kurdistan (PUK), one of the two mainstream Iraqi Kurdish parties, around Halabja in December 2002. Ansar gunmen were allegedly responsible for an assassination attempt against PUK "prime minister" of the Kurdish region Barham Salih (now a deputy Prime Minister of Iraq) in April 2002. The leader of the Arab contingent within Ansar al-Islam was Abu Musab al-Zarqawi, an Arab of Jordanian origin who reputedly fought in Afghanistan. Although more recent assessments indicate Zarqawi commanded Arab volunteers in Afghanistan separate from those recruited by bin Laden, Zarqawi was linked to purported Al Qaeda plots in the 1990s and early 2000s. He allegedly was behind foiled bombings in Jordan during the December 1999 millennium celebration, to the assassination in Jordan of U.S. diplomat Lawrence Foley (2002), and to reported attempts in 2002 to spread chemical agents in Russia, Western Europe, and the United States. In explaining why the United States needed to confront Saddam Hussein's regime militarily, U.S. officials maintained that Baghdad was connected to Ansar al-Islam. In his U.N. presentation, Secretary of State Powell said: Iraq today harbors a deadly terrorist network headed by Abu Musab al-Zarqawi, an associate and collaborator of Osama bin Laden and his Al Qaeda lieutenants.... Baghdad has an agent in the most senior levels of the radical organization, Ansar al-Islam, that controls this corner of Iraq.... Zarqawi's activities are not confined to this small corner of northeastern Iraq. He traveled to Baghdad in May 2002 for medical treatment, staying in the capital for two months while he recuperated to fight another day. During this stay, nearly two dozen extremists converged on Baghdad and established a base of operations there.... From his terrorist network in Iraq, Zarqawi can direct his network in the Middle East and beyond. However, some accounts question the extent of links, if any, between Baghdad and Ansar al-Islam. Baghdad did not control northern Iraq even before Operation Iraqi Freedom (OIF), and it is questionable whether Zarqawi, were he tied closely to Saddam Hussein's regime, would have located his group in territory controlled by Saddam's Kurdish opponents. The Administration view on this point is that Saddam saw Ansar as a means of pressuring Saddam Hussein's Kurdish opponents in northern Iraq. The reputed DOD memorandum reportedly includes allegations of contacts between lead September 11 hijacker Mohammad Atta and Iraq intelligence, including as many as four meetings between Atta and Iraq's intelligence chief in Prague, Ahmad Samir al-Ani. The DOD memo says that al-Ani agreed to provide Atta with funds at one of the meetings. The memo asserts that the CIA confirmed two Atta visits to Prague—October 26, 1999, and April 9, 2001—but did not confirm that he met with Iraqi intelligence during those visits. The DOD memo reportedly also contains reports indicating that Iraqi intelligence officers attended or facilitated meetings with Al Qaeda operatives in southeast Asia (Kuala Lumpur) in early 2000. In the course of these meetings, the Al Qaeda activists were said to be planning the October 12, 2000, attack on the U.S.S. Cole docked in Aden, Yemen, and possibly the September 11 plot as well. As noted above, Secretary of State Powell reportedly considered the information too uncertain to include in his February 5, 2003, briefing on Iraq to the U.N. Security Council. President Bush did not mention this allegation in his January 29, 2003, State of the Union message, delivered one week before the Powell presentation to the U.N. Security Council. President Bush said on September 16, 2003, that there was no evidence Saddam Hussein's regime was involved in the September 11 plot; he made the statement in response to a journalist's question about statements a few days earlier by Vice President Cheney suggesting that the issue of Iraq's complicity in September 11 is still open. There is dispute within Czech intelligence that provided the information on the meetings, that the Iraq-Atta discussions took place at all, particularly the April 2001 meeting. In November 2001, Czech Interior Minister Stanislav Gross said that Atta and al-Ani had met, but Czech Prime Minister Milos Zeman subsequently told U.S. officials that the two had discussed an attack aimed at silencing anti-Saddam broadcasts from Prague. Since 1998, Prague has been the headquarters of Radio Free Europe/Radio Liberty, a U.S.-funded radio service that was highly critical of Saddam Hussein's regime. In December 2001, Czech President Vaclav Havel said that there was a "70% chance" the meeting took place. The U.S. Federal Bureau of Investigation (FBI) and the Central Intelligence Agency (CIA) eventually concluded, based on records of Atta's movements within the United States in April 2001, that the meeting probably did not take place and that there was no hard evidence of Iraqi regime involvement in the September 11 attacks. Some press reports say the FBI is more confident than is the CIA in the judgment that the April 2001 meeting did not occur. Al Ani himself, captured by U.S. forces in 2003, reportedly denied to U.S. interrogators that the meeting ever happened. Whether or not Al Qaeda leaders and Saddam Hussein had a relationship, a major issue facing the United States is the degree to which Al Qaeda elements are threatening the U.S. effort to stabilize post-Saddam Iraq. Commenting on the Iraq insurgency in its early stages, President Bush said in a speech on September 8, 2003, that "We have carried the fight to the enemy.... We are rolling back the terrorist threat to civilization, not on the fringes of its influence but at the heart of its power." In his January 20, 2004, State of the Union message, President Bush said, "These killers [Iraq insurgents], joined by foreign terrorists, are a serious, continuing danger." Similar statements followed in subsequent years as the Administration sought to assert that Iraq had become the "central front" in the broader post-September 11 "war on terrorism," and that it is preferable to combat Al Qaeda in Iraq rather than allow it to congregate elsewhere in the region and hatch plots inside the United States itself. In a January 10, 2007, major speech announcing the U.S. "troop surge," President Bush made similar points: ... we will continue to pursue al Qaeda and foreign fighters. Al Qaeda is still active in Iraq. Its home base is Anbar Province. Al Qaeda has helped make Anbar the most violent area of Iraq outside the capital. A captured al Qaeda document describes the terrorists' plan to infiltrate and seize control of the province. This would bring al Qaeda closer to its goals of taking down Iraq's democracy, building a radical Islamic empire, and launching new attacks on the United States at home and abroad. In a July 24, 2007, speech specifically on the issue, President Bush said: ... Our troops are....opposing ruthless enemies, and no enemy is more ruthless in Iraq than al Qaeda. They send suicide bombers into crowded markets; they behead innocent captives and they murder American troops. They want to bring down Iraq's democracy so they can use that nation as a terrorist safe haven for attacks against our country.... Critics of this view maintain that Al Qaeda or pro-Al Qaeda elements were motivated by the U.S. invasion to enter Iraq to fight the United States there. According to this argument, the U.S. presence in Iraq has generated new Al Qaeda followers—both inside and outside Iraq—who might not have become active against the United States had the war against Iraq not occurred. This view draws some support from the unclassified "key judgments" of a July 2007 National Intelligence Estimate (NIE) that said: ...we assess that [Al Qaeda central leadership's] association with AQ-I helps Al Qaeda to energize the broader Sunni extremist community, raise resources, and to recruit and indoctrinate operatives, including for homeland attacks. Other critics maintain that the Administration has emphasized an "Al Qaeda" component of the insurgency as a means of bolstering U.S. public support for the war effort in Iraq. According to this view, the Administration has repeatedly attempted to link in the public consciousness the Iraq war to the September 11 attacks in part because of consistent public support for a military component of the overall war on terrorism. In analyzing the debate over Al Qaeda involvement in Iraq, a major question is the degree to which AQ-I has driven the insurgency against U.S. forces and the government of Iraq. Few dispute that there has been, from almost the inception of the insurgency in mid-2003, a "foreign fighter" component. In November 2003, early in the insurgency, one senior U.S. commander in Iraq (82 nd Airborne Division commander Maj. Gen. Charles Swannack) said, in response to reports that foreign fighters were key to the insurgency: "I want to underscore that most of the attacks on our forces are by former regime loyalists and other Iraqis, not foreign forces." At that time, other commanders emphasized the foreign fighter role in the insurgency by asserting that the high profile suicide bombings that occurred were having a significant impact in undermining U.S. and international confidence in the U.S. ability to stabilize post-Saddam Iraq. As examples of such attacks that caused doubt in the U.S. ability to stabilize Iraq, commanders cited the August 19, 2003 bombing of U.N. headquarters in Baghdad and the August 29, 2003, bombing of a major mosque complex in Najaf that killed the leader of the large Shiite faction Supreme Council of the Islamic Revolution in Iraq, Mohammad Baqr Al Hakim. (The group renamed itself in June 2007 as the Islamic Supreme Council of Iraq, ISCI). As a result, the United States has consistently focused on combatting Abu Musab al-Zarqawi, his foreign fighter network in Iraq, and his successors. On March 15, 2004, his Ansar al-Islam group was named as "Foreign Terrorist Organization" under the Immigration and Nationality Act. On October 15, 2004, the State Department named the "Monotheism and Jihad Group"—the successor to Ansar al-Islam—as an FTO. The designation said that the Monotheism group "was...responsible for the U.N. headquarters bombing in Baghdad." Later that month, perhaps in response to that designation, Zarqawi changed the name of his organization to "Al Qaeda Jihad Organization in the Land of Two Rivers (Mesopotamia - Iraq)—commonly known now as Al Qaeda in Iraq, or AQ-I. The FTO designation was applied to the new name. Along with the designations came stepped up U.S. military efforts to find and capture or kill Zarqawi. There were several reported "near misses," according to press reports. However, on June 7, 2006, U.S. forces were able to track Zarqawi to a safe house in Hibhib, near the city of Baqubah, in the mixed Sunni-Shiite province of Diyala, and an airstrike by one U.S. F-16 mortally wounded him. A related group is Ansar al-Sunna, an offshoot of the Zarqawi network that was operating in northern Iraq, including the Kurdish areas and areas of Arab Iraq around Mosul. It was named as an FTO as an alias of Ansar al-Islam when the latter group was designated in March 2004, and Ansar al-Sunna remains on the FTO list. Ansar al-Sunna changed its name back to Ansar al-Islam in November 2007; however, the group has always maintained some distance from AQ-I. For example, it did not join the AQ-I umbrella group called the "Islamic State of Iraq." In its most significant attack, the group claimed responsibility for February 1, 2004, twin suicide attacks in Irbil, northern Iraq, which killed over 100 Kurds, including some senior Kurdish officials. Another major attack—attributed to Ansar al-Sunna by the State Department "Country Reports on Terrorism: 2006" (released April 2007 by the State Department Office of the Coordinator for Counterterrorism)—was the December 2004 suicide bombing of a U.S. military dining facility at Camp Marez in the northern city of Mosul, which killed 13 U.S. soldiers. The State Department terrorism report for 2007 said that Ansar al-Sunna/Islam "continues to conduct attacks against a wide range of targets including Coalition Forces, the Iraqi government and security forces, and Kurdish and Shia figures." Before his death, Zarqawi had largely set AQ-I's strategy as an effort to provoke all out civil war between the newly dominant Shiite Arabs and the formerly pre-eminent Sunni Arabs. In this strategy, Zarqawi apparently calculated that provoking civil war could, at the very least, undermine Shiite efforts to consolidate their political control of post-Saddam Iraq. If fully successful, the strategy could compel U.S. forces to leave Iraq by undermining U.S. public support for the war effort, and thereby leaving the Shiite government vulnerable to continued AQ-I and Sunni insurgent attack. The strategy might have been controversial among Al Qaeda circles, as evidenced by a purported letter (if genuine) from the number two Al Qaeda leader, Ayman al-Zawahiri, to Zarqawi, in July 2005. In that letter, Zawahiri questioned Zarqawi's strategy in Iraq by arguing that committing violence against Shiite civilians and religious establishments would undermine the support of the Iraqi people for AQ-I and the Sunni "resistance" more broadly. To implement its strategy, AQ-I under Zarqawi focused primarily on spectacular suicide bombings intended to cause mass Shiite casualties or to destroy sites sacred to Shiites. Several suicide bombings were conducted in 2005 against Shiite celebrations, causing mass casualties. The most significant attack the February 22, 2006, bombing of the Shiite "Golden Mosque" in Sunni-inhabited Samarra (Salahuddin Province), widely attributed to AQ-I. The attack largely destroyed the golden dome of the mosque. It touched off widespread Shiite reprisals against Sunnis nationwide and is widely considered to have started the "civil war" that raged from the time of the bombing until late 2007, when it began to abate. On several occasions, President Bush has said that Zarqawi largely succeeded in his strategy, although he and other senior Administration officials did not, even at the height of the violence in late 2006, characterize the Iraq as in a state of "civil war." AQ-I's most lethal attack, and the single deadliest attack of the war to date, was the August 2007 truck bombings of Yazidi villages near Sinjar, in northern Iraq, killing an estimated 500 persons, mostly Yazidis. By the end of 2006 and in early 2007, most senior U.S. officials were identifying AQ-I as a driving force, or even the driving force, of the insurgency. In his "threat assessment" testimony before the Senate Armed Services Committee on February 27, 2007, Director of the Defense Intelligence Agency Gen. Michael Maples called AQ-I "the largest and most active of the Iraq-based terrorist groups." On April 26, 2007, at a press briefing, the overall U.S. commander in Iraq, Gen. David Petraeus, called AQ-I "probably public enemy number one" in Iraq. On July 12, 2007, US. military spokesman in Iraq, Brig. Gen. Kevin Bergner, said that AQ-I was responsible for 80 to 90% of the suicide bombings in Iraq, and that defeating it was a main focus of U.S. operations. Some U.S. commanders said that, while most foreign fighters going to Iraq become suicide bombers, others are contributing to the overall insurgency as snipers, logisticians, and financiers. However, other U.S. commanders noted—and continue to note—that these major bombings constituted a small percentage of overall attacks in Iraq (which in early 2007 numbered about 175 per day), and that most of the U.S. combat deaths came from roadside bombs and direct or indirect munitions fire likely wielded by Iraqi Sunni insurgent fighters. In January 2007, President Bush articulated a new counter-insurgency strategy developed by Gen. Petraeus and others, based on assessments within the Administration and outside, that U.S. policy was failing to produce stability. The deterioration in the previous U.S. strategy was attributed, in part, to the burgeoning sectarian violence that AQ-I had helped set off. The cornerstone of the new strategy was to increase the number of U.S. troops in Baghdad and in Anbar Province in order to be able to protect the civilian population rather than conduct combat operations against militants. The U.S. "troop surge" reached full strength in June 2007. The U.S. troop surge was intended to try to take advantage of a growing rift within the broad insurgency that was being observed by U.S. commanders in Iraq as early as mid-2005. The Zarqawi strategy of attempting to provoke civil war, and some of its ideology and practices in the Sunni areas, were not universally popular among Iraq's Sunnis, even among some Sunni insurgent groups. Strategically, Iraqi Sunnis have discernible political goals in Iraq, and some AQ-I tactics, such as attacks on Shiite civilians, were perceived as preventing future power sharing compromise with the Shiites. AQ-I fighters have broader goals, such as defeating the United States and establishing a Sunni-led Islamic state in Iraq that could expand throughout the region. Iraqi Sunni insurgents believed that attacks should be confined to "combatant" targets—Iraqi government forces, most of which are Shiite, Iraqi government representatives, and U.S. and other coalition forces. Other Iraqi Sunnis resented AQ-I practices in the regions where AQ-I fighters congregated, including reported enforcement of strict Islamic law, segregation by sex, forcing males to wear beards, and banning all alcohol sales and consumption. In some cases, according to a variety of press reports, AQ-I fighters killed Iraqi Sunnis who violated these strictures. Other Sunnis, particularly tribal leaders involved in trade and commerce, believed that the constant fighting provoked by AQ-I was depriving Iraqi Sunnis of their livelihoods. Others believe that the strains between AQ-I and Iraqi Sunni insurgent fighters were a competition for power and control over the insurgency. According to this view, Iraqi Sunni leaders no more wanted to be dominated by foreign Sunnis than they did by Iraqi Shiites or U.S. soldiers. During 2003-2006 these strains were mostly muted as Iraqi Sunnis cooperated with AQ-I toward the broader goal of overturning the Shiite-dominated, U.S.-backed power structure in Iraq. The first evidence of strains between AQ-I and Iraqi Sunni insurgents emerged in May 2005 in the form of a reported battle between AQ-I fighters and Iraqi Sunni tribal militiamen in the western town of Husaybah. Still, U.S. commanders had not, at this point, articulated or developed a successful strategy to exploit this rift. Meanwhile, Zarqawi was attempting to counter the strains developing between AQ-I and Iraqi Sunni political and insurgent structures. In January 2006, AQ-I announced formation of the "Mujahidin Shura Council"—an umbrella organization of six groups including AQ-I and five Iraqi Sunni insurgent groups, mostly those with an Islamist ideology. Forming the Shura Council appeared to many to be an attempt by AQ-I to demonstrate that it was working cooperatively with its Iraqi Sunni hosts and not seeking their subordination. To further this impression, in April 2006, the Council announced that an Iraqi, Abdullah Rashid (aka Abu Umar) al-Baghdadi, had been appointed its leader, although there were doubts as to Baghdadi's true identity. (In July 2007, a captured AQ-I operative said Baghdadi does not exist at all, but was a propaganda tool to disguise AQ-I's large role in the insurgency. ) Iraqi Sunni insurgent groups dominated by ex-Baath Party and ex-Saddam era military members apparently did not join the Mujahidin Shura. AQ-I continued to operate under the Mujahidin Shura umbrella at least until Zarqawi's death. The shift to increased integration with Iraqi Sunni insurgents continued after Zarqawi's demise. After his death, Abu Ayub al-Masri (an Egyptian, also known as Abu Hamza al-Muhajir) was formally named leader of the Mujahidin Shura Council (and therefore leader of AQ-I). According to the State Department terrorism report for 2006, al-Masri "continued [Zarqawi's] strategy of targeting Coalition forces and Shi'a civilians in an attempt to foment sectarian strife." In October 2006, al-Masri declared the "Islamic State of Iraq" (ISI) organization under which AQ-I and its allied groups now claim their attacks. ISI appeared to be a replacement for the Mujahidin Shura Council. In April 2007, the ISI named a "cabinet" consisting of a minister of war (al-Masri), the head of the cabinet (al-Baghdadi), and seven other "ministers." The AQ-I efforts to improve cooperation with the Iraqi insurgents did not satisfy the entire Sunni community, even though that community remained resentful of the Shiite-dominated government of Prime Minister Nuri al-Maliki and its perceived monopoly on power. In August 2006, U.S. commanders began to receive overtures from Iraqi Sunni tribal and other community leaders in Anbar Province to cooperate with U.S. efforts to expel AQ-I and secure the cities and towns of the province. This became known as the "Awakening" (As Sahawa). In September 2006, 23 Sunni tribal leaders in Anbar, led by a tribal sub-leader named Abd al-Sattar Al Rishawi, formed an "Anbar Salvation Council." The Council initially recruited about 13,000 young Sunnis from the province to help secure Ramadi, Fallujah, and other Anbar cities. The Council survived the September 13, 2007 killing of Rishawi by a suicide bomber believed to belong to AQ-I. Rishawi's brother (Shaykh Ahmad al-Rishawi) later took over the group and, along with the governor (Mamoun Rashid al-Awani) and other tribal figures from Anbar, visited Washington D.C. in November 2007 and in June 2008 to discuss the security progress in their province. The U.S. "troop surge" included the addition of 4,000 U.S. Marines in Anbar Province. This additional force apparently emboldened the Anbar Salvation Council to continue recruiting Sunni volunteers to secure the province and purportedly convinced Anbar residents to increase their cooperation with U.S. forces to prevent violence. U.S. commanders emboldened this cooperation by offering funds ($350 per month per fighter) and training, although no U.S. weapons, to locally recruited Sunni security forces. These volunteers are now referred to as "Sons of Iraq" – there are about 103,000, of which about 80% are Sunnis. The 20% who are Shiites are opposed to Shiite extremist groups such as that of Moqtada Al Sadr. To retain the loyalty of the Sons of Iraq, U.S. officials are trying to fold them into the official Iraqi Security Forces (ISF), which would then pay their salaries. However, the Shiite-dominated Maliki government fears that the Sunni fighters are trying to burrow into the ISF with the intent of regaining power in Iraq, and have only agreed to accept about 35,000 Sons of Iraq fighters onto the ISF payrolls, not all of which are Sunni. U.S. commanders say that this hesitation by the Maliki government risks driving the Sunnis back into insurgent ranks and back into cooperation with AQ-I. Some Sons of Iraq have already abandoned their positions out of frustration, particularly in Diyala Province, although they have not necessarily resumed insurgent activity. By June 2007, at the height of the U.S. troop surge, Gen. Petraeus called security improvements in Anbar "breathtaking" and said that security incidents in the province had declined by about 90%. He and other commanders reported an ability to walk incident free, although with security, in downtown Ramadi, a city that had been a major battleground only months earlier and which U.S. military intelligence experts reportedly had given up as "lost" in late 2006. General Petraeus testified in April 2008 that he estimates that Anbar Province could be turned over to Provincial Iraqi Control by July 2008, although the handover has been delayed by a power struggle between the Awakening tribal figures and the more urban, established Iraqi Sunni parties such as the Iraqi Islamic Party (IIP). The positive trends observed in Anbar encouraged other anti-AQ-I Sunnis to join the Awakening movement. In May 2007, a Diyala Salvation Council was formed in Diyala Province of tribal leaders who wanted to stabilize that restive province. In early 2007, Amiriyah was highly violent, but was stabilized by the emergence of former Sunni insurgents now cooperating with U.S. forces as a force called the "Amiriyah Freedom Fighters." Other Baghdad neighborhoods, including Saddam stronghold Adhamiyah, began to undergo similar transformations. In Baghdad, the U.S. military established supported this trend in the course of the Baghdad Security Plan ("troop surge") by establishing about 100 combat outposts, including 33 "Joint Security Stations" in partnership with the ISF, to clear neighborhoods of AQ-I and to encourage the population to come forward with information about AQ-I hideouts. Prime Minister Maliki said on February 16, 2008 that AQ-I had been largely driven out of Baghdad, and assessment that has not been subsequently contradicted by U.S. officials. Gen. Petraeus attempted to increase the momentum of the Awakening Movement and the Sons of Iraq program with extensive U.S.-led combat against AQ-I and its sanctuaries. The large scale operations included those related to the troop surge in Baghdad, and two other large operations—Phantom Thunder and Phantom Strike. Operation Phantom Thunder (June 2007), was intended to clear AQ-I sanctuaries in the "belts" of towns and villages within a 30 mile radius around Baghdad. Part of the operation reportedly involved surrounded Baquba, the capital city of Diyala Province, to prevent the escape of AQ-I from the U.S. clearing operations in the city. A related offensive, Operation Phantom Strike, was conducted in August 2007 to prevent AQ-I from establishing any new sanctuaries.To maintain pressure on AQ-I, in January 2008, the U.S. military conducted Operation Iron Harvest and Operation Iron Reaper to disrupt AQ-I in northern Iraq. General Petraeus appeared before four Committees of Congress during April 8-9, 2008 to discuss progress in Iraq. He testified that the assistance from the Sons of Iraq, coupled with "relentless pursuit" of AQ-I by U.S. forces, had "reduced substantially" the threat posed by AQ-I. On May 10, 2008, CIA Director Michael Hayden said Al Qaeda is on "the verge of a strategic defeat in Iraq" because of its reduced presence and activity in large parts of Iraq. On August 10, 2008, Gen. James Conway, Commandant of the Marine Corps, told journalists that AQ-I had permanently lost its foothold in large parts of Iraq, that it is no longer welcomed by Sunni populations in Iraq, and theat AQ-I fighters had begun to shift their focus to Afghanistan where their efforts against the United States might be more effective. In late July 2008, a reputed AQ-I leader in Anbar told the Washington Post that AQ-I leader Abu Ayyub al-Masri had left Iraq to go to Afghanistan, or to the border areas of Pakistan where Al Qaeda leaders are believed to be hiding. On the other hand, General Petraeus testified and has said in other settings that AQ-I remains highly active in and around Mosul, and views Mosul as key to its survival in Iraq, because it is astride the entry routes from Syria. He testified that AQ-I is "still capable of lethal attacks" and that the United States must "maintain relentless pressure on the organization, on the networks outside Iraq that support it, and on the resource flows that sustain it." He also testified that Al Qaeda's senior leaders ..."still view Iraq as the central front in their global strategy" and "send funding, direction, and foreign fighters to Iraq." On August 12, 2008, the U.S. National Intelligence Officer for Transnational Threats, Ted Gistaro, in prepared remarks, told a Washington, D.C. research institute (Washington Institute for Near East Policy) that Despite setbacks in Iraq, AQ-I remains Al Qaeda's most prominent and lethal regional affiliate. While Al Qaeda leaders likely see the declining effectiveness of AQ-I as a vulnerability to their global recruiting and fundraising efforts, they likely continue to see the fight in Iraq as important to their battle with the United States. [Osama] bin Laden and [Al Qaeda deputy leader Ayman ] al-Zawahiri since late 2007 have issued eight statements to rally supporters, donors, and prospective fighters by publicly portraying the Iraq jihad as part of a wider regional cause to "liberate" Jerusalem. Although there have been differences among commanders about the contribution of the foreign fighters to the overall violence in Iraq, estimates of the numbers of foreign fighters have remained fairly consistent over time, at least as a percentage of the overall insurgency. As early as October 2003, U.S. officials estimated that as many as 3,000 might be non-Iraqi, although, suggesting uncertainty in the estimate, Gen. Abizaid said on January 29, 2004, that the number of foreign fighters in Iraq was "low" and "in the hundreds." A September 2005 study by the Center for Strategic and International Studies estimated that there were about 3,000 non-Iraqi fighters in Iraq - about 10% of the estimated total size of the insurgency. The State Department report on terrorism for 2007 (Country Reports on Terrorism: 2007, released April 30, 2008) says AQ-I has a "membership" estimated at 5,000 - 10,000, making it the largest Sunni extremist group in Iraq. This estimate is somewhat higher than what many experts might expect in light of the official U.S. command assessments of the weakening of AQ-I by U.S. operations and strategy. Another issue is the rate of flow of foreign fighters into Iraq. U.S. commanders said in July 2007 that approximately 60-80 foreign fighters come across the border every month (primarily the Iraq-Syria border) to participate in the Iraq insurgency. Press reports say that U.S. commanders estimate that the flow slowed to about 40 in October 2007, in part because of a U.S. raid in September 2007 on a desert camp at Sinjar, need the Syrian border, that was the hub of operations to smuggle foreign fighters into Iraq. General Petraeus testified in April 2008 that about 50 - 70 foreign fighters were still coming across the Syrian border into Iraq, and that Syria "has taken some steps to reduce the flow of foreign fighters through its territory, but not enough to shut down the key network that supports AQ-I." In June and July 2008, U.S. commanders estimate the flow at about 20-30 fighters per month. Another issue is the specific nationalities of the foreigners. One press report in July 2007, quoting U.S. officials in Iraq, said that about 40% of the foreign fighters in Iraq are of Saudi origin. The November 22, 2007 New York Times article, cited above, says that Saudi Arabia and Libya accounted for 60% of the 700 foreign fighters who came into Iraq over the past year. That article was consistent with the findings of a study produced by the Combating Terrorism Center of West Point (Al Qa'ida's Foreign Fighters in Iraq), based on records of 700 foreign nationals who had entered Iraq, and whose papers were found in Iraq by U.S.-led forces near Sinjar, along the border with Syria, published in February 2008. The Sinjar records indicated that, of the 595 records in which a country of origin was stated, about 245 were of Saudi origin; about 110 were of Libyan origin; about 48 were of Syrian origin; 47 were of Yemeni origin; 45 were of Algerian origin; about 40 were of Moroccan origin and a similar amount were of Tunisian origin; about 20 were or Jordanian origin; about 8 were of Egyptian origin; and 20 were "other." If the reports of significant AQ-I relocations to the Pakistan tribal areas bordering Afghanistan are correct, this would suggest that the links are tightening between AQ-I and Al Qaeda's central leadership as represented by Osama bin Laden and Ayman al-Zawahiri. Both Al Qaeda leaders are widely believed to be hiding in areas of Pakistan near the border with Afghanistan, and many assessments since 2007 say that Al Qaeda is enjoying increasing freedom of movement and action in the border regions. If Al Qaeda's ranks are now augmented by an influx of AQ-I fighters from the Iraq battlefront, it could be argued that Al Qaeda's overall capabilities to attack the U.S. homeland, or to undermine U.S. efforts to stabilize Afghanistan, have been increased. U.S. commanders in Afghanistan say they are seeing growing signs of Al Qaeda involvement in the insurgency in Afghanistan, beyond financing and logistical facilitation, although it is not certain whether any of this added assistance to the Afghan insurgency is coming from fighters recently relocated from Iraq. The issue of how the United States is combatting the Afghan insurgency, both in Afghanistan and increasingly through direct action on the Pakistani side of the border, is discussed in CRS Report RL30588, Afghanistan: Post-War Governance, Security, and U.S. Policy , by [author name scrubbed]. On the other hand, as noted above, the fact that AQ-I fighters and leaders are leaving Iraq represents a blow to Al Qaeda and could weaken its ability to recruit new adherents. The links between AQ-I and Al Qaeda's central leadership might be tightening, but they are not new. As discussed above, on July 24, 2007, President Bush devoted much of a speech to the argument that AQ-I is closely related to Al Qaeda's central leadership. The President noted the following details, including: In 2004, Zarqawi formally joined Al Qaeda and pledged allegiance to bin Laden. Bin Laden then publicly declared that Zarqawi was the "Prince of Al Qaeda in Iraq." President Bush stated that, according to U.S. intelligence, Zarqawi had met both bin Laden and Zawahiri. He asserted later in the speech that, according to U.S. intelligence, AQ-I is a "full member of the Al Qaeda terrorist network." After Zarqawi's death, bin Laden sent an aide named Abd al-Hadi al-Iraqi to help Zarqawi's successor, al-Masri, but al-Iraqi was captured before reaching Iraq. That a captured AQ-I leader, an Iraqi named Khalid al-Mashhadani, had told U.S. authorities that Baghdadi was fictitious. In July 2007, Brig. Gen. Bergner, a U.S. military spokesman, told journalists that Mashhadani is an intermediary between al-Masri and bin Laden and Zawahiri. That AQ-I is the only insurgent group in Iraq "with stated ambitions to make the country a base for attacks outside Iraq." Referring to the November 9, 2005, terrorist attacks on hotels in Zarqawi's native Jordan, President Bush said AQ-I "dispatched terrorists who bombed a wedding reception in Jordan." Referring to an August 2005 incident, he said AQ-I "sent operatives to Jordan where they attempted to launch a rocket attack on U.S. Navy ships" docked at the port of Aqaba. Some experts believe that links between Al Qaeda's central leadership and AQ-I have been tenuous, and that the few operatives linking the two do not demonstrate an ongoing, substantial relationship. Others point to the Zawahiri admonishment of Zarqawi, discussed above, as evidence that there is not a close connection between the two. Still others have maintained that there is little evidence that AQ-I seeks to attack broadly outside Iraq, and that those incidents that have taken place have been in Jordan, where Zarqawi might have wanted to try to undermine King Abdullah II, whom Zarqawi opposed as too close to the United States. Since the 2005 attacks noted above, there have not been any attacks outside Iraq that can be directly attributed to AQ-I.

In explaining the decision to invade Iraq and oust Saddam Hussein from power, the Administration asserted, among other justifications, that the regime of Saddam Hussein had a working relationship with the Al Qaeda organization. The Administration assessed that the relationship dated to the early 1990s, and was based on a common interest in confronting the United States. The Administration assertions were derived from U.S. intelligence showing a pattern of contacts with Al Qaeda when its key founder, Osama bin Laden, was based in Sudan in the early to mid-1990s and continuing after he relocated to Afghanistan in 1996. Critics maintain that subsequent research demonstrates that the relationship, if it existed, was not "operational," and that no hard data has come to light indicating the two entities conducted any joint terrorist attacks. Some major hallmarks of an operational relationship were absent, and several experts outside and within the U.S. government believe that contacts between Iraq and Al Qaeda were sporadic, unclear, or subject to alternate explanations. Another pillar of the Administration argument, which has applications for the current U.S. effort to stabilize Iraq, rested on reports of contacts between Baghdad and an Islamist Al Qaeda affiliate group, called Ansar al-Islam, based in northern Iraq in the late 1990s. Although the connections between Ansar al-Islam and Saddam Hussein's regime were subject to debate, the organization evolved into what is now known as Al Qaeda in Iraq (AQ-I). AQ-I has been a numerically small but operationally major component of the Sunni Arab-led insurgency that frustrated U.S. efforts to stabilize Iraq. Since mid-2007, in part facilitated by combat conducted by additional U.S. forces sent to Iraq as part of a "troop surge," the U.S. military has exploited differences between AQ-I and Iraqi Sunni political, tribal, and insurgent leaders to virtually expel AQ-I from many of its sanctuaries particularly in Baghdad and in Anbar Province. U.S. officials assess AQ-I to be weakened almost to the point of outright defeat in Iraq, although they say it remains lethal and has the potential to revive in Iraq. Attacks continue, primarily in north-central Iraq, that bear the hallmarks of AQ-I tactics, and U.S. and Iraqi forces continue to conduct offensives targeting suspected AQ-I leaders and hideouts. As of mid-2008, there are indications that AQ-I leaders are relocating from Iraq to join Al Qaeda leaders believed to be in remote areas of Pakistan, near the Afghanistan border. That perception, if accurate, could suggest that AQ-I now perceives Afghanistan as more fertile ground than is Iraq to attack U.S. forces. The relocation of AQ-I leaders to Pakistan could also accelerate the perceived strengthening of the central Al Qaeda organization. This report will be updated as warranted by developments. See also: CRS Report RL31339, Iraq: Post-Saddam Governance and Security, by [author name scrubbed].

There has been an elevated level of drug trafficking-related violence within and between the drug trafficking organizations (DTOs) in Mexico—a country with which the United States shares a nearly 2,000-mile border. Estimates have placed the number of drug trafficking-related deaths in Mexico between December 2006 (when then-Mexican President Felipe Calderón began his campaign against the DTOs) and December 2012 (when the Calderón administration ended) at somewhere between 45,000 and 55,000. While estimates of drug trafficking-related violence vary by the source, some have estimated the death toll for 2012 alone at over 9,575. This violence has generated concern among U.S. policy makers that the violence in Mexico might spill over into the United States. U.S. federal officials have denied that the increase in drug trafficking-related violence in Mexico has resulted in a spillover into the United States, but they acknowledge that the prospect is a serious concern. As an extension of its counternarcotics policy, as well as in response to the possibility of violence spillover, the U.S. government is supporting Mexico's crackdown campaign against DTOs in Mexico through bilateral security initiatives, including the Mérida Initiative. It is also enhancing border security programs and working to reduce the movement of contraband (drugs, money, and weapons) in both directions across the Southwest border. When discussing drug trafficking-related violence in the United States, one important point to note is that the mere presence of Mexican DTOs in the United States is not in and of itself an indication of any spillover of Mexican drug trafficking-related violence into the United States. While their presence may be an indication of the drug problem in general, it does not necessarily reflect activity directly tied to the recent violence seen in Mexico. The DTOs (Mexican and others) have been developing sophisticated illicit drug smuggling and trafficking networks for years. These activities engender violence and associated criminal activity, not just along the Southwest border but in other areas throughout the country, such as along domestic interstate distribution networks and in major metropolitan areas. The United States has experienced levels of drug trafficking-related crime for many years. The immediate question confronting policy makers is whether the elevated violence between DTOs in Mexico impacts either the level or character of drug trafficking-related violence in the United States. A related question is whether evidence of spillover violence would necessitate a policy response from Congress that is qualitatively different from the current efforts to combat drug trafficking. This report focuses on how policy makers would identify any spillover of drug trafficking-related violence into the United States. It provides (1) an overview of Mexican drug trafficking organization structures, how they conduct business, and the relationship between the drug trafficking organizations in Mexico and their partnerships operating here in the United States; (2) a discussion of the illicit drug trade between Mexico and the United States, as well as a discussion of factors implicated in drug trafficking-related violence; (3) an analysis of the possible nature of any spillover violence that may arise, as well as issues involved in accurately identifying and measuring such violence; and (4) an evaluation of available crime rate data and a discussion of how this data may or may not reflect changes in drug trafficking-related crime. This report does not include a discussion of illicit drug enforcement issues, nor does it include specific policy options that may be considered to stem a potential uptick in drug trafficking-related violence. The nature of the conflict between the DTOs in Mexico has manifested itself, in part, as a struggle for control of the smuggling routes into the United States. Therefore, the prospects for spillover violence are most keenly anticipated in the Southwest border (SWB) region of the United States because the region represents the arrival zone for the vast majority of illicit drugs that are smuggled into the country. The size, geography, and climate of the SWB region have long presented unique challenges to law enforcement. The southern border with Mexico stretches nearly 2,000 miles in length, is sparsely populated in some areas, and is dotted with legitimate crossing points (ports of entry)—both large and small. The National Drug Threat Assessment, 2008 , summarized the illicit drug threat scenario along the SWB in stark terms: The Southwest Border Region is the most significant national-level storage, transportation, and transshipment area for illicit drug shipments that are destined for drug markets throughout the United States. The region is the principal arrival zone for most drugs smuggled into the Unites States; more illicit drugs are seized along the Southwest Border than in any other arrival zone. Mexican DTOs have developed sophisticated and expansive drug transportation networks extending from the Southwest Border to all regions of the United States. They smuggle significant quantities of illicit drugs through and between ports of entry (POEs) along the Southwest Border and store them in communities throughout the region. Most of the region's principal metropolitan areas, including Dallas, El Paso, Houston, Los Angeles, Phoenix, San Antonio, and San Diego, are significant storage locations as well as regional and national distribution centers. Mexican DTOs and criminal groups transport drug shipments from these locations to destinations throughout the country. The most recent threat assessment indicates that the Mexican DTOs pose the greatest drug trafficking threat to the United States. Demand for illicit drugs in the United States partly drives this threat. The United States is the largest consumer of illegal drugs and sustains a multi-billion dollar market in illegal drugs. According to the Central Intelligence Agency, the United States is the largest consumer of Colombian-produced cocaine and heroin as well as Mexican-produced heroin and marijuana. It is also a large consumer of Mexican-produced methamphetamine. The latest National Household Survey on Drug Use and Health (NSDUH), in 2011, surveyed individuals aged 12 and older regarding their drug use during the previous month. In 2011, about 22.5 million individuals were current (in the past month) illegal drug users, representing 8.7% of individuals aged 12 and older. This percentage of users had remained relatively stable since 2002. Among these drug users, marijuana was the most commonly used drug, with an estimated 18.1 million users (7.0% of the population), followed by nonmedical use of prescription-type psychotherapeutic drugs (6.1 million users, or 2.4% of individuals). The survey also estimated that there were 1.4 million users of cocaine (0.5% of Americans), as well as nearly one million users of hallucinogens (0.4% of the population). Results also estimated 439,000 methamphetamine users (0.2% of the population). Mexican DTOs are the major suppliers and key producers of most illegal drugs smuggled into the United States across the SWB. Moreover, Mexico is the major transit country for cocaine. According to the U.S. State Department, "[a]pproximately 95 percent of the cocaine flow to the United States transits the Mexico-Central America corridor from its origins in South America." According to the National Drug Threat Assessment, 2011 , cocaine availability began decreasing in U.S. markets in 2007 and has remained below pre-2007 levels since then. The decreased cocaine availability has been attributed to a number of factors, including cocaine eradication, cocaine seizures, increased worldwide demand for cocaine, pressure on drug trafficking organizations in Mexico, inter-cartel violence, and border security. While cocaine availability decreased, the availability of heroin; marijuana; methamphetamine; and 3,4-Methylenedioxymethamphetamine (MDMA) remained, and even increased, in some areas. In addition to controlling most of the wholesale cocaine distribution in the United States, Mexican DTOs also control more of the wholesale distribution of heroin, methamphetamine, and marijuana than other major drug trafficking organizations in the United States. There has been an increase in heroin production in Mexico—including white powder, black tar, and brown powder heroin—and a subsequent increase in its availability in the United States. With respect to methamphetamine, there was a temporary decline in the supply of Mexican-produced methamphetamine beginning in 2006, in part because of Mexican import restrictions on precursor drugs beginning in 2006. However, by 2008, the DTOs had circumvented the Mexican chemical control laws and were using non-ephedrine based production methods, including the phenyl-2-propanone(P2P) method. This has enabled a subsequent uptick in Mexican methamphetamine flow into the United States. Marijuana availability in the United States has also increased due to factors such as rising marijuana production in Mexico, increasing marijuana cultivation in the United States led by criminal networks—including Mexican DTOs, and decreasing marijuana eradication in Mexico. The true quantity of drugs produced and transported by Mexican DTOs, however, is unknown. Available data provide insight into the quantity of drugs seized along the SWB, though this data cannot speak to the total amount of drugs produced and/or transported into the United States, nor does it provide information about the proportion of these drugs that are actually seized along the SWB. For instance, Table 1 illustrates federal seizures of illegal drugs along the SWB for calendar years (CY) 2005-2010. Total drug seizures (measured in kilograms) generally increased during this time period, despite declines in 2008 and 2010. The decline in seizures for 2010 was primarily driven by a nearly 141,000 kg drop in marijuana seizures compared to 2009. Additionally, cocaine seizures along the SWB decreased in 2007 and 2008 relative to previous years when cocaine seizures had been increasing, but seizures began to increase again in 2009, a year that was marked by an increase in all major illegal drug seizures except for seizures of MDMA. MDMA seizures continued to decline in 2010 as well. These data, however, do not provide insight into the total amount of drugs illegally produced and transported by the DTOs. Rather, these data reflect an unknown proportion of drugs that the Mexican DTOs are bringing into the United States through a variety of transportation modes. Mexican DTOs, in addition to being the major supplier of illegal drugs being smuggled into the United States, have a strong presence within the United States, operating in more than 1,200 U.S. cities. Mexican DTOs are transnational organized crime groups whose criminal activities center primarily around the drug trade. In general, organized crime groups attempt to fill particular illicit market niches. Specifically, DTOs respond to the societal demand for illegal drugs. Some experts have likened drug trafficking organizations to corporations or even small nation-states. They are influenced by factors such as geography, politics, economics, and culture. Geographically, for example, Mexican DTOs are situated between the world's largest producer of cocaine (Colombia) and the world's largest consumer of cocaine (United States), leading Mexico to be a natural drug transshipment route between the two countries. In addition, major Mexican criminal organizations focus primarily (though not exclusively) on drugs, because the drug trade has, to date, generally proven to be more economically lucrative than other illicit activities such as kidnapping and extortion. Nonetheless, Mexican DTOs have diversified their operations, adding to their portfolio crimes ranging from kidnapping and extortion to human trafficking and intellectual property rights violations. These enterprises may help the DTOs supplement their drug trafficking-related income. Mexican DTOs either (1) transport or (2) produce and transport drugs north across the United States-Mexico border. Figure 1 illustrates the drug trafficking routes within Mexico and at the United States-Mexico border. After being smuggled across the border by DTOs, the drugs are distributed and sold within the United States. The illicit proceeds may then be laundered or smuggled south across the border. The proceeds may also be used to purchase weapons in the United States that are then smuggled into Mexico. This leads to a general pattern of drugs flowing north across the border and money and guns flowing south. Although Mexican DTOs have been active for some time, they have become more prominent since the decline of the powerful Colombian DTOs beginning in the 1980s. The National Drug Intelligence Center (NDIC), in its 2009 threat assessment, estimated that Mexican DTOs maintain drug distribution networks—or supply drugs to distributors in at least 230 U.S. cities, as illustrated in Figure 2 . More recent NDIC estimates reportedly indicate that the DTOs have expanded operations and are present in at least 1,286 U.S. cities. Of these operations, 143 are reported to be controlled directly by DTO members in Mexico. Mexican DTOs annually transport multi-ton quantities of illicit drugs from Mexico into the United States using a variety of multi-modal transportation methods. Estimates are that these drugs generate between $18 billion and $39 billion in U.S. wholesale drug proceeds for the Colombian and Mexican DTOs annually. When conceptualizing Mexican drug trafficking organizations as businesses, policy makers may question the impact of possible drug trafficking-related violence spillover (into the United States) on the drug trafficking business —selling drugs in the U.S. black market. Although the effects of violence on businesses in the black market may not mirror those effects on business in the licit market, one way of examining this question may be to look at the impact that violence or violent crimes have on business in general. One study, for example, examined the impact of surges in violence on businesses in various industries in locations of varying crime rates. Results suggested that surges in violence had the most negative impact on those businesses that were service-related (e.g., retail and personal service industries) and located in typically low-crime areas. Specifically, the impact on business was in terms of a reduction in the number of new businesses, a decrease in business expansions, and a lack of overall business growth. In order to generalize these findings from retail businesses to drug businesses, one underlying assumption must be that the locations for buying retail goods and personal services are the same as those for purchasing drugs. If these findings can be generalized to the drug trafficking business, this could suggest that any spillover in drug trafficking-related violence to the United States could adversely affect those service-related businesses (including drug trafficking businesses) in cities with relatively (pre-spillover) low crime rates. On the other hand, if violence affects businesses in the licit and illicit markets differently, these findings may not apply to potential effects of drug trafficking-related violence on drug trafficking business. There have been anecdotal predictions regarding the impact of violence on drug trafficking business; Douglas, AZ, police chief Alberto Melis has said that "spillover violence would be bad for business ... and they're [the drug traffickers] businessmen." Further, the Drug Enforcement Administration (DEA) has expressed moderate confidence that there will not be a significant increase in spillover violence—at least in the short term—because "Mexican trafficking organizations understand that intentional targeting of U.S. persons or interests unrelated to the drug trade would likely undermine their own business interests." Some have suggested that major acts of violence in the United States would lead to a federal law enforcement response. And, the resulting incarceration of perpetrators would be detrimental to the drug trafficking business. The NDIC has indicated that in order to facilitate the distribution and sale of drugs in the United States, Mexican DTOs have formed relationships with U.S. street gangs, prison gangs, and outlaw motorcycle gangs. Although these gangs have historically been involved with retail-level drug distribution, their ties to the Mexican DTOs have allowed them to become increasingly involved at the wholesale level as well. These gangs facilitate the movement of illicit drugs to urban, suburban, and rural areas of the United States. Not only do these domestic gangs distribute and sell the drugs, but they also "provide warehousing, security, and/or transportation services as well." For example, Barrio Azteca is one of at least nine prominent U.S. prison gangs with ties to Mexican DTOs. Barrio Azteca primarily generates money from smuggling marijuana, heroin, and cocaine across the Southwest border for the DTOs—namely, the Juárez cartel—but they are also involved in other crimes, such as extortion, kidnapping, and alien smuggling. Like other organized crime groups, Mexican DTOs are profit-driven. While the primary goods trafficked by DTOs are drugs, some experts have noted that these organizations do generate income from other illegal activities, such as the smuggling of humans and weapons, counterfeiting and piracy, kidnapping for ransom, and extortion. If the DTOs are not able to generate income from the drugs—due to any number of reasons (increased Mexican or U.S. law enforcement, decreased drug supply, decreased drug demand, etc.)—they may increase their involvement in other money-generating illegal activities, such as kidnapping and home invasions. Take, for example, the number of drug trafficking-related kidnappings for ransom in Phoenix, AZ. In 2009, the NDIC reported 358 such incidents in 2007 and 357 in 2008 (through December 15, 2008), and indicated that nearly every incident was drug-related. These statistics were revised in the 2010 National Drug Threat Assessment, indicating that kidnappings in Phoenix reached 260 in 2007, 299 in 2008, and 267 in 2009. This decrease in the number of reported kidnappings for 2007 and 2008 was reportedly due to a reclassification of certain cases by the Phoenix Police Department. Further, the NDIC reports that kidnappings may be generally underreported because victims may fear retaliation for reporting or may expose their own involvement in drug trafficking. Still, Tucson, AZ, police have reported that although there has been an increase in kidnappings for ransom and home invasions, the suspects in the cases are local criminals—not active DTO members from Mexico. This disparity in reports indicates that while there may be an increase in certain illegal activities that may be tied to drug smuggling and trafficking, these illegal activities are not necessarily directly related to drug trafficking in general or to Mexican drug trafficking organizations in particular. As such, they may not be valid or reliable indicators for the presence or absence of drug trafficking-related spillover violence. In an illegal marketplace, where prices and profits are elevated due to the risks of operating outside the law, violence or the threat of violence becomes the primary means for settling disputes and maintaining a semblance of order—however chaotic that "order" might appear to the outside observer. This was a fundamental conclusion reached by the National Academy of Sciences Panel on the Understanding and Control of Violent Behavior. Because illegal drug markets operate outside the law, no courts or other forms of peaceful mediation exist for resolving disputes between drug producers, traffickers, and their customers. As with other black markets, drug markets are necessarily governed by the threat of violence, which may lead to actual violence. Illegal drugs and violence, then, are linked primarily through the operations of underground drug markets. Drug trafficking-related violence in Mexico has been elevated, particularly since 2007, and in 2012, there were over 9,575 drug trafficking-related murders in Mexico. Mexican drug trafficking organizations are now at war with each other as well as with the police and military personnel who are attempting to enforce the drug laws in northern Mexico along the U.S. border. The DTOs, as a result of enforcement actions in Mexico, along with increasing border enforcement measures taken by the United States, are finding it more difficult and more costly to control the production zones and smuggling routes. One of the consequences of this increasingly competitive environment is a rise in the level of violence associated with the illicit drug trade as the DTOs struggle for control over territory, markets, and smuggling routes. Policy makers are thus confronted with the uncomfortable possibility that increased law enforcement (which leads to increased difficulty and costs to control production zones and smuggling routes, and which in turn leads to the need to resolve disputes over such territories) could result in increased drug trafficking-related violence. This appears to be the situation that has developed in Mexico. This relationship gives rise to a number of important issues for policy makers. One such matter is evaluating the relative costs and benefits of increased enforcement of the current drug policy against the potentially elevated levels of violence that such increased enforcement might engender. Could the drug trafficking-related violence currently evidenced in Mexico reach a level that would prompt U.S. policy makers to consider policy actions that could alter the underpinnings of the illegal drug market? It does not appear as if the violence has reached such a level as yet. Policy makers, however, have expressed significant concern over the possibility of the current violence in Mexico spilling over into the United States. When assessing the potential implications of increased violence in Mexico as a result of the increasing tensions between the DTOs located in Mexico, one of the central concerns for U.S. policy makers is the potential for what has recently been termed "spillover" violence—an increase in drug trafficking-related violence in United States. Given this concern, it is critical to develop an understanding of what "spillover" is, what it might look like, how it might be measured, and what potential triggers for policy action can be identified from this analysis. To date, Congress has not adopted a formal definition of spillover violence. Several definitions and/or qualities of spillover violence have been provided by government officials, as well as experts and analysts. For instance, according to the DEA, the interagency community has defined spillover violence in the following manner: [S]pillover violence entails deliberate, planned attacks by the cartels on U.S. assets, including civilian, military, or law enforcement officials, innocent U.S. citizens, or physical institutions such as government buildings, consulates, or businesses. This definition does not include trafficker on trafficker violence, whether perpetrated in Mexico or the U.S. This definition of spillover provides a relatively narrow scope of what may constitute spillover violence. In particular, it excludes the category of violence—trafficker-on-trafficker violence—in which the vast majority of drug trafficking-related violence in Mexico has occurred. If policy makers and law enforcement are concerned that the drug trafficking-related violence, as seen in Mexico, may spill over into the United States, they are necessarily concerned with this predominant category of trafficker-on-trafficker violence that is excluded from the interagency community's definition of spillover violence. The boundaries of what may constitute spillover violence, as defined by the interagency community, thus makes the likelihood that the United States will experience this form of spillover violence relatively small. Further, by generally constraining the definition of spillover violence to those acts that target the government and innocent civilians, the type of violence necessary to constitute spillover (according to the interagency definition) may begin to resemble acts of terrorism. If so, policy makers and experts may be challenged with discriminating between spillover violence and terrorism. Several experts and scholars have also discussed qualities of drug trafficking-related violence that may constitute spillover, including aspects of trafficker-on-trafficker violence. Such qualities are analyzed in the following section and may provide policy makers with additional definitions of spillover violence. Of note, this report does not address non-violent indicators—such as rising corruption of U.S. officials and law enforcement—that could be related to drug trafficking-related violence spillover. Some experts have suggested that a spillover of violence into the United States may look similar to the recent surge of violence in Mexico. In Mexico, this increasing violence has been seen through a rise in both the number of drug trafficking-related murders and the brutality of the murders. It is also taking the forms of increasing intimidation and fear, attacks on security forces, assassinations of high-ranking officials, growing arsenals of weapons, and indiscriminate killing of civilians. While a potential spillover of violence into the United States could appear similar to the violence in Mexico, the violence may be contingent upon numerous factors that differ between the United States and Mexico. For instance, the U.S. government may respond differently to domestic drug trafficking-related violence than the Mexican government has, and these differences in responses could in turn influence the nature of the drug trafficking-related violence seen in each country. This section of the report discusses several factors that may be of concern as Congress debates the potential spillover of drug trafficking-related violence. These factors include who may be implicated in the violence, what type of violence may arise, when violence may appear, and where violence may occur. If the drug trafficking-related violence were to spill over from Mexico into the United States, Congress may be concerned with both the individuals perpetrating the violence as well as the victims of the violence. Reports on the drug trafficking-related violence in Mexico generally indicate that the perpetrators of violence are active members of DTOs who are vying for territory, avenging betrayals, and reacting against the Mexican government's crackdown on the traffickers. If violence were to spill into the United States, policy makers may question whether the perpetrators of the violence will continue to be active drug trafficking members from Mexico, or whether violence will be inflicted by others who may be more indirectly tied to the DTOs. As mentioned, the DTOs have connections with U.S. groups such as street gangs, prison gangs, and outlaw motorcycle gangs who distribute and sell drugs, aid in smuggling drugs, and enforce the collection of drug proceeds. To date, reports from law enforcement on drug trafficking-related violence in the United States are mixed; while some suggest that violence may be carried out by drug traffickers or other criminals from Mexico, others indicate that domestic drug traffickers or gang members may be responsible. The violence plaguing Mexico has been directed toward several groups: competing DTOs vying for territory, Mexican security forces, government officials, and those indebted to the traffickers. In fact, Mexican government officials have estimated that 90% of the murders in Mexico have targeted members of drug trafficking organizations. Although there have been reports of civilian bystanders being killed and isolated events of indiscriminate killing, there are not consistent reports of the drug traffickers targeting civilians who are unconnected to the drug trade. There have been concerns, however, raised by the isolated incidents of U.S. law enforcement agents killed both in the United States and in Mexico by suspected drug smugglers and traffickers. For example, U.S. Border Patrol Agent Brian Terry was killed in December 2010 in Arizona, and in February 2011, two ICE agents were shot, one fatally, while driving between Monterrey and Mexico City. Experts have suggested that "[i]f the current security trends [in Mexico] continue to worsen ... the deliberate and sustained targeting of U.S. government personnel will become more likely." If there were to be a significant spillover of violence into the United States, policy makers may question whether the victims would be of a similar group as the victims of violence in Mexico. To date, the anecdotal reports of drug trafficking-related violence in the United States indicate that not only the perpetrators, but the victims of the crimes as well, are all somehow involved in the drug trade. If any significant spillover of drug trafficking-related crime were to follow a similar pattern, policy makers could expect that individuals on both sides of the violence are connected to the drug trade. There are circumstances, however, under which the drug trafficking victims in the United States could extend to groups beyond those involved in trafficking. If there is an increase in violence and the U.S. government cracks down on the DTOs similarly to the Mexican government, the traffickers' reactions in the United States may be similar to that seen in Mexico—a surge in violence against security forces and government officials. Of note, overall violence against federal law enforcement officials along the SWB has remained relatively constant over the past several years, with 1,056 assaults against border patrol agents in FY2009 and 1,049 in FY2010. Examining specific sectors, however, has revealed localized changes—increased assaults against border patrol agents in the Tucson, AZ, and El Paso, TX, sectors coupled with decreased assaults against agents in the San Diego, CA, sector. It is unclear what proportion of these assaults—if any—may have been carried out by members or affiliates of Mexican DTOs. Federal officials have indicated that increased targeting of U.S. law enforcement personnel, similar to that which has occurred in Mexico, would constitute evidence of spillover. If, however, the U.S. response differs from that of Mexico, the reactions from the DTOs may also differ. Further, a change in the victim pattern—to include innocent bystanders, for instance—may represent a departure from current patterns of drug trafficking-related violence and thus could represent a reasonable trigger for policy action to mitigate the effects of spillover violence. In Mexico, the drug trafficking-related violence most often reported is murder. Estimates are that there were somewhere between 45,000 and 55,000 drug trafficking-related murders between December 2006 and the end of 2012. There have also been reports of kidnappings, home invasions, and assaults, among other crimes. In the United States, many of the anecdotal reports citing an increase in violence point to an increase in drug trafficking-related kidnappings and home invasions. However, the true number of these crimes across the country, and how many have clear ties to drug trafficking, is unknown. It is also unknown whether or not different types of violence are more associated with certain crimes (committed by drug traffickers) than with others. If there were to be a substantial spillover of drug trafficking-related violence from Mexico, policy makers and law enforcement may be concerned with what types of violence may appear. Would the types of drug trafficking-related violence already seen in the United States to date (i.e., kidnappings and home invasions) become more prevalent, or would there be a greater emergence of the types of violence seen in Mexico (i.e., murders)? In addition to the type of violence, a spillover or increase in violence could also be measured by the nature of the violence. As mentioned, the rise in the number of murders in Mexico was also accompanied by increasing brutality, intimidation, and attacks on individuals other than those directly involved in the illicit drug trade (i.e., security forces and governmental officials). If any spillover of violence into the United States followed a similar pattern as the violence in Mexico, there may be an increase in the brutality of crimes in addition to an increase in the pure number of crimes. Critical to the assessment of whether the United States is experiencing spillover violence is the establishment of a realistic timeline for measuring the change in drug trafficking-related violence in the United States. If the policy goal is to determine if any spillover violence is occurring in the United States as a result of the increasing violence in Mexico, then it would be logical to look at trends in drug trafficking-related crime in the United States since the onset of the conditions that precipitated the recent violence in Mexico—roughly beginning around when former Mexican President Felipe Calderón took office in December, 2006. A comparison of the trends in drug-trafficking related violence (in the United States) before and after this reference point might shed some light on whether or not the United States is experiencing spillover violence. As noted, the United States has experienced and continues to experience certain levels of drug trafficking-related crime. It may be difficult to isolate those drug trafficking-related violent crimes that are occurring either directly or indirectly as a result of the situation in Mexico. Therefore, it may also be useful for policy makers to use this same timeframe to measure changes in other spillover indicators, such as changes in the profile of victims of drug trafficking-related crime, the number and nature of violent attacks on U.S. law enforcement personnel, and changes in the nature of drug trafficking-related violence. This could be one means to standardize the measurement of any potential spillover and to provide policy makers with a more concrete idea of the trends. The discussion of when the violence occurs begs the question of where to measure any potential change in violence. As may be expected, the majority of the discussion surrounding the prospects of spillover violence in the United States has been focused on the Southwest border (SWB). Initially, this makes intuitive sense. Even the very term "spillover" suggests the spread of violence across the border from Mexico—almost by osmosis. From a policy perspective, it is useful to question whether or not a focus exclusively on the border makes sense. Certainly this is where the analysis should begin as the SWB region is the primary region that links production and smuggling operations within Mexico to the United States. As noted, however, the drug trafficking organizations' operations within the United States are geographically dispersed in as many as 1,286 or more cities. DTOs are businesses, and they not only maintain their own presence in the United States but also have relationships with U.S. groups such as street gangs, prison gangs, and outlaw motorcycle gangs to facilitate the distribution and sale of drugs within the United States. Given that drug trafficking-related violence is prevalent throughout the United States, the task for policy makers is to concentrate the geographic analysis of changes in drug trafficking-related violence around areas that would have the greatest likelihood of eliciting evidence of spillover. One possible method of accomplishing this task could be to look at the various factors discussed above—changes in the levels, nature, and victim pattern of drug trafficking-related violence in selected geographic locations—along a timeline that corresponds with the escalation of drug trafficking violence in Mexico. Of course, the critical issue is selecting those geographic locations. Areas already identified as strategically important to drug trafficking operations here in the United States would be an optimal place to start. These locations would include cities, states, and localities in the SWB region, as well as along significant inland distribution routes. Policy makers may also wish to examine geographic areas that are not currently identified as strategically important to drug trafficking operations here in the United States, as a control for comparison. This section of the report discusses some of the challenges facing policy makers when considering policy options dealing with drug control and border security issues in general. These issues are discussed more generally because they provide the context within which any specific options for dealing with the potential spillover of drug trafficking-related violence will be determined. These policy challenges include the complexity of the issue, defining goals and objectives, and measuring the problem. As evidenced through some of the above discussion, there are many federal agencies, state and local entities, task forces, intelligence centers, and various other groups that are not only involved in drug control policy in general, but have specific roles in countering threats posed by the Mexican DTOs. Each of these agencies has different authorities, budgets, resources, and responsibilities when it comes to the drug control issue. This complexity has also been evident in the federal government's current response to the increasing drug trafficking-related violence in Mexico. The policy implication of this intricate web of jurisdictions is that it is difficult to centralize the establishment, implementation, and evaluation of policies—be they drug control policies in general, or the specific policy responses to the increased drug trafficking-related violence in Mexico. Several congressional hearings have been held on various aspects of the drug control and drug trafficking-related violence issues, and some congressional policy makers have voiced their concerns over the lack of centralized direction on these issues. In particular, some in Congress have expressed concern over who is taking the lead—not just among the involved agencies—but within Congress itself. Complicated congressional jurisdiction spread across a variety of committees in both houses means that oversight of the drug control and the drug trafficking-related violence issues is equally complex. Consequently, coordination of oversight of the areas is problematic and difficult to manage. Adding further complexity is the fact that few of the agencies involved in the drug control effort are solely dedicated to a counterdrug mission (DEA and ONDCP being two of few exceptions). This presents several challenges in analyzing drug control policy. One challenge, for example, involves disaggregating an agency's drug control mission and activities from its other missions and activities. Take, for instance, interdiction at ports of entry. CBP officers select people, goods, and conveyances for additional scrutiny based on a variety of factors. Often, officers have no idea what the ultimate outcome of a physical inspection might be. The inspection might uncover illicit drugs, or it might uncover cash, weapons, or any number of items that are prohibited from entering the country. How then, may one estimate the portion of CBP officers' time that is spent on the counterdrug effort? This same question applies to the multitude of other agencies that also have drug control responsibilities. The question becomes even more difficult to answer when the aim is to analyze a specific drug control policy—such as specific policies targeted toward any potential spillover violence from Mexico. Disaggregating the drug control mission (or specific policies), however, is critical on several levels; not only does it affect the measurement of an agency's progress in implementing drug control efforts, but it also affects the directing of resources towards these efforts or specific policies. The definition of success is a critical aspect of policy evaluation. As noted above, the existing complexities surrounding drug control policies in general, and policies to address the potential spillover violence from Mexico in particular, complicate the evaluation of these policies. For this reason, it is important to identify appropriate goals or objectives either for what might be an overall strategy or for specific policies. For example, the appropriate domestic policy response to the increased drug trafficking-related violence in Mexico is difficult to articulate. This is because several forces are at work; it is tempting to conflate the response to a specific iteration of the problem (the change in drug trafficking-related violence in Mexico) with the drug control problem in general and, at the same time, to disaggregate the issue down to so many constituent parts (outbound inspections at the border, kidnappings in Phoenix, straw purchases in Houston, a drug trafficking-related shooting in El Paso, etc.). This allows for the potential to obscure the actual policy problem to be confronted. From a policy perspective also, the degree to which this conflation or disaggregation occurs may not matter in the final analysis if the appropriate metrics are ultimately used to evaluate each. With particular relevance to the subject of this report, if the policy task is to identify any potential or actual drug trafficking-related spillover violence in the United States, and the appropriate drug activity indicators can be accurately identified, the issue becomes how to correlate any change in drug activity indicators to the increased drug trafficking-related violence in Mexico. One potential complication with such an analysis is uniformly defining what constitutes drug-related violence. This could potentially be broken down into three general categories: crimes committed by people under the influence of drugs; economic-compulsive crimes (crimes committed in order to obtain money or drugs to support drug use); and what are termed systemic drug crimes—crimes that result from the business of trafficking illicit drugs. These definitions are important, because while the commission of crimes by people who are under the influence of illegal drugs and economic-compulsive crimes present important policy issues in and of themselves, changes in these indicators contribute little value to the determination of whether or not the United States is experiencing any spillover violence from Mexico particularly related to the elevated level of drug trafficking-related violence . The issue of measurement is important in several different contexts. There are issues with the collection and reporting of drug control statistics, as well as questions concerning what value the reported measures have. Because the drug control issue is complex, and so many agencies participate in its execution, invariably there are going to be differences in how agencies collect and report enforcement statistics. Central to the issue at hand in this report is the question of how to measure changes in drug-related violence, and specifically drug trafficking-related violence. Even an indicator that conceptually could provide some value added to the central question (to choose an example popularly cited in the media—violent crimes excluding robberies) is difficult to evaluate. For example, in Tucson, the number of violent crimes excluding robberies from January to March of 2009 was 632; for the same period in 2008 the number was 651. So, there were fewer violent crimes in Tucson in the first three months of 2009 than in 2008. These are not necessarily drug trafficking-related violent crimes, but if the premise—that the United States is experiencing spillover violence stemming from the drug trafficking activity in Mexico—is accurate, one would expect violent crimes to go up, and drug trafficking-related violent crimes would be included in the more general violent crime reporting. On the other hand, a significant drop in non-drug trafficking-related violence could obscure a rise in actual drug trafficking-related violent crime. However, the true driver of the change in drug trafficking-related violent crime cannot be ascertained from these statistics. Another measurement issue is where to look for changes in drug-trafficking-related violence. This is another area where the problems with available data are manifested. Ideally, to conduct this analysis, one would have access to drug-trafficking-related violent crime data from the geographic areas of interest (border and interior locations with known drug trafficking activity). This data would be available in small geographic increments so that local differences could be taken into account, and it would be consistently available in comparable sets across an adequately long time period so as to conduct a statistically significant trend analysis. Unfortunately, this and other data are not readily available for analysis, as detailed in the section outlining the Congressional Research Service's (CRS's) evaluation of available data. As discussed, a multitude of factors are involved in both defining as well as measuring spillover violence. Currently, there is no comprehensive, publicly available data that can definitively answer the question of whether there has been a significant spillover of drug trafficking-related violence into the United States. Although anecdotal reports have been mixed, U.S. government officials maintain that there has not yet been a significant spillover. In an examination of data that could provide insight into whether there has been a significant spillover in drug trafficking-related violence from Mexico into the United States, CRS undertook an analysis of violent crime data from the FBI's Uniform Crime Report (UCR) program. Of note, however, the UCR data does not allow analysts to determine what proportion of the violent crime rate is related to drug trafficking or, even more specifically, what proportion of drug trafficking-related violent crimes can be attributed to spillover violence. The UCR compiles data from monthly reports from approximately 17,000 local police departments or state agencies, and it provides some of the most commonly cited crime statistics in the United States. Under the UCR program, the FBI collects data on the number of offenses known to police, the number and characteristics of persons arrested, and the number of "clearances" for eight different offenses, collectively referred to as Part I offenses. Part I offenses include murder and nonnegligent manslaughter, forcible rape, robbery, aggravated assault, burglary, larceny-theft, motor vehicle theft, and arson. Within the Part I offenses, crimes are categorized as either violent or property crimes. Violent crimes include murder and nonnegligent manslaughter, forcible rape, robbery, and aggravated assault. Property crimes include burglary, larceny-theft, motor vehicle theft, and arson. The UCR, however, is not a comprehensive source for data on crime in the United States. It collects offense data on a limited number of crimes (Part I crimes), which means that offense data are available only for a small number of all crimes committed in the United States. For instance, it does not include data on kidnapping—one of the oft-cited drug trafficking-related crimes discussed as evidence of spillover violence. Further, the inclusivity of the UCR data is affected by other factors such as whether or not local law enforcement chooses to report data to the FBI, the variety in reporting and data classification practices of local law enforcement agencies, and the imputation methods used by the FBI to estimate crime in jurisdictions that have not reported for an entire year. For the purpose of this report, CRS presents and analyzes violent crime rates as reported by the UCR program, as policy makers have repeatedly expressed concern about the possibility of drug trafficking-related violent crimes increasing. In addition to providing the overall national violent and property crime rates annually, the UCR program also provides these crime rates for metropolitan statistical areas (MSAs). In the present analysis of violent crime rate data, CRS relies upon the violent crime rate data for the MSAs as calculated by the UCR program. As mentioned, the violent crime rate includes murder and nonnegligent manslaughter, forcible rape, robbery, and aggravated assault. As mentioned, the NDIC estimated in its 2009 threat assessment that Mexican DTOs maintain drug distribution networks—or supply drugs to distributors in at least 230 U.S. cities (as illustrated in Figure 2 ). It was later noted that DTOs have expanded operations and are present in at least 1,286 U.S. cities. Because this information is assimilated based on state and local law enforcement agency estimations, as well as law enforcement interviews with NDIC staff, this is not necessarily a comprehensive or nuanced picture of Mexican drug trafficking presence in cities around the United States. For instance, while some cities may experience a larger amount of drug trafficking activity than others, these cities are considered as equally experiencing drug trafficking presence for the purpose of the NDIC estimate. In addition, there may be other cities not reporting the presence of DTOs, even if these organizations are active in those cities. If drug trafficking-related violence is in fact increasing in those cities reporting a presence of Mexican DTOs, one may expect to see an increase in such violence in the cities identified by the NDIC—or perhaps only in those cities that are situated along the SWB if the violence is truly spilling directly across the border. Further, if this increase in violence were to follow a similar time frame as the escalating violence in Mexico, one may expect to see an increase in violence since December 2006, when former Mexican President Felipe Calderón took office and began to crack down on the DTOs. For each of the 230 cities cited by the NDIC's 2009 threat assessment as having Mexican DTO presence, CRS determined whether there was a corresponding MSA and violent crime rate reported in the UCR for that MSA. CRS identified 138 such MSAs, 8 of which directly abut the border between the United States and Mexico. CRS refers to these 8 as the "border MSAs" and the other 130 MSAs that do not directly abut the U.S.-Mexico border as the "non-border MSAs." As illustrated in Figure 3 , CRS calculated the average violent crime rate across the border MSAs and the non-border MSAs for each of the years 1999 through 2011. CRS analysis of available data suggests that the violent crime rate has not significantly increased in those areas where there is an identified presence of Mexican DTOs, as well as available data on the violent crime rate for those MSAs. Further, such analysis suggests there is no statistically significant difference in the average violent crime rate in these border and non-border MSAs between the years 1999 and 2011. Since 2001, the average violent crime rate in the eight selected border MSAs has generally declined, and it has remained below the national violent crime rate since 2005. It is unknown, however, whether trends in the violent crime rate are related to changes in drug trafficking-related violent crimes. Because the violent crime rate is a compilation of violent crimes both related and unrelated to drug trafficking, an increase in drug trafficking-related violent crime could be masked by a decrease in those violent crimes not related to trafficking—or vice versa. Looking at the aggregate of border and non-border MSAs, however, may not provide information as to trends in individual MSAs or cities. For example, Figure 4 illustrates the trends in violent crime rates in eight border MSAs. As mentioned, if spillover violence were to trend in time with the escalating violence in Mexico, analysts may expect to see an increase in drug trafficking-related violence between 2007 and 2011 relative to previous years. For instance, although one MSA—El Paso, TX—experienced an increase in the violent crime rate in 2007, 2008, 2009, and 2010 compared to 2006, the violent crime rate in the El Paso MSA remained lower than the violent crime rate in that MSA from 1999-2004. Further, when drug trafficking-related violence peaked in Mexico in 2011, the violent crime rate in El Paso dropped, as did the violent crime rate in six of the seven other border MSAs depicted in Figure 4 . These trends may be counterintuitive to some who expect that a "spillover" in violence may touch those cities closest in proximity to the violence in Mexico. Spillover violence may not occur uniformly across the entire SWB during the same time periods. There may be hot-spot "flare-ups" in response to Mexican drug trafficking activity directly across the border. If this were true, violence would have climbed in Laredo, TX, in 2004 and 2005 when there was an increase in drug trafficking-related violence across the border in Nuevo Laredo. It did not. Also using this hot-spot analysis, the more recent increase in violence in Ciudad Juarez should be linked to an increase in violence in El Paso, TX, between 2008 and 2010. In this case, an increase in violence in a Mexican city does appear to be correlated with an increase in violence in a neighboring U.S. city. This further illustrates that relying on trends in overall violent crime rates may not provide an accurate depiction of trends in violent crime (or more specifically, in drug trafficking-related violent crime) around the country. Another possibility is that there may be a time lag between drug trafficking-related violence in Mexico and any associated violence in the United States. For instance, after settling territorial disputes in Mexico, rival DTOs may engage in violent conflict on the U.S. side of the border. With the data available, however, it is not possible to separate out a time lag from other factors that may influence levels of drug trafficking-related violence that may be seen in the United States. Mexico has experienced an elevated level of drug trafficking-related violence within and between the drug trafficking organizations (DTOs), and the number of drug trafficking-related deaths in Mexico between December 2006 (when then-Mexican President Felipe Calderón began his campaign against the DTOs) and December 2012 (when the Calderón administration ended) has been estimated at somewhere between 45,000 and 55,000. Congress remains concerned with the possibility that the current drug trafficking-related violence in Mexico may spill over into the Untied States. One of the primary challenges in assessing this violence is defining the term spillover . While the interagency community has defined spillover violence as violence targeted primarily at civilians and government entities—excluding trafficker-on trafficker-violence—other experts and scholars have recognized trafficker-on-trafficker violence as central to spillover. When defining and analyzing changes in drug trafficking-related violence within the United States to determine whether there has been (or may be in the future) any spillover violence, critical elements include who may be implicated in the violence (both perpetrators and victims), what type of violence may arise, when violence may appear, and where violence may occur (both along the Southwest border and in the nation's interior). At present, there is no comprehensive, publicly available data that can definitively answer the question of whether there has been a significant spillover of drug trafficking-related violence into the United States. Although anecdotal reports have been mixed, U.S. government officials maintain that there has not yet been a significant spillover. CRS analyzed violent crime data from the Federal Bureau of Investigation's (FBI's) Uniform Crime Report program in order to examine data that could provide insight into whether there has been a significant spillover in drug trafficking-related violence from Mexico into the United States. However, the overall violent crime data do not allow CRS to determine the proportion of violent crimes that are related to drug trafficking or, even more specifically, the proportion of drug trafficking-related violent crimes that are attributable to spillover violence. In its analysis, CRS calculated the average violent crime rate across eight selected Metropolitan Statistical Areas (MSAs) along the Southwest border and 130 selected non-border MSAs—identified by the National Drug Intelligence Center (NDIC) as having the presence of Mexican DTOs—for each of the years 1999 through 2011. CRS analysis suggests that the violent crime rate has not significantly increased in those areas where there is an identified presence of Mexican DTOs. Further, there appears to be no significant difference in the average violent crime rate in the selected border and non-border MSAs between the years 1999 and 2011. In conclusion, however, because the trends in the overall violent crime rate may not be indicative of trends in drug trafficking-related violent crimes, CRS is unable to develop fact-based conclusions about trends in drug trafficking-related violence spilling over from Mexico into the United States.

There has been an elevated level of drug trafficking-related violence within and between the drug trafficking organizations in Mexico. This violence has generated concern among U.S. policy makers that the violence in Mexico might spill over into the United States. U.S. federal officials have denied that the increase in drug trafficking-related violence in Mexico has resulted in a spillover into the United States, but they acknowledge that the prospect is a serious concern. The most recent threat assessment indicates that the Mexican drug trafficking organizations pose the greatest drug trafficking threat to the United States, and this threat is driven partly by U.S. demand for drugs. Mexican drug trafficking organizations are the major suppliers and key producers of most illegal drugs smuggled into the United States across the Southwest border (SWB). The nature of the conflict between the Mexican drug trafficking organizations in Mexico has manifested itself, in part, as a struggle for control of these smuggling routes into the United States. Further, in an illegal marketplace—such as that of illicit drugs—where prices and profits are elevated due to the risks of operating outside the law, violence or the threat of violence becomes the primary means for settling disputes. When assessing the potential implications of the increased violence in Mexico, one of the central concerns for Congress is the potential for what has been termed "spillover" violence—an increase in drug trafficking-related violence in United States. While the interagency community has defined spillover violence as violence targeted primarily at civilians and government entities—excluding trafficker-on-trafficker violence—other experts and scholars have recognized trafficker-on-trafficker violence as central to spillover. When defining and analyzing changes in drug trafficking-related violence within the United States to determine whether there has been (or may be in the future) any spillover violence, critical elements include who may be implicated in the violence (both perpetrators and victims), what type of violence may arise, when violence may appear, and where violence may occur (both along the SWB and in the nation's interior). Currently, no comprehensive, publicly available data exist that can definitively answer the question of whether there has been a significant spillover of drug trafficking-related violence into the United States. Although anecdotal reports have been mixed, U.S. government officials maintain that there has not yet been a significant spillover. In an examination of data that could provide insight into whether there has been a significant spillover in drug trafficking-related violence from Mexico into the United States, CRS analyzed violent crime data from the Federal Bureau of Investigation's Uniform Crime Report program. The data, however, do not allow analysts to determine what proportion of the violent crime rate is related to drug trafficking or, even more specifically, what proportion of drug trafficking-related violent crimes can be attributed to spillover violence. In conclusion, because the trends in the overall violent crime rate may not be indicative of trends in drug trafficking-related violent crimes, CRS is unable to develop fact-based conclusions about trends in drug trafficking-related violence spilling over from Mexico into the United States.

The child tax credit was created in 1997 by the Taxpayer Relief Act of 1997 ( P.L. 105-34 ) to help ease the financial burden that families incur when they have children. Over the past 20 years legislative changes have significantly changed the credit, transforming it from a generally nonrefundable credit available only to the middle and upper-middle class, to a partially refundable credit that more low-income families are eligible to claim. This report examines the legislative history of the credit, describing how the credit has changed over the past two decades as a result of different laws. The report includes a description of the recent legislative changes made to the credit by P.L. 115-97 . The child tax credit was initially structured in the Taxpayer Relief Act of 1997 ( P.L. 105-34 ) as a $500-per-child nonrefundable credit to provide tax relief to middle- and upper-middle-income families. Since 1997, various laws have modified key parameters of the credit, expanding the availability of the benefit to more low-income families while also increasing the value of the tax credit. The first significant change to the child tax credit occurred with the enactment of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA; P.L. 107-16 ). EGTRRA increased the amount of the credit over time to $1,000 per child and made it partially refundable under the earned income formula. The refundable portion of the credit—the amount that exceeds income tax liability—is often referred to as the additional child tax credit or ACTC. Subsequent legislation enacted in 2003 and 2004 accelerated the implementation of the changes made under EGTRRA. In 2008 and 2009, Congress passed legislation—the Emergency Economic Stabilization Act of 2008 (EESA; P.L. 110-343 ) and the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5 )—that further expanded the availability and amount of the credit to taxpayers whose income was too low to either qualify for the credit or be eligible for the full credit. ARRA lowered the refundability threshold to its current level of $3,000 for 2009 through 2010. The ARRA provisions were subsequently extended several times and made permanent by the Protecting Americans from Tax Hikes (PATH) Act of 2015 (Division Q of P.L. 114-113 ). At the end of 2017, Congress enacted P.L. 115-97 which, in addition to making numerous changes to the tax code, temporarily changed the child tax credit. Specifically, the law increased the credit for many (though not all) taxpayers by doubling the maximum amount of the credit (and increasing the maximum amount of the ACTC to $1,400), increasing the income at which the credit begins to phase out, and reducing the refundability threshold as illustrated in Table 1 . In addition, this law temporarily modified the identification (ID) number requirement of the credit, requiring taxpayers to provide the Social Security number (SSN) for every child for whom they claimed the credit. Below is a summary of major legislative changes made to the child tax credit between 1997 and 2017. These descriptions are preceded by an overview of policy debates that occurred immediately before enactment of the credit. The first child tax credit was enacted in 1997 as part of the Taxpayer Relief Act of 1997 ( P.L. 105-34 ), but it was conceived years earlier and included in several different bills before it ultimately became law. In 1991, the bipartisan National Commission on Children, which was established to provide solutions to a variety of problems facing children, recommended in its final report to the President the creation of a $1,000 refundable child tax credit for all children through age 18. The commission's proposed credit amount was indexed for inflation. The report cited slow wage growth, the increasing costs of living, and a rising tax burden for the average family as key factors leading to increased financial burdens on families with children. The report's authors acknowledged that there were provisions in the tax code meant to address the increased financial burden to families that arose from having children, specifically the exemption for dependents. The dependent exemption was intended to provide economic relief to families with children by reducing taxable income by a fixed amount per dependent, and hence reducing tax liability. However, the amount of the exemption was fixed in nominal terms (i.e., not adjusted for inflation) and the commission's report highlighted the fact that its real value had declined considerably since it was established in 1948. The commission argued against simply increasing the amount of the dependent exemption, noting that such a policy would not provide adequate benefit to lower- and middle-income families. Specifically, the commission noted that the dependent exemption, similar to a tax deduction, provided greater monetary benefit to taxpayers with greater taxable income since its value (in terms of tax savings) was proportional to a taxpayer's highest marginal tax bracket. And since the dependent exemption could not lower the tax liability of taxpayers who, due to low income, owed no federal income tax, it was unavailable to many families with children who the commission believed most needed economic assistance. Three years later, in 1994, a child tax credit was included in legislation meant to enact key principles of the Contract with America, a list of policy proposals released by the Republican Party before the 1994 midterm elections. In the 104 th Congress, both the American Dream Restoration Act ( H.R. 6 ) and later the Tax Fairness and Deficit Reduction Act of 1995 ( H.R. 1215 ), if they had been enacted, would have provided a $500-per-child nonrefundable tax credit for children under 18 years. The credit would have begun to phase out for families with AGI above $200,000 (regardless of filing status). In response to the legislation that had been drafted in Congress, President Clinton proposed his own child tax credit during the 104 th Congress in his Middle Class Bill of Rights Tax Relief Act of 1995. Under this proposal, the child tax credit was a $300-per-child nonrefundable tax credit for tax years 1996 through 1998, increasing to $500 per child after 1998, with income phaseouts beginning at $60,000. The credit amounts were indexed for inflation. An eligible child was defined as being under 13 years of age. President Clinton's proposal was estimated by the Department of the Treasury to cost $35.6 billion over five years, while the American Dream Restoration Act was estimated to cost $107 billion over the same time period. After they did not reach an agreement in 1995, Congress and President Clinton revisited the topic of a child tax credit in 1997. The House, Senate, and Clinton Administration all proposed a $500 nonrefundable tax credit. A key distinction among the proposals centered on the interaction of the child tax credit with the EITC, which would have an impact on the availability of the child tax credit to lower-income taxpayers. Both the Senate and House legislation proposed applying the nonrefundable child tax credit after the EITC had already reduced tax liability. President Clinton proposed the application of the child tax credit before the application of the EITC. For many low- and moderate-income taxpayers, claiming the EITC before the nonrefundable child tax credit reduced or eliminated their child tax credit. By contrast, claiming the nonrefundable child credit before the EITC allowed the taxpayer to claim the full amount of the child tax credit they were eligible for and did not change the value of their EITC. For example, assume that in 1997 a two-parent, two-child family has $23,000 of income. This family would have an $825 tax liability before the application of credits. They would also be eligible for $1,325 in the EITC and, assuming the child credit was $500 per child, $1,000 of the child tax credit. If the EITC was claimed before the child tax credit, this family's tax liability would be reduced to zero and they would receive the remainder of the EITC as a $500 refund. Since they had no tax liability, they could not claim the $1,000 of the nonrefundable child tax credit. If, on the other hand, they claimed the child tax credit first, they could claim $825 of the nonrefundable child tax credit, reducing their tax liability to zero and then claim the full $1,325 of EITC as a refund. The child tax credit proposals differed in other ways, notably the interaction of the child tax credit with the child and dependent care credit, the age of a qualifying child, and the income phase-out levels and phase-out rates. Given that the child tax credit was part of a broader tax bill that had to meet budget rules, many of the specific details of the provision were likely agreed upon after evaluating their budgetary impact. What emerged from the conference negotiations that year was the Taxpayer Relief Act of 1997 ( P.L. 105-34 ), which established a child tax credit. The credit was structured as a $500 nonrefundable tax credit ($400 in 1998) for most families with qualifying children under 17. The credit phased out at a rate of $50 for every $1,000 by which a taxpayer's modified AGI exceeded thresholds based on filing status, namely $110,000 for married taxpayers filing jointly, $75,000 for taxpayers filing as head of household, and $55,000 for married taxpayers filing separately. The credit was refundable for taxpayers with three or more qualifying children and was calculated as the excess of a taxpayer's payroll taxes over their EITC (the alternative formula). Neither the credit amount nor the phaseout thresholds were indexed for inflation. The refundable portion of the credit was reduced by the amount of the taxpayer's alternative minimum tax (AMT).  In addition, the total amount by which personal nonrefundable credits (including the child tax credit) could reduce an individual's regular tax liability was limited. The Omnibus Consolidated and Emergency Supplemental Appropriations Act, 1999 ( P.L. 105-277 ), which was enacted shortly after the enactment of the Taxpayer Relief Act of 1997, repealed the provision that reduced the refundable portion of the child tax credit by the AMT for tax year 1998. In addition, this act allowed personal nonrefundable credits (including the child tax credit) to fully offset a taxpayer's regular income tax liability in 1998. The Ticket to Work and Work Incentives Improvement Act of 1999 ( P.L. 106-170 ) extended the provision in P.L. 105-277 which allowed the nonrefundable personal credit to fully offset regular tax liability for one additional year, through the end of 1999. In addition, for tax years 2000 and 2001, the act included a provision which allowed taxpayers to use their personal nonrefundable credits (including the child tax credit) to not only offset their regular tax liability in full, but also their AMT. Finally, the act also extended for tax years 1999 through 2001 the prior-law repeal of the provision that reduced the refundable portion of the child tax credit by the AMT. The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA; P.L. 107-16 ) made four significant changes to the child tax credit. First, EGTRRA increased the maximum amount of the credit per child in scheduled increments until it reached $1,000 per child in 2010. Second, EGTRRA made the credit refundable for families irrespective of size using the earned income formula. For tax years 2001 through 2004, the earned income formula set the amount of the refundable portion of the credit equal to 10% of a taxpayer's earned income in excess of $10,000, up to the maximum amount of the credit for that tax year. The refundability rate was scheduled to increase to 15% for tax years 2005 through 2010. The $10,000 threshold was indexed for inflation beginning in 2002. Third, EGTRRA allowed the child tax credit to offset AMT tax liability for tax years 2002 through 2010. Fourth, the law temporarily repealed the prior law provision that reduced the refundable portion of the child tax credit by the amount of the AMT. All the EGTRRA provisions were scheduled to expire at the end of 2010. The Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA; P.L. 108-27 ) temporarily accelerated the scheduled increase in the maximum credit amount. Specifically, while EGTRRA increased the maximum credit amount to $600 per child for 2003 and 2004, JGTRRA increased this amount to $1,000 per child for those two years. In the summer of 2003, the $400 increase in the credit for 2003 was paid in advance from the Department of the Treasury to many families who qualified for the child tax credit. These direct payments were distributed based on information contained on taxpayers' 2002 income tax returns. The JGTRRA provisions were scheduled to expire after 2004, and the child tax credit would have reverted to its scheduled level under EGTRRA—$700 per child in 2005. In September 2004, Congress passed the Working Families Tax Relief Act of 2004 (WFTRA; P.L. 108-311 ), which further accelerated the implementation of key provisions of EGTRRA. This act extended the maximum amount of the credit established under JGTRRA, $1,000 per child, through 2009. For 2010, the EGTRRA provisions would apply and the maximum amount of the credit would remain $1,000 per child. In addition, WFTRA increased the refundability rate to 15% for 2004. Under EGTRRA, the refundability rate would remain at 15% from 2005 through 2010. WFTRA also contained a provision that allowed combat pay to be included as part of earned income for purposes of computing refundability of the child tax credit. As more soldiers began to see combat due to the wars in Iraq and Afghanistan, they started receiving combat pay. Income earned by members of the armed services in a combat zone is generally excluded from taxation. This exclusion benefits taxpayers who have positive tax liability and reduces the taxes they owe. However, for some lower-income members of the Armed Forces, the exclusion resulted in earnings being too low to qualify for the refundable portion of the child tax credit. The inclusion of combat pay as earned income for purposes of calculating the refundable child tax credit under WFTRA meant that the earnings of some military families would increase above the refundability threshold, ultimately resulting in larger child tax credit refunds. This change was for 2004 through 2010, and was scheduled to expire, along with other provisions of EGTRRA, at the end of 2010. In October 2008, Congress passed the Emergency Economic Stabilization Act of 2009 (EESA; P.L. 110-343 ) in response to the financial and housing crisis. The law included a provision to lower the refundability threshold for the child tax credit for 2008 from $12,050 to $8,500. In the absence of any additional congressional action, the refundability threshold was scheduled to increase to $12,550 in 2009. In early 2009, Congress began to debate different legislative proposals for economic stimulus. Part of that debate concerned changing the refundability threshold of the child tax credit. The House proposed reducing the refundability threshold to zero for 2009 and 2010, while the Senate proposed lowering the refundability threshold to $8,100 over the same time period. The House's proposed changes to the child tax credit were estimated to cost $18.3 billion over 10 years, in comparison to $7.2 billion for the Senate proposal. The provision took its final shape during the meetings between the Senate and the House conferees. In February 2009 Congress passed the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5 ), which ultimately reduced the refundability threshold to $3,000 for 2009 and 2010. This proposal was estimated to cost $14.8 billion over 10 years. At the end of 2010, both the EGTRRA and ARRA provisions of the child tax credit (see Table 2 ) were scheduled to expire. Since ARRA's changes to the refundability threshold built upon changes made by EGTRRA, the expiration of EGTRRA would effectively terminate the expansion of refundability made by the 2009 stimulus law (ARRA). Absent an extension of EGTRRA, the maximum amount of the child tax credit would have reverted to $500 per child, the credit would only have been refundable to families with three or more children using the alternative formula, and the amount of the child tax credit would not have been allowed in full against the AMT. In December 2010, Congress passed the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 ( P.L. 111-312 ), which extended both the EGTRRA provisions of the child tax credit and the expansion of refundability from ARRA for two years through the end of 2012. At the end of 2012, Congress passed the American Taxpayer Relief Act of 2012 ( P.L. 112-240 ; ATRA). This law made the EGTRRA changes to the child tax credit permanent and extended the $3,000 refundability threshold enacted as part of ARRA for five years, through the end of 2017. The Protecting Americans from Tax Hikes (PATH) Act of 2015 (Division Q of P.L. 114-113 ) made the ARRA modification to the child tax credit—the $3,000 refundability threshold—permanent. In addition, the PATH Act modified the taxpayer identification requirement for the credit to specify an ID requirement for each child for whom the credit is claimed. Specifically, a taxpayer claiming the credit must provide a valid Taxpayer Identification Number (TIN) for each qualifying child on their federal income tax return. Valid TINs include individual taxpayer identification numbers (ITINs), Social Security numbers (SSNs), and adoption taxpayer identification numbers (ATINs). ITINs are issued by the Internal Revenue Service (IRS) to noncitizens who do not have and are not eligible to receive SSNs. ITINs are supplied solely so that noncitizens are able to comply with federal tax law, and do not affect immigration status. The law also required that the TIN—for both the qualifying child and the taxpayer—be issued on or before the due date of the return. At the end of 2017, Congress passed the 2017 tax revision ( P.L. 115-97 ) which made numerous changes to the federal income tax for individuals and businesses, including temporarily expanding the child tax credit. These temporary changes to the child tax credit are summarized in Table 1 . The law doubled the maximum amount of the credit from $1,000 to $2,000 per qualifying child and increased the maximum amount of the refundable portion of the credit (the additional child tax credit or ACTC) from $1,000 per qualifying child to $1,400 per qualifying child. While in effect, the expanded ACTC amount can be annually adjusted for inflation using the chained consumer price index. (The law uses an indexing convention that rounds the $1,400 amount to the next lowest multiple of $100.) The law also lowered the income level at which taxpayers could begin receiving the ACTC from $3,000 to $2,500. Finally, the law increased the income level at which the credit begins to phase out from $75,000 to $200,000 for unmarried taxpayers, and from $110,000 to $400,000 for married taxpayers filing joint returns. Aside from the inflation adjustment of the ACTC, all other parameters of the child tax credit are not adjusted for inflation. In addition, the law temporarily required taxpayers to provide an SSN associated with work authorization for any child for whom they claim the credit. The SSN must be issued before the due date of the tax return. Failure to provide the child's current SSN could result in the taxpayer being denied the credit (both the nonrefundable and refundable portions of the credit). The law did not change the ID requirement for the taxpayer. Finally, the law created a new temporary "family credit" for non-child credit eligible dependents (children ineligible for the child tax credit or older non-child dependents). Non-child credit eligible dependents excludes otherwise eligible dependents who are not U.S. citizens and are residents of Mexico or Canada. The credit is equal to $500 per non-child credit eligible dependent. The amount is not annually adjusted for inflation. The phaseout parameters of the child credit (e.g., phaseout thresholds of $400,000 married filing jointly, $200,000 other taxpayers, 5% phaseout rate) apply to the family credit. The family credit is not annually adjusted for inflation. All the modifications to the child tax credit and the new family credit are currently scheduled to expire at the end of 2025.

The child tax credit was initially structured in the Taxpayer Relief Act of 1997 (P.L. 105-34) as a $500-per-child nonrefundable credit to provide tax relief to middle- and upper-middle-income families. Since 1997, various laws have modified key parameters of the credit, expanding the availability of the benefit to more low-income families while also increasing the value of the tax credit. The first significant change to the child tax credit occurred with the enactment of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA; P.L. 107-16). EGTRRA increased the amount of the credit over time to $1,000 per child and made it partially refundable under the earned income formula. The refundable portion of the credit—the amount that exceeds income tax liability—is often referred to as the additional child tax credit or ACTC. Subsequent legislation enacted in 2003 and 2004 accelerated the implementation of the changes made under EGTRRA. In 2008 and 2009, Congress passed legislation—the Emergency Economic Stabilization Act of 2008 (EESA; P.L. 110-343) and the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5)—that further expanded the availability and amount of the credit to taxpayers whose income was too low to either qualify for the credit or be eligible for the full credit. ARRA lowered the refundability threshold to its current level of $3,000 for 2009 through 2010. The ARRA provisions were subsequently extended several times and made permanent by the Protecting Americans from Tax Hikes (PATH) Act of 2015 (Division Q of P.L. 114-113). At the end of 2017, Congress enacted P.L. 115-97 which, in addition to making numerous changes to the tax code, temporarily changed the child tax credit. Specifically, the law increased the credit for many (though not all) taxpayers by doubling the maximum amount of the credit (and increasing the maximum amount of the ACTC to $1,400), increasing the income at which the credit begins to phase out, and reducing the refundability threshold. In addition, this law temporarily modified the identification (ID) number requirement of the credit, requiring taxpayers to provide the Social Security number (SSN) for every child for whom they claimed the credit. P.L. 115-97 also created a new temporary "family credit" for non-child credit eligible dependents (children ineligible for the child tax credit or older non-child dependents). Non-child credit eligible dependents excludes otherwise eligible dependents who are citizens of Mexico or Canada. The credit is equal to $500 per non-child credit eligible dependent. The amount is not annually adjusted for inflation. The phaseout parameters of the child credit (i.e., phaseout thresholds of $400,000 married filing jointly, $200,000 other taxpayers, 5% phaseout rate) apply to the family credit. The family credit is not annually adjusted for inflation. All the modifications to the child tax credit and the new family credit are currently scheduled to expire at the end of 2025.

The current gap between U.S. coal supply and domestic demand may widen as low cost natural gas becomes more attractive to electric power plants, and uncertainties with new environmental regulations discourage investment in new coal plants. Coal producers with excess supply will likely seek to expand their market abroad. Consequently, in the long run (over the next decade and possibly longer), U.S. coal exports are expected to rise. In the near term, however, the U.S. Energy Information Administration (EIA) projects coal exports to decline from a high point of 126 million short tons in 2012 to 107 million short tons in 2014. Growth potential in Asian coal markets seems large, but there are potential bottlenecks (e.g., lack of infrastructure, potential rising costs of regulation, competition from other fuels, and transportation), which could slow export growth. Also, limits on natural gas supply (for any number of reasons) would likely increase domestic coal prices and cut into exports. Although U.S. consumption of coal appears to be declining, other parts of world are increasing their use of coal. U.S. consumption of coal declined from 2011 to 2012. Coal production also declined, but exports rose 17%. The decrease in supply was driven, in part, by the decline in domestic demand. The EIA includes coal in its 2013 Annual Energy Outlook Early Release. In its reference case, net exports of coal may increase through 2040, increasing almost 50% from 2011 levels. Increased net exports could improve the U.S. trade balance as well as add government revenue from production on federal lands that might otherwise decline because of falling domestic consumption. Exporting coal may run counter to the current Administration's domestic environmental policies aimed at reducing greenhouse gas emissions (GHG), and affect current U.S. policy goals addressing global climate change and other environmental issues. Depending upon the location of the coal exports, certain parts of the country may benefit economically. Current and projected coal exports, issues associated with infrastructure, and the environment have prompted interest by Congress. Bills were introduced in the 112 th Congress that supported increased coal exports ( H.R. 3409 , S. 3450 ) and sought to limit exports ( H.R. 6202 ). Coal export-related issues that have raised congressional concern include carbon emissions abroad, coal dust from rail transport, infrastructure development (particularly port expansion), and federal coal valuation for royalty purposes, among others. Global production, consumption, and trading of coal have increased over the last decade, and are projected to continue growing. In fact, worldwide coal was the fastest-growing source of primary energy in 2011, according to the International Energy Agency's (IEA's) Coal Medium-Term Market Report 2012 . Coal consumption is projected to also grow more than oil or natural gas over the next five years, according to the IEA report, and reach parity with oil as the most used fuel source in the world. Worldwide, coal production has increased by nearly 60% since 2002, with most of the increase coming from China—a 130% rise. China accounted for about 50% of coal production in 2011, up from 34% in 2002. U.S. coal production has declined by 13 million tonnes of oil equivalent (Mtoe) over this time period. The data in Figure 1 illustrate that other countries such as Colombia, Indonesia, and India also had significant production increases since 2002. India's coal production grew by 60% over the past 10 years, while Indonesia's production more than tripled. Australia increased coal production by 26% over the same time period. At the company level, t he concentration of production worldwide is not significant. In 2010, the top five world coal producers account ed for about 18% of world production (Coal India (6%), Shenhua Group China (5%), Peabody Energy ( 3 %), Datong Coal Mining Group-China (2%) , and Arch Coal (2%) ) . The top 30 coal firms produce d 40% of world production. The United States ranked number one in the world in coal reserves in 2011, with almost 240 billion metric tons (mt) (28%). Russia was second with an estimated reserve base of 157 billion mt (18%), with China in third with 115 billion mt (13%). Taken together, the top three countries hold 59% of the world's recoverable coal reserves. When India and Australia are added, the top five coal producing countries hold 75% of world recoverable coal reserves (see Table 2 ). As a result of increasing electricity demand, global coal consumption has steadily risen over the last decade, an era of economic recession, which portends opportunities for increases in U.S. coal exports. The IEA projects that by 2017 coal use will be on par with oil as the top fuel in the world's energy mix (see Figure 2 ). Worldwide, coal is the largest contributor to primary energy growth, accounting for 65% of the increase in primary energy between 2010 and 2011. And, China's coal consumption was the largest contributor to the global growth in coal, up almost 165 Mtoe, in 2011 for about a 10% increase. Most of China's coal consumption is for its rapidly expanding electricity generation sector (see Figure 3 ). The global coal market in 2011 was over 3,700 Mtoe or 8.2 billion short tons (BST), up about 68% since 2000. This represents an annual average growth rate of roughly 5%, the highest among fossil fuels. China dominates the global coal market, accounting for almost half of global coal consumption in 2011. For comparison, the world's second- and third-largest coal consumers, the United States and India, account for 13% and 8% of global consumption, respectively. The European Union consumed about 8%. China's growing consumption of coal outpaced its production, taking that country from being a net coal exporter to a net importer. In 2000, China was the world's second-largest coal exporter, behind Australia. China started importing more than it was exporting in 2009 and became the world's second-largest importer, after Japan, according to EIA statistics. In 2010, net imports to China represented 5% of China's domestic consumption. International trade is more limited in coal than other fossil fuels. Roughly 15% of coal—1.2 billion short tons (BST) is traded globally versus 60% of oil and 30% of natural gas. The largest coal consumers are also the world's largest producers—China, the United States, and India. However, outside of China and India, most of the growth in global coal production has come from major coal exporters Indonesia (likely to curtail exports in the coming years for domestic use), Australia, Russia, and Colombia. Essentially, they are filling the space left in the market as China swung from being a net exporter to a net importer. Global trade in coal has averaged about 15% of world production, with the United States ranking among the top five exporting countries in 2010 through 2012. Australia, Indonesia, Russia, South Africa, and Colombia have also ranked in the top five coal exporting countries over the last five years. Meanwhile, Japan, China, South Korea, Taiwan, India, and Germany have ranked in the top five importing countries during those five years. Most notably, China climbed to be the second-largest importer in 2009, surpassing Japan for the top spot in 2012. The value of coal varies according to certain characteristics—energy content, ash level, sulfur content, moisture, and volatiles—while contracts include factors such as use, coal quality, length of contract, delivery terms, and payment options. These variables have made comparison of coals for export more difficult than for other hydrocarbons, which tend to be more uniform. Coal prices around the world reached a peak in 2008 and then fell sharply with the global economy, as did oil and natural gas prices. As prices rebounded in 2009, the gap between the U.S. benchmark Central Appalachia coal price and other international coal prices widened (see Figure 4 ). As more U.S. coal enters the global market, the additional demand will likely raise domestic prices while contributing low-cost coal to the world market. All else being equal, the additional U.S. low-cost coal might result in more coal being consumed worldwide. The United States has been exporting coal since the late 1800s. From 2003 to 2012, U.S. coal exports rose over 200%, mainly driven by competitive production costs, global demand, and lower prices, among other factors (see Figure 5 ). Coal exports comprised 12% of U.S. coal production in 2012. The recent U.S. economic crisis caused a sharp decline in U.S. 2009 exports over 2008, but exports are again trending up, more than doubling since 2009. U.S. coal exports were aided by a drop in value of the U.S. dollar against other currencies, including those of other major coal exporting countries, such as Australia, Indonesia, and Russia. Exports of both metallurgical coal and thermal coal from the United States have been increasing since 2009, rising almost 87% and 73%, respectively. Prior to 2009, exports of both had been on the rise, but the economic crisis stifled that growth. In 2011, U.S. coal exports broke 100 MST for the first time since 1992 and in 2012 reached 126 MST, surpassing their previous peak of almost 113 MST in 1981. The value of U.S. coal exports has increased, rising from under $10 billion in 2010 to almost $16 billion in 2011, according to EIA data (see Figure 6 ). Figure 7 shows a breakdown of coal exports by states. West Virginian coal accounted for the largest portion of U.S. coal exports. Over the last five years, coal from the Appalachian region fell as a percent of the total amount of coal exported, but has grown almost 70%, in absolute terms, since 2007. Other key Appalachian region coal exporters include Pennsylvania and Virginia. Western states, led by Montana, comprised the second-largest share of exports, 21%, in 2011. The Interior region is up the greatest amount in percentage terms, rising from 1.5 MST to 7.7 MST during the same time period. Domestically, other factors have contributed to the rise in U.S. coal exports since 2009. U.S. natural gas prices have trended significantly lower since peaking in mid-2008 because of the economic crisis and the introduction of large amounts of shale gas to the market. Coal and natural gas compete directly in electric power generation. Historically, coal plants were more expensive to build, but the fuel cost was cheaper. Natural gas prices in 2012 have dipped below coal prices on an energy equivalent basis, altering the industry's perception. Coal and natural gas reached parity in electricity generation in April 2012 for the first time. But are cheap natural gas prices a sustainable trend? Electricity generation accounts for 93% of coal consumption, and the decrease in coal generation contributed to lower coal prices relative to international markets. The trend for gas prices is projected to continue to decrease the competitiveness of coal as a fuel for electric power generation in the U.S. market, according to the EIA. Therefore, in order to maintain production levels, coal companies are looking more to foreign markets and exports as a growing segment of their market. Of the 107 MST exported in 2011, about 54 MST went to Europe and 28 MST went to Asia. Asia's largest recipients include South Korea, Japan, and China (10 MST, 7 MST, and 6 MST respectively). Nearly 70 MST of U.S. exports in 2011 were metallurgical coal (coking coal), up from 56 MST in 2010. Steam (thermal) coal accounted for 38 MST in 2011, up from 26 MST in 2010. Metallurgical coal has a higher energy content and is used to make coke used in making steel. It is mostly produced in Appalachia, whereas most steam coal used for heating and power generation is produced from the Illinois Basin and the Powder River Basin (PRB). Most U.S. coal is exported through Mid-Atlantic ports in the Eastern U.S. customs district (see Table 4 ), particularly Norfolk, VA, and Baltimore, MD. Nearly 40% of U.S. exports passed through Norfolk, and 34 MST of 41 MST exported were metallurgical coal. This coal was primarily from West Virginia, Pennsylvania, and Virginia. A large amount of coal is also exported out of the Southern ports of Mobile, AL, and New Orleans, LA. Western exports of coal were 7.4 MST, of which nearly 5 MST passed through the Seattle, WA, customs district. With greater energy content per pound, metallurgical coal can be more attractive to ship over longer distances. Further, global metallurgical coal demand has been boosted in recent years due to the rapid economic growth in emerging markets, which involved infrastructure and industrial expansion, creating demand for steel. According to the IEA, global metallurgical coal consumption grew by 87% between 2000 and 2010, versus 70% growth of steam coal and 12% growth in brown coal or lignite, with China accounting for 80% of global metallurgical coal consumption growth between 2000 and 2010. For context, according to the IEA, metallurgical coal makes up 14% of global coal consumption but more than 30% of the international coal trade. There are several key factors likely to influence how much coal will be exported from the United States. Several export terminal projects have been proposed by 2016, such that the United States could be exporting more than double its current coal exports. Projects in the Pacific Northwest have attracted much of the attention, even though the Northeast or Mid- and South Atlantic ports continue to account for most exports. Additionally, the Gulf Coast export facilities may be in a good position to expand capacity and incrementally increase exports. In its 2013 Annual Energy Outlook Early Release, EIA's base case projects that total U.S. coal exports will rise steadily starting in 2013 through 2038, growing over 50% during the time period. Also, it is worth noting that EIA's coal export base case has been revised significantly higher since its 2012 forecast. There is growing interest in exporting Powder River Basin (PRB) coal. Low production costs, large reserves and production, and low sulfur content can make PRB coal attractive to domestic and foreign electric utilities. However, PRB coal has greater moisture content and lower energy content per pound, making it more expensive to transport on a per unit of energy basis. Today, nearly all coal produced from the PRB is consumed within the United States (mostly in the Midwest), and it is used almost entirely for electric power generation. PRB coal has a relatively low sulfur content, which makes it easier for coal-burning utilities to meet Clean Air Act ( P.L. 101-549 ) restrictions on sulfur dioxide emissions. The PRB sits largely on federal lands in Montana and Wyoming, and according to estimates accounts for more than 90% of the total coal produced from the two states. In 2010, the latest year for export data by state, Wyoming and Montana produced just over 487 MST of coal, of which less than 1% was exported. While the vast majority of PRB coal stays within the United States, exports of PRB coal have increased in 2011 as total U.S. exports have increased significantly. Coal distribution data from EIA for 2011 show that 95% of PRB coal has been distributed around the United States, mostly for electric generation. Note that while PRB's low sulfur content may help utilities meet EPA sulfur regulations, new EPA regulations, such as those on hazardous air pollutants, may still reduce domestic PRB demand if overall coal-fired electricity declines. PRB coal is exported primarily from Canadian terminals at Roberts Bank (near Vancouver, British Columbia) and Ridley Terminal at Prince Rupert, British Columbia. PRB coal is transported to both facilities for export via railway. However, the Canadian export terminals have reached capacity. Although the Canadian export facilities have plans for expansion that may better accommodate U.S. exports, PRB coal producers have been searching for a potential domestic export link to the growing Asian market. That link appears to be through the Pacific Northwest. Three port terminal projects for exporting coal in Washington and Oregon have permit applications pending before the U.S. Army Corps of Engineers (the Corps): Gateway Pacific Terminal (GPT) and Rail Expansion, Cherry Point, WA; Millennium Bulk Terminal (MBT), Longview, WA; Coyote Island Terminal (CIT) at the Port of Morrow, Boardman, OR. Several other projects have been discussed, but it is unclear at this point how many or when any additional projects may move forward. Although increasing coal exports from the Pacific Northwest are attracting the most attention, the Gulf Coast may be a more likely candidate to add export capacity in the short term. The region has more existing capacity to build from and less local opposition to increased exports. Over the next five years, over 40 MST of proposed expansions and new projects will be evaluated, particularly for Illinois Basin coal (IB) and PRB coal. Transporting IB coal by barge to export terminals in the Gulf, especially New Orleans, is cheaper than moving other coal to the coasts by rail. Located in the central United States, the Illinois Basin ranges across Illinois, Indiana, and western Kentucky. The coal produced in this region is bituminous coal with relatively high sulfur content. Production within the state of Illinois (23.9 MST) has been a key driver of the basin production increase over the first half of 2012. Exports of IB coal have been rising but only account for about 13% of IB production, which has also been increasing. IB coal is cost competitive on the international market, with most exports going to the United Kingdom and the Netherlands (approximately 3.8 MST and 1.4 MST, respectively), but usually requires a discount because of its high sulfur content. China was the third-largest recipient, with 1.2 MST. Coal exports to international markets from Illinois doubled from 2010 to 2011 (2.5 million tons in 2010 to 5 million tons in 2011). In addition, domestic demand for coal from the Illinois Basin, particularly in Illinois itself, increased as a result of a shift in demand toward the Illinois Basin's low-cost, high-sulfur coal and away from Central Appalachia's high-cost, low-sulfur coal. Domestic utilities that have added scrubbers can burn high-sulfur coal while remaining in compliance with existing requirements to reduce sulfur dioxide emissions. Because of the relatively low cost of Illinois Basin coal and its use in larger, efficient plants with modern pollution control equipment, its producers were less affected by recent low natural gas prices. Coal shipments from East Coast terminals of Appalachian coal have dominated U.S. coal exports, accounting for almost 60% and 71%, respectively, in 2010 and 2011. Appalachian coal, led by production in West Virginia, has declined as a percent of overall U.S. coal exports over the last five years, but has grown almost 70% in absolute terms. Coal exports from Pennsylvania and Virginia are also up, 169% and 65%, respectively, in the same period. Multiple projects are being reviewed to increase East Coast export capacity of Appalachian coal. Although there are proposals for constructing new facilities, most companies are looking to expand their existing terminals: expansions tend to have fewer regulatory requirements and lower cost. Given coal's low value-to-weight ratio, the large volume and non-time sensitive nature of shipments, and the long distances typically required for movement from coal mine to port, rail and barge offer the most economical means of transporting coal for export. In the West, a coal train of 120 cars can carry over 14,000 tons of coal (118 tons per car). Coal trains in the East are somewhat shorter in length. One barge holds 1,570 tons of coal but 15 barges (holding 23,550 tons) are often tied together in a tow through locked portions of inland rivers. On the Mississippi River below St. Louis, where there are no locks, 30 to 40 barges can make up a single tow of coal destined for terminals on the Mississippi River, where it is loaded aboard oceangoing ships for export from Louisiana. Rail transport from mid-Atlantic mines to Norfolk, VA, has historically been the leading pathway for U.S. exports of coal. Secondary pathways include movement of Alabama coal to Mobile by rail and/or truck, barge transport of Midwest and Ohio Valley originated coal to Mississippi River Delta ports, and rail transport of Pennsylvania coal to Baltimore (see Appendix A , Figure A-1 for U.S. coal regions, and infrastructure). Some U.S. coal is exported from Ohio across the Great Lakes to Canada. Western U.S. coal is also shipped by rail to Duluth, MN, and then through the Great Lakes to Quebec, where it is moved to large oceangoing ships for export to Europe. An obvious way to export PRB coal to China, Japan, or Korea would be through ports in Washington, Oregon, or British Columbia, Canada. Most coal from the PRB is currently moving east or south by railroad. A small fraction moves by rail to Washington and Oregon for domestic use and to Vancouver and Prince Rupert, BC, for export. While not currently used heavily for coal transport, east-west rail lines are the main pathways for carrying Pacific Northwest port traffic. However, even though coal trains are slower and less time-sensitive than trains carrying other commodities, they are cumbersome to move to sidings due to their exceptional weight, and can interfere with other traffic. Coal terminals at the California ports of Richmond, Stockton, Los Angeles, and Long Beach can be used to export coal from other western mines to Asia. Although the routing is more circuitous, PRB coal could be exported to China, Japan, or Korea by rail through Texas ports or through Mississippi River Delta ports (possibly in combination with barge transport from upriver terminals). These routes avoid the Rocky Mountains and more severe winter weather, and the tracks are in place to handle heavy coal traffic. The central location of Gulf ports also allows for some hedging against coal sourcing (western, central, or Appalachian mines) as well as Trans-Pacific versus Trans-Atlantic destination markets (India is closer to Gulf ports via a Trans-Atlantic crossing and passage through the Suez Canal). Charleston, SC, and Philadelphia, PA, on the East Coast could become additional conduits for export of Appalachian coal. Most rail freight travels under rates negotiated between shippers and railroads. Typically, rates are specified in confidential contracts that may last for months or years, and may include other provisions such as discounts to the shipper for exceeding a certain volume during a given period or penalties to the railroad for late delivery. A coal contract might cover shipments from a single mine or to a single power plant, but it could also cover multiple origination or destination points. Under existing law, governments at all levels have limited influence over the type or quantity of cargo railroads carry on their networks. Railroads' construction plans are generally not subject to state or local permitting laws, and approval by the federal Surface Transportation Board is necessary only for construction of new railroad rights-of-way and railroad mergers or acquisitions and generally not for improvements to existing lines. A railroad's share of the cost when improving highway-rail grade crossings is limited by federal law. As the nation's largest source of coal, the PRB has been the focus of much attention. Union Pacific and BNSF Railroads share a right-of-way out of the PRB—the "joint line." It is 103 miles in length and is mostly triple tracked with a fourth track on segments with hills. It is the busiest rail track in the world, carrying most of the PRB coal from the mines to points south and east. In May 2005, two derailments caused by ballast deterioration from heavy rains and coal dust (the railroads contend coal dust prevents proper drainage) severely interrupted PRB shipments. The railroads made extensive repairs and upgrades to the line but this took two years to complete. To keep coal dust from blowing off cars in transit, railroads are mounding or shaping the coal more uniformly when loading (to reduce wind resistance), and applying a surfactant as a sealant. The railroads and coal shippers have disputed who should pay for these measures. Plans for an additional line into the PRB from the north, the Tongue River Railroad, are under review by the Surface Transportation Board (STB). A growing concern of barge operators has been the reliability of locks because of more frequent scheduled and unscheduled maintenance by the Army Corps of Engineers. Many of the locks were originally constructed in the 1930s or 1950s. The cost of keeping locks functioning has increased significantly in recent years, and has surpassed current financing mechanisms. This includes a 20-cent-per-gallon federal tax on barge fuel that offsets about 10% of the federal cost of providing inland waterway infrastructure. The insufficiency of funds generated by the fuel tax would be exacerbated if demand for coal were to decline substantially. In a period of constrained federal budgets, Congress is evaluating alternatives for financing inland waterway infrastructure. Most coal shipped overseas from the United States is carried in Panamax vessels. These vessels are of a size limited by the dimensions of Panama Canal locks. They can carry about 60,000 tons of coal to keep their draft from exceeding 40 feet, the allowable draft depth of Panama Canal locks. Some U.S. export coal is loaded into Capesize vessels (which are too large for the Panama and Suez Canals and therefore must sail around the capes of South Africa and South America). Capesize vessels have a capacity of 90,000 to 200,000 short tons and a draft in the range of 48 to 56 feet. The Capesize vessels loading coal at Norfolk and Baltimore are in the smaller range of this class with drafts up to 50 feet. The expansion of the Panama Canal in early 2015 will allow smaller Capesize vessels with 50-foot drafts to pass through, but many U.S. ports and foreign unloading ports have insufficient depth to handle this type of ship. As discussed in greater detail in the U.S. Export section of this report, below, the three proposed port terminals with permit applications would have capacities of 54 million metric tons (GPT), 44 million metric tons (MBT), both in Washington State, and 8 million tons (CIT) in Oregon. The economies of scale that can be achieved with a ship carrying twice as much cargo (Capesize versus Panamax) can significantly reduce the per ton cost of ocean transport. Only Puget Sound and Los Angeles area terminals have the depths to handle large Capesize vessels. Table 5 below lists the depths of ports that currently export coal or have been mentioned as possibly handling coal in the future. With the exception of Puget Sound ports (Bellingham), Southern California ports, and Canadian ports, which are all naturally deep harbors, all of the ports listed require regular maintenance dredging (ranging from continuous to yearly to episodic) in order to maintain channel depths and widths. Congress is debating the appropriate level of funding for harbor maintenance. Generally, commercial port development is initiated and governed at the local level by harbor communities via a port authority, not by the federal government. A port authority could be a function of state, county, or city government. Federal jurisdiction over port development is primarily concerned with waterside infrastructure and operations. The U.S. Army Corps of Engineers is responsible for dredging shipping fairways and maintaining breakwaters and jetties. Reflecting local concerns, Congress authorizes the depths of harbors and determines the Corps' annual budget for harbor maintenance and operations. Deepening a port is funded from the General Treasury, while Corps maintenance costs are paid with an ad valorem tax on imported and domestic port cargo. Non-federal stakeholders are responsible for dredging ship berths and other non-federal channels in ports. The development of landside terminal infrastructure, such as coal unloading/loading facilities, is typically financed by private industry but may be assisted by the port authority. Terminal property could be privately owned by a shipper or owned by the port authority and leased to a terminal operator. Shipping rates in the dry bulk sector are notoriously volatile, depending on global supply and demand conditions. A new vessel requires two or more years to build and this lag can lead to oversupply or shortage conditions. Dry bulk vessels are the simplest big ships to build and are favored by new shipyards in boom years. Such ships are versatile, geographically and across commodities. Coal competes with iron ore for Capesize vessel capacity and with cement, steel, fertilizer, woodchips, salt, and grain for Panamax vessel capacity. Ocean freight rates, especially for longer trans-Pacific voyages, are significant relative to the value of coal, and thus fluctuations in dry bulk vessel rates will affect the price competitiveness of U.S. coal compared to foreign sources. Currently, dry bulk rates are low but their range of decline in recent years also indicates their upswing potential. From 2010 to 2011, dry bulk rates generally decreased by 70% to 80%. Representatives from state and local agencies along the potential coal transport corridor, particularly in Washington and Oregon, as well as industry, community, and environmental groups, have raised certain concerns over port terminal projects that would allow for increased export of PRB coal through the Pacific Northwest. Opponents, including several environmental groups, have argued that increased train and barge traffic would have significant adverse impacts to the human, natural, and cultural environment. Environmental groups have recently filed a lawsuit against the BNSF Railway Company and several coal companies under the Clean Water Act in the U.S. District Court for the Western District of Washington. Project supporters have argued that the projects would create or maintain jobs in the construction, mining, and transportation industries and bring increased tax revenue to the states. Supporters such as the coal companies and labor unions also argue that many potential adverse impacts can be mitigated. Some stakeholders are taking a wait-and-see approach—recognizing potential benefits, but waiting to see what the cumulative effects of the various port terminal projects may be, including mitigation measures that would be implemented, before deciding whether potential benefits outweigh adverse impacts. Stakeholder concerns over the cumulative impacts to communities, tribes, states, and regions primarily pertain to effects of increased rail and barge transport of PRB coal through the Pacific Northwest. Considering the pending and potential projects, it would appear that annual PRB coal export capacity could expand to exceed 100 million short tons. Rail industry representatives have stated that such an increase in export capacity could result in 8 to 16 additional trains per day. The coal would arrive through the Columbia River Gorge by rail from the PRB in Montana and Wyoming, and continue by rail and/or barge to export facilities in Washington and Oregon. The potential for an increase in mile-and-a-half long coal trains has generated concern regarding potential adverse impacts from increased coal dust emissions to air and deposition to land or surface water; traffic congestion and increased wait times at rail crossings; potential derailments or delays to emergency response vehicles; and noise and vibrations high enough to cause structural damage. Dredging and construction activities in waterways to accommodate increased barge traffic and deep-water vessels have also generated concern over potential impacts to fisheries, marine ecosystems, or endangered species habitat. Also, some stakeholders have cited broader global climate change impacts associated with increased coal burning in Asia. Project proponents argue that many of the potential adverse effects, particularly those related to increased barge and rail transport, can be mitigated or largely eliminated. However, some stakeholders have expressed concern that the potentially broader, cumulative impacts of pending and possible future projects will not be adequately identified and, thus, not be addressed. Efforts to explicitly require or negotiate agreements with coal producers and transporters to mitigate effects of transporting PRB coal through the Pacific Northwest will likely occur within the context of existing local, state, tribal, or federal requirements applicable to individual port terminal projects. Since permit applications have been submitted to the Corps, state governors, local, state, tribal, and federal agencies, community and environmental organizations, and individual members of the public have submitted comments to the Corps urging them to ensure that indirect and cumulative impacts of the projects are fully identified and considered before they make a final decision whether to issue those permits. The framework within which the Corps will identify and analyze indirect and cumulative project impacts will comply with the National Environmental Policy Act (NEPA). Opponents of the coal export projects have asked the Army Corps of Engineers to conduct a more comprehensive region-wide environmental impact statement that would look at impacts ranging from mining to burning U.S. coal overseas. This viewpoint was rejected by the Corps of Engineers, stating that an analysis of the potential broad-based impacts, i.e., from mining through burning U.S. coal overseas, was beyond their scope and jurisdiction. However, the Washington Department of Ecology has plans for a comprehensive review of environmental, transportation, health, and climate issues before the coal ports can be built. Scoping the environmental review for the proposed terminal near Longview, WA, being coordinated by the Department of Ecology, the Army Corps of Engineers, and Cowiltz County, began on August 16, 2013. The three agencies plan to issue a joint environmental impact statement (EIS). Two perspectives may shape policy makers' consideration of greenhouse gas emissions (GHG) emissions and the coal export issue: a legal view and a physical/environmental view. From the legal perspective, some might ask whether coal exports could put the United States at risk of violating obligations under existing or future domestic laws or international agreements to address climate change. From a physical view, regardless of legal requirements, a question is whether increasing coal exports may exacerbate climate change and the risks it poses by increasing U.S. and/or global emissions of greenhouse gases. Rising coal exports would not compromise the ability of the United States to meet any existing, enforceable climate-related obligations of the U.S. federal government. Domestically, the Environmental Protection Agency (EPA) has set certain regulations to control methane emissions, but not on coal mines. The EPA has proposed performance standards for carbon dioxide emissions from large combustion units, but these would not apply to exported coal. In the international context, current federal commitments to reduce coal-related GHG emissions are not legally enforceable. For example, under the United Nations Framework Convention on Climate Change (UNFCCC), the United States adheres to an objective of avoiding dangerous human interference with the climate system, and to develop national plans that would reduce national GHG emissions. The United States has not agreed to legally binding, quantitative emissions caps. President Obama in 2009 stated a policy that the United States should reduce its GHG emissions to 17% below 2005 levels by 2020. However, there are no binding mechanisms for the international community to enforce this U.S. policy. In the future, rising coal exports could make it more challenging to reach any potential, absolute GHG target, whether set domestically or internationally. For the United States, on the one hand, increasing production of U.S. coal would tend to increase related methane emissions above what would otherwise occur. On the other hand, coal exports would tend to raise domestic coal prices and thereby tend to curb U.S. coal use and related emissions. The balance between increases and decreases is unknown. U.S. coal exports could make it more difficult for other countries to meet absolute GHG targets. Reportedly, European utilities have increased imports of relatively inexpensive coal from the United States, raising their GHG emissions and complicating their efforts to meet the European Union's legally binding GHG targets under European Union law and the Kyoto Protocol of the UNFCCC. U.S. coal exports to China, India, and other rapidly growing coal consumers would likely affect efforts to persuade them to commit to reducing their GHG emissions. Past Congresses have resolved that binding commitments from such countries must be made for the United States to bind itself to GHG emissions under the UNFCCC. In this sense, increasing U.S. coal exports would likely impair U.S. persuasiveness and cooperative efforts to negotiate a legal international framework that includes GHG reductions from China, India, and other countries. Increasing U.S. coal exports would likely contribute to rising global emissions of GHG, by increasing availability of coal and stimulating greater coal consumption due to lower market prices. Higher GHG emissions would add to suspected human-induced climate change globally as well as to local and transboundary air pollution and related health risks. As noted above, U.S. coal production for export would increase U.S. emissions of production-related methane above what would otherwise occur, but could increase or decrease U.S. combustion-related emissions of carbon dioxide. Current coal exports come primarily from the Appalachian region, which generally has higher potential emissions of methane than western surface mines. Though producers of Appalachian coal plan to expand exports, much of the anticipated increase in exports would be produced in the Powder River Basin. The net effect is likely that increasing U.S. exports of coal could contribute to rising emissions of greenhouse gases (carbon dioxide and methane) as well as other pollution, although the increase could be small. No published study has thoroughly quantified this complicated question. Broadly, NEPA requires federal agencies to consider the environmental impacts of their actions before a final decision is made regarding that action. Consideration of a proposed project's environmental impacts is described in the appropriate NEPA document. For projects anticipated to have a "significant" impact on the quality of the human environment, an environmental impact statement (EIS) must be prepared. Projects with uncertain impacts require preparation of an environmental assessment (EA) to determine whether the impacts would be significant. The Corps has identified permit issuance among those actions normally requiring an EA, but not necessarily an EIS. However, of the three Pacific Northwest coal terminal projects, the Corps has determined that an EA will be prepared for the Coyote Island transfer terminal and that the GPT and MBT will have significant impacts, requiring the preparation of an EIS. During the project "scoping" phase of the NEPA compliance process, the Corps must clarify significant issues that will be analyzed in depth in the EIS. The scoping phase is currently underway for the GPT and MBT projects. As a result, the full range of issues that will be analyzed in each EIS is not yet known. However, in determining the scope of an EIS, the Corps is required to consider connected, cumulative, or similar project-related actions and the resulting direct, indirect, and cumulative effects of those actions. Permit applications pending before the Corps for export terminal expansion projects in Oregon and Washington may be considered connected or similar actions that would result in certain indirect or cumulative impacts. What is uncertain, however, is how broadly the Corps may define those terms. For example, it is unclear whether the Corps may identify increased train traffic out of Montana or Wyoming as an indirect effect of increasing coal export capacity related to permit issuance for the GPT or MBT projects. Also, given the current limits to commercial rail capacity in Washington and Oregon, it is not known whether the Corps would identify the potential need to expand rail capacity as a reasonably foreseeable indirect effect of port terminal permit approval. The potential need for new rail construction or the expansion of existing rail facilities may be particularly relevant if such activities were subject to approval from the U.S. Surface Transportation Board (i.e., a federal action subject to NEPA). While it is difficult to determine the full range of project-related actions and resulting impacts that the Corps may include in the EA and EISs currently being prepared, a letter from the Corps indicates its approach to the environmental review process for the proposed projects. In response to a letter from Oregon Governor John Kitzhaber regarding concerns over the cumulative impacts of port terminal projects proposed in Washington and Oregon, the Corps states, in part: The effects that the Corps will consider in the review of each project proposal will include the specific activity requiring a DA [Department of the Army] permit, and those portions of the entire project over which there is sufficient federal control and responsibility to warrant Corps NEPA review. Based on existing law and DA regulations, the Corps will extend its scope of analysis beyond the proposed activity with the Corps jurisdiction…only where the Corps determines that extension to be appropriate under its NEPA regulations and other relevant authorities. What are unknown are which activities the Corps may determine are beyond its jurisdiction, but appropriate for consideration under NEPA. So far, at least, there appears to be some disagreement between EPA and the Corps over the potential project impacts that should be addressed during the NEPA process. In an April 2012 letter to the Corps, EPA notes various elements of the Coyote Island terminal project that led EPA to determine that an EIS was necessary for that project. That determination alone conflicts with the Corps' determination that the project would, at least initially, require the preparation of an EA. Additionally, in delineating the project impacts that warrant the preparation of an EIS, EPA identified the potential public health impacts from coal dust and diesel pollution related to the proposed Coyote Island terminal project; the high level of interest and concern among communities, agencies, interest groups, and industries regarding the proposal to transport coal from Wyoming and Montana to Asia; the uncertainty of potential impacts of transporting large quantities of PRB coal, including trans loading activities on the Columbia River; and the proposed and potential future projects' contribution to cumulatively significant impacts to human health and the environment from increases in greenhouse gas emissions, rail traffic, mining activities on public lands, and the transport of particulate matter and mercury from Asia to the United States, among other possible impacts. To address the cumulative impacts, EPA recommended that the Corps conduct a broadly scoped cumulative impacts analysis of exporting large quantities of PRB-mined coal through the U.S. West Coast to Asia. The Corps has taken another approach and, as stated earlier, the Corps is preparing an EA for the Coyote Island terminal project and individual EISs for the other pending projects. EPA's assessment of potential project effects that should be included for analysis appears to be broader than the project-specific effects that the Corps would address in the NEPA documents for the three currently pending projects. In addition to the April 2012 letter from EPA, some Members of Congress have also written to the Corps requesting that the scope of its environmental review include a comprehensive analysis of the cumulative impacts of all proposed port terminal projects. The Corps accepted comments from the public until early 2013 regarding the potential scope of issues it will analyze in the GPT and MBT EISs. It may be sometime after the scoping process is complete before it is known how extensively the Corps will consider indirect and cumulative impacts of the proposed projects. In June 2013 the Corps announced that it would not conduct an area-wide EIS of the potential impacts of the three proposed export terminals. The Obama Administration continues to support clean coal, natural gas, renewables, and uranium as energy sources for electric power in the United States, as U.S. coal exports continue to rise. The Administration has not been clear where it falls along the spectrum of coal exports but announced on June 25, 2013, a proposal to limit U.S. government financing of coal plants overseas as part of an overall U.S. strategy to reduce carbon emissions. As U.S. hydrocarbon resources have expanded over the last few years, there is greater interest by some groups, mainly producers, to export a portion of these resources. In addition to coal, the United States became a net exporter of petroleum products in 2011, and there are 23 pending liquefied natural gas export projects at various stages of the regulatory approval process. There has even been interest in possibly exporting crude oil from the United States in the future. Planned expansion of U.S. hydrocarbon exports has generated some controversy. Environmental groups and various consumer groups have been most vocal against exports. Coal exports have attracted greater attention from both sides of the question as fast as new projects have been proposed. In addition to areas where new port capacity is being proposed, some communities along potential and existing rail routes, and mining sites, have voiced their opposition. H.R. 2396 , the True Cost of Coal Act of 2013, would extend to 50 years the recovery period, for depreciation purposes, for specified coal port property used for the export of coal. S. 831 , the Coal Miner Employment and Domestic Energy Infrastructure Protection Act of 2013, would prohibit the Secretary of the Interior, before December 31, 2017, from issuing or approving any proposed or final regulation under the Surface Mining Control and Reclamation Act of 1977 that would: (3) reduce the quantity of coal available for domestic consumption or for export. House Energy and Commerce Committee, Subcommittee on Energy and Power, "U.S. Energy Abundance Regulatory, Market, and Legal Barriers to Export," June 18, 2013, addressed coal exports. Science, Space, and Technology Committee, Subcommittee on Energy, "The Future of Coal: Utilizing America's Abundant Energy Resources," July 25, 2013. CRS Report R42950, Prospects for Coal in Electric Power and Industry , by [author name scrubbed], [author name scrubbed], and [author name scrubbed]. CRS Report R43011, U.S. and World Coal Production, Federal Taxes, and Incentives , coordinated by [author name scrubbed]. U.S. Coal Exports: National and State Economic Contributions , Prepared for the National Mining Association, by Ernst and Young, May 2013. Our Pain, Thei r Gain: Mountains Destroyed for Coal Shipped Overseas , by U.S. House Committee on Natural Resources—Democrats, July 19, 2012. Appendix A. Map of Coal Deposits and Infrastructure Appendix B. Characteristics of Different Coals Coal—a dense carbonaceous fossil fuel—is formed from decayed organic matter that has been subjected to various temperatures and pressures without the presence of oxygen. This burnable rock also contains quantities of hydrogen, sulfur, and nitrogen, and other elements and various amounts of mineral matter. Coal seams are formed along with other sedimentary rocks, primarily sandstone and shale. There are four basic types of coal with varying characteristics throughout the United States. The characteristics of a particular coal will determine how it is used, mainly for heat or electric power generation, or in steel production. Coal quality is measured by its energy value (e.g., British thermal units or Btus per pound), moisture and sulfur levels, and ash content. Lignite: A brownish-black coal with high moisture and ash content and relatively low heating value, between 4,000 British thermal units (Btu) to 8,300 Btu per pound. It contains the lowest carbon content of the four types of coal, and is usually consumed in electricity generation. Lignite is mainly mined in Texas, North Dakota, Louisiana, and Montana. Sub-bituminous: This type of coal was the most produced coal in 2011, accounting for 47% of U.S. production. It is a dull black coal with higher heating value than lignite and used for generating electricity and space heat. Its Btu content ranges from 8,300 Btu to 13,000 Btu per pound. Resources are primarily found in Montana, Wyoming, Colorado, New Mexico, Washington, and Alaska. Bituminous (soft coal): This type of coal is the most abundant in the United States and has a higher heating value than sub-bituminous and lignite, between 10,500 Btu and 15,500 Btu per pound. It is typically used for electric power generation in the United States. Coke is also produced from bituminous coal. Metallurgical coke produced from bituminous coal is used to make steel. It is found primarily in Appalachia and the Midwest. Anthracite (hard coal): Anthracite has the highest carbon content and energy content (15,000 Btu per pound) of all coals but occurs in limited geographic areas, mainly in Appalachia and Pennsylvania. The highest grades are used in metallurgy. Thermal Coal: Coal that is used primarily to generate steam or heat for industrial purposes. Used in electric power generation. Metallurgical Coal: Also known as coking coal, this type of coal is used to make steel. Appalachia: Primarily the East Coast of the United States, and includes the North, Central, and Southern Appalachia Basins. Interior: Mainly in the Midwest part of the United States and includes the Illinois Basin. Western: Mostly the Rocky Mountain region of the United States and includes the Powder River and Uinta Basins.

The gap between available U.S. coal supply and demand may continue to widen as low cost natural gas becomes more attractive to electric power plants and uncertainties with emission regulations may inhibit new coal plant investments. Coal producers with excess supply will likely seek to expand their market abroad. Consequently, U.S. coal exports are forecast to continue to rise over the next decade and possibly longer. Growth potential in Asian markets seems large, but there are potential bottlenecks, such as infrastructure and potential rising costs of regulation, competition from other fuels, and transportation constraints that could slow export growth. The U.S. Energy Information Administration (EIA), in its 2013 Annual Energy Outlook Early Release reference case, projects net exports of coal to trend up through 2040, almost 50% from 2011 levels, with some fluctuations. The significance of this may have short- and long-term ramifications as well as positive and negative consequences. Increased net exports could improve the U.S. trade balance as well as add government revenue from production that may otherwise decline because of falling domestic consumption. Environmentally, exporting coal may run counter to the current Administration's domestic environmental policies and affect U.S. efforts to address global environmental issues. Depending upon the nature of the coal exports, certain parts of the country may benefit economically. Current and projected coal exports, the associated infrastructure, and the environmental consequences have prompted interest by Congress. The United States has been exporting coal since the late 1800s. From 2003 to 2012, U.S. coal exports have risen over 200%, mainly driven by competitive production costs, global demand, and lower prices, among other factors. Coal exports comprised 12% of U.S. coal production in 2012. In 2011, U.S. coal exports broke 100 million short tons (MST) for the first time since 1992 and in 2012 surpassed their peak of almost 113 MST in 1981. The value of U.S. coal exports has increased, rising from under $10 billion in 2010 to almost $16 billion in 2011, according to U.S. Energy Information Administration data. Many factors will influence how much coal will be exported from the United States. Enough projects have been proposed that by 2016 the United States could be exporting more than double its current coal exports. Projects in the Pacific Northwest have attracted much of the attention, even though the Northeast continues to be the source for most exports. Representatives from state and local agencies, particularly in Washington and Oregon, as well as industry, community, and environmental groups, along the potential coal transport corridor, have expressed outright support for or opposition to port terminal projects that would allow for increased export of Powder River Basin coal through the Pacific Northwest. Opponents have argued that increased train and barge traffic will have significant adverse impacts to the human, natural, and cultural environment. Project supporters have argued that the projects would create or maintain jobs in the construction, mining, and transportation industries and bring increased tax revenue to the states. Broadly, the National Environmental Policy Act (NEPA) requires federal agencies to consider the environmental impacts of their actions before a final decision is made regarding that action.

Many years of debate about unauthorized immigration to the United States culminated in the enactment of the Immigration Reform and Control Act (IRCA) of 1986. That year, there were an estimated 3.2 million unauthorized aliens in the country. IRCA coupled legalization programs for certain segments of the unauthorized population with provisions to deter future unauthorized immigration by reducing the magnet of employment. These latter provisions reflected a belief, widely held then and now, that most unauthorized aliens enter and remain in the United States in order to work. To reduce the job magnet, IRCA amended the Immigration and Nationality Act (INA) to add a new Section 274A, which makes it unlawful to knowingly hire, recruit, or refer for a fee, or continue to employ, an unauthorized alien, and requires all employers to examine documents presented by new hires to verify identity and work authorization and to complete and retain employment eligibility verification (I-9) forms. The IRCA provisions did not have the effect of curtailing future illegal immigration. After falling to an estimated 1.9 million in 1988 as eligible unauthorized aliens legalized their status, the unauthorized population began to grow. By the early 1990s, it had surpassed pre-IRCA levels. The I-9 process was effectively undermined by the ready availability of genuine-looking fraudulent documents. Ten years after the enactment of IRCA, Congress attempted to strengthen the employment verification process as part of the Illegal Immigration Reform and Immigrant Responsibility Act of 1996 (IIRIRA). IIRIRA directed the Attorney General to conduct three largely voluntary pilot programs for electronic employment eligibility confirmation. After examining documents and completing I-9 forms as required under INA Section 274A, employers participating in a pilot program would seek to confirm the identity and employment eligibility of their new hires. IIRIRA tasked the Attorney General with establishing a confirmation system to respond to inquiries made by participants in these pilot programs "at any time through a toll-free telephone line or other toll-free electronic media concerning an individual's identity and whether the individual is authorized to be employed." The former Immigration and Naturalization Service (INS) within the U.S. Department of Justice had initial responsibility for administering the employment eligibility confirmation pilot programs. In 2003, DHS assumed this responsibility. The Basic Pilot progra m, the first of the three IIRIRA employment verification pilots to be implemented and the only one still in operation, began in November 1997 in the five states with the largest unauthorized alien populations at the time. In December 2004, in accordance with P.L. 108-156 , the program became available nationwide, although it remained primarily voluntary. The Basic Pilot program has changed over the years. Since July 2005, it has been entirely internet-based. It is administered by DHS's U.S. Citizenship and Immigration Services (USCIS). The Basic Pilot Program was briefly renamed the Employment Eligibility Verification (EEV) Program by the Administration of George W. Bush, and was again renamed E-Verify by that Administration in August 2007. IIRIRA, as originally enacted, directed the Attorney General to terminate the Basic Pilot program four years after going into effect, unless Congress provided otherwise. Congress has extended the life of the Basic Pilot program/E-Verify multiple times. Most recently, it extended E-Verify until September 30, 2018, as part of the Consolidated Appropriations Act, 2018. As part of the I-9 process, all employers must review documents presented by new hires to verify their identity and employment authorization and, along with the new hires, must complete I-9 forms. Employers participating in E-Verify then must submit information from the I-9 form about their new hires (name, date of birth, Social Security number, immigration/citizenship status, and alien number, if applicable) via the internet for confirmation. The information in the employer's query is automatically compared with information in SSA's primary database, the Numerical Identification File (Numident), which contains records of individuals issued Social Security numbers. For those employees identifying themselves as citizens, if the information submitted by the employer matches the information in Numident and SSA records confirm citizenship, the employer is notified that the employee's work authorization is verified. If the information submitted by the employer about a self-identified citizen matches the information in Numident but SSA records cannot confirm citizenship, the information is automatically checked against USCIS naturalization databases. If this check confirms citizenship, the employer is notified that the employee's work authorization is verified. If the employer-submitted information about a new hire does not match information in Numident, the employer is notified that the employee has received an SSA tentative nonconfirmation finding. In cases in which the employer-submitted information matches SSA records but the individual self-identifies as a noncitizen, the information is sent electronically to USCIS for verification of work authorization. If the USCIS electronic check confirms work authorization, the employer is so notified. If the electronic check does not confirm work authorization, an Immigration Status Verifier (ISV) at USCIS checks additional databases. If the ISV is unable to confirm work authorization, the employer is notified that the employee has received a USCIS tentative nonconfirmation finding. Employers are required to notify their employees about SSA and USCIS tentative nonconfirmation findings. If an employee chooses to contest a tentative nonconfirmation finding, the employer must refer the case to SSA or USCIS, as appropriate. The employee has eight federal government work days from the referral date to contact the appropriate agency to resolve the issue. If an employee does not contest the finding within that period or the contest is unsuccessful, the system issues a final nonconfirmation. If an employee receives a final nonconfirmation finding that he or she believes is incorrect, the employee may contact USCIS to have the case reviewed. The E-Verify program continues to grow. On January 31, 2006, there were 5,272 employers enrolled in the program, representing 22,710 hiring sites. Six years later, on March 17, 2012, there were 345,467 employers enrolled, representing more than 1,090,000 hiring sites. On April 2, 2018, employer enrollment in E-Verify stood at 779,722, and there were more than 2.5 million participating sites. Based on the number of firms in the United States in 2015 according to U.S. Census Bureau data, these enrolled employers represented about 13% of U.S. employers. As the number of enrolled employers has grown, so has the number of employer queries, or cases, received by E-Verify. Between FY2007 and FY2017, the annual number of E-Verify queries increased more than tenfold, from about 3.3 million to about 34.9 million. For general comparison purposes, there were about 65.3 million nonfarm hires in the United States in calendar year 2017, according to the Bureau of Labor Statistics. As mentioned, E-Verify is a largely voluntary program. Under IIRIRA, however, violators of INA prohibitions on unlawful employment or those who engage in unfair immigration-related employment practices may be required to participate in a pilot program. IIRIRA also states that each department of the federal government and each Member of Congress, each officer of Congress, and the head of each legislative branch agency "shall elect to participate in a pilot program." In August 2007, the Office of Management and Budget (OMB) issued a memorandum requiring all federal departments and agencies to begin verifying their new hires through E-Verify as of October 1, 2007. In addition, federal regulations that went into effect in 2008 and 2009 included new E-Verify participation requirements, as discussed below. USCIS, which administers E-Verify, is a fee-supported agency. Until FY2007, funding for the Basic Pilot program came from unrelated USCIS fees. (As discussed below, employers are not charged a fee to participate in E-Verify.) In recent years, however, Congress has provided funds for E-Verify as part of DHS/USCIS appropriated funding for Research, Development, Training, and Services. Since FY2009, Congress has appropriated at least $100.0 million each year for E-Verify. For FY2018, the Consolidated Appropriations Act, 2018, includes $131.5 million for E-Verify. Although the unauthorized alien resident population has declined in size since its 2007 high point of an estimated 12 million, it remains substantial. According to a preliminary estimate by the Pew Research Center, unauthorized alien residents in the United States numbered about 11.3 million in 2016. The Pew Research Center has also estimated that there were some 8.0 million unauthorized workers in the civilian labor force in 2014. Policymakers have considered an expansion of electronic employment verification—whether though E-Verify or a new system—as a key option for addressing unauthorized employment. Electronic employment eligibility verification measures have been introduced in recent Congresses. Among these measures are bills that have variously proposed to make E-Verify permanent, make E-Verify mandatory for all employers or a subset of employers, permit or require the verification of previously hired workers through E-Verify, and authorize a new electronic employment eligibility verification system. Although no broad measures along these lines have been enacted, some more limited provisions have been enacted, including language to extend the E-Verify program (see " E-Verify "). Some bills with major electronic employment eligibility verification provisions, however, have seen legislative action in recent years. In the 113 th Congress, the Senate passed a comprehensive immigration reform bill, the Border Security, Economic Opportunity, and Immigration Modernization Act ( S. 744 ), that included such provisions. The House Judiciary Committee considered similar versions of the Legal Workforce Act in the 113 th and 114 th Congresses, reporting the bill in the former Congress ( H.R. 1772 ) and ordering it to be reported in the latter ( H.R. 1147 ). All these measures would have amended the INA to permanently authorize a new electronic verification system modeled on E-Verify, which would have been mandatory for all employers. The 115 th Congress has likewise acted on electronic employment verification measures. The House Judiciary Committee has again ordered to be reported the Legal Workforce Act ( H.R. 3711 ), a bill similar to its predecessors in the 113 th and 114 th Congresses. A Legal Workforce Act title, similar to H.R. 3711 , is also included in the Securing America's Future Act of 2018 ( H.R. 4760 ), as introduced in the 115 th Congress. In addition, one of the immigration proposals considered on the Senate floor in February 2018 ( S.Amdt. 1959 ) included a provision to make E-Verify permanent (but not mandatory). The Senate rejected a motion to invoke cloture on this amendment. Several federal rules that became effective in 2008 and 2009 require employers to participate in E-Verify in order to take advantage of certain opportunities to benefit their businesses. One of these rules implements an executive order issued by President George W. Bush in 2008 to require federal contractors to conduct electronic employment eligibility verification. The order read, in part: Executive departments and agencies that enter into contracts shall require, as a condition of each contract, that the contractor agree to use an electronic employment eligibility verification system designated by the Secretary of Homeland Security to verify the employment eligibility of: (i) all persons hired during the contract term by the contractor to perform employment duties within the United States; and (ii) all persons assigned by the contractor to perform work within the United States on the Federal contract. The Secretary of Homeland Security subsequently designated E-Verify as the required employment eligibility verification system for contractors. A final rule to implement the executive order was published in November 2008. It requires covered federal contracts to contain a new clause committing contractors to use E-Verify "to verify that all of the contractors' new hires, and all employees (existing and new) directly performing work under Federal contracts, are authorized to work in the United States." After several delays, the rule became applicable on September 8, 2009. In addition, immigration regulations issued by the Bush Administration required employers to be users of E-Verify in order to be able to employ certain temporary residents (nonimmigrants). In an interim final rule, effective in April 2008, DHS extended the maximum period of optional practical training (OPT) for foreign students on F-1 visas who had completed a science, technology, engineering, or mathematics (STEM) degree. Under this rule, eligible F-1 students could extend their postgraduation OPT period, previously limited to 12 months, for 17 additional months, for a maximum OPT period of 29 months. In order to be eligible for this extension, however, the students had to be employed by an employer that was enrolled in and was a participant in good standing in E-Verify. This 2008 rule was replaced by a new final rule, effective in May 2016, that, among other changes, provided for a longer STEM OPT extension period of 24 months, and, thus, for a new maximum OPT period of 36 months. The new final rule retained the E-Verify requirement. A DHS final rule on the H-2A temporary agricultural worker program, effective January 17, 2009, likewise requires employer participation in E-Verify as a condition of receiving an employment authorization benefit. Under the rule, an H-2A worker who is waiting for an extension of H-2A status based on a petition filed by a new employer can begin working for that new employer before the extension is approved, if the new employer is enrolled in and is a participant in good standing in E-Verify. If the new employer is not an E-Verify participant, the worker would not be authorized to begin working for the new employer until the extension-of-stay application is approved. In weighing proposals that may emerge on electronic employment eligibility verification, policymakers may want to consider potential impacts on the key issues of unauthorized employment; verification system accuracy, efficiency, and capacity; discrimination; employer compliance; privacy; and verification system usability and employer burden. The primary goal of an employment eligibility verification system is to ensure that individuals holding jobs are authorized to work in the United States. Independent studies of E-Verify, conducted for INS and DHS over the years by Westat and Temple University's Institute for Survey Research, have evaluated whether the system has reduced unauthorized employment and met other policy goals. An evaluation issued by Westat in 2012 considered the accuracy of E-Verify findings, particularly for employment-authorized workers. Westat evaluators have determined that most individuals receiving final nonconfirmations (FNCs), or final findings that employment authorization cannot be confirmed, are, in fact, not authorized to work. Thus, if and when workers receiving final nonconfirmations are terminated, unauthorized employment would decrease. The extent of this decrease would depend, in part, on whether these workers were able to find other employment and if so, how long it took them to do so. It may be that E-Verify further helps reduce unauthorized employment by deterring unauthorized workers from applying for positions with employers that participate in E-Verify. The effectiveness of E-Verify in reducing unauthorized employment through either final nonconfirmation findings or by discouraging applications, however, is limited by the size of the program relative to overall employment. Its effectiveness is also limited by its inability to detect various forms of fraud. Under E-Verify, the information on the I-9 form is checked against information in SSA and DHS databases. As a result, the system is able to detect certain types of document fraud, such as when a new hire presents counterfeit documents containing information about a non-work authorized or nonexistent person. (There is further discussion of fraud in the sections on accuracy, below.) In the future, the authors of the 2009 Westat report posit, E-Verify may indirectly deter unauthorized employment by increasing the cost of securing that employment. According to the report, as unauthorized workers become more knowledgeable about E-Verify, they will increasingly obtain counterfeit, borrowed, or stolen documents with information about work-authorized persons, or will use fraudulent breeder documents, such as birth certificates, to obtain "legitimate" ones. The authors speculate that the perceived need for more sophisticated forms of fraud, with more expensive price tags, may have the long-term effect of reducing unauthorized employment: As it becomes harder to obtain fraudulent documents that will not be detected by E-Verify, the cost of such documents will presumably increase. Therefore, an important deterrent value of the Program ultimately may be to increase the cost of obtaining unauthorized employment, which, in turn, would cause some reduction in unauthorized employment; however, the amount of such reduction cannot be easily determined. Another possible outcome, if E-Verify makes it too difficult for unauthorized aliens to obtain legitimate employment, is that they may end up working under the table, thereby increasing the risks of worker exploitation. An opinion piece on Reason Online, affiliated with Reason magazine, made this argument: In the end, E-verify will not "turn off the tap," "dry up the pool of jobs," or "turn off the magnet." It will simply encourage workers underground, where they will be more vulnerable to abuse and less likely to pay taxes. In order for an electronic employment eligibility verification system to reduce unauthorized employment and not deprive legal workers of job opportunities, it must respond to queries correctly—that is, it must confirm the employment eligibility of individuals who are, in fact, authorized to work and not confirm the employment eligibility of individuals who lack work authorization. To be most effective, the system also must be efficient. IIRIRA required that the confirmation system, intended to be used as part of all three of the original pilot programs, be designed and operated to, among other things, maximize its reliability. Independent evaluations of E-Verify conducted by Westat and the Institute for Survey Research have analyzed the accuracy of the system using a variable known as the erroneous tentative nonconfirmation (TNC) rate for ever-authorized employees . This error rate, which can be calculated from available data, is defined as the percentage of individuals ultimately verified through the system that initially receives a tentative nonconfirmation finding. The erroneous TNC rate for ever-authorized employees was 4.8% for the first two years of the Basic Pilot Program (November 1997-December 1999 period); that is, 4.8% of the workers who were ultimately found to be work authorized first received a tentative nonconfirmation. The erroneous TNC rate decreased significantly in subsequent years, to 0.3% in the third quarter of FY2010 (April 2010-June 2010). There are important limitations to the erroneous TNC rate as a measurement of error, however. The variable does not take into account work-authorized individuals who receive tentative nonconfirmations but who, for whatever reason, do not contest them; these individuals are not classified as "ever-authorized." In addition, the data used to calculate the erroneous TNC rate include individuals who are found to have work authorization by the system, but who are not , in fact, work authorized. Eliminating these false positives (used here to refer to findings that unauthorized workers are work-eligible) from the calculation would change the error rate. Thus, as explained in the 2009 Westat report: [T]he erroneous TNC rate is an imperfect measure of program success because it underestimates the inaccuracy rate for authorized workers and because it is not possible to produce an estimate of an analogous inaccuracy rate for non-employment-authorized workers. There are similar limitations to the related "confirmed after initial mismatch" statistic reported by USCIS. It represents the percentage of all E-Verify cases that are confirmed as work authorized after receiving and successfully contesting a TNC finding. USCIS considers this statistic an important performance metric for E-Verify but does not use it as a measure of the program's accuracy. As part of its 2009 evaluation, Westat developed new measures of inaccuracy to more fully assess the system's performance. These new inaccuracy rates are estimates of the consistency of E-Verify findings with actual work authorization status. The inaccuracy rate for authorized workers is an estimate of the percentage of work-authorized workers not initially found to be authorized to work through E-Verify. For the period from April 2008 to June 2008, the inaccuracy rate for authorized workers was approximately 0.8%, meaning that less than 1% of authorized workers were initially found by the system to lack work authorization. Analogously, the inaccuracy rate for unauthorized workers is an estimate of the percentage of workers without work authorization that is initially and incorrectly found to be employment authorized through E-Verify. For the April 2008-June 2008 period, the inaccuracy rate for unauthorized workers was approximately 54%, meaning that about half of the unauthorized workers checked through E-Verify were incorrectly found to be authorized to work. The total inaccuracy rate is an estimate of the percentage of all workers checked through E-Verify who receive inaccurate initial work authorization findings. For the April 2008-June 2008 period, E-Verify's total inaccuracy rate was approximately 4.1%, meaning that 4.1% of workers received initial E-Verify findings that were inconsistent with their actual work authorization status. There are several key reasons for the inconsistencies between E-Verify findings and actual work authorization status. Inaccurate findings for authorized workers are due mainly to data input errors and inaccurate or out-of-date federal government records. For unauthorized workers, incorrect work authorization findings are due mainly to fraud—both document fraud, in which employees present counterfeit or invalid documents or fraudulently obtained "valid" documents, and identity fraud, in which employees present valid documents issued to other individuals. The 2009 and 2012 Westat reports cited identity fraud as a chief source of inaccurate work authorization findings for unauthorized workers. While E-Verify can detect certain types of document fraud, it has limited ability to detect such fraud when the "counterfeit documents are of reasonable quality and contain information about actual work-authorized persons who resemble the worker providing the documentation." Some observers, like Jim Harper of the Cato Institute, are particularly concerned about the potential for increased identity fraud if E-Verify were to become mandatory for all employers. In written testimony for a 2007 House hearing on employment verification and worksite enforcement, Harper took the position that expanding E-Verify would increase identity fraud. He argued that to gain approval under a nationwide electronic system, unauthorized workers would seek "documents with genuine, but rarely used, name/SSN combinations," which would "increase illicit trade in Americans' Social Security numbers." USCIS has made changes to E-Verify over the years to address the sources of inaccuracy for both authorized and unauthorized workers. One set of changes aims to reduce inaccuracies for authorized workers due to data input errors and incorrect federal government records. Since September 2007, in cases where an initial electronic check of SSA or USCIS records indicates a mismatch, the system automatically prompts the employer to double check the data in a query and make any corrections before E-Verify issues an SSA TNC or refers a case to an USCIS Immigration Status Verifier for additional database checks. A December 2009 addition "enables E-Verify to recognize European date format and common clerical errors of transposed visa and passport numbers." Other enhancements involve inclusion of additional databases in the E-Verify process that are automatically checked, as appropriate, before a tentative nonconfirmation is issued. In a May 2008 change, which is known as Naturalization Phase I and is described above as part of the standard verification process, USCIS naturalization databases are automatically checked in cases in which SSA records cannot confirm citizenship for a self-identified citizen. This change seeks to reduce the number of TNCs issued to naturalized citizens whose SSA records have not been updated to reflect their citizenship status. In February 2009, Department of State passport records were incorporated into the E-Verify program. These records are checked when a self-identified citizen presents a U.S. passport to establish identity and employment eligibility as part of the I-9 process and DHS or SSA cannot immediately confirm work eligibility. In addition, in May 2008, real time arrival data for noncitizens from the Integrated Border Inspection System was added to the system. In October 2012, access to another database—DHS's Arrival and Departure Information System (ADIS) database—was added to E-Verify. These enhancements are intended to reduce mismatches for recent arrivals. Another initiative, known as E-Verify Self Check, enables individuals to voluntarily check their work authorization status online through E-Verify to determine whether there are any mismatches between the information they enter and the information in SSA or DHS databases that need to be corrected. First implemented on a pilot basis in March 2011, E-Verify Self Check became available nationwide in February 2012. USCIS has likewise implemented enhancements to E-Verify aimed at reducing inaccuracies for unauthorized workers. In September 2007, the agency launched a Photo Screening Tool to improve E-Verify's ability to detect a certain type of identity fraud. The Photo Tool comes into play if a new hire presents an Employment Authorization Document (EAD), a Permanent Resident Card (green card), or a U.S. Passport to establish employment authorization. In such cases, the employer checks the photo on the document provided by the new hire against the image stored in USCIS databases. This tool enables detection of legitimately issued documents that have been altered by photo-substitution. The effectiveness of the Photo Tool, however, is greatly limited by the fact that a new hire does not have to show either an EAD, a green card, or a U.S. Passport; a new hire can opt to show other documents to evidence his or her identity and employment eligibility. According to USCIS, approximately 5% of all E-Verify cases in each of FY2016 and FY2017 used the Photo Tool. Another feature to reduce inaccurate findings for unauthorized workers is known as Records and Information from DMVs for E-Verify (RIDE). Launched in June 2011, RIDE seeks to detect document fraud in cases in which a new hire presents a driver's license or state-issued identification card to establish identity as part of the I-9 process. When a new hire presents a driver's license or state-issued identification card from a participating state, RIDE enables E-Verify to compare the information on the document against state records. Mississippi became DHS's first partner in this effort in June 2011. Since then, nine other states have joined the RIDE program. A November 2013 enhancement to E-Verify enables the system to lock Social Security numbers that appear to have been used fraudulently. According to USCIS, it "will use a combination of algorithms, detection reports and analysis to identify patterns of fraudulent SSN use and then lock the number in E-Verify." A more recent enhancement, known as myE-Verify, builds on this lock feature and the Self Check initiative described above. Launched in October 2014 in five states and the District of Columbia and available nationwide since April 2015 with additional features, myE-Verify incorporates Self Check and enables individuals to track the status of an E-Verify case. By creating a myE-Verify account, individuals also have the ability to lock their own Social Security numbers to prevent unauthorized use in E-Verify and to track where their identities have been used in E-Verify and Self Check. Incorporating biometrics into the E-Verify system also has been suggested as a way to address identity fraud. Biometric proposals, however, are highly controversial and raise a variety of concerns, including about costs and worker privacy (see " Privacy "). An accurate verification system requires accurate underlying data. Data inaccuracies can be a source of false positives (i.e., findings that unauthorized workers are work-eligible) as well as false negatives (i.e., findings that authorized workers are not work-eligible). In establishing the Basic Pilot program and the other pilots, IIRIRA directed SSA and the former INS to maintain accurate records. The 2002 evaluation of the Basic Pilot Program found that there were "serious problems with the timeliness and accuracy of the INS database." The 2007 Westat evaluation reported progress on this front, but indicated that additional improvements were needed. The accuracy of SSA's Numident database was the subject of a report issued by the SSA Inspector General in December 2006. Prompted by a congressional request, this review examined the accuracy of the Numident fields relied on by E-Verify. The report found Numident to be "generally accurate," but also "identified some discrepancies" that could result in employers receiving incorrect information in the employment eligibility verification process. More specifically, the SSA Inspector General estimated that "discrepancies in approximately 17.8 million (4.1%) of the 435 million Numident records could result in incorrect feedback when submitted through Basic Pilot." The report noted particular concern about the "extent of incorrect citizenship information" in Numident for foreign-born U.S. citizens and noncitizens. The 2009 Westat evaluation of E-Verify reported improvement in database accuracy, stating that "the accuracy of the USCIS database, as measured by the erroneous TNC rate for workers ever found authorized, has improved considerably" (see " Initiatives to Improve Accuracy "). The 2012 Westat report noted continuing efforts to improve database accuracy, while also making clear that "[m]aintaining accurate, timely, and complete information on biographic data and immigration and citizenship status presents a major challenge for Federal databases accessed by E-Verify." The report cited as reasons for these ongoing challenges the changing nature of immigration status and a lack of public knowledge about the need to report name changes to SSA and immigration agencies. The efficiency of an employment eligibility verification system, like its accuracy, is multidimensional. One measure of efficiency used in the independent evaluations of E-Verify is the percentage of employees verified automatically or after initial review by a USCIS Immigration Status Verifier—without a tentative nonconfirmation being issued (see " Verification Process "). As reported by Westat, in the June 2004-March 2007 period, 93% of cases were verified automatically or after initial ISV review. In April 2008-June 2008, 96% of cases were verified automatically or after initial ISV review. According to USCIS, in FY2017, 98.9% of cases were verified automatically, either instantly or within 24 hours. At the same time, some employer groups and advocates for immigrants and low-income families have maintained that E-Verify is not efficient. In opposing legislative efforts to require certain employers to use E-Verify, groups have argued that such mandatory participation would result in increased bureaucracy and hiring delays. The capacity of an electronic employment eligibility verification system to handle queries about most or all newly hired workers in the United States has arisen as an issue in light of proposals to expand electronic verification or make it mandatory for all employers. In FY2017, as noted, E-Verify received about 34.9 million queries. In 2011 congressional testimony, a USCIS official reported on E-Verify's capacity to handle an expanded workload: "E-Verify currently has the capacity to receive at least 60 million electronic queries annually if all new hires were run through the E-Verify program." A 2010 Government Accountability Office (GAO) report further cited information from E-Verify program officials that USCIS had tested the E-Verify system in 2007 and determined that it could process 240 million queries annually. In addition, according to USCIS, system upgrades have "increased system performance exponentially and will help support additional E-Verify traffic if the program is mandated nationally." USCIS indicated that with these upgrades, E-Verify will be able to handle up to 10,000 concurrent users. At the time of IRCA's enactment, there was widespread concern that the new INA Section 274A verification requirements would result in employment discrimination against foreign-looking or foreign-sounding work-authorized individuals as, for example, employers opted not to hire them for fear that they lacked work authorization or treated them differently than other work-authorized job applicants or workers. To partly address these concerns, IRCA added a new Section 274B to the INA to make it an unfair immigration-related employment practice to discriminate against an individual, other than an unauthorized alien, in hiring, recruitment or referral for a fee, or termination because of the individual's national origin or the individual's citizenship or permanent immigration status. IRCA, as originally enacted, also directed GAO to report to Congress on the implementation and enforcement of Section 274A to determine, among other things, if "a pattern of discrimination has resulted" against U.S. citizens or other work-eligible jobseekers. In 1990, GAO reported that widespread discrimination had occurred as a result of IRCA. Congress, however, took no action on these findings. One goal of the IIRIRA employment eligibility verification pilot programs was to reduce discrimination associated with the I-9 process. To that end, the law required that the confirmation system, intended to be used as part of all three of the original pilot programs, be designed and operated to have reasonable safeguards against the system's resulting in unlawful discriminatory practices based on national origin or citizenship status, including (A) the selective or unauthorized use of the system to verify eligibility; (B) the use of the system prior to an offer of employment; or (C) the exclusion of certain individuals from consideration for employment as a result of a perceived likelihood that additional verification will be required, beyond what is required for most job applicants. These enumerated behaviors are prohibited under the E-Verify system, but evaluations have found that some employers nevertheless practice them (see " Employer Compliance "). The potential impact of the IIRIRA pilot programs on employment discrimination was the subject of much debate during congressional consideration of the legislation. Some stakeholders maintained that the availability of electronic verification could make employers more likely to hire foreign-born individuals, thus reducing discrimination. On the other hand, immigrant advocates expressed concerns that discrimination would increase, even if employers followed proper pilot program procedures. They argued, for example, that work-authorized foreign-born individuals would be more likely than their U.S.-born counterparts to receive tentative nonconfirmations and, thus, to be subject to the inconveniences and other negative consequences associated with these findings. Evaluations of E-Verify have found evidence to support both of these predictions. In 2013, Westat conducted a survey of E-Verify employers and found the following: Across survey years, a large majority of E-Verify users (75 percent) reported that their companies were neither more nor less willing to hire job applicants who appear to be foreign-born than they were prior to using E-Verify. Among those reporting an effect, the percentage of users across survey years who indicated that the system made them more willing to hire immigrant workers was substantially greater than the percentage who indicated that it made them less likely to do so. At the same time, evaluations of E-Verify have consistently found that work-authorized foreign-born workers are more likely than U.S.-born workers to receive erroneous tentative nonconfirmations (initial findings that an individual's work authorization cannot be confirmed). Based on this increased likelihood of receiving an erroneous TNC, the 2009 Westat report stated that "E-Verify contributes to post-hiring discrimination against foreign-born workers." The report discussed some of the impacts on workers of receiving a TNC, such as missed work time to contest the finding and associated financial costs. In addition, according to the report, some work-authorized employees who receive TNCs may quit their jobs. In cases in which employers do not follow proper procedures, a TNC may result in a worker being fired. Historically, naturalized U.S. citizens have had relatively high erroneous TNC rates compared to U.S.-born citizens or work-authorized noncitizens. These relatively high rates have been attributed mainly to SSA records not reflecting the fact that the noncitizens had naturalized. USCIS has taken steps to address this problem with apparent success. The Naturalization Phase I initiative (see " Initiatives to Improve Accuracy ") was credited in the 2009 Westat report with bringing about "a dramatic reduction in the erroneous TNC rate for foreign-born citizens." In a March 2009 news release, USCIS reported that the addition of passport data was "already reducing the incidences of mismatches among foreign-born citizens." In a related effort to correct erroneous TNCs issued to naturalized citizens, USCIS implemented the Naturalization Phase II initiative in May 2008 to give naturalized citizens who receive a tentative nonconfirmation the option of telephoning USCIS, rather than visiting an SSA field office, to resolve the issue. Employer compliance in the context of E-Verify refers to employers' properly following the program's policies and procedures, which include submitting an E-Verify query to verify a new hire's employment eligibility within three days after the hire date, providing notice to employees of tentative nonconfirmation findings, and not taking adverse actions against employees who choose to contest TNC findings. Employer compliance helps strengthen E-Verify, while employer noncompliance can reduce the effectiveness of the program in curtailing unauthorized employment and can result in discrimination. In the interest of preventing discrimination, as noted, certain employer behaviors are prohibited by law. These include the selective use of the system to verify employment eligibility and the use of the system to prescreen job applicants. The 2009 Westat evaluation found that employer compliance with the various E-Verify requirements was "generally much higher than noncompliance." In a notable example, the data analyzed by Westat supported the idea that employers were not selectively submitting queries only for citizens or noncitizens. The discussion of employer compliance in the 2009 report, however, focused mainly on "noncompliant behaviors of interest." Based on self-reported information in the 2008 employer survey, supplemented by information from worker interviews, record reviews, and other sources, the evaluation identified a range of prohibited behaviors that employers were engaging in, including the following: Some employers did not follow procedures with respect to training employees on the E-Verify system. Some employers used E-Verify to screen job applicants. Some employers used E-Verify for existing employees. Some employers did not notify employees of TNC findings at all or did not provide written notification of TNCs. There was evidence that a small number of employers discouraged employees with TNCs from contesting the findings. Some employers took prohibited adverse actions against employees while they were contesting TNC findings. These actions included restricting work assignments, delaying training, or reducing pay. Some employers did not always follow the legal requirement to promptly terminate the employment of employees receiving FNC findings. The 2012 Westat report further discussed the negative implications for E-Verify accuracy of employers' not following proper procedures when employees receive TNCs. According to Westat, if all employment-authorized workers were properly informed of tentative nonconfirmations, there would be a significant decrease in the issuance of final nonconfirmations to work-authorized workers. As mentioned, the 2012 Westat report indicated that about 94% of workers who received FNCs in FY2009 were unauthorized workers. This measure is known as the FNC accuracy rate. The Westat evaluators estimated as part of the 2012 report that if all employment-authorized workers had been informed of their TNCs and the contesting process, the FNC accuracy rate in FY2009 would have increased to 99%. Westat's 2013 survey of E-Verify employers found that "[o]verall, users continued to report high levels of compliance with E-Verify policies." Some employers, however, did report engaging in prohibited behavior. For example, Westat found instances of selective use of E-Verify, as "some employers self-reported that they used E-Verify for workers they believed to be not work authorized." With respect to TNCs, the 2013 survey found "[A]mong E-Verify employers that had ever received a TNC finding for a worker, some reported taking adverse action against such workers including restricting work assignments ... and delaying training until work authorization could be confirmed." In addition, Westat reported the following: Across survey years, a small percentage of employers agreed with the practice of discouraging workers from contesting TNCs, either because the process was perceived to be too time-consuming or it rarely resulted in work authorizations. A key issue to consider with respect to employer compliance is the extent to which requiring employers to participate in E-Verify or another electronic employment eligibility verification system, as under some legislative proposals, could affect compliance. It seems plausible that, for a variety of reasons, mandatory participants as a whole may have lower levels of compliance than voluntary users. Westat, however, found little support for this hypothesis in its 2013 survey of E-Verify employers. It instead concluded that "with a few exceptions, mandated users were no more or less likely to comply with procedures compared to voluntary users." Employee privacy was another issue considered in the development of the original IIRIRA pilot programs. Among the IIRIRA requirements for the confirmation system was that the system be designed and operated "with appropriate ... safeguards to prevent unauthorized disclosure of personal information." The 2009 Westat report stated that SSA and USCIS had taken steps to protect worker privacy in connection with E-Verify. It explained that both agencies had policies to ensure the security of the databases used in E-Verify. According to the report, all employers participating in E-Verify must sign a memorandum of understanding and are only given access to the cases they submit. The 2009 report also noted some potential privacy-related weaknesses of E-Verify. Among them is a concern that individuals could improperly use E-Verify to obtain information about others. Another potential weakness involves employers not informing workers that they have received TNCs in private settings. In the 2008 employer survey conducted as part of the 2009 Westat evaluation of E-Verify, 89% of employers that had received any TNCs reported that they consistently informed workers of TNCs in private. That figure was 93% in the 2013 survey. Proposals to expand E-Verify, particularly proposals to make the system mandatory for all employers, have heightened the concerns of some interested parties about employee privacy. In his 2007 House testimony, Jim Harper of the Cato Institute argued that a nationwide electronic employment verification system would have serious privacy consequences. He drew sharp distinctions between a paper-based I-9 system, in which employee information "remains practically obscure," and a web-based electronic system, in which the entered information is very easy for the participating agencies to access, copy, and use. In Harper's view, any electronic verification system would be at risk of becoming "a surveillance system ... that observes all American workers." The American Civil Liberties Union (ACLU) likewise expressed concerns about the threats to privacy posed by a mandatory E-Verify system, in a statement submitted to the House Judiciary Committee at the time of the committee's E-Verify hearing in February 2013. The statement argued that a mandatory E-Verify system "would create a virtual national ID and would lay the groundwork for a possible biometric national ID system." In the view of the ACLU, a "national ID system" would threaten personal privacy and individual freedom: Our society is built on the presumption of privacy: as long as we obey the law, we are all free to go where we want and do what we want ... without the government (or the private sector) looking over our shoulders or monitoring our behavior. A national ID system would turn those assumptions upside down by making every person's ability to participate in a fundamental aspect of American life—the right to work—contingent upon government approval. Another of the IIRIRA requirements for the pilot program confirmation system was that it be designed and operated to maximize its ease of use by employers. According to Westat's 2008 and 2013 employer surveys, most employers found E-Verify to be an effective tool that was not unduly burdensome. More than 90% of employers in both years indicated that E-Verify was effective. To measure burden, employers were asked about meeting the processing requirements of the program. In 2008, 19% of employers agreed that it was impossible to meet their obligations under E-Verify; in 2013, the comparable percentage was 11%. Employers are not charged a fee by the government to participate in E-Verify, but they may incur set-up costs (such as for training and computer hardware) and operating costs (such as for wages for verification staff and computer maintenance). In the 2008 employer survey, 74% of employers indicated that they incurred no direct set-up costs. This percentage was 78% in the 2013 survey. The median total cost for those reporting direct set-up costs in both survey years was $100. With respect to operating costs, 77% of employers in the 2008 survey and 85% in the 2013 survey reported no direct maintenance costs. The median annual cost for those reporting direct maintenance costs in the 2008 and 2013 surveys was $350 and $300, respectively. Surveys conducted by the CFI Group for USCIS have measured participating employer satisfaction with E-Verify. According to the 2017 survey report, "historically, users have been consistently satisfied with E-Verify." If E-Verify were to become a mandatory program, the percentage of employers in the higher-cost group may grow. Employers that do not currently have the personnel or hardware to conduct electronic verifications could find required participation particularly burdensome. The policy issues discussed here may be especially important to consider in the context of proposals to require all employers to conduct electronic employment eligibility verification. A mandatory system could arguably make it possible to identify many more unauthorized workers. At the same time, under such a system, any inaccuracies, inefficiencies, or privacy breaches that occurred could affect much larger numbers of employees and employers. Employer compliance under a mandatory system would seem to be a salient issue, especially since it has direct implications for other issues, notably discrimination. Employer burden may be another important consideration. It may be that a mandatory system would require new strategies to address these issues.

Unauthorized immigration and unauthorized employment continue to be key issues in the ongoing debate over immigration policy. Today's discussions about these issues build on the work of prior Congresses. In 1986, following many years of debate about unauthorized immigration to the United States, Congress passed the Immigration Reform and Control Act (IRCA). This law sought to address unauthorized immigration, in part, by requiring all employers to examine documents presented by new hires to verify identity and work authorization and to complete and retain employment eligibility verification (I-9) forms. Ten years later, in the face of a growing unauthorized population, Congress attempted to strengthen the employment verification process by establishing pilot programs for electronic verification, as part of the Illegal Immigration Reform and Immigrant Responsibility Act of 1996 (IIRIRA). The Basic Pilot program (known today as E-Verify), the first of the three IIRIRA employment verification pilots to be implemented and the only one still in operation, began in November 1997. Originally scheduled to terminate in November 2001, it has been extended several times. It is currently authorized until September 30, 2018, in accordance with the Consolidated Appropriations Act, 2018 (P.L. 115-141). E-Verify is administered by the Department of Homeland Security's (DHS's) U.S. Citizenship and Immigration Services (USCIS). As of April 2, 2018, there were 779,722 employers enrolled in E-Verify, representing more than 2.5 million hiring sites. E-Verify is a largely voluntary program, but there are some mandatory participation requirements. Among them is a rule, which became effective in 2009, requiring certain federal contracts to contain a new clause committing contractors to use E-Verify. Under E-Verify, participating employers enter information about their new hires (name, date of birth, Social Security number, immigration/citizenship status, and alien number, if applicable) into an online system. This information is automatically compared with information in Social Security Administration and, if necessary, DHS databases to verify identity and employment eligibility. Legislation on electronic employment eligibility verification has been considered in recent Congresses. In weighing proposals on electronic employment verification, Congress may find it useful to evaluate them in terms of their potential impact on a set of related issues: unauthorized employment; verification system accuracy, efficiency, and capacity; discrimination; employer compliance; privacy; and verification system usability and employer burden.

Research on former foster youth is limited and most of the studies on outcomes for these youth face methodological challenges. For example, they include brief follow-up periods; have low response rates, non-representative samples, and small sample sizes; and do not follow youth prior to exit from foster care. Few studies include comparison groups to gauge how well these youth are transitioning to adulthood in relation to their peers in the foster care population or general population. However, two studies—the Northwest Foster Care Alumni Study and the Midwest Evaluation of the Adult Functioning of Former Foster Youth—have tracked outcomes for a sample of youth across several domains, either prospectively (following youth in care and as they age out and beyond) or retrospectively (examining current outcomes for young adults who were in care at least a few years ago), and compared these outcomes to other groups of youth, either those who aged out and/or youth in the general population. Nonetheless, these studies focus only on youth who were in foster care in four states. The 1999 law ( P.L. 106-169 ) authorizing the Chafee Foster Care Independence Program (CFCIP) required that HHS develop a data system to capture the characteristics and experiences of certain current and former foster youth across the country. The law directed the Department of Health and Human Services (HHS) to consult with state and local public officials responsible for administering independent living and other child welfare programs, child welfare advocates, Members of Congress, youth service providers, and researchers to (1) "develop outcome measures (including measures of educational attainment, high school diploma, avoidance of dependency, homelessness, non-marital childbirth, incarceration, and high risk behaviors) that can be used to assess the performances of States in operating independent living programs"; and (2) identify the data needed to track the number and characteristics of children receiving independent living services, the type of services provided, and state performance on the measures. In response to these requirements, HHS created the National Youth in Transition Database (NYTD). The final rule establishing the NYTD became effective April 28, 2008, and it required states to report data to HHS on youth beginning in FY2011. This report provides summary and detailed data for FY2011 through FY2013. HHS uses NYTD to engage in two data reporting activities. First, states report information twice each fiscal year on eligible youth who currently receive independent living services regardless of whether they continue to remain in foster care, were in foster care in another state, or received child welfare services through an Indian tribe or privately operated foster care program. These youth are known as served youth . Independent living services refer to the supports that youth receive—such as academic assistance and career preparation services—to assist them as they transition to adulthood. Second, states report information on foster youth on or about their 17 th birthday, two years later on or about their 19 th birthday, and again on or about their 21 st birthday. In this second group, foster youth at age 17 are known as the baseline youth, and at ages 19 and 21 they are known as the follow-up youth (and are also referred to as tracked youth in this report). These current and former foster youth are tracked regardless of whether they receive independent living services at ages 17, 19, and 21. States may track a sample of youth who participated in the outcomes collection at age 17 to reduce the data collection burden. Information is to be collected on a new group of foster youth at age 17 every three years. Table 1 includes an overview of data on the served youth who received an independent living service and the type of services they received for each of FY2011 through FY2013. The number of youth receiving an independent living service in each of those years ranged from about 97,500 to nearly 102,000. Across all three years, youth were 18 years old, on average, and more than half were female (51% to 52%). The largest share of youth were white (41%-42%) followed by black (29%-31%) and Hispanic youth (19%). About 7 out of 10 youth were in foster care when they reported receiving a service. Youth generally had less than a 12 th grade level of education, and about one out of five received special education instruction during a given fiscal year. In addition, nearly one out of five had been adjudicated delinquent, meaning that a court has found the youth guilty of committing a delinquent act. Among the most frequently received services in most of the three years were academic support to assist the youth with completing high school or obtaining a general equivalency degree (GED), such as academic counseling and literacy training; career preparation services that focus on developing a youth's ability to find, apply for, and retain appropriate employment, including vocational and career assessments and job seeking and job placement support; and an independent living needs assessment to identify the youth's basic skills, emotional and social capabilities, strengths, and needs to match the youth with appropriate independent living services (see Figure 1 ). About 60% of youth received three or more independent living services. Table 2 summarizes the characteristics and outcomes of the 19-year-old follow-up youth in FY2013. These youth—part of the follow-up population—were initially surveyed in FY2011 (at "baseline") when they were 17 years of age. The table displays information for the entire surveyed group of 19-year-olds (youth overall) as well as four sub-categories of these youth: those who were in foster care and those who were not, and those who had received at least one independent living service and those who had not. These categories are not mutually exclusive. Most of the 19-year-old youth who were in foster care also received at least one independent living service. Therefore, the data for these two groups are similar. In total, 7,536 youth participated in the survey at age 19 (this is compared to 15,597 who participated at age 17). Those who did not participate had declined to participate, were considered to be on runaway or missing status; could not be otherwise located; were incapacitated or incarcerated; or were deceased. Figure 2 includes data on selected outcomes for youth in foster care and those who are no longer in foster care. Slightly more than half of the 19-year-old youth participants were male. The largest share of youth were white (42%), followed by black (31%) and Hispanic (19%) youth. Youth were asked about their outcomes across six areas—financial self-sufficiency, educational (academic or vocational) training, positive connections with adults, homelessness, high-risk behaviors, and access to health insurance. About one-third of youth were working full-time and/or part-time at age 19; however, youth in foster care were more likely to be working part-time and youth not in foster care or not receiving any independent living service were slightly more likely to be working full-time. Approximately 30% of youth had completed an apprenticeship, internship, or other type of on-the-job training in the past year. (For comparison, approximately 13% of these youth were working full-time and/or part-time and 20% had completed employment-related skills training when they were surveyed at age 17). The 19-year-old youth were about equally likely to receive Social Security benefits, either Supplemental Security Income (SSI) or Social Security Disability Insurance (SSDI) (12% to 14%), regardless of foster care status or receipt of independent living services. (About the same share of these youth was receiving Social Security at age 17.) Youth not receiving any independent living services were slightly less likely to report receiving other ongoing financial support (11% versus 13%-17%). Youth who were in foster care at age 19 did not qualify for public supports such as financial assistance, food assistance, and public housing. The other groups of 19-year-old youth—those not in care, those receiving at least one independent living service (and not in care), and youth not receiving any independent living services (and not in care)—were equally likely to receive such public supports. Overall, youth were most likely to have a high school diploma (56%) or its equivalent. Educational outcomes were notably distinct for follow-up youth at age 19 depending on whether or not they were in foster care or whether they received an independent living service. Youth who were in foster care at age 19 and/or who received at least one independent living service were also slightly more likely to have a high school diploma or equivalent than those youth who were not in care or had not received at least one independent living service (58%-60% versus 52%-53%). Overall, 54% of youth were enrolled in school at age 19, which could include high school, college, or vocational school. Among youth in foster care, 70% were currently enrolled. This is compared to 44%-62% of youth in the other three subgroups (youth not in care, youth receiving at least one independent living service, and youth not receiving at least one such service). (Also for comparison, when these youth were age 17, almost all (93%) were attending school and 8% had obtained a high school diploma or its equivalent.) Almost all youth at age 19—regardless of foster care status or receipt of independent living services—said that they had a positive connection to an adult who could serve in a mentoring or substitute parent role, including a relative, former foster parent, birth parent, or older member of the community. (Nearly all youth had reported the same when they were surveyed at age 17.) Most of the 19-year-old youth had not experienced homelessness in their lifetime, and youth in foster care were much less likely to report being homeless than the other groups (11% versus 18%-24%). (This is compared to 16% of youth overall when they were surveyed at age 17.) Youth in care at age 19 were also less likely to report having been incarcerated (14% versus 20%-29%). About the same share of youth (13%-17%) self-referred or were referred for an alcohol or drug abuse assessment or counseling during the fiscal year, regardless of foster care or independent living status. Youth in care and/or receiving at least one independent living service were slightly less likely to report that they had ever given birth to, or fathered, any children (9%-10% versus 13%-14%). In general, nearly 9 out of 10 youth had Medicaid or some other health insurance at age 19 (about the same share of youth had health insurance coverage at age 17). Youth in care and/or youth receiving at least one independent living service were more likely to report having health insurance (95%-99%), compared to youth not in care nor receiving independent living services (74%-88%). Most youth in care or receiving at least one independent living service received Medicaid coverage (81%-85%). About the same share of youth (14% to 17%), regardless of foster care status or their receipt of independent living services, had other health insurance. Among youth who had health insurance, youth receiving at least one independent living service and/or not in foster care were slightly more likely than youth in foster care and/or not receiving any independent living services to have insurance coverage for at least some prescription drugs (77%-78% versus 70%-72%).

Congress has long been concerned with the well-being of older youth in foster care and those who have recently emancipated from care without going to a permanent home. Research on this population is fairly limited, and the few studies that are available have focused on youth who live in a small number of states. This research has generally found that youth who spend time in foster care during their teenage years tend to have difficulty as they enter adulthood and beyond. The Chafee Foster Care Independence Act (P.L. 106-169), enacted in 1999, specified that state child welfare agencies provide additional supports to youth transitioning from foster care under the newly created Chafee Foster Care Independence Program (CFCIP). The law also directed the U.S. Department of Health and Human Services (HHS), which administers child welfare programs, to consult with stakeholders to develop a national data system on the number, characteristics, and outcomes of current and former foster youth. In response to these requirements, HHS created the National Youth in Transition Database (NYTD) under a final rule promulgated in 2008. The rule requires that each state child welfare agency commence collecting and reporting the data beginning in FY2011 (October 1, 2010). This report provides summary and detailed data about current and former foster youth, as reported by states to HHS via the National Youth in Transition Database (NYTD). Data are available on two sets of youth. First, states report information each fiscal year on eligible youth who currently receive independent living services regardless of whether they continue to remain in foster care, were in foster care in another state, or received child welfare services through an Indian tribe or privately operated foster care program. These youth are known as served youth. Data on served youth are intended to show how many youth received independent living services. Second, states report information on foster youth on or about their 17th birthday, on or about their 19th birthday, and on or about their 21st birthday. This reported information is based primarily on data collected through surveys of the youth. In this second group, foster youth at age 17 are known as the baseline youth, and at ages 19 and 21 they are known as the follow-up youth. Data from the tracked population of youth are intended to show education, work, health, and other outcomes of youth who were in foster care at age 17. These current and former foster youth are tracked regardless of whether they receive independent living services at ages 17, 19, and 21. As noted, states began reporting NYTD data to HHS for served and baseline youth in FY2011. The data in this report include those for served youth in FY2011 through FY2013 and for follow-up youth for FY2013. Between 97,000 and 102,000 youth received an independent living service in each of FY2011 through FY2013. The median age of these youth was 18. In each of the three years, the most common independent living services they received were academic support, career preparation, and education about housing and home management. Approximately 7,500 follow-up youth were surveyed about their outcomes at age 19. About one-third of youth were working full-time and/or part-time. Just over half (54%) were enrolled in school. Almost all of the youth had a positive connection with an adult who could serve in a mentoring or substitute parent role. Most youth had not experienced homelessness or incarceration in their lifetimes. The majority of youth had Medicaid or some other health insurance. However, youth who were no longer in foster care tended to have more negative outcomes on certain indicators. For example, youth in foster care were much less likely to report ever having been homeless compared to youth who left care (11% versus 24%). Likewise, they were less likely to report having ever been incarcerated compared to these same peers (14% versus 29%).

Located along the Pacific coast of South America, Chile is a politically stable, upper-middle-income nation of 18 million people. The country declared independence from Spain in 1810 but did not achieve full independence until 1818. Chile enjoyed mass electoral democracy from 1932 until 1973, when the Chilean military, under the control of General Augusto Pinochet, deposed the democratically elected Marxist government of President Salvador Allende (1970-1973). More than 3,200 people were killed or "disappeared" and some 38,000 people were imprisoned and/or tortured during Pinochet's 17-year dictatorship. Chile ultimately restored democratic governance in 1990. A center-left coalition of parties, known as the "Coalition of Parties for Democracy" ( Concertación ), governed Chile for two decades after the return to democratic rule. While the Concertación governments were significantly constrained by authoritarian provisions in the Pinochet-era constitution, they were able to enact incremental political, economic, and social reforms. They largely maintained the market-oriented economic framework they inherited from Pinochet and built upon it by negotiating a broad network of trade agreements designed to foster export-led development. Chile has implemented trade agreements with some 60 countries and now has open and reciprocal access to major consumer markets, such as China, Japan, the European Union, and the United States. The Concertación also institutionalized countercyclical fiscal policies and gradually strengthened Chile's social safety net. Sebastian Piñera of the center-right "Alliance for Chile" ( Alianza ) coalition broke the Concertación's hold on power, serving as president from 2010-2014, but his administration largely maintained the same policy mix. Analysts credit Chile's policy framework for the significant economic and social gains that the country has made over the past 25 years. Real annual economic growth has averaged over 5% since 1990, lifting Chile's gross domestic product (GDP) to $258 billion and per capita GDP to $14,480 in 2014. The percentage of Chileans living below the national poverty line fell from 39% in 1990 to 8% in 2013, and the percentage of Chileans living in extreme poverty fell from 13% to 2.5% during the same time period. Nevertheless, many Chileans have expressed discontent with the socioeconomic situation in their country. They are dissatisfied with the country's high level of inequality and believe that the country's economic gains have not translated into better living conditions and public services for most Chileans. The Gini coefficient, which is used to measure income concentration, has barely changed over the past decade, remaining near 0.53. Although it falls to 0.50 when taxes and government transfers are taken into account, it is well above the Organisation for Economic Cooperation and Development (OECD) average of 0.31. Moreover, intergenerational social mobility is low since the education system tends to replicate existing class disparities. Chileans have also become increasingly dissatisfied with their political leaders and institutions, which have proven unable or unwilling to address these socioeconomic concerns. The country's unique binomial electoral system, a legacy of the Pinochet dictatorship, significantly limits the responsiveness of the Chilean government. Under the binomial system, deputies and senators are elected from two-member electoral districts that require a coalition to win by two-to-one margins in order to secure both seats. Since it effectively ensures a relatively equal distribution of power between the two major political coalitions regardless of voters' preferences, elections are extremely limited in their ability to produce change. Moreover, municipal and regional governments have little authority and few resources to address local concerns since political power is heavily concentrated in the central government. Given these constraints on electoral democracy, many Chileans have taken to the streets in recent years to voice their demands and hold their leaders accountable. Students calling for the government to guarantee free, high-quality education have organized the largest and most persistent of the protests. Seeking to capitalize on popular discontent and return to power, the four parties of the Concertación joined with various social movement leaders, the Communist Party, and other left-leaning groups to form the "New Majority" ( Nueva Mayoría ) coalition for Chile's 2013 general elections. The coalition selected former President Michele Bachelet (2006-2010) as its presidential candidate and pledged to implement a series of ambitious policy changes designed to reduce inequality and improve social mobility. The three pillars of Bachelet's platform were a major fiscal reform, an overhaul of the education system, and a new constitution. Bachelet easily defeated the Alianza's Evelyn Matthei, 62%-38%, in a second round runoff election. In legislative elections held concurrently with the first-round presidential vote, Bachelet's coalition secured one of the largest congressional majorities since Chile's return to democracy, with 67 of 120 seats in the Chamber of Deputies and 21 of 38 seats in the Chilean Senate (see Figure 1 ). President Bachelet has quickly moved forward with her policy agenda since assuming office for a four-year term in March 2014. Her first major initiative was a fiscal reform, which she signed into law in September 2014. It will be phased in over four years and is designed to increase revenues by 3% of GDP ($8.2 billion) by 2018. The majority of the new revenues will come from increasing the corporate tax rate from 20% to at least 25%. The reform also abolishes a business tax credit, taxes stationary sources of pollution such as fossil fuel power plants, increases taxes on tobacco and alcohol, reduces the top individual tax rate from 40% to 35%, and offers new incentives to small- and medium-size enterprises for savings and investment. Bachelet intends to use the additional revenue resulting from the fiscal reform to finance changes to Chile's education system, ensure the government budget is structurally balanced, and strengthen public health, pension, and social protection programs. Since the enactment of the fiscal reform, much of the political debate in Chile has focused on overhauling the education system. President Bachelet signed into law several initial education reforms in May 2015. Those changes, which are scheduled to take effect in March 2016, will cut off government funding to for-profit educational institutions and forbid primary and secondary schools that receive government funding from selectively admitting students. The Chilean Congress is still debating additional education reforms, including measures to strengthen teacher training, transfer school supervision from municipalities to the central government, and guarantee free post-secondary education for most students. The Bachelet Administration's 2016 budget proposal would enable 200,000 students whose families are in the bottom half of the income distribution to attend accredited nonprofit higher education institutions without paying tuition. In October 2015, President Bachelet announced a process for fulfilling her third major electoral pledge, the adoption of a new constitution. Over the course of the next year, the Bachelet Administration intends to educate citizens about the issues involved, hold a national dialogue to hear what Chileans would like to include in the constitution, and send a measure to the Chilean Congress that would authorize the next Congress—scheduled to take office in 2018—to select a mechanism for considering a new constitution. The new constitution would need to be approved by congressional supermajorities and a national referendum. The current constitution was adopted in 1980 under the Pinochet dictatorship. While many provisions have been amended since the reestablishment of democracy, some sectors of Chilean society still view it as illegitimate. Bachelet highlighted a number of potential constitutional changes in her electoral platform, including the recognition of various citizen rights and decentralization of power to regional governments. As a result of an overhaul of the electoral system that President Bachelet signed into law in April 2015, the next Chilean Congress will be elected through proportional representation. Under the new system, each of Chile's 15 regions will elect between two and five senators, and Chileans will be divided into 28 multi-member electoral districts that will elect between three and eight deputies, depending on their population. The electoral reform will increase the number of seats in the Chamber of Deputies from 120 to 155 and the number of seats in the Senate from 38 to 50. It will also require political parties to ensure that no more than 60% of their candidates are the same gender. While advocates of the previous binomial electoral system maintain that it fostered political stability and consensus-based politics, detractors note that it significantly limited the ability of Chilean citizens to enact policy changes and hold their leaders accountable. In addition to these large-scale reforms of Chile's tax, education, and political systems, Bachelet and her New Majority coalition are pushing ahead with a number of other notable policy initiatives. These include a union-empowering labor reform, the creation of a state-run pension fund to compete with private retirement plans, decriminalization of abortion in certain circumstances, and repeal of the amnesty law that shields members of the Pinochet regime and security forces who committed human rights abuses between 1973 and 1978. They have already enacted a law establishing civil unions for same-sex couples. Many of these policy changes only require simple majorities in Congress and are likely to be enacted in some form. In the aftermath of a series of scandals that have tarnished much of the Chilean political establishment over the past year, the Bachelet Administration has focused on advancing anti-corruption policies. Chilean authorities have brought charges against several business executives and politicians from the right-wing Independent Democratic Union party—part of the opposition Alianza coalition—who allegedly were involved in a scheme to illegally finance the party and evade taxation. Other corruption scandals have implicated members of the governing New Majority Coalition. One case involves Bachelet's son, who is accused of using his influence during the presidential campaign to secure a $10 million real estate loan from one of Chile's most prominent businessmen. These corruption scandals have reinforced public perceptions in Chile that wealth and power are too concentrated in the hands of a small number of business and political elites who use their connections to exert influence and advance their economic interests. In an attempt to regain the initiative, Bachelet has introduced a series of anti-corruption bills, including measures to make campaign financing more transparent and impose tougher sanctions for corruption. A little over a year and a half into her term, the Chilean public remains divided over President Bachelet's reform agenda. While students, unions, and other groups have continued to hold demonstrations and have called on Bachelet and the Chilean Congress to enact more far-reaching policy changes more quickly, some economic and political analysts maintain that Chilean policymakers should slow down in order to reassure the business community and establish broader consensus on significant policy changes. Similar divisions have emerged within Bachelet's ideologically diverse New Majority coalition, which ranges from the Communist Party on the far left to the Christian Democratic Party in the center. Opinion polls have shown that nearly all of Bachelet's reforms have had broad public support upon their introduction, but they have become less popular over time as they have been subject to protracted debates in the Chilean Congress. President Bachelet's approval rating has declined significantly since she took office, with divisions regarding her reform agenda, recent corruption scandals, and the weakening economy (see " Economic Challenges " below) taking a toll on her popularity. In October 2015, 29% of Chileans approved of Bachelet's performance in office while 67% disapproved. Bachelet's approval rating has slightly improved from a low of 24% in August 2015, but is still far below the 54% approval rating she had upon taking office in March 2014. Chileans appear to be dissatisfied with the entire political class as the approval ratings for the governing New Majority coalition (22%), the opposition Alianza coalition (15%), the Senate (14%), and the Chamber of Deputies (10%) are even lower. President Bachelet is also attempting to address Chile's slowing economy. According to many analysts, Chile has the most competitive and fundamentally sound economy in Latin America, but it remains heavily dependent on the copper industry, which accounted for over half of Chile's exports and 11% of the country's GDP in 2014. While the global commodity boom contributed to an extended period of economic growth and job creation last decade, copper prices have steadily declined since 2011, taking a toll on the economy. Chile's economic growth slowed to 1.9% in 2014. Economic analysts attribute the deceleration to a sharp decline in private investment stemming from the drop in copper prices and other external factors, as well as a fall in business confidence that appears to be related to the Bachelet Administration's reforms. The Chilean government has sought to stimulate economic growth over the past year. The Bachelet Administration's 2015 budget increased public expenditure by nearly 10%, boosting spending on infrastructure and allocating additional resources for education, healthcare, and social welfare programs. Chile is in a relatively strong position to pursue countercyclical fiscal policies since gross public debt remains low (15.1% of GDP at the end of 2014) and it can draw from its Economic and Social Stabilization Fund, which holds $14.1 billion (equivalent to about 5.5% of GDP). The Chilean Central Bank has complemented the Bachelet Administration's fiscal stimulus with an expansionary monetary policy. Buoyed by these measures, Chile's annual economic growth is forecast to accelerate slightly to 2.3% in 2015. Growth is expected to remain well below the 2005-2014 average of 4.3% for several years, however, as the slowdown in China's economy, lower global commodity prices, and other global developments weigh down the country's open economy. Analysts maintain that while the Bachelet Administration's reforms are also likely to have a negative impact on short-term economic activity, they have the potential to boost productivity and long-term growth. Chile is one of the safest countries in Latin America, with a homicide rate of 3.1 per 100,000 residents; however, small militant groups have carried out sporadic acts of violence. Over the past decade, more than 200 explosive devices have been planted outside banks, government buildings, and religious institutions in Santiago in generally low-level attacks that Chilean authorities have attributed to anarchist groups. Although most of the attacks have taken place in the middle of the night and have caused few casualties, an explosion near a subway station in Santiago injured 14 people in September 2014, and another explosion a few weeks later killed a man. Some members of the Mapuche (indigenous) community have also engaged in acts of violence. The Mapuche account for about 9% of the Chilean population and are primarily located in Santiago and the central and southern regions of Biobío, Araucanía, Los Ríos, and Los Lagos (see Figure A-1 for a map of Chile). They experience higher poverty levels, lower education levels, and poorer living standards than the general Chilean population, and have long sought official recognition of their rights and restoration of their territories. Some Mapuche groups have employed militant means to achieve those objectives, occupying ancestral lands and destroying vehicles, machinery, and buildings located upon them. While most of the attacks have resulted in damaged property, a Mapuche activist was convicted of killing an elderly couple by setting fire to their remote ranch in 2013. The September 2014 anarchist bombings in Santiago and ongoing attacks by Mapuche activists in southern Chile have led to a renewed focus on Chile's antiterrorism law. The law dates to the Pinochet regime but has been amended several times since the return to democracy. It sets harsher penalties for crimes deemed to be terrorist acts and allows the government to detain those accused of such acts and hold them without bail before trial, among other provisions. Local and international human rights groups have criticized the Chilean government numerous times over the years for invoking the law to prosecute Mapuche activists. In July 2014, for example, the Inter-American Court of Human Rights ordered the Chilean government to overturn the convictions of eight Mapuche activists who had been charged under the anti-terrorism law. While some legislators from the New Majority coalition have called for the anti-terrorism law to be repealed, the recent attacks have led others to call for a stronger anti-terrorism legal framework. The Bachelet Administration has proposed several amendments to the anti-terrorism law, which are currently pending in Congress. They include changes to allow the infiltration of terrorist organizations by covert police officers and to extend the law to cover so-called "lone-wolf" terrorists. Bachelet has also announced special preventative measures to protect truckers after a series of arson attacks in southern Chile. Some members of the opposition Alianza coalition have criticized Bachelet's proposals and actions as insufficient and have called for the government to apply the anti-terrorism law to arsons and other attacks carried out by Mapuche activists. The United States and Chile have traditionally enjoyed friendly relations. Over the past seven years, the Obama Administration has sought to maintain close ties with Chile while encouraging its leadership in Latin America and on the international stage. President Obama hosted President Bachelet at the White House in June 2014, calling her return to office "an opportunity to strengthen further the outstanding relationship between the United States and Chile." Congress has expressed particular interest in U.S.-Chilean trade and investment relations, security ties, and energy cooperation. The countries also collaborate on various areas of scientific research, such as astronomy and glacier monitoring, and engage in so-called trilateral cooperation to support security, governance, and socioeconomic development in other Latin American and Caribbean countries. U.S.-Chilean trade relations have grown considerably since the U.S.-Chile Free Trade Agreement entered into force on January 1, 2004. The agreement immediately eliminated tariffs on 87% of bilateral trade; 100% of U.S. exports enter Chile duty free as of this year (2015). In the absence of the agreement, each nation's exports would be subject to the other's most-favored nation tariff rates. In 2014, Chile's average applied most-favored nation tariff was 6%, while that of the United States was 3.5%. The agreement thus provides each country with preferential access to the other's market. Total bilateral trade has quadrupled since the agreement was signed, growing from $7.9 billion in 2003 to $31 billion in 2014 (see Figure 2 ). U.S.-Chile merchandise trade was valued at $26 billion in 2014. Between 2003 and 2014, U.S. exports to Chile increased over 500% and U.S. imports from Chile increased over 150%. As a result of U.S. exports increasing more quickly than imports, the United States has run a trade surplus in merchandise with Chile since 2008. In 2014, the surplus was valued at $7 billion. U.S. merchandise exports to Chile amounted to $16.5 billion, with refined oil products, heavy machinery, and civilian aircraft and parts accounting for a majority. U.S. merchandise imports from Chile amounted to $9.5 billion, with copper, edible fruit, and seafood accounting for a majority. In 2014, the United States was Chile's second-largest trading partner, behind China, while Chile was the United States' 29 th -largest trading partner. U.S.-Chile services trade has also grown under the free trade agreement, amounting to $5 billion in 2014. U.S. services exports to Chile totaled $3.8 billion and U.S. services imports from Chile totaled $1.2 billion. Travel, transport, and intellectual property charges were the top categories for U.S. services exports to Chile while transport and travel were the top categories for U.S. services imports from Chile. Travel between Chile and the United States is likely to increase in the coming years since the U.S. Department of Homeland Security approved Chile for entry into the Visa Waiver Program in 2014, allowing Chilean citizens who meet certain requirements to travel to the United States for up to 90 days without a visa. Chile has extended the same policy to U.S. citizens. Chile and the United States have both participated in negotiations concerning the Trans-Pacific Partnership (TPP), a proposed 12-member Asia-Pacific regional trade agreement that includes Australia, Brunei, Canada, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. While TPP trade ministers announced that they had concluded the agreement on October 5, 2015, it still needs to be ratified in each of the participating nations. The 114 th Congress may consider the TPP under the rules and procedures set forth in the Bipartisan Comprehensive Trade Priorities Act ( P.L. 114-26 ), commonly known as trade promotion authority (TPA), which the House and Senate approved, and President Obama signed into law, in June 2015. During TPP negotiations, many Chilean analysts and policymakers expressed concerns about the potential agreement. They argued that since Chile already has trade agreements with each of the other participating nations, it should only sign onto the TPP if it provides more favorable conditions. Some expressed concerns that the agreement could serve as an indirect renegotiation of Chile's existing trade agreement with the United States, and that it could lead to concessions on issues like pharmaceutical patents that would restrict the country's autonomy to determine public policies that benefit the Chilean public. Although President Bachelet expressed similar concerns about the TPP during her election campaign, she has defended the agreement since taking office. She maintains that the agreement would open up new opportunities for Chilean exporters since the TPP "has developed new high-standard rules for international trade" that go beyond the provisions included in Chile's existing trade agreements with other TPP members. She also maintains that the final agreement would not impose stricter pharmaceutical patents protections than those already in place as a result of the U.S.-Chile Free Trade Agreement. Analysts expect that Bachelet will be able to secure ratification from the Chilean Congress within about five months. The U.S. Trade Representative (USTR), U.S. business groups, and some Members of Congress assert that Chile has not adhered to its intellectual property rights commitments. USTR placed Chile on its Priority Watch List in 2015, as it has every year since 2007, as a result of "serious concerns regarding long-standing intellectual property rights issues under the U.S.-Chile Free Trade Agreement." In its annual Special 301 Report on intellectual property rights, USTR urged Chile to provide greater protection for pharmaceutical patents and plant varieties and to amend its Internet Service Provider liability regime to permit more effective action against piracy over the Internet. Given the long-standing nature of these complaints, some Members of Congress have called on USTR to initiate formal dispute settlement proceedings against Chile. The Chilean government asserts that it has developed a solid institutional framework to protect intellectual property rights over the past decade, and that it continues to improve its system while trying to maintain a balance between fostering innovation and ensuring Chileans have access to knowledge and medications. It argues that USTR's Special 301 Report fails to acknowledge the advances that Chile has made, lacks clear criteria for categorizing countries, and reflects the desire of U.S. companies "to selectively apply their intellectual property standards to other countries." Furthermore, the Chilean government asserts that the Special 301 Report "does not contribute" to the improvement of bilateral relations. According to the U.S. State Department, Chile is viewed as an attractive destination for investment as a result of its open economy, well-developed institutions, and strong rule of law. As of 2014, the accumulated stock of U.S. foreign direct investment in Chile was $27.6 billion, including more than $12.5 million invested in the mining industry. In comparison, the accumulated stock of Chilean foreign direct investment in the United States was $730 million. In February 2010, the United States and Chile signed an income tax treaty designed to encourage investment in both countries by providing certainty on the tax treatment of investors and reducing tax-related barriers to investment. Among other provisions, the treaty would reduce source-country withholding taxes on certain cross-border payments of dividends, interest, and royalties; establish rules to determine when an enterprise or individual of one country is subject to tax on business activities in the other; enhance the mobility of labor by coordinating the tax aspects of the U.S. and Chilean pension systems; foster collaboration to resolve tax disputes and relieve double taxation; and ensure the full exchange between the U.S. and Chilean tax authorities of information for tax purposes. President Obama submitted the agreement to the U.S. Senate for its advice and consent in May 2012 ( Treaty Doc. 112-8 ). The Senate Foreign Relations Committee held a hearing to consider the treaty, along with seven other pending agreements, on October 29, 2015, and reported the treaty favorably on November 10, 2015. The committee had previously reported the treaty favorably in April 2014, but the full Senate never acted on it before the end of the 113 th Congress. General John F. Kelly, Commander of the U.S. Southern Command, has characterized Chile as a strong, capable partner; a regional leader; and an outstanding contributor to hemispheric and international security. Chile has supported peacekeeping efforts in Haiti since 2004, when it quickly responded to the U.N. Security Council's request for peacekeepers, and paved the way for a number of other Latin American countries to contribute troops to the U.N. Stabilization Mission in Haiti (MINUSTAH). Chile has committed more human and material resources to MINUSTAH than it has to any previous peacekeeping mission and currently has 331 troops and 3 police officers on the ground. Chile has also provided training to Central American police and militaries and participated in Operation Martillo —a multinational and interagency drug interdiction effort designed to cut off illicit trafficking routes along the coasts of Central America. Chile is also one of four countries directly supporting peace talks between the Colombian government and the Revolutionary Armed Forces of Colombia ( Fuerzas Armadas Revolucionarias de Colombia , FARC). In order to foster closer security ties, the United States provides some foreign aid to Chile. U.S. security aid to Chile amounted to slightly less than $1.1 million in FY2014 and FY2015 (see Table 1 ). It is currently unclear how much security aid will be provided in FY2016 since Congress has yet to adopt a full year appropriations bill. Programs are currently being funded through a continuing resolution ( P.L. 114-53 ) that funds most aid programs and activities at the FY2015 level, minus an across-the-board reduction of 0.2108%, until December 11, 2015. The Obama Administration requested $700,000 in security assistance for Chile in FY2016. $500,000 would fund training for the Chilean military designed to promote professional development and technical capabilities, strengthen civil-military relationships, and increase interoperability with U.S. forces. The other $200,000 would support the Chilean government's efforts to develop a nonproliferation-driven strategic trade control system that meets international standards. In June 2013, the United States and Chile signed an extradition treaty. It would replace the treaty that is currently in place, which dates to 1900, in order to modernize the list of extraditable offenses, allow for the extradition of individuals regardless of their nationalities, and incorporate procedural changes designed to accelerate the extradition process. President Obama submitted the agreement, known as the "Extradition Treaty Between the Government of the United States of America and the Republic of Chile," to the U.S. Senate for its advice and consent in September 2014 ( Treaty Doc. 11 3-6 ). The Senate has yet to act on the treaty. The U.S. and Chilean governments have both expressed interest in developing clean energy resources to meet domestic needs and mitigate global climate change. In recent years, however, Chile has become more reliant on carbon-emitting power sources (such as coal-fired thermoelectric plants) as the country has struggled to satisfy its fast-growing demand for energy. Between 2004 and 2014, Chile's total primary energy consumption increased by 27%. During the same time period, Chile's coal consumption increased by 142%, and the percentage of total primary energy consumption accounted for by coal nearly doubled from 10% to 19%. Since Chile is a minor producer of fossil fuels, it is heavily dependent on energy imports. In order to diversify its energy supply, lower fossil fuel emissions, and reduce its reliance on expensive energy imports, Chile adopted a law in 2013 that requires 20% of the national energy mix to be generated from nonconventional renewable energy sources by 2025. President Bachelet's energy strategy reiterates Chile's commitment to that goal and stipulates that 45% of electricity capacity installed between 2014 and 2025 should come from renewable energy sources. Bachelet's energy strategy also aims to make liquefied natural gas (LNG) a larger component of Chile's energy mix. Renewables currently account for about 5.4% of Chile's primary energy consumption while natural gas accounts for 12% (see Figure 3 ). The United States is working with Chile to overcome the financial and technical barriers that have prevented the country from taking advantage of its vast wind, solar, tidal, and geothermal energy potential. In June 2009, under the umbrella of President Obama's "Energy and Climate Partnership for the Americas," the United States and Chile signed a memorandum of understanding on cooperation in clean energy technologies. As a result of the agreement, the U.S. Department of Energy provided support to Chile's Renewable Energy Center and two solar plant pilot projects in the Atacama Desert. Additionally, the Overseas Private Investment Corporation (OPIC), an independent U.S. government agency, has approved nearly $700 million of loan guarantees for five solar energy projects in Chile since 2013. In 2014, the United States and Chile signed a joint statement on expanding bilateral energy cooperation. While continuing to work together on renewable energy, the countries also agreed to collaborate on energy efficiency, electricity grid policy, and oil and natural gas development. Chile's National Petroleum Company ( Empresa Nacional del Petróleo , ENAP) is scheduled to begin importing U.S. LNG by 2016. Chile is in the midst of a political and economic transition. Following the return to democracy in 1990, Chilean leaders and institutions prioritized political stability and economic growth, eschewing ambitious structural reforms in favor of consensus-based politics, orthodox economic policies, and incremental social change. Those preferences allowed Chile to consolidate democratic governance and produce significant improvements in the living standards of its citizens, but they inhibited the political system's ability to address Chile's high level of inequality. Discontent with the limits of the post-Pinochet policy consensus propelled President Bachelet and her New Majority coalition to sizeable electoral victories. While their ambitious fiscal, educational, and constitutional reforms have produced uncertainty and could be damaging to the country's economy and stability if mishandled, they have the potential to foster inclusive growth and revitalize Chile's democratic institutions. U.S.-Chilean relations are likely to remain friendly in the coming years as a result of shared values and common interests. The countries currently cooperate on a range of issues, including trade, security, energy, and scientific research. Congressional approval of the Trans-Pacific Partnership trade agreement and a bilateral income tax treaty could lead to higher levels of trade and investment, while approval of a pending extradition treaty could lead to enhanced security cooperation. The United States and Chile may also discover new areas for collaboration as Chile's ongoing transition to a higher level of economic development enables it to take on additional regional and global responsibilities. Map of Chile Chilean Political Party Acronyms

Chile, located along the Pacific coast of South America, is a politically stable, upper-middle-income nation of 18 million people. In 2013, Michelle Bachelet and her center-left "New Majority" coalition won the presidency and sizeable majorities in both houses of the Chilean Congress after campaigning on a platform of ambitious reforms designed to reduce inequality and improve social mobility. Since her inauguration to a four-year term in March 2014, President Bachelet has signed into law significant changes to the tax, education, and electoral systems. She has also proposed a number of other economic and social policy reforms, as well as a process for adopting a new constitution. Although a significant majority of the public initially supported the reforms, Chileans have grown more divided over time, with some groups pushing for more far-reaching policy changes and others calling for Bachelet to scale back her agenda. Disapproval of the reforms, a corruption scandal that implicated her son, and Chile's slowing economy have taken a toll on President Bachelet's approval rating, which has declined to 29%. Chile's economic growth has slowed considerably in recent years, falling to 1.9% in 2014. Analysts have largely attributed the slowdown to the end of the global commodity boom and the coinciding drop in copper prices, which have a significant impact on the Chilean economy. There are also indications that the Bachelet Administration's policy reforms may have reduced business confidence and dampened growth. In order to stimulate the economy, the Chilean government has implemented expansive fiscal and monetary policies over the past year. Growth is forecast to accelerate slightly to 2.3% in 2015 and gradually increase in the following years. President Obama and President Bachelet have sought to build upon the long-standing partnership between the United States and Chile. Commercial ties are particularly strong. Total trade in goods and services reached $31 billion in 2014, more than quadrupling since the implementation of a free trade agreement in 2004. Trade and investment flows could increase if the Trans-Pacific Partnership (TPP) trade agreement, which includes the United States, Chile, and 10 other nations in the Asia-Pacific region, is approved. The United States and Chile also work together to address regional and global security challenges, such as instability in Haiti. The United States provided Chile with an estimated $1 million in foreign aid in FY2015 to strengthen the capabilities of Chilean security forces and foster closer security ties. The countries' mature partnership includes additional collaboration on issues such as energy development and scientific research. The 114th Congress is currently considering several measures related to U.S.-Chilean relations. Congress may consider implementing legislation for the TPP agreement under the rules and procedures set forth in the Bipartisan Comprehensive Trade Priorities Act (P.L. 114-26, "trade promotion authority"), which both houses passed and the President signed into law in June 2015. The Senate also may consider a bilateral income tax treaty with Chile (Treaty Doc. 112-8), which was signed in 2010, submitted to the U.S. Senate for its advice and consent in 2012, and reported favorably by the Senate Foreign Relations Committee on November 10, 2015. An extradition treaty with Chile (Treaty Doc. 113-6), which was signed in 2013 and submitted to the Senate in September 2014, also awaits the Senate's advice and consent.

Americans spend more than $1 trillion on food each year, nearly half of it in restaurants, schools, and other places outsid e the home. Federal laws give food manufacturers, distributors, and retailers the basic responsibility for assuring that foods are wholesome, safe, and handled under sanitary conditions. A number of federal agencies, cooperating with state, local, and international entities, play a major role in regulating food quality and safety under these laws. 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, the Centers for Disease Control and Prevention (CDC) reports that each year an estimated one in six Americans—a total of 48 million people—becomes sick from contaminated food foodborne illnesses caused by contamination from any one of a number of microbial pathogens. Of these, an estimated 128,000 cases require hospitalization and 3,000 cases result in death. In addition, experts have cited numerous other hazards to health, including the use of unapproved veterinary drugs, pesticides, and other dangerous substances in food commodities, of particular concern at a time when a growing share of the U.S. food supply is from overseas sources. These concerns, combined with the ongoing recurrence of major food safety-related incidents, have heightened public and media scrutiny of the U.S. food safety system and magnified congressional interest in the issue. Numerous federal, state, and local agencies share responsibilities for regulating the safety of the U.S. food supply. Federal responsibility for food safety rests primarily with 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). FDA is responsible for ensuring that all domestic and imported food products—except for most meats and poultry—are safe, nutritious, wholesome, and accurately labeled. FDA also has oversight of all seafood, fish, and shellfish products. USDA's Food Safety and Inspection Service (FSIS) regulates most meat and poultry and some egg and fish products. The Government Accountability Office (GAO) has identified as many as 15 federal agencies, including FDA and FSIS, as collectively administering at least 30 laws related to food safety. Appendix A and Appendix B provide a brief comparative look at each of these agencies and their responsibilities. State and local food safety authorities collaborate with federal agencies for inspection and other food safety functions, and they regulate retail food establishments. This organizational complexity, and trends in U.S. food markets—for example, increasing imports as a share of U.S. food consumption and increasing consumption of fresh, often unprocessed, foods—pose ongoing challenges to ensuring food safety. The text box below provides a comparison of FDA and USDA and other federal agencies' responsibilities for food safety and related food quality and other requirements. The division of food safety responsibility between FDA and USDA is rooted in the early history of U.S. food regulation. Congress created separate statutory frameworks when it enacted, in 1906, both the Pure Food and Drugs Act and the Meat Inspection Act. The former addressed the widespread marketing of intentionally adulterated foods, and its implementation was assigned to USDA's Bureau of Chemistry. The latter law addressed unsafe and unsanitary conditions in meat packing plants, and implementation was assigned to the USDA's Bureau of Animal Industry. This bifurcated system has been perpetuated and split further into additional food safety activities under additional agencies (for example, the Environmental Protection Agency, the National Marine Fisheries Service, and others) by a succession of statutes and executive directives. The separation of the two major food safety agencies was further reinforced when, in 1940, the President moved responsibilities for safe foods and drugs, other than meat and poultry, from USDA to the progenitor of HHS, the Federal Security Agency. Meat inspection remained in USDA. There has been discussion over time regarding whether this dispersal of food safety responsibilities has been problematic, or whether a reorganization would divert time and attention from other fundamental problems in the system. Figure 1 shows this history by providing a timeline of selected important dates for food safety in the United States. Over the years, GAO has published a series of reports highlighting how food safety oversight in the United States is fragmented and recommending broad restructuring of the nation's food safety system. These GAO reports document examples where a number of federal agencies are responsible for some aspect of food safety or product quality, resulting in split agency jurisdiction for some foods. Limited coordination and sharing of information results in often overlapping and/or duplication of efforts. Similar observations are noted in a series of food safety studies by the National Research Council (NRC) and Institute of Medicine (IOM). The NRC/IOM studies further recommend that the core federal food safety responsibilities should reside within a single entity/agency; have a unified administrative structure, clear mandate, and dedicated budget; and maintain full responsibility for oversight of the entire U.S. food supply. FDA has primary responsibility for the safety of most (about 80%-90%) of all U.S. domestic and imported foods. The FDA is responsible for ensuring that all domestic and imported food products—except for most meats and poultry—are safe, nutritious, wholesome, and accurately labeled. Examples of FDA-regulated foods are produce, dairy products, and processed foods. FDA also has oversight of all seafood and shellfish products, and most fish products (except for catfish). FDA has jurisdiction over meats from animals or birds that are not under the regulatory jurisdiction of FSIS. FDA shares some 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. As described in a memorandum of understanding between FDA and FSIS: FDA is responsible for implementing and enforcing the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 301, et seq .), the Public Health Service Act (42 U.S.C. 201, et seq .), the Fair Packaging and Labeling Act (15 U.S.C. 1451 et seq .), and parts of the Egg Products Inspection Act [21 U.S.C. §§1031 et seq .]. In carrying out its responsibilities under these acts, FDA conducts inspections of establishments that manufacture, process, pack, or hold foods, with the exception of certain establishments that are regulated exclusively by FSIS. FDA also inspects vehicles and other conveyances, such as boats, trains, and airplanes, in which foods are transported or held in interstate commerce. In addition, the 111 th Congress passed comprehensive food safety legislation with the FDA Food Safety Modernization Act (FSMA, P.L. 111-353 ), amending the Federal Food, Drug, and Cosmetic Act (FFDCA). FSMA was the largest expansion of FDA's food safety authorities since the 1930s. FSMA did not directly address meat and poultry products under USDA's jurisdiction. New rules governing FDA's food inspection regime of both domestic and imported foods under the agency's jurisdiction are now being implemented. For more information, see CRS Report R43724, Implementation of the FDA Food Safety Modernization Act (FSMA, P.L. 111-353) . In the Washington, DC, area, two FDA 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. The FDA also cooperates with over 400 state agencies across the nation to carry out a wide range of food safety regulatory activities. However, 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, comprising roughly 10%-20% of the U.S. food supply. As described in a memorandum of understanding between FDA and FSIS, FSIS's jurisdiction is as follows: FSIS is responsible for implementing and enforcing the Federal Meat Inspection Act (21 U.S.C. 601, et seq .), the Poultry Products Inspection Act (21 U.S.C. 451, et seq .), and parts of the Egg Products Inspection Act (21 U.S.C. 1031, et seq .). In carrying out its responsibilities under these acts, FSIS places inspectors in meat and poultry slaughterhouses and in meat, poultry, and egg processing plants. FSIS also conducts inspections of warehouses, transporters, retail stores, restaurants, and other places where meat, poultry, and egg products are handled and stored. In addition, FSIS conducts voluntary inspections under the Agriculture Marketing Act (7 U.S.C. 1621, et seq .). The Federal Meat Inspection Act (FMIA) of 1906, as amended, requires USDA to inspect all cattle, sheep, swine, goats, horses, mules, and other equines slaughtered and processed for human consumption. The Poultry Products Inspection Act (PPIA) of 1957, as amended, gives USDA the authority to inspect poultry meat. The PPIA mandates USDA inspection of any domesticated birds (chickens, turkeys, ducks, geese, guineas, ratites [ostrich, emu, and rhea], and squab (pigeons up to one month old]) intended for use as human food. The Egg Products Inspection Act, as amended, provides USDA authority to inspect liquid, frozen, and dried egg products. Each of these laws contains provisions governing USDA's authority to label food products under its jurisdiction. Under the authority of the Agricultural Marketing Act of 1946 as amended, USDA's FSIS may provide voluntary inspection for buffalo, antelope, reindeer, elk, migratory waterfowl, game birds, and rabbits. This type of inspection is performed by FSIS on a fee-for-service basis. However, these meat and poultry species are still within the purview of FDA under FFDCA, whether or not inspected under the voluntary FSIS program. FDA has jurisdiction over meat products from such species in interstate commerce, even if they bear the USDA inspection mark. FDA also has jurisdiction over shell eggs. In addition, the 2008 farm bill requires that FSIS inspect and grade farmed catfish products. Meat and poultry animals and products undergo continuous (i.e., 100%) inspection, which may in turn act as a deterrent to fraud in some cases. FSIS inspects all meat and poultry animals to look for signs of disease, contamination, and other abnormal conditions, both before and after slaughter ("antemortem" and "postmortem," respectively), on a continuous basis—meaning that no animal may be slaughtered and dressed unless an inspector has examined it. One or more federal inspectors are on the line during all hours the plant is operating. Processing plants visited once every day by an FSIS inspector are considered to be under continuous inspection in keeping with the laws. Inspectors monitor operations, check sanitary conditions, examine ingredient levels and packaging, review records, verify food safety plans, and conduct statistical sampling and testing of products for pathogens and residues during their inspections. FSIS 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 product to the United States. Meat and poultry imports are 100% visually inspected (process-based, documentation, labeling), although physical inspections of imports may be more random. FSIS conducts evaluations of foreign meat safety programs and visits establishments to determine whether they are providing a level of safety equivalent to that of U.S. safeguards. No foreign plant can ship meat or poultry to the United States unless its country has received such an FSIS determination. 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. Plants processing meat and poultry under state inspection 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. 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 plants may travel in interstate commerce. CDC is responsible for (1) monitoring, identifying, and investigating foodborne disease problems to determine the contributing factors; (2) working with FDA, FSIS, National Marine Fisheries Service (NMFS), state and local public health departments, universities, and industry to develop control methods; and (3) evaluating the effect of control methods. CDC's "FoodNet" is a collaborative project with the FDA and USDA to improve data collection on foodborne illness outbreaks. 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 allow 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 (42 U.S.C. §§201, et seq .) provides legislative authority for CDC's food safety-related activities. Although the 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), which is part of the U.S. Department of Commerce, 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. NMFS works with FDA, which helps provide training and other technical assistance to NMFS. Under the program, NMFS inspects a reported 20% of the seafood consumed in the United States. EPA has the statutory responsibility for ensuring that the chemicals used on food crops do not endanger public health. EPA's Office of Pesticide Programs is the part of the agency that (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 FFDCA, as amended (21 U.S.C. §§301 et seq. ), are the primary authorities for EPA's activities in this area. USDA's Agricultural Marketing Service (AMS) is responsible for establishing quality and marketing grades and standards for many foods (including dairy products, fruits and vegetables, livestock, meat, poultry, seafood, and shell eggs) and for certifying quality programs and conducting quality grading services. Accordingly, AMS is primarily responsible for ensuring product quality and not food safety . USDA programs establishing quality grade standards to encourage uniformity and consistency in commercial practices are provided for under the Agricultural Marketing Act of 1946 (7 U.S.C. §1621). AMS also administers the Pesticide Data Program (PDP), a cooperative federal-state residue testing program through which it collects data on residual pesticides, herbicides, insecticides, fungicides, and growth regulators in over 50 different commodities. The pesticides and commodities to be tested each year are chosen based on EPA data needs and on information about the types and amounts foods consumed, in particular, by infants and children. Authorization for the program is under the Federal Food, Drug, and Cosmetic Act, as amended by the 1996 Food Quality Protection Act (21 U.S.C. §§301 et seq. ). 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. It 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) is to coordinate many food security activities, including at U.S. borders. Historically, federal funding and staffing levels between FDA and FSIS have been disproportionate to their respective responsibilities for addressing food safety activities. Although FSIS is responsible for roughly 10%-20% of the U.S. food supply, it has received about 60% of the two agencies' combined food safety budget. Although FDA has been responsible for 80%-90% of the U.S. food supply, a few years ago it received about 40% of the combined budget for federal food safety activities ( Table 1 ). Staffing levels also have varied considerably among the two agencies: FSIS staff numbered around 9,400 FTEs in FY2010, while FDA staff working on food-related activities numbers about 3,400 FTEs. In recent years, however, the balance of overall funding for food safety between FDA and USDA has started to shift. Congressional appropriators have increased funding for FDA food activities, which more than doubled from $435.5 million in FY2005 to $987.3 million in FY2016 ( Table 1 ). Funding for FSIS remained mostly unchanged to slightly lower overall. The Food Safety Modernization Act (FSMA) also provided for additional limited funding through certain types of industry-paid user fees. FSMA—comprehensive food safety legislation enacted in the 111 th Congress—authorized additional appropriations and staff for FDA's future food safety activities. FSMA was the largest expansion of FDA's food safety authorities since the 1930s. Among its many provisions, FSMA authorized increased frequency of inspections at food facilities, tightened record-keeping requirements, extended oversight to certain farms, and mandated product recalls. It required food processing, manufacturing, shipping, and other facilities to conduct food safety plans of the most likely safety hazards and design and implement risk-based controls. It also mandated improvements to the nation's foodborne illness surveillance systems and increased scrutiny of food imports, among other provisions. FSMA did not directly address meat and poultry products under USDA's jurisdiction. Although Congress authorized appropriations when it enacted FSMA, it did not provide the funding needed for FDA to perform these activities, and FDA funding for FSMA implementation and other food safety activities has been lower than what agency officials have said is needed to fully implement the law. Previously, FDA reported that an additional $400 million to $450 million per year above the FY2012 base is needed to fully implement FSMA. The enacted FY2016 Agriculture appropriation provided for a $104.5 million increase in budget authority for FDA's food safety activities, including FSMA implementation. For additional information, see CRS Report R44309, FY2016 Appropriations: Selected Federal Food Safety Agencies . Funding levels specific to food safety responsibilities at other federal and state agencies are not readily available. Although FDA staff working on food-related activities has increased, actual staffing levels remain below that mandated in FSMA. Among its many provisions, FSMA mandated an increase in the number of food safety inspectors within FDA and expanded the agency's authority to increase inspection of domestic and foreign food facilities. FSMA states a "goal of not fewer than ... 5,000 staff members in fiscal year 2014." Instead, FDA reports actual staffing levels at 3,700 FTEs in FY2015 ( Table 1 ). FSIS staff number about 8,900 FTEs, a reduction from that in previous years. The discrepancy between the number of FDA and FSIS inspectors is, in part, attributable to differences in how each agency fulfills its respective inspection mandate. Whereas FDA inspection involves primarily review and sampling, FSIS personnel inspect all meat and poultry animals at slaughter on a continuous basis, requiring that at least one federal inspector is on the line during all hours the plant is operating. Processing inspection does not require an FSIS inspector to remain constantly on the production line or to inspect every item. Instead, inspectors are on site daily 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 is also considered to be continuous. As of February 2016, a reported more than 300,000 domestic and foreign food facilities were registered with the agency and are potentially subject to inspection FDA reports. Of these, about 88,000 facilities are domestic (U.S.) registrations, and 212,000 facilities are foreign registrations. Registration of domestic and foreign food facilities is required under the Public Health Security and Bioterrorism Preparedness and Response Act of 2002 ("Bioterrorism Act," P.L. 107-188 ). Most recent available information for FY2012 indicate that FDA and the states under contract with FDA inspected 24,462 domestic food facilities and 1,342 foreign food facilities ( Table 2 ). Data compiled by FDA indicate that, on average, between 10% and 30% of all domestic facilities are inspected by FDA annually, most of which are considered "high-risk" facilities. Estimates of unannounced compliance inspections of domestic establishments by FDA officials range from once every five years to once every 10 years, on average, although the agency claims to visit about 6,000 so-called "high-risk" facilities on an annual basis. In general, FDA relies on notifications from within the industry or from other federal or state inspection personnel to alert it to situations calling for increased inspection. FDA inspection rates of imported foods are much lower, with a reported roughly 2% of all food import lines being physically examined by FDA. Previously, GAO reported that FDA inspections covered only about 1% of the food imported under its jurisdiction. Although FDA is not able to physically inspect a large percentage of food entering the United States, FDA electronically screens all import entries using an automated system known as Predictive Risk-based Evaluation for Dynamic Import Compliance Targeting (PREDICT) information technology system. In addition, FDA can issue import bulletins to signal field inspectors to pay special attention to a particular product, or a range of products from a particular producer, shipper, or importer. The number of regulated meat and poultry facilities under USDA's jurisdiction is much lower and has remained mostly stable over time ( Table 3 ). Much of the agency's work is conducted in cooperation with federal, state, and municipal agencies, as well as private industry. FSIS currently conducts inspections in 6,389 establishments. This compares to 2002, when USDA reported that it conducted inspections in about 6,000 establishments. This total includes Talmadge-Aiken plants, wherein state inspectors perform inspections under federal inspectors' supervision. There were 350 Talmadge-Aiken plants in 2015, up from 235 in 2002. Of the total number of meat, poultry, and egg establishments under FSIS jurisdiction, about 1,100 plants either slaughter or slaughter and process livestock or poultry. More than 4,000 facilities only process meat and poultry, and about 80 process egg products. FSIS also reinspects imported meat, poultry, and egg products at about 140 import reinspection facilities. In the Senate, food safety issues are under the jurisdiction of the Committees on Agriculture, Nutrition, and Forestry; Homeland Security and Governmental Affairs; and Health, Education, Labor, and Pensions. In the House, various food safety activities fall under the jurisdiction of the Committees on Agriculture; Energy and Commerce; Oversight and Government Reform; and Science, Space, and Technology. Agriculture subcommittees of the House and Senate Appropriations Committees set funding and provide oversight of the major agencies that carry out food safety policies. In general, the House and Senate Agriculture Committees maintain jurisdiction over USDA's meat and poultry inspection programs and also other food-safety-related programs administered by other USDA agencies ( see text box below ). One exception involves certain nutrition programs, such as the National School Lunch Program and certain other institutional food service programs administered by USDA's Food and Nutrition Service (FNS), where the committees of jurisdiction are the Senate Committee on Agriculture, Nutrition, and Forestry and the House Committee on Education and the Workforce. FDA-regulated foods and other products generally fall under the jurisdiction of the House Committee on Energy and Commerce and the Senate Committee on Health, Education, Labor, and Pensions. Under FSMA, the separate authorities between FDA and USDA for various foods were explicitly maintained in the enacted law. However, identifying committees of jurisdiction for specific laws, programs, and federal agencies is not straightforward and further complicated by split jurisdiction between FDA and USDA in the case of some foods due to documented fragmentation, overlap, and duplication among the agencies responsible for administering the laws and programs governing certain foods. Appendix A. Major Federal Food Safety Agencies and Selected Laws Appendix B. Selected Comparison of FSIS and FDA Responsibilities

Numerous federal, state, and local agencies share responsibilities for regulating the safety of the U.S. food supply. Federal responsibility for food safety rests primarily with the Food and Drug Administration (FDA) and the U.S. Department of Agriculture (USDA). FDA, an agency of the Department of Health and Human Services, is responsible for ensuring the safety of all domestic and imported food products (except for most meats and poultry). FDA also has oversight of all seafood, fish, and shellfish products. USDA's Food Safety and Inspection Service (FSIS) regulates most meat and poultry and some egg products. The Government Accountability Office (GAO) has identified as many as 15 federal agencies, including FDA and FSIS, as collectively administering at least 30 laws related to food safety. State and local food safety authorities collaborate with federal agencies for inspection and other food safety functions, and they regulate retail food establishments. The combined efforts of the food industry and government regulatory agencies often are credited with making the U.S. food supply among the safest in the world. However, critics view this system as lacking the organization, regulatory tools, and resources to adequately combat foodborne illness—as evidenced by a series of widely publicized food safety problems, including concerns about adulterated food and food ingredient imports, and illnesses linked to various types of fresh produce, to peanut products, and to some meat and poultry products. Some critics also note that the organizational complexity of the U.S. food safety system as well as trends in U.S. food markets—for example, increasing imports as a share of U.S. food consumptions and increasing consumption of fresh, often unprocessed, foods—pose ongoing challenges to ensuring food safety. Over the years, GAO has published a series of reports highlighting how food safety oversight in the United States is fragmented and recommending broad restructuring of the nation's food safety system. Similar observations are noted in a series of food safety studies by the National Research Council (NRC) and the Institute of Medicine (IOM) that recommend that the core federal food safety responsibilities should reside within a single entity/agency, with a unified administrative structure, a clear mandate, a dedicated budget, and full responsibility for oversight of the entire U.S. food supply. The 111th Congress passed comprehensive food safety legislation with the FDA Food Safety Modernization Act (FSMA, P.L. 111-353). FSMA is the largest expansion of FDA's food safety authorities since the 1930s. Although numerous agencies share responsibility for regulating food safety, FSMA focused on foods regulated by FDA, amended FDA's existing structure and authorities, and did not directly address meat and poultry products under USDA's jurisdiction. Beyond these changes, some in Congress continue to push for additional policy reforms to address other perceived concerns about the safety of the U.S. food supply.

On September 22, 2010, President Obama signed the Presidential Policy Directive on Global Development. The directive called for the elevation of foreign development assistance as a national priority and outlined an integrated approach to development, diplomacy, and national security. The Global Climate Change Initiative (GCCI)—one of the three main pillars to the 2010 directive —aims to integrate climate change considerations into relevant foreign assistance through a range of bilateral, multilateral, and private mechanisms to promote sustainable and resilient societies, foster low-carbon economic growth, and reduce greenhouse gas emissions from deforestation and land degradation. The GCCI is divided into three main programmatic initiatives, or categories: (1) adaptation assistance, (2) clean energy assistance, and (3) sustainable landscapes assistance. Adaptation programs aim to assist low-income countries with reducing their vulnerability to climate change impacts and building climate resilience. Bilateral and regional programs at the Department of State and USAID target the more vulnerable countries in Africa, Asia, and Latin America and strive to address climate risks in areas including infrastructure, agriculture, health, and water services; to develop capacity for countries to use the best science and analysis for decision making; and to promote sound governance to carry out these decisions. Multilateral initiatives supported by the United States include the Least Developed Country Fund and the Special Climate Change Fund, which focus on climate resilience and food security provisions in countries with the greatest needs; and the Strategic Climate Fund: Pilot Program for Climate Resilience, which is tasked with coordinating comprehensive strategies in several of the most vulnerable countries to support actions that respond to the potential risks of a changing climate. Clean energy programs aim to reduce greenhouse gas emissions from energy generation and energy use by accelerating the deployment of clean energy technologies, policies, and practices. The United States delivers much of its assistance for clean energy deployment through multilateral trust funds. These funds are primarily housed in international financial institutions (e.g., the World Bank); are currently supported by the financial contributions of donor country governments; and provide financial assistance for projects implemented by a variety of organizations, including U.N. agencies, multilateral development banks, nongovernmental organizations, and national institutions. These funds take advantage of existing large-scale greenhouse gas reduction opportunities and establish investment channels for larger private sector financing. They include the Clean Technology Fund, which aims to spur large-scale clean energy investments in lower-income countries with rapidly growing emissions; the Global Environment Facility, which provides incremental funding for energy and infrastructure projects that support global environmental benefits; and the Strategic Climate Fund: Program for Scaling-Up Renewable Energy in Low Income Countries, which endeavors to assist the poorest countries expand energy access and stimulate economic growth through the scaled-up deployment of renewable energy strategies. Bilateral efforts at the Department of State and U.S. Agency for International Development (USAID) seek to complement the multilateral investments by helping to shape development policy and regulatory environments in the recipient countries. Sustainable landscape programs aim to reduce greenhouse gas emissions from deforestation and forest degradation. Bilateral and regional programs at the Department of State and USAID support country-driven policies for forest governance, forest cover and land use change monitoring systems, law-based resource management and land tenure, and on-the-ground efforts to halt deforestation and foster sustainable forest-based livelihoods. Multilateral initiatives include the Strategic Climate Fund: Forest Investment Program, which tries to address the circumstances that lead to deforestation and increased greenhouse gas emissions in select lower-income countries by improving regulation and enforcement, mobilizing private financing, and securing the social and economic benefits of sound forest management; and the Global Environment Facility, which provides incremental funding for projects that support global environmental benefits such as biodiversity and sustainable land use. The recently launched United Nations Framework Convention on Climate Change (UNFCCC) Green Climate Fund, when capitalized, would support programming in all three programmatic initiatives. The Global Climate Change Initiative is funded through programs at the Department of State, the Department of the Treasury, and USAID (i.e., GCCI "core" agencies). Funds for these programs are appropriated in the Administration's Executive Budget, the International Affairs Function 150 account, for State, Foreign Operations, and Related Programs. Recent trends in GCCI budget authority have seen it fluctuate between $820 million and $950 million since FY2010, and it accounts for less than 2% of total programming in the Function 150 account. Recent budget authority for the GCCI was reported as $945 million in FY2010, $819 million in FY2011, $857 million in FY2012, $840 million in FY2013, and $834 million in FY2014. Funding for FY2015 has yet to be fully reported by agencies. The Administration's FY2016 GCCI budget request is for $1,290 million, including $500 million for the UNFCCC Green Climate Fund. Some additional funds for international climate change financing flow through programs at complementary agencies within the federal government (e.g., the Department of Energy, the Environmental Protection Agency, the Department of Agriculture); however, these allocations are defined outside the scope of the GCCI and are not included in this report. Budget authority for GCCI programming from FY2010 to FY2016 is presented by agency and account in Table A-1 . Congress is responsible for several activities in regard to the GCCI, including (1) authorizing periodic appropriations for federal agency programs and multilateral fund contributions, (2) enacting those appropriations, (3) providing guidance to the agencies, and (4) overseeing U.S. interests in the programs. Congressional committees of jurisdiction for international climate change programs at the Department of State, the Department of the Treasury, and USAID include the following: U.S. House of Representatives Committee on Foreign Affairs, U.S. House of Representatives Committee on Financial Services, U.S. House of Representatives Committee on Appropriations, U.S. Senate Committee on Foreign Relations, and U.S. Senate Committee on Appropriations. H.R. 3288 , the Consolidated Appropriations Act, 2010, was enacted December 16, 2009, as P.L. 111-117 . It included appropriations for the Department of State, Foreign Operations, and Related Programs (Division F) that support Global Climate Change Initiative programming. Many GCCI activities are funded by allocations at the sub-account level, and were left undefined in P.L. 111-117 . Allocations for FY2010 GCCI sub-account programmatic activities in this report are as reported by agencies on the U.S. Department of State's "Foreign Assistance" website. Appropriations enacted in P.L. 111-117 related to GCCI activities include the following: $86.5 million for the Global Environment Facility (of which the U.S. Department of State estimates that $37 million was allocated toward projects related to global climate change activities, with the remainder allocated to projects related to biodiversity, international waters, ozone protection, organic pollutants, etc.); $300.0 million for the Clean Technology Fund; $75.0 million for the Strategic Climate Fund (including the Pilot Program for Climate Resilience and the Forest Investment Program); and larger account level appropriations at the Department of State, USAID, and the Department of the Treasury, including "Development Assistance" at $2,520 million; "Assistance for Europe, Eurasia and Central Asia" at $741.6 million; "Economic Support Fund" at $6,344 million (with another $2,490 million enacted in FY2010 Supplemental Appropriations ( H.R. 4899 ; P.L. 111-212 ); "Department of the Treasury, Debt Restructuring" at $60 million; and "International Organizations and Programs" at $394 million. From these larger accounts, agencies reported $533 million in sub-account level bilateral and regional development programming allocated for GCCI activities. See the Appendix for a breakdown of the FY2010 budget authority. H.R. 1473 , the Department of Defense and Full-Year Continuing Appropriations Act, 2011, was enacted April 15, 2011, as P.L. 112-10 . It included appropriations for the Department of State, Foreign Operations, and Related Programs (Title IX) that support Global Climate Change Initiative programming. Many GCCI activities are funded by allocations at the sub-account level, and were left undefined in P.L. 112-10 . Allocations for FY2011 GCCI sub-account programmatic activities in this report are as reported by agencies on the U.S. Department of State's "Foreign Assistance" website. Appropriations enacted in P.L. 112-10 related to GCCI activities include the following: $89.8 million for the Global Environment Facility (of which the Global Environment Facility reports that approximately 50% is allocated toward projects related to global climate change activities, with the remainder allocated to projects related to biodiversity, international waters, ozone protection, organic pollutants, etc.); $184.6 million for the Clean Technology Fund; $49.9 million for the Strategic Climate Fund (including the Pilot Program for Climate Resilience, the Forest Investment Program, and the Program for Scaling-Up Renewable Energy in Low Income Countries); and larger account level appropriations at the Department of State, USAID, and the Department of the Treasury, including "Development Assistance" at $2,520 million; "Assistance for Europe, Eurasia and Central Asia" at $696 million; "Economic Support Fund" at $5,946 million; "Department of the Treasury, Debt Restructuring" at $50 million; and "International Organizations and Programs" at $354 million. From these larger accounts, agencies reported $539 million in sub-account level bilateral and regional development programming allocated for GCCI activities. See the Appendix for a breakdown of the FY2011 budget authority. H.R. 2055 , the Consolidated Appropriations Act, 2012, was enacted December 23, 2011, as P.L. 112-74 . It included appropriations for the Department of State, Foreign Operations, and Related Programs (Division I) that support Global Climate Change Initiative programming. Many GCCI activities are funded by allocations at the sub-account level, and were left undefined in P.L. 112-74 . Allocations for FY2012 GCCI sub-account programmatic activities in this report are as reported by agencies on the Department of State's "Foreign Assistance" website. Appropriations enacted in P.L. 112-74 related to GCCI activities include the following: $89.8 million for the Global Environment Facility (of which the Global Environment Facility reports that approximately 50% is allocated toward projects related to global climate change activities, with the remainder allocated to projects related to biodiversity, international waters, ozone protection, organic pollutants, etc.); $184.6 million for the Clean Technology Fund; $49.9 million for the Strategic Climate Fund (including the Pilot Program for Climate Resilience, the Forest Investment Program, and the Program for Scaling-Up Renewable Energy in Low Income Countries); larger account level appropriations at the Department of State, USAID, and the Department of the Treasury, including "Development Assistance" at $2,520 million; "Assistance for Europe, Eurasia and Central Asia" at $627 million; "Economic Support Fund" at $5,763 million; "Department of the Treasury, Debt Restructuring" at $12 million; and "International Organizations and Programs" at $349 million. From these larger accounts, agencies reported $493 million in sub-account level bilateral and regional development programming allocated for GCCI activities; and provisions for funding transfers were included, such that in consultation with the Secretary of the Treasury, the Secretary of State may transfer up to $200 million of the funds made available under the "Economic Support Fund" to funds appropriated under the headings ''Multilateral Assistance, Funds Appropriated to the President, International Financial Institutions'' for additional payments to such institutions, facilities, and funds. Using these provisions, the Department of State transferred funds to the Department of the Treasury, which allocated $30 million to the Global Environment Facility (of which $15 million is considered GCCI funding), $45 million to the Clean Technology Fund, and $25 million to the Strategic Climate Fund for FY2012. See the Appendix for a breakdown of the FY2012 budget authority. H.R. 933 , the Consolidated and Further Continuing Appropriations Act, 2013, was enacted March 26, 2013, as P.L. 113-6 . Under P.L. 113-6 , appropriations for the Department of State, Foreign Operations, and Related Programs (Division F, Title VII) that support Global Climate Change Initiative programming were funded through a continuing resolution at the same level as in FY2012, with several changes specified as provisions in the legislation. FY2013-enacted account level estimates were subject to the budget sequestration process as established by the Budget Control Act of 2011 ( P.L. 112-25 ) and the American Taxpayer Relief Act ( P.L. 112-240 ). The enacted State-Foreign Operations funding for FY2013 was reduced by approximately 5% through sequestration, and those reductions were applied at the program, project, and activity level. As in prior years, many GCCI activities are funded by allocations at the sub-account level, and were left undefined in P.L. 113-6 . Allocations for FY2013 GCCI sub-account programmatic activities in this report are as reported by agencies in the U.S. Office of Management and Budget, FY2014 Federal Climate Change Expenditures Report to Congress , August 2013. This reporting is minus the reductions pursuant to the Budget Control Act of 2011 ( P.L. 112-25 ) sequestration order, and accounting for any known and applicable reprogramming, transfers, or other related adjustments. Appropriations enacted in P.L. 113-6 related to GCCI activities (post-sequestration and rescissions estimates) include the following: $124.84 million for the Global Environment Facility (of which the Global Environment Facility reports that approximately 50% is allocated toward projects related to global climate change activities, with the remainder allocated to projects related to biodiversity, international waters, ozone protection, organic pollutants, etc.); $175.28 million for the Clean Technology Fund; $47.37 million for the Strategic Climate Fund (including the Pilot Program for Climate Resilience, the Forest Investment Program, and the Program for Scaling-Up Renewable Energy in Low Income Countries); larger account level appropriations at the Department of State, USAID, and the Department of the Treasury, including "Development Assistance" at $2,718 million; "Economic Support Fund" at $5,583 million; "Department of the Treasury, Debt Restructuring" at $11 million; and "International Organizations and Programs" at $331 million. From these larger accounts, agencies reported $472 million in sub-account level bilateral and regional development programming allocated for GCCI activities; and provisions for funding transfers, as they existed in P.L. 112-74 , were retained in P.L. 113-6 . Using these provisions, the Department of State transferred funds to the Department of the Treasury, which allocated $20.9 million to the Clean Technology Fund and $62.8 million to the Strategic Climate Fund for FY2013. See the Appendix for a breakdown of the FY2013 budget authority. H.R. 3547 , the Consolidated Appropriations Act, 2014, was enacted January 17, 2014, as P.L. 113-76 . It included appropriations for the Department of State, Foreign Operations, and Related Programs (Division K) that support Global Climate Change Initiative programming. Many GCCI activities are funded by allocations at the sub-account level, and were left undefined in P.L. 113-76 . Detailed FY2014 funding has yet to be fully reported by the agencies. Appropriations enacted in P.L. 113-76 related to GCCI activities include the following: $143.75 million for the Global Environment Facility (of which the Global Environment Facility reports that approximately 50% is allocated toward projects related to global climate change activities, with the remainder allocated to projects related to biodiversity, international waters, ozone protection, organic pollutants, etc.); $184.63 million for the Clean Technology Fund; $49.90 million for the Strategic Climate Fund (including the Pilot Program for Climate Resilience, the Forest Investment Program, and the Program for Scaling-Up Renewable Energy in Low Income Countries); larger account level appropriations at the Department of State, USAID, and the Department of the Treasury, including "Development Assistance" at $2,705 million, "Economic Support Fund" at $4,640 million, and "International Organizations and Programs" at $334 million. From these larger accounts, agencies have yet to report funding for sub-account level bilateral and regional development programming allocated for GCCI activities; and provisions for funding transfers were included, such that in consultation with the Secretary of the Treasury, the Secretary of State may transfer funds appropriated under the heading "Economic Support Fund" to funds appropriated under the heading "Multilateral Assistance, International Financial Institutions." Using these provisions, the Department of State transferred funds to the Department of the Treasury, which allocated $25.0 million to the Clean Technology Fund and $25.0 million to the Strategic Climate Fund for FY2014. See the Appendix for a breakdown of the FY2014 proposed budget authority. H.R. 83 , the Consolidated and Further Continuing Appropriations Act, 2015, was enacted December 16, 2014, as P.L. 113-235 . It included appropriations for the Department of State, Foreign Operations, and Related Programs (Division J) that support Global Climate Change Initiative programming. Many GCCI activities are funded by allocations at the sub-account level, and were left undefined in P.L. 113-235 . Detailed FY2015 funding has yet to be fully reported by the agencies. Appropriations enacted in P.L. 113-235 related to GCCI activities include the following: $136.56 million for the Global Environment Facility (of which the Global Environment Facility reports that approximately 50% is allocated toward projects related to global climate change activities, with the remainder allocated to projects related to biodiversity, international waters, ozone protection, organic pollutants, etc.); $184.63 million for the Clean Technology Fund; $49.90 million for the Strategic Climate Fund (including the Pilot Program for Climate Resilience, the Forest Investment Program, and the Program for Scaling-Up Renewable Energy in Low Income Countries); larger account level appropriations at the Department of State, USAID, and the Department of the Treasury, including "Development Assistance" at $2,507 million, "Economic Support Fund" at $5,459 million, and "International Organizations and Programs" at $344 million. From these larger accounts, agencies have yet to report funding for sub-account level bilateral and regional development programming allocated for GCCI activities; and provisions for funding transfers were included, such that in consultation with the Secretary of the Treasury, the Secretary of State may transfer funds appropriated under the heading "Economic Support Fund" to funds appropriated under the heading "Multilateral Assistance, International Financial Institutions." Using these provisions, the Department of State transferred funds to the Department of the Treasury, which allocated $16.7 million to the Clean Technology Fund and $13.3 million to the Strategic Climate Fund during FY2015. See the Appendix for a breakdown of the FY2015 proposed budget authority. The President's FY2016 budget request for the Global Climate Change Initiative is $1,289.6 million, including the following: $348.5 million for international climate change programming at USAID; $459.8 million for international climate change programming at the Department of State, including $350.0 million for the Green Climate Fund, $11.7 million for the UNFCCC/IPCC, and $25.5 million for the Montreal Protocol; and $481.3 million for international climate change programming at the Department of the Treasury, including $150.0 million for the Green Climate Fund, $168.3 million for the Global Environment Facility (of which approximately 60% is considered GCCI funding), $170.7 million for the Clean Technology Fund, and $59.6 million for the Strategic Climate Fund. The requests for the Clean Technology Fund and the Strategic Climate Fund would fulfill the joint $2 billion pledge made by the United States in 2008. See the Appendix for a breakdown of the FY2016 request. As Congress considers potential authorizations and/or appropriations for initiatives administered through the Department of State, the Department of the Treasury, USAID, and other agencies with international programs, it may have questions concerning the purpose, direction, efficiency, and effectiveness of U.S. agency initiatives and current bilateral and multilateral programs that address global climate change. Some issues that may raise concerns over providing assistance include the following: F iscal Constraints. Budget constraints may lead to questions about sustaining high levels of support for international development assistance in general, and international climate change assistance in particular. The burden is exacerbated during times of economic downturn, when the federal government is hard-pressed to generate fiscal resources to adequately address domestic challenges and maintain basic levels of public services and quality of life. Some have suggested that retaining available funds for immediate domestic priorities, such as fostering renewed economic growth and creating jobs, should take precedence over global concerns for which many Americans feel less urgency and responsibility. Potential for Misuse. National and international institutions that dispense financial assistance have been criticized on occasion for inefficient and bloated bureaucracies; their lack of transparency about project procurement practices and operating costs; and the proportion of their funds misused or lost through instances of graft, corruption, and other political inefficiencies. Some suggest revisiting operational guidance of these institutions before further appropriations are made. Uncertain Results . Questions remain regarding the overall effectiveness of international financial assistance in spurring economic development and reform in lower-income countries, and, more specifically, in addressing issues of climate change and the environment. Many studies have examined the effects of international assistance provided to lower-income countries, including both bilateral and multilateral mechanisms, and have returned mixed results, making it difficult to reach firm conclusions that would support or oppose continued contributions. Uncertainties in Climate Science . Prevailing scientific research on the current and future impacts of greenhouse gas emissions on the global climate exhibits varying degrees of analytical uncertainty. The lack of definitiveness in some data and in certain model projections has been offered by some as a reason to postpone and/or reconsider both domestic and international climate change assistance policies and programs. Some issues that may support providing assistance include the following: Commercial Interests. Some maintain that international climate change assistance benefits U.S. businesses, as support for low-emission economic growth may increase trade, commerce, and economic activity in the global marketplace for U.S. goods and services. Increased assistance may allow some U.S. industries to make competitive inroads into rapidly expanding markets, improve the advancement and commercialization of U.S. technologies, mobilize greater investment in related domestic sectors, and enhance job creation in the United States. Decreased funding may cede American influence in global markets to other economic powers still engaged with lower-income countries on environmental and natural resource issues (e.g., the European Union, China). Investment Efficiencies. Some argue that the costs of responding to tomorrow's climate-related catastrophes, instabilities, conflicts, and technological needs may be significantly higher than the costs of preventing them today. Some economists note that lower-income countries account for nearly all of the recent growth in global emissions and represent the cheapest near-term opportunity to mitigate GHG pollution as part of a cost-effective global solution. Natural Disaster Preparedness . Some claim that international climate change assistance is a means to support natural disaster preparedness around the globe. Assistance for adaptation activities to help "climate-proof" developing countries' infrastructure and other sectors may help avoid future capital and other losses; minimize the redirection of resources to ad hoc disaster response and urgent humanitarian needs; and avoid chronic humanitarian crises, such as food shortages, particularly for the resource poor in the least developed countries. National Security. Some defend international climate change assistance as a way to address and mitigate risks to national security. According to a 2008 National Intelligence Assessment, the impacts of global climate change may worsen problems of poverty, social tensions, environmental degradation, and weak political institutions across the developing world. Some see international climate change assistance as a means to help make lower-income countries less susceptible to these threats, for the benefit of both the country and the security interests of the United States. Internatio nal Leadership. Some see the promotion of international climate change assistance to lower-income countries as a method through which to increase U.S. leadership in global environmental issues. Through such leadership, the United States may be able to influence and set important international economic and environmental policies, practices, and standards.

The United States supports international financial assistance for global climate change initiatives in developing countries. Under the Obama Administration, this assistance has been articulated primarily as the Global Climate Change Initiative (GCCI), a platform within the President's 2010 Policy Directive on Global Development. The GCCI aims to integrate climate change considerations into U.S. foreign assistance through a range of bilateral, multilateral, and private sector mechanisms to promote sustainable and climate-resilient societies, foster low-carbon economic growth, and reduce greenhouse gas emissions from deforestation and land degradation. The GCCI is implemented through programs at three "core" agencies: the Department of State, the Department of the Treasury, and the U.S. Agency for International Development (USAID). Most GCCI activities at USAID are implemented through the agency's bilateral development assistance programs. Many of the GCCI activities at the Department of State and the Department of the Treasury are implemented through international organizations, including the United Nations Framework Convention on Climate Change's Least Developed Country Fund and Special Climate Change Fund, as well as multilateral financial institutions such as the Global Environment Facility, the Clean Technology Fund, and the Strategic Climate Fund. The GCCI is funded through the Administration's Executive Budget, Function 150 account, for State, Foreign Operations, and Related Programs. Congress is responsible for several activities in regard to the GCCI, including (1) authorizing periodic appropriations for federal agency programs and multilateral fund contributions, (2) enacting those appropriations, (3) providing guidance to the agencies, and (4) overseeing U.S. interests in the programs and the multilateral funds. Recent budget authority for the GCCI was $945 million in FY2010, $819 million in FY2011, $857 million in FY2012, $840 million in FY2013, and $834 million in FY2014. Funding for FY2015 has yet to be fully reported by agencies. Funding has been enacted through legislation including the Consolidated Appropriations Act, 2010 (H.R. 3288; P.L. 111-117); the Supplemental Appropriations Act, 2010 (H.R. 4899; P.L. 111-212); the Department of Defense and Full-Year Continuing Appropriations Act, 2011 (H.R. 1473; P.L. 112-10); the Consolidated Appropriations Act, 2012 (H.R. 2055; P.L. 112-74); the Consolidated and Further Continuing Appropriations Act, 2013 (H.R. 933; P.L. 113-6); the Consolidated Appropriations Act, 2014 (H.R. 3547; P.L. 113-76); and the Consolidated and Further Continuing Appropriations Act, 2015 (H.R. 83; P.L. 113-235). The Administration's FY2016 GCCI budget request is for $1,290 million, including $500 million for the recently launched United Nations Framework Convention on Climate Change (UNFCCC) Green Climate Fund. Congressional committees of jurisdiction over the GCCI include the U.S. House of Representatives Committees on Foreign Affairs, Financial Services, and Appropriations, and the U.S. Senate Committees on Foreign Relations and Appropriations. As Congress considers potential authorizations and/or appropriations for activities administered through the GCCI, it may have questions concerning U.S. agency initiatives and current bilateral and multilateral programs that address global climate change. Some potential concerns may include cost, purpose, direction, efficiency, and effectiveness, as well as the GCCI's relationship to industry, investment, humanitarian efforts, national security, and international leadership. This report serves as a brief overview of the GCCI and its structure, intents, and funding history.

U.S. policymakers and members of the public have contentiously debated U.S. ratification of the United Nations (U.N.) Convention on the Elimination of All Forms of Discrimination Against Women (CEDAW, or the Convention) since it was drafted in 1979. CEDAW is the only international human rights treaty that specifically focuses on the rights of women. As of July 22, 2015, 189 countries have ratified or acceded to the Convention. The United States is the only nation to have signed but not ratified CEDAW. President Jimmy Carter signed the Convention and submitted it to the Senate in 1980. The Senate Foreign Relations Committee (SFRC) held hearings on CEDAW in 1988, 1990, 1994, and 2002, and reported it favorably in 1994 and 2002. To date, the treaty has not been considered for advice and consent to ratification by the full Senate. Other countries that are not parties to CEDAW include Iran, Palau, Somalia, Sudan, and Tonga. The Senate may consider providing advice and consent to U.S. ratification of CEDAW during the 114 th Congress. The Barack Obama Administration has expressed support for the Convention, calling it "an important priority." In a May 2009 letter to the SFRC, the Obama Administration identified CEDAW as a human rights treaty on which it "supports Senate action at this time." Most recently, Secretary of State John Kerry stated that he supported U.S. ratification of the Convention. U.S. policymakers generally agree with CEDAW's overall objective of eliminating discrimination against women around the world. Many, however, question whether the Convention is an appropriate or effective mechanism for achieving this goal. Opponents are concerned that U.S. ratification would undermine national sovereignty and require the federal government or, worse, the United Nations to interfere in the private conduct of citizens. They argue that the Convention is ineffective, and emphasize that countries with reportedly poor women's rights records—including China and Saudi Arabia—have ratified CEDAW. Supporters, however, contend that the Convention is a valuable mechanism for fighting women's discrimination worldwide. They argue that U.S. ratification will give CEDAW additional legitimacy and empower women who aim to eliminate discrimination in their own countries. This report addresses CEDAW's background, objectives, and structure and provides an overview of U.S. policy toward the Convention. It examines issues that have been raised in the U.S. ratification debate, including the treaty's impact on U.S. sovereignty, the effectiveness of the Convention, and its possible use as an instrument of U.S. foreign policy. It also describes controversial provisions and CEDAW Committee recommendations addressing the role of women in society and women's equal access to education and healthcare. U.N. member states adopted several treaties addressing aspects of women's rights prior to adoption of CEDAW in 1979, including the Convention on the Political Rights of Women (1952) and the Convention on the Consent to Marriage (1957). In 1967, after two years of negotiations, the U.N. General Assembly adopted the Declaration on the Elimination of Discrimination Against Women, a nonbinding document that laid the groundwork for CEDAW. Subsequently, the U.N. Commission on the Status of Women drafted CEDAW, which the General Assembly adopted on December 18, 1979. The Convention entered into force on September 3, 1981, after receiving the required 20 ratifications. CEDAW calls on States Parties to take all appropriate measures to eliminate discrimination against women in all areas of life. This includes equality in legal status, political participation, employment, education, healthcare, and the family structure. Article 2 of the Convention specifies that States Parties should undertake to "embody the principle of equality of men and women in their national constitutions or other appropriate legislation ... to ensure, through law and other appropriate means, the practical realization of this principle." The Convention defines discrimination against women as any distinction, exclusion or restriction made on the basis of sex which has the effect or purpose of impairing or nullifying the recognition, enjoyment or exercise by women irrespective of their marital status, on a basis of equality of men and women, of human rights and fundamental freedoms in the political, economic, social, cultural, civil, or any other field. It specifically calls for equal pay with men, more attention to the equality of rural women, the freedom to choose a marriage partner, and the suppression of trafficking in women and girls. The Committee on the Elimination of Discrimination Against Women (the Committee) was established in 1982, under Article 17 of CEDAW, as a mechanism to monitor the progress of the Convention's implementation. It is composed of 23 independent experts who are elected at a meeting of States Parties to the Convention by secret ballot, with consideration given to the principle of equitable geographic distribution. Each State Party may nominate one expert, and if elected, the expert serves a four-year term. The majority of the Committee members are women who, according to the Convention, should have "high moral standing and competence" and "represent different forms of civilization as well as principal legal systems." The Committee is led by a Chairperson, three Vice Chairpersons, and a rapporteur, which are elected by Committee members. The Chairperson directs the discussion and decision-making process of the Committee and represents the Convention at international conferences and events. The Committee reports annually on its activities to the U.N. General Assembly through the U.N. Economic and Social Council and meets twice a year at the U.N. Office in Geneva. As one of seven U.N. human rights treaty bodies, the Committee is financed from the U.N. regular budget. It was previously supported by the U.N. Division for the Advancement of Women, but since January 2008 it has been serviced by the U.N. Office of the High Commissioner for Human Rights. The Committee is responsible for reviewing the reports on national CEDAW implementation submitted by States Parties. Countries are required to submit an initial report within the first year of ratification or accession, followed by a report every four years. The reports identify areas of progress as well as concerns or difficulties with implementation. The Committee engages in an open dialogue and exchange of ideas with the reporting country and compiles recommendations and conclusions based on its findings, which include general recommendations on cross-cutting issues of concern. The general recommendations are nonbinding, and there is no mechanism for their enforcement. The Committee has made over 30 general recommendations since 1986 covering a wide range of issues affecting women, such as improvement in education and public information programs, elimination of female circumcision, equality in marriage and family relations, and preventing violence against women. On October 6, 1999, the U.N. General Assembly adopted an Optional Protocol to strengthen the Convention. The Protocol entered into force in December 2000, and has been ratified by 106 countries. It is a stand-alone treaty that can be signed or ratified by countries that are not party to the main treaty. It includes a "communications procedure" that permits groups or individuals to file complaints with the CEDAW Committee. It also incorporates an "inquiry procedure" that allows the Committee to explore potential abuses of women's rights in States Parties to CEDAW. Successive U.S. Administrations and Members of Congress have supported the Convention's overall objective of eliminating discrimination against women. They have disagreed, however, as to whether the Convention is an effective or appropriate means of achieving this goal. The Obama Administration has expressed support for the Convention. On January 15, 2009, Susan Rice, U.S. Permanent Representative to the United Nations, stated at her Senate confirmation hearing that CEDAW "will be an important priority" for the Administration. In May of the same year, the Obama Administration identified CEDAW as a human rights treaty on which it "supports Senate action at this time," prompting some to speculate that the Administration may transmit the treaty to the Senate Foreign Relations Committee (SFRC) for its advice and consent. In March 2010, Secretary of State Hillary Clinton announced that the Administration "will continue to work for the ratification of CEDAW." At a November 2010 Subcommittee on Human Rights and the Law hearing, then- Ambassador-at-Large for Global Women's Issues Melanne Verveer supported U.S. ratification of CEDAW, noting that it is critical to U.S. efforts to "promote and defend the rights of women" worldwide. At the same hearing, a representative from the Department of Justice Civil Rights Division expressed support for CEDAW ratification to "express more forcefully our [the United States'] commitment to the rights of women in the United States and to further opportunities for girls and women around the world." Secretary of State John Kerry also expressed his support for U.S. ratification of CEDAW at his January 2013 nomination hearing before SFRC. Most recently, in a February 2015 report to the U.N. Human Rights Council, the Administration reaffirmed its support for the Convention, stating that "the principles endorsed in CEDAW are consistent with our domestic and foreign policy objectives and are strongly supported in federal and state law." President Carter signed the Convention on July 17, 1980, and submitted it to the Senate for advice and consent on November 12 of the same year. The Reagan and first Bush Administrations did not support ratification, and the Convention remained pending in the SFRC. The Clinton Administration supported CEDAW ratification and in 1994 sent a treaty package to the Senate for advice and consent to ratification. The package included nine proposed reservations, understandings, and declarations (RUDs) to the Convention. (RUDs often accompany U.S. ratification of a treaty. See text box.) The SFRC reported the Convention favorably, but it never came to vote in the full Senate because of opposition from several Senators. The reservations recommended by the Clinton Administration addressed the following issues: "private conduct," which made clear that the United States "does not accept any obligation under the Convention to regulate private conduct except as mandated by the Constitution and U.S. law"; "combat assignments," which stated that the United States "does not accept an obligation under the Convention to put women in all combat positions"; "comparable worth," which made clear that the United States would not accept the doctrine of comparable worth based on the Convention's broad description; and "paid maternity leave," which stated that the United States could not guarantee paid maternity leave as the Convention stipulates because it is not a requirement under federal or state law. The three understandings submitted by the Clinton Administration stated that (1) the United States will fulfill its obligations under the Convention in a "manner consistent with its federal role," recognizing that issues such as education are the responsibility of state and local governments; (2) the United States will not accept Convention obligations that restrict freedom of speech or expression; and (3) the United States and other States Parties may decide the nature of the health and family planning services referred to in the Convention, and may determine whether they are "necessary" and "appropriate." The Clinton Administration's proposed declarations included a "non-self-executing" provision, which stated that no new laws would be created as a result of CEDAW, and a "dispute settlement" provision, which stated that the United States was not bound by Convention Article 29(1) that refers unresolved disputes to the International Court of Justice. The Bush Administration stated that it supported the Convention's goal of eradicating discrimination against women on a global scale but had several concerns with the Convention. These concerns were outlined in 2002, when the SFRC held hearings on potential CEDAW ratification. Then-Secretary of State Colin Powell wrote a letter to the SFRC stating that the Convention was under the State and Justice Departments' review because of concerns regarding "the vagueness of the text of CEDAW and the record of the official U.N. body [the CEDAW Committee] that reviews and comments on the implementation." In particular, the Administration cited "controversial interpretations" of the CEDAW Committee's recommendations to States Parties. Powell's letter specifically noted a Committee report on Belarus that "questioned the celebration of Mother's Day," and a report on China that "called for legalized prostitution." These positions, Powell argued, were "contrary to American law and sensibilities." The Bush Administration further maintained that the vagueness of the CEDAW text opened the door for broad interpretation by international and domestic entities and that the 1994 RUDs proposed by the Clinton Administration did not address these interpretation issues. It also emphasized the importance of ensuring the Convention would not conflict with U.S. constitutional and statutory laws in areas typically controlled by the states. In light of these concerns, the Administration urged the SFRC not to vote on the Convention until a full legal review was complete. The review began in mid-April 2002. On February 7, 2007, the Administration transmitted a letter to the Senate stating that it did not support the Senate taking action on the Convention at that time. CEDAW has been pending in the SFRC for over 30 years. The committee held hearings in 1988 and 1990 but did not vote to recommend the Convention for advice and consent of the full Senate. With support from the Clinton Administration, the SFRC held another round of ratification hearings in June 1994. The committee reported the Convention favorably with a vote of 13 to 5 in September 1994, but the 103 rd Congress adjourned before it could be brought to vote in the full Senate. The Republican Party was elected as the majority in the 104 th Congress, and the incoming chairman of the Foreign Relations Committee, Senator Jesse Helms, did not allow further consideration of CEDAW because of his concerns regarding its possible impact on U.S. sovereignty and U.S. laws, including those related to abortion and family planning. In June 2002, the debate over U.S. ratification of CEDAW gained momentum as the SFRC again held hearings on ratification of the Convention. On July 30, 2002, the committee reported the Convention favorably by a vote of 12 to 7, subject to four reservations, five understandings, and two declarations. These included the nine RUDs recommended by the Clinton Administration in 1994, plus two additional understandings. The first additional understanding included a proposal from Senator Jesse Helms, who was then the ranking minority Member, which stated that "nothing in this Convention shall be construed to reflect or create any right to abortion and in no case should abortion be promoted as a method of family planning." The second additional understanding addressed the impact of the CEDAW Committee on U.S. law, stating, "the CEDAW Committee has no authority to compel parties to follow its recommendations." The 107 th Congress adjourned before the Senate could vote on the Convention. (See Appendix B for a timeline of SFRC consideration of CEDAW.) On November 18, 2010, the Senate Judiciary Committee's Subcommittee on Human Rights and the Law held a public hearing, "Women's Rights Are Human Rights: U.S. Ratification of the Convention on the Elimination of All Forms of Discrimination Against Women (CEDAW)," representing the first Senate hearing on CEDAW in eight years. Though it has no direct role in providing advice and consent to ratification of treaties, the House of Representatives has demonstrated a continued interest in CEDAW. In March 2015, Representative Carolyn Maloney introduced H.Res. 145 expressing the sense of the House of Representatives that the Senate should ratify the Convention. Similar House resolutions were introduced in the 106 th through 113 th Congresses. Some policy decisions and issues may continue to play a role in the debate if the Senate considers providing its advice and consent to ratification during the 114 th Congress. For many policymakers, the question of U.S. ratification of CEDAW touches on the broader issue of national sovereignty. The minority views in the 2002 SFRC report on the Convention, for instance, state that CEDAW represents "a disturbing international trend" of favoring international law over U.S. constitutional law and self-government, thereby undermining U.S. sovereignty. Opponents are particularly concerned that if the United States ratifies the Convention, the CEDAW Committee would have authority over the actions of the U.S. government and private citizens regarding discrimination against women. Many critics, for example, have taken issue with the Committee's recommendations regarding abortion, Mother's Day, and prostitution. CEDAW advocates maintain that U.S. ratification would not affect national sovereignty. During Senate debate in 2002, for instance, proponents argued that the Convention would impose a "minimal burden" on the United States given that the Constitution and other existing federal and state laws already meet the obligations of the Convention. Supporters also emphasize that the United States would likely file several reservations, understandings, and declarations (RUDs) to the Convention, including a non-self-executing declaration that would require Congress to enact implementing legislation to bring CEDAW's provisions into use—thereby addressing any potential conflicts with existing U.S. laws. Advocates further contend that the actions of the CEDAW Committee would not affect domestic laws or the private lives of U.S. citizens. They maintain that the Committee relies primarily on individual countries to fulfill their obligations under the Convention and that it has no established rules for enforcing its recommendations or addressing treaty noncompliance. In order to alleviate ongoing concerns regarding the Committee's role, during the 2002 Senate ratification debate then-SFRC Chairman Senator Joseph Biden proposed an understanding stating the CEDAW Committee does not have the authority to compel States Parties to follow its recommendations. A major point of contention among supporters and opponents of U.S. ratification is whether CEDAW is an effective mechanism for addressing women's rights internationally. Opponents generally recognize that global discrimination against women is a problem that should be eliminated, but they do not view the Convention as an effective way to achieve this goal. They emphasize that many countries widely believed to have poor women's rights records ratified the Convention. Some also contend that the Convention hurts rather than helps women struggling to achieve human rights internationally—arguing that CEDAW serves as a "facade for continuing atrocities" in countries that have ratified it. Supporters of U.S. ratification maintain that CEDAW is an effective mechanism for improving women's rights globally. They contend that the Convention is a formal mechanism through which to draw attention to women's issues on both a national and international level, particularly in developing countries. To support this position, they cite studies and research conducted on CEDAW's implementation. The U.N. Development Fund for Women (UNIFEM) (now UN Women), for example, found that some countries, including Brazil and Colombia, incorporated language into their national constitutions to reflect CEDAW provisions or objectives. In June 2000, York University and the International Women's Rights Project (IWRP) conducted the First CEDAW Impact Study, which highlighted evidence of CEDAW's effectiveness at the national level and identified circumstances that contributed to successful implementation of the Convention. The study found that in Turkey CEDAW was cited in numerous court cases regarding discrimination against women; while in Nepal, the Ministry of Women and Social Welfare formed a taskforce to review all laws that were inconsistent with the Convention. In addition, a 2010 study by the International Center for Research on Women found that in Saudi Arabia , CEDAW is being used to draft a new law that allows women lawyers to try family cases in court (under current law they cannot do so); in the Philippines in 2009, the government introduced the Magna Carta of Women (Republic Act No. 9710), a comprehensive women's rights law that relies heavily on CEDAW provisions and definitions; in Costa Rica in 2003, the Constitutional Chamber of the Supreme Court ruled that the Legislative Assembly President had not named a proportionate number of women to the Assembly's permanent committees, which was inconsistent with the Costa Rican constitution and Article 7 of CEDAW; and in Zambia in 1997, the High Court ruled in Longwe v. Intercontinental Hotels that the Intercontinental Hotel discriminated against women under the Zambian constitution and Articles 1, 2, and 3 of CEDAW because it refused to allow women to enter the premises unaccompanied by a male companion. Despite such progress, supporters have acknowledged that much work needs to be done to achieve full implementation of CEDAW. In particular, the IWRP impact study identified several barriers to the Convention's implementation, including (1) the alienation of national governments from civil society, (2) lack of support from governments, (3) difficulty in implementing gender-integrated policies, and (4) lack of public awareness. Similarly, UNIFEM acknowledged that CEDAW's effectiveness is "largely dependent on the political will of governments." Both supporters and opponents of U.S. ratification have expressed concern with some of the RUDs filed by States Parties that appear to undermine the intent and effectiveness of the treaty. For instance, several countries—including Egypt, Iraq, Malaysia, and Syria—submitted reservations stating that certain provisions would not apply if they are deemed incompatible with Islamic Shari'a law or values. Similarly, Niger filed a reservation to a provision calling on States Parties to modify social and cultural patterns related to the conduct of men and women, while North Korea filed a reservation to a provision that calls on States Parties to modify or abolish existing laws that constitute discrimination against women. When filing their own reservations, other States Parties—including Canada, France, and the United Kingdom—formally objected to the inclusion of these reservations, stating that they conflict with Article 28(2) of CEDAW, which states that a reservation incompatible with the object and purpose of the Convention shall not be permitted. Many CEDAW proponents acknowledge the concerns regarding RUDs; however, they maintain that the benefits of the Convention's almost universal ratification outweighs the drawbacks of conditions imposed by some States Parties. Supporters also emphasize that a number of governments have decided to withdraw or modify RUDs because their national laws, policies, or priorities have changed. Examples of countries that have withdrawn reservations include the Bahamas, France, Germany, and Ireland. CEDAW proponents contend that U.S. ratification will increase the credibility of the United States abroad and enhance its ability to champion women's rights in other countries. They argue that U.S. nonratification leads other governments to question the U.S. commitment to combating discrimination against women, thereby hindering its ability to advocate women's rights internationally. For example, at a 2010 hearing before the Senate Subcommittee on Human Rights and the Law, then-Ambassador Verveer stated that CEDAW nonratification "deprives us [the United States] of a powerful tool to combat discrimination against women ... because as a non-party, it makes it more difficult for us to press other parties to live up to their commitments under the treaty." At the same hearing, Wazhma Frogh, a women's rights activist from Afghanistan, stated that U.S. failure to ratify CEDAW "is of huge international significance," and noted that conservative elements in Afghanistan "use American's failure to ratify CEDAW to attack [Afghan] women's rights defenders." Supporters also maintain that the United States might be viewed as hypocritical because it expects countries to adhere to international standards that it does not itself follow. In support of this position, some point to U.S. statutes that require foreign assistance to be based on a recipient country's compliance with "internationally recognized human rights." Many also hold that U.S. ratification would give the United States additional fora in which to combat discrimination against women, particularly if a U.S. citizen were elected to the CEDAW Committee. Serving on the Committee, supporters argue, would provide the United States with an opportunity to share its expertise and experience in combating discrimination against women with other countries. Critics contend that the United States is already an international leader in promoting and protecting women's rights and that CEDAW ratification would not affect its ability to advocate such issues internationally. They argue that current U.S. laws and policies regarding gender discrimination serve as an example of the United States' commitment to women's equality. In addition, many assert that CEDAW and, more broadly, other human rights treaties, are meant for countries with lesser human rights records than the United States. Some critics have also voiced reluctance to bring the question of U.S. obligations under international human rights treaties to other countries, particularly those with poor human rights records. Many opponents are also concerned that the CEDAW Committee could be used as a platform for unfounded political criticisms of the United States. Moreover, they contend that U.S. ratification would not affect the laws and policies addressing discrimination against women in other countries. They further emphasize that improvements in the status of women in nations such as China and Sudan can be made only by the governments of these countries. Many opponents of CEDAW are concerned that U.S. ratification would undermine U.S. privacy laws and policies—particularly those relating to family structure and the rights and responsibilities of parents. Some, for example, have taken issue with provisions that they believe could be interpreted to undermine traditional family roles. Article 5(a), for instance, calls on States Parties to take all appropriate measures (a) To modify the social and cultural patterns of conduct of men and women, with a view to achieving the elimination of prejudices ... which are based on ... the idea of the inferiority or the superiority of either of the sexes or on stereotyped roles for men and women; (b) To ensure that family education includes ... recognition of the common responsibility of men and women in the upbringing and development of their children, it being understood that the interest of the children is the primordial consideration in all cases. Such language has prompted critics to contend that CEDAW obligates governments, families, and individuals to adhere to a predetermined or artificial set of values, regardless of whether they align with national law, family traditions, or personal convictions. Specifically, some argue that the Convention dismisses "established moral and ethical principles" that are based on human nature and experience, and discriminates against the "traditional" family and a "diversity of cultures and religious beliefs." CEDAW proponents counter that the Convention does not obligate States Parties to redefine or regulate gender roles or family structures. They note that Article 5 calls on States Parties to take "all appropriate measures" [emphasis added], thereby leaving it to governments to determine what actions are appropriate based on their domestic laws and policies. Some further argue that Article 5 addresses gender stereotypes in the context of their possible link to violence against women. To support this position, they point to the CEDAW Committee General Recommendations on Violence Against Women. Recommendation 19, for instance, relates "traditional attitudes by which women are regarded as subordinate to men or as having stereotyped roles" to "practices involving violence or coercion." Consequently, some contend, Article 5(b) addressing family planning education primarily refers to public education, grant, or information programs that aim to combat violence against women. Another area of concern is CEDAW's possible impact on the role of women as mothers and caregivers. Many opponents are particularly critical of the CEDAW Committee's recommendation to Belarus in 2000 that expressed concern regarding the "continuing prevalence of sex-role stereotypes and by the reintroduction of such symbols as a Mother's Day ... which it sees as encouraging women's traditional roles." Some point to this statement as evidence of CEDAW redefining the family and the role of women in society. In response to such concerns, supporters argue that the Committee was not criticizing Mother's Day; rather, it was responding to Belarus's celebration of the holiday as the only response to the obstacles women face in that country. Proponents further emphasize that the Committee has reviewed the reports of many other countries that celebrate Mother's Day and made no similar comments. A number of critics also contend that U.S. ratification of CEDAW may undermine parental rights. Opponents have taken issue with Article 16(d), which says that States Parties shall take all appropriate measures to ensure that women receive "the same rights and responsibilities as parents ... in matters relating to their children; in all cases the interest of the children shall be paramount." Opponents are concerned that such language could be interpreted to give the CEDAW Committee authority to determine what is in the best interest of U.S. children, thereby undermining the rights and responsibilities of parents. Proponents, however, contend that CEDAW supports the role of parents in child-rearing, emphasizing that it calls for the "common responsibility of men and women in the upbringing and development of their children." Furthermore, they argue that CEDAW would not affect parental rights because the U.S. Constitution limits government interference in private matters, including parenting. Recognizing the concerns of many CEDAW opponents regarding the Convention's possible impact on the private lives of U.S. citizens—particularly relating to family and parenting—in 1994 the Clinton Administration proposed a "private conduct" reservation to the Convention. It stated that the United States "does not accept any obligation under the Convention to regulate private conduct except as mandated by the Constitution and U.S. law." Some CEDAW supporters object to the inclusion of the proposed reservation, arguing that the United States should strive to adhere to the treaty's provisions regarding gender stereotypes. They contend that a private conduct reservation implies a "lack of political commitment" by the United States and indicates that it views CEDAW as "applicable only in other countries." A significant issue in the CEDAW ratification debate centers on whether the Convention takes a position on abortion or is "abortion neutral." Many who support U.S. ratification hold that the treaty is abortion neutral because the word "abortion" is never mentioned in the Convention's text. This point of view was shared by the Clinton Administration, which declared the treaty abortion neutral in 1994. Supporters also emphasize that many countries where abortion is regulated or illegal, including Burkina Faso, Colombia, and Ireland, ratified the Convention without associated reservations, understandings, or declarations (RUDs), and regularly report to the CEDAW Committee. Many opponents of U.S. ratification argue that while CEDAW does not include the word "abortion," parts of the Convention text could be interpreted to undermine current U.S. abortion law. Specifically, some have taken issue with Article 12(1), which states that countries "shall take all appropriate measures to eliminate discrimination against women in the field of health care in order to ensure ... access to health care services, including those related to family planning." Critics have also expressed concern regarding Article 16(1)(e), which requires that States Parties take all appropriate measures to ensure that women have the right to "decide freely and responsibly on the number and spacing of their children." Opponents suggest that such language could lead to the abolishment of state parental notification laws, require federal funding for abortions, or obligate the U.S. government to promote and provide access to abortion. Two States Parties to the Convention—Malta and Monaco—explicitly stated in their reservations to CEDAW that they do not interpret Article 16(1)(e) as imposing or forcing the legalization of abortion in their respective countries. CEDAW supporters counter such criticisms by emphasizing that Articles 12 and 16 call on States Parties to take all " appropriate measures" [emphasis added], thereby leaving it up to States Parties to determine what actions are appropriate based on their domestic laws and policies. To support this view, some have cited the negotiating history of CEDAW, which appears to demonstrate the intent of some countries to keep the Convention's text intentionally ambiguous so that the treaty could be ratified by countries with a wide range of domestic laws and policies. The CEDAW Committee's recommendations to States Parties regarding abortion are a particularly controversial aspect of the U.S. ratification debate. Many opponents of CEDAW, particularly pro-life advocates, are strongly critical of the Committee because, in their view, it calls on States Parties to support and encourage abortion despite the fact that it is never mentioned in the CEDAW text. As evidence of this, critics point to the Committee's General Recommendation 24, which elaborates on CEDAW Article 12(1) addressing women's equal access to health care, including family planning services. The Committee recommends that "when possible, legislation criminalizing abortion could be amended to remove punitive provisions imposed on women who undergo abortion." Opponents also criticize Committee recommendations to individual countries that appear to encourage the decriminalization or legalization of abortion and oppose conscientious objector policies. In 1998, for example, the Committee recommended to Mexico that "all states ... should review their legislation so that, where necessary, women are granted access to rapid and easy abortion." More recently, in 2007, the Committee urged Poland "to ensure that women seeking legal abortion have access to it, and that their access is not limited by the use of the conscientious objection clause." In addition, opponents have suggested that the Committee's interpretation of CEDAW could be used as a basis for challenging abortion laws in the United States and other countries. In particular, some critics have expressed concern with a May 2006 decision by the Constitutional Court of Colombia, which cited CEDAW when it determined that abortion should not be considered a crime in all circumstances (such as rape or incest and when the life of the mother is in danger). As mentioned previously, many CEDAW supporters emphasize that the purpose of the Committee is to consider the progress of States Parties' implementation of the Convention. They point out that CEDAW has no established mechanism for noncompliance and that it relies primarily on States Parties to fulfill their treaty obligations. Further, proponents contend that many of the Committee recommendations to States Parties demonstrate its overall opposition to abortion as a method of family planning. In 2006, for example, the Committee expressed concern that in the Former Yugoslav Republic of Macedonia "abortion continues to be used as a method of birth control." Similarly, in 2007 the Committee noted with concern that in Greece "due to inadequate access to family planning and contraceptive methods, abortion is often used by women and adolescent girls as a method of birth control." Moreover, supporters maintain that the overall goal of the Committee is to encourage States Parties to reduce abortion rates through education and family planning. Consequently, some argue, the Committee makes recommendations regarding abortion only in very specific circumstances, such as when (1) a nation demonstrates a high rate of abortion, indicating that voluntary family planning education and resources are needed to reduce the abortion rate; (2) a country appears to rely on abortion as a method of family planning; or (3) a country reports that unsafe and illegal abortions contributed to high mortality rates. In June 2002, under the chairmanship of former Senator Joseph Biden, the SFRC held hearings on CEDAW ratification. On July 30, 2002, the committee reported the Convention favorably by a vote of 12 to 7, subject to several RUDs. One of the understandings was a proposal from Ranking Member Senator Jesse Helms that stated "nothing in this Convention shall be construed to reflect or create any right to abortion and in no case should abortion be promoted as a method of family planning." This "Helms understanding" was included as a compromise to alleviate the concerns of pro-life advocates who were concerned that CEDAW ratification could affect U.S. abortion laws. Though some pro-choice women's groups favoring U.S. ratification questioned whether the understanding was necessary or appropriate, they recognized that its inclusion could increase the chances of U.S. ratification—which they believed would improve the lives of women both domestically and abroad. Conversely, other women's groups that supported U.S. ratification opposed the inclusion of the Helms understanding because, in their view, it would encourage countries that have ratified CEDAW to view it as abortion neutral. They argued that such an interpretation could add legitimacy to efforts of other governments that prohibit abortion and infringe on women's reproductive rights. Some pro-life opponents of U.S. ratification were satisfied that the Helms understanding would address their concerns regarding the Convention's impact on U.S. abortion laws. Many, however, believed that it would fail to ensure that domestic abortion laws would not be affected by U.S. ratification. In particular, they argued that abortion should be addressed as a "reservation" to the Convention instead of as an "understanding." (An understanding is an interpretive statement that is generally considered to have less authority than a reservation under international law.) Some also suggested that the inclusion of the Helms understanding would have no impact on the recommendations of the CEDAW Committee. They further argued that the understanding would most likely not prevent pro-choice organizations from advocating for fewer abortion restrictions in the United States. A number of CEDAW opponents are concerned with specific references to family planning in the Convention text, including the following: Article 10(h), addressing education, calls on States Parties to take all appropriate measures to ensure "access to specific educational information to help and ensure the health and well-being of families, including information and advice on family planning." Many fear that this could lead to mandatory sex education in both public and private U.S. schools. Article 12(1), addressing healthcare, calls on States Parties to take all appropriate measures to "eliminate discrimination against women in the field of health care in order to ensure, on a basis of equality of men and women, access to health care services, including those related to family planning." Many are concerned that such language could require the U.S. government to distribute family planning materials or contraceptives at schools or in public. Some also assert that CEDAW's references to access to family planning could be interpreted to include abortion. Article (12)(2) calls on States Parties to "ensure to women appropriate services in connection with pregnancy, confinement and the post-natal period, granting free services where necessary, as well as adequate nutrition during pregnancy and lactation." Some interpret this to mean that the U.S. government could be required to pay for family planning services, including abortion. Article 14(2)(b), addressing problems faced by rural women, calls on States Parties to take all appropriate measures to "have access to adequate health care facilities, including information, counseling and services in family planning." The concerns regarding this provision are similar to those expressed regarding Article 12(1). CEDAW supporters counter these concerns by emphasizing that the Convention calls on States Parties to take "all appropriate measures" [emphasis added], thereby leaving it to governments to determine what constitutes access to family planning. In support of this, they point to the negotiating history of the Convention that indicates that the text was left intentionally ambiguous to allow for states with different family planning policies to ratify the Convention. To address the concerns of some Convention opponents, in 1994 the Clinton Administration proposed an understanding to CEDAW that said that the United States understands that Article 12 permits States Parties to determine which health care services are appropriate in connection with family planning, pregnancy, confinement, and the post-natal period, as well as when the provision of free services is necessary, and does not mandate the provision of particular services on a cost-free basis. Proponents argue that such an understanding allows for the United States to provide its own interpretation of family planning; however, others counter that its inclusion is "superfluous" because the CEDAW text already provides for such interpretations through its use of the terms "appropriate" and "necessary." The Senate may consider providing its advice and consent to other treaties during the 114 th Congress—including the U.N. Convention on the Law of the Sea, the U.N. Convention on the Rights of the Child (CRC), and the U.N. Convention on the Rights of Persons with Disabilities (CRPD). These treaties, like CEDAW, have generated considerable debate because of concerns that they might undermine U.S. sovereignty and affect current U.S. laws and policies. In particular, the debate over U.S. ratification of CRC, which aims to protect the rights of children, includes many issues similar to CEDAW—including the Convention's possible effect on education, parental rights, and healthcare. Unlike CEDAW, however, CRC has not been submitted to the Senate by the President. Consequently, the Senate cannot yet consider providing its advice and consent to ratification. The Senate Foreign Relations Committee (SFRC) or the full Senate could consider providing its advice and consent to ratification of the Convention at any time because the treaty has already been submitted to the Senate. In practice, however, presidential support, sometimes accompanied by executive branch suggestions for conditions on ratification, has preceded Senate action. For example, the Senate considered the Convention on the Prevention and Punishment of the Crime of Genocide, the Convention Against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment, and the International Covenant on Civil and Political Rights after being strongly urged to do so by Presidents Reagan (with respect to Genocide and Torture) and George H. W. Bush (with respect to Torture and Civil and Political Rights). Options for the Senate include the following: The SFRC continuing to take no action on CEDAW. The treaty may be left as it currently stands, as pending SFRC business, with the Senate neither giving nor rejecting advice and consent to ratification. The Senate giving its advice and consent to ratification without recommending any reservations, understandings, and declarations (RUDs). The Senate giving its advice and consent subject to the RUDs proposed by previous Administrations (Presidents Carter and Clinton) and/or by the current Administration. The Senate giving its approval for advice and consent, with RUDs proposed by the SFRC or by Members on the Senate floor. The Senate rejecting the treaty if more than one-third of the Senators present vote against U.S. ratification. The Senate requesting, by resolution, that the Convention be withdrawn and sent back to the President without any action. A number of other issues may arise in the CEDAW ratification debate if the Senate considers providing its advice and consent to ratification during the 114 th Congress. These issues involve the effect of the Convention on the private conduct of citizens, as well as its impact on current U.S. laws and policies. Article 6 of CEDAW says that States Parties shall take all appropriate measures, including legislation, to "suppress all forms of traffic of women and exploitation of prostitution of women." Some critics contend that the CEDAW Committee has made recommendations that contradict the intent of this provision and could obligate States Parties to decriminalize or legalize prostitution. Specifically, in 1999 the Committee expressed its concern in a report on China that prostitution "which is often a result of poverty and economic deprivation, is illegal," and recommended that it be decriminalized by the Chinese government. Supporters, however, assert that the Convention does not support prostitution, and emphasize that the Committee made the recommendation in an effort to reduce high levels of prostitution in China. They argue that regulating prostitution might make it easier for prostitutes who are victims of violence to come forward without fear of retaliation or shame, undergo treatment for sexually transmitted diseases, or receive access to education. CEDAW opponents argue that the Convention's definition of discrimination against women is too broad and that it could apply to private organizations and areas of personal conduct not covered by U.S. law. A primary point of contention is the use of the phrase "any other field," which some interpret to mean that CEDAW could interfere in the private lives of individuals—including family life or religious practices. Critics have also expressed concern that such a broad definition could lead to an increase in "frivolous" lawsuits. Supporters, however, hold that the CEDAW definition of violence against women would not undermine U.S. laws regarding discrimination, particularly if the Senate files a non-self-executing declaration stating that no new laws would be created as a result of the treaty's ratification. They also emphasize that U.S. ratification of the International Convention on the Elimination of All Forms of Racial Discrimination (CERD), which includes a definition of racism, did not lead to an increase in the number of lawsuits. Still others maintain that applying the CEDAW definition to U.S. law would improve domestic discrimination laws; however, they acknowledge that to do so would likely require separate action by Congress or the Administration. Some opponents have taken issue with CEDAW provisions addressing equal access to education. Specifically, Article 10(b) calls on States Parties to take all appropriate measures to ensure that men and women receive "access to the same curricula ... examinations, teaching staff with qualifications of the same standard and school premises and equipment of the same quality." Some contend that this provision could require U.S. parents to send their children to public schools instead of single-sex schools, private schools, or home schools. Some have also expressed concern with Article 10(d), which calls on States Parties to ensure "the elimination of any stereotyped concept of the roles of men and women at all levels and in all forms of education ... by the revision of textbooks and school programs and the adaptation of teaching methods." Some critics hold that implementation of this provision might lead to "gender re-education" in U.S. schools that could include re-writing curricula to reflect gender neutrality. CEDAW supporters argue that the intent of the text is to ensure that girls and boys have equal access to education services, facilities, and curricula, regardless of whether they attend a single or mixed-sex school. They also note that CEDAW does not specifically mention single-sex schools. Some CEDAW opponents who oppose same-sex marriage hold that Article 1, which defines discrimination against women as "any distinction, exclusion or restriction made on the basis of sex," could obligate the United States to legalize same-sex marriage because not allowing a woman to marry another woman could be viewed as a form of discrimination. Others, however, maintain that CEDAW's aim is to address discrimination against women rather than men. Consequently, they argue, a same-sex marriage claim in the context of CEDAW would be ineffective because the treaty applies only to women. Appendix A. States Parties to the Convention on the Elimination of All Forms of Discrimination Against Women Appendix B. Senate Committee on Foreign Relations Consideration of CEDAW: Timeline and Documentation November 12, 1980 —Convention on the Elimination of All Forms of Discrimination Against Women, adopted by the U.N. General Assembly on December 18, 1979, and signed on behalf of the United States of America on July 17, 1980. Ex. R, 96-2. (Treaty Doc. 96-53.) December 5, 1988 —Public hearing. (S. Hrg. 100-1039.) August 2, 1990 —Public hearing. (S. Hrg. 101-1119.) September 27, 1994 —Public hearing. (S. Hrg. 103-892.) September 29, 1994 —Ordered reported, 13 in favor, 5 against. October 3, 1994 —Reported, with four reservations, four understandings, and two declarations, and with minority views. (Exec. Rept. 103-38.) (Automatically re-referred under Paragraph 2 of Rule XXX of the Standing Rules of the Senate.) June 13, 2002 —Public hearing. (S. Hrg. 107-530.) July 25, 2002 —Discussion during business meeting. July 30, 2002 —Ordered reported, 12 in favor, 7 against. September 6, 2002 —Reported with four reservations, five understandings and two declarations. (Exec. Rept. 107-9.) (Automatically re-referred under paragraph 2 of Rule XXX of the Standing Rules of the Senate.) Sources: Senate Committee on Foreign Relations, CRS. Notes: Due to Senate computerization of Executive Clerk records, all treaties must conform to the same numbering system. In the case of treaties prior to the 97 th Congress, the new treaty number is denoted in parentheses. All votes are by voice unless otherwise indicated.

The Senate may consider providing its advice and consent to U.S. ratification of the United Nations (U.N.) Convention on the Elimination of All Forms of Discrimination Against Women (CEDAW, or the Convention) during the 114th Congress. CEDAW is the only international human rights treaty that specifically addresses the rights of women. It calls on States Parties to take measures to eliminate discrimination against women in all areas of life, including political participation, employment, education, healthcare, and family structure. CEDAW has been ratified or acceded to by 189 States Parties. The United States is the only country to have signed but not ratified the Convention. Other governments that have not ratified the treaty include Iran, Palau, Somalia, Sudan, and Tonga. U.S. Actions President Jimmy Carter signed the Convention and submitted it to the Senate in 1980. The Senate Foreign Relations Committee held hearings on CEDAW in 1988, 1990, 1994, and 2002. It reported CEDAW favorably, subject to certain conditions, in 1994 and 2002. To date, however, the Convention has not been considered by the full Senate. The election of President Barack Obama focused renewed attention on the possibility of U.S. ratification of CEDAW. The Administration called the Convention an "important priority," and in May 2009 identified it as a treaty on which it "supports Senate action at this time." At a November 2010 hearing on CEDAW held by the Senate Judiciary Committee's Subcommittee on Human Rights and the Law, Administration officials expressed further support for U.S. ratification. Then-Ambassador-at-Large for Global Women's Issues Melanne Verveer stated that ratification is critical to U.S. efforts to promote and defend women's rights worldwide. Secretary of State John Kerry has also expressed support for U.S. ratification of CEDAW. The Senate Foreign Relations Committee or the full Senate could consider providing its advice and consent to ratification of the Convention at any time because the treaty has already been submitted to the Senate. In practice, however, presidential support, sometimes accompanied by executive branch suggestions for conditions to ratification, has preceded Senate action. Policy Issues U.S. ratification of CEDAW is a contentious policy issue that has generated considerable debate in Congress and among the public. CEDAW supporters hold that the Convention is a valuable and effective mechanism for fighting women's discrimination worldwide. They argue that U.S. ratification would give the United States additional legitimacy when it advocates women's rights internationally, and that it might empower women who fight discrimination in specific countries. CEDAW opponents maintain that the treaty is not an effective mechanism for addressing discrimination against women internationally, emphasizing that countries widely believed to have poor women's rights records have ratified the Convention. Critics also contend that U.S. ratification could undermine U.S. sovereignty and impact the private conduct of U.S. citizens. This report will be updated as events warrant.

The Government Accountability Office (GAO)—with more than 3,100 staff positions and an annual budget exceeding $507 million in FY2008—is the largest of several support agencies that provide research, review, and analysis for Congress; and it is the only one with a nationwide field structure. GAO, which had been titled the General Accounting Office until 2004, operates under the control and direction of the Comptroller General of the United States (CG). The head is appointed by the President—after receiving recommendations from a special bicameral congressional commission—by and with the advice and consent of the Senate, for a 15-year nonrenewable term. The position, which had been vacant for two years, was filled in late 1998, when David M. Walker was sworn in and became only the seventh Comptroller General in GAO's history, which began more than eight decades ago. The post is now vacant with Mr. Walker's resignation on March 12, 2008. GAO was established as an independent auditor of government agencies and activities by the Budget and Accounting Act of 1921 (42 Stat. 23). That enactment also created the Bureau of the Budget, the forerunner to the Office of Management and Budget, and established presidential authority over the budget formulation process. The basic authority for the office and its head is codified at 31 U.S.C. 701 et seq. and 3511 et seq. Numerous other statutory provisions affect the powers and duties of both GAO and the CG. The office was designed to be "independent of the executive departments," which were placed under its audit and review powers (31 U.S.C. 702(a)). Sometimes characterized as "Congress's watchdog" and the "investigative arm of Congress," the GAO provides a variety of services to Congress, largely connected to the oversight, investigation, and evaluation of executive operations, activities, and programs. The evolution of the office's authority, functions, and mandates over time, along with new pay and personnel powers for the Comptroller General, prompted him to request a change in its name: from the General Accounting Office to the Government Accountability Office ( P.L. 108-271 ). GAO's current activities and services include: auditing and evaluating federal programs and operations; conducting special investigations (through a small office) of alleged violations of federal criminal law, particularly conflict of interest or procurement and contract fraud; providing various legal services to Congress, including advice on legal issues involving government programs and activities; resolving bid protests that challenge government contract awards; prescribing accounting principles and standards for the executive branch, advising federal agencies on fiscal and other policies and procedures, and setting standards for auditing government programs; assisting the professional audit/evaluation community in improving and keeping abreast of ongoing developments in such matters as audit methodology and approaches; and detailing GAO staff to work directly for congressional committees (in these temporary transfers, the assigned staffs represent the committees and not GAO itself). Since 1994, GAO has been the subject of congressional hearings, studies, and proposals for change connected with its mission, roles, capabilities, and personnel system. After a lengthy period of growth—in its powers, duties, and resources—the office experienced reductions in these areas in the mid-1990s. In 1996, for instance, certain of the "executive powers" of the Comptroller General were abolished or transferred to executive branch agencies. In addition, GAO's budget was cut by 25% over a two-year period (FY1996 and FY1997), representing the largest reduction in a seven-year downsizing (1992-1999). Since then, however, its budget authority has increased, from a low of $358 million in FY1998 to a high of $507.2 million for FY2008. Since 1995, however, full-time-equivalent employees are fewer than in each previous year, with 3,100 currently compared to 4,324 in FY1995. In fact, in the midst of the cutbacks during the 1990s, GAO experienced an overall staff reduction of 39% from FY1992 to FY1998. The Budget and Accounting Act of 1921, which created the General Accounting Office, built upon efforts over a considerable period of time to develop a new budget process and involved trade-offs between the legislature and executive. The legislation gave the President substantial responsibilities and authority over the federal budget formulation process. To assist in this endeavor, the statute also created the Bureau of the Budget in the Treasury Department. (The bureau was later moved to the Executive Office of the President and is now known as the Office of Management and Budget.) As a counterweight to these enhancements of executive power in the budget process, Congress established the General Accounting Office in the legislative branch, in large part through the transfer of comptroller and auditor duties from the Treasury Department. Congressional work on what was to become the 1921 act began two years earlier with legislative proposals to transfer the duties and responsibilities of the comptrollers and auditors from the Treasury Department to an entity independent of the executive departments and, indeed, located in the legislative branch. This initial legislation was vetoed by President Woodrow Wilson, who objected to a section allowing for the removal of the new Comptroller General by Congress alone, through a concurrent resolution. This provision was later changed to allow for the removal of the Comptroller General by adoption of a joint resolution. The joint resolution, which must be signed by the President, is subject to presidential veto and the possibility of a veto override. The 1921 act abolished the post of Comptroller and Assistant Comptroller of the Treasury, along with the six auditors in the department. Their personnel, records, and resources were transferred to the new General Accounting Office. The establishing authority also vested GAO with the powers and responsibilities of the auditors and Comptroller of the Treasury, some of which dated to the Treasury Act of 1789. Along with this, the originating legislation gave the Comptroller General broad authority to "investigate, at the seat of government or elsewhere, all matters relating to the receipt, disbursement, and application of public funds" (42 Stat. 25). To augment this, the Comptroller General was given extensive access to information in "all departments and establishments ... regarding the powers, duties, activities, organization, financial transactions, and methods of business of their respective office as he may from time to time require" (42 Stat. 26). Adding to the new position, the law authorized the Comptroller General to recommend legislation "to facilitate the prompt and accurate rendition and settlement of accounts and concerning such other matters relating to the receipt, disbursement, and application of public funds as he may think advisable" (42 Stat. 25-26). The initial authority, moreover, established new requirements for reporting to Congress and directed the Comptroller General to make special investigations and reports when ordered by either House of Congress or by any committee with jurisdiction over revenue, appropriations, and expenditures. Since 1921, the scope of GAO's powers, mandates, and jurisdiction has been expanded by public laws. Its current functions, duties, and extensive jurisdiction (with a few notable exceptions ) have grown out of its powers over finances and expenditures of the federal government, the two major legislative branch reorganizations (in 1946 and 1970), and specific additions to the Comptroller General's responsibilities and authority. Additional responsibilities and authority have accrued over time. The Government Corporation Control Act of 1945, for instance, granted GAO audit authority over mixed-ownership government corporations (59 Stat. 600-601). And the Budget and Accounting Procedures Act of 1950 directed the Comptroller General to prescribe principles and standards for accounting in executive agencies (64 Stat. 835). Building on this, the Federal Manager's Financial Integrity Act of 1982 required each agency to establish internal accounting and administrative controls in accordance with standards prescribed by the Comptroller General (96 Stat. 814). In addition, the Chief Financial Officers Act of 1990 gave the Comptroller General enhanced audit authority and the power to review financial audits conducted by an inspector general or an external auditor (104 Stat. 2852-2854). Along these same lines, GAO has a prominent role in monitoring and reviewing the development and implementation of the Government Performance and Results Act of 1993 (GPRA) (107 Stat. 285). GAO has been involved not only in the training of executive personnel and congressional staff who are to implement and oversee GPRA, but also in the evaluation of pilot programs, strategic plans, annual performance plans and goals, and followup reports from the agencies. In the 106 th Congress, GAO was authorized to review federal agency rules and regulations, under the Truth in Regulating Act of 2000. But the program was not implemented because of a lack of funding. In order to fulfill its mission, the Government Accountability Office has been given broad powers to gain access to information and materials of government entities, based on its original authority as well as later supplements (31 U.S.C. 712 and 716), with several exceptions. These powers are designed to provide access—fully and directly in most cases—or, barring that, provide an auxiliary means to compel recalcitrant offices to release information. To enforce this, the Comptroller General has power, rarely used, to sue a noncomplying agency for the production of requested records (31 U.S.C. 716). Under this authority, the CG makes a written request to the agency head, who has 20 days to explain why the records are not being made available. At that time, the Comptroller General may file a report with the President, the Director of the Office of Management and Budget, the head of the relevant agency, and Congress. Twenty days after this action, the CG may file suit in the district court for the District of Columbia to require the agency head to produce the requested records. An attempt to use this authority in 2001 resulted in a conflict with the executive. In this case, the Comptroller General was denied access to records of an executive commission—the National Energy Policy Development Group (NEPDG), established by a presidential memorandum and headed by the Vice President. Still denied access after issuing a demand letter, the Comptroller General sued. In 2002, however, the District Court for the District of Columbia held in Walker v. Cheney that GAO lacked standing to sue the Vice President to compel the release of information pertaining to NEPDG. The decision has not been appealed. Legislation ( H.R. 6388 ) has been introduced in the 110 th Congress—by Representative Henry Waxman, chairman of the House Committee on Oversight and Government Reform, for himself and 18 other House chairs—that would, in effect, override Walker v. Cheney , by augmenting the CG's authority to gain access to such records. The bill would also affirm GAO's right to obtain records from three specified agencies (i.e., Centers for Medicare and Medicaid Services, Federal Trade Commission, and Food and Drug Administration). Furthermore, H.R. 6388 would expand GAO's authority to administer oaths and give it express powers to interview federal employees when conducting evaluations and investigations. Major legislative reorganization efforts have also augmented GAO's powers and independence. The Legislative Reorganization Act (LRA) of 1946 specifically directed the Comptroller General "to make an expenditure analysis of each agency in the executive branch of Government (including Government corporations), which, in the opinion of the Comptroller General, will enable Congress to determine whether public funds have been economically and efficiently administered and expended" (60 Stat. 837). In the 1970 LRA, Congress significantly expanded GAO's assistance to congressional committees and strengthened its program evaluation responsibilities (84 Stat. 1167-1171). In addition to the office's assignments and powers, the Comptroller General himself has been given a variety of specific responsibilities in public law, some of which are temporary while others are permanent. Over the years, these have included the power to bring suit to require the release of impounded funds (2 U.S.C. 687); a duty to impose civil penalties under the Energy Policy and Conservation Act of 1975 (42 U.S.C. 6385(a)); the assignments to serve as a member of the Chrysler Corporation Loan Guarantee Board (15 U.S.C. 1862) and of the Board of Directors of the United States Railway Association (45 U.S.C. 711(d)); and the authority to consider bid protests under the Competition in Contracting Act of 1984 (31 U.S.C. 3551-3556). The Comptroller General, along with the Secretary of the Treasury and Director of OMB, serves as a principal on the Federal Accounting Standards Advisory Board. It considers and recommends issuance of accounting standards and principles and provides interpretations of existing ones. Previously, the CG had co-chaired the Cost Accounting Standards Review Panel, consisting of public officials and defense industry representatives. It had examined operations and activities of the Cost Accounting Standards Board (CASB), an executive agency in OMB (41 U.S.C. 422). In the aftermath of the devastating Gulf Coast hurricanes of 2005, the Comptroller General joined inspectors general from appropriate agencies in a new Hurricane Katrina Contract Audit Task Force. It serves as a means of coordinating the efforts of federal organizations auditing the Gulf Coast Recovery Program. Besides GAO, these include offices of inspector general in the Departments of Defense, Homeland Security, Housing and Urban Development, Health and Human Services, and Transportation, as well as the Environmental Protection Agency and General Services Administration. The Comptroller General also chaired the Commercial Activities Panel (CAP), a now-defunct interagency group consisting of representatives from executive departments (i.e., the Office of Personnel Management and Department of Defense), as well as from private organizations and public sector unions. The congressionally mandated panel, which completed its mission in 2002, studied and made recommendations for improving the policies and procedures governing the transfer of commercial activities from the government to contractor personnel. Several different types of changes in the authority of GAO and the CG have occurred since the mid-1980s. In 1985, a constitutional conflict arose over powers delegated to the Comptroller General, when Congress gave him specific budget-reduction authority under the Balanced Budget and Deficit Control Act. The CG was to review recommendations about such reductions and report his findings to the President, who, in turn, was to issue a sequestration order mandating spending reductions specified by the CG. Additional legislative mechanisms (or "fallback" provisions) to cut spending were also included in the statute. The Supreme Court held, however, that the delegation of authority to the CG was unconstitutional, concluding that "the powers vested in the Comptroller General under section 251 violate the command of the Constitution that the Congress play no direct role in the execution of the laws." In contrast to GAO's long-term expansion over decades, the mid-1990s witnessed a cutback in its authority and, perhaps more importantly, its resources (discussed below). The 1996 General Accounting Office Act abolished or transferred—to the Director of the Office of Management and Budget or the head of an executive department or agency—certain specific "executive" powers of the Comptroller General (110 Stat. 3826 and 3838-3840). These related to his authority to make certain determinations about executive assistance and services, resolve disputes over certain purchases made by executive agencies, conduct identified audits of executive accounts, or prescribe regulations for specified executive operations. A number of proposals in the 110 th Congress would affect GAO's organization, structure, and authority. In July 2007, the Comptroller General called for changes in a number of areas, changes that have been included, as requested or modified, in legislative proposals in the 110 th Congress. The initial version of the Government Accountability Office Act, H.R. 3268 , was introduced at the request of the CG; and an amended version, H.R. 5683 , has passed the House and Senate and has been sent to the White House. The various transformations would affect GAO's pay and personnel system, retirement pay, voluntary separation incentive payments, the CG's annuity level, reimbursement of audit costs, administering oaths, appointment of the deputy, and the office of inspector general. If signed into law, H.R. 5683 would modify the CG's authority over pay rates for GAO officers and employees. One provision, for instance, would allow them to rise to level III of the Executive Schedule (EX), instead of the current GS-15 ceiling, while another would grant more discretion to the Comptroller General in determining pay for several high-ranking positions now paid by reference to the EX Schedule; these posts are the Comptroller General, deputy, general counsel, and up to 20 experts and consultants. The legislation would also set new requirements for future annual pay adjustments and respond to past pay discrepancies. With regard to the latter, a proposal would grant pay adjustments for certain employees and officers, including a lump-sum payment for officers and employees who failed to receive certain pay increases in 2006 and 2007. Another modification, in H.R. 3268 but not H.R. 5638 , would set the Comptroller General's annuity at EX level II. (Discussed further below.) The appointment process for the Deputy Comptroller General would be transformed—under H.R. 3268 but not H.R. 5683 —allowing the Comptroller General to appoint the deputy, after consultation with a special congressional commission. The new process would end the current arrangement in which the deputy, whose post has been vacant for nearly 30 years, is a presidential nominee subject to Senate confirmation. The establishment of a statutory inspector general (IG), also contained in H.R. 5683 , would replace the current administrative construct. The new office would mirror but not duplicate its counterparts in "designated federal entities"—usually the smaller agencies, boards, commissions, foundations, and government corporations, where the IG is appointed by and can be removed by the agency head—now operating under the Inspector General Act of 1978, as amended. The new statutory inspector general at GAO, to be selected without regard to political affiliation, would be appointed by and removable by the Comptroller General, who could not, however, prevent the IG from carrying out his or her duties. The inspector general would be responsible for combating waste, fraud, and abuse in GAO and keeping the Comptroller General and Congress currently and fully informed concerning such matters, by way of semi-annual reports and otherwise. Statutory offices of inspector general, incidently, have previously been established in four other legislative branch entities: the Architect of the Capitol Office, Government Printing Office, Library of Congress, and U.S. Capitol Police, all of which allow for the agency head (or a board) to appoint and remove the inspector general. Another provision in H.R. 5683 calls for the reimbursement of certain audit costs by executive agencies (or components thereof), beginning in FY2009. They would have to reimburse GAO for its costs associated with auditing their annual financial statements or related schedules prepared under 31 U.S.C. 3515—which covers all accounts and associated activities—under certain conditions. The revenue from the reimbursements would be deposited in a special account in the Treasury, to be made available to GAO as specified in its annual appropriations acts. A conflict with the executive arose in 2001 over GAO's independent access to certain executive branch records, in this case, those of the National Energy Policy Development Group, headed by the Vice President. In 2002, as noted above, a federal district court in Cheney v. Walker held that GAO lacked access to the records. In response, Representative Henry Waxman, for himself and 18 other chairs, introduced the Government Accountability Act of 2008 ( H.R. 6388 ) that would augment the CG's power to gain access to such records as well as those from three specified agencies (Centers for Medicare and Medicaid Services, Food and Drug Administration, and Federal Trade Commission). The legislation, which has been approved by the House, would also expand GAO's authority to administer oaths and give it express powers to interview federal employees when conducting evaluations and investigations. Another provision in the bill creates a reporting mechanism, so that Congress would be informed when federal agencies fail to cooperate with the office. As noted above, the Government Accountability Office possess nearly unfettered jurisdiction to audit and investigate the federal government. GAO's access, however, may be precluded in certain situations: by the President, if it involves sensitive or classified records, such as foreign intelligence and counterintelligence activities; in instances where the records are statutorily exempted from disclosure (31 U.S.C. 716(d)); or in cases where an executive agency holds competing powers which prevent GAO access. The last of these proscriptions has led to conflicts between the Government Accountability Office and the Intelligence Community (IC), particularly the Central Intelligence Agency (CIA). Legislation has been introduced in the 110 th Congress to clarify GAO's auditing the IC, with hearings held in 2008. The CIA views its own statutory authority as keeping it off-limits to independent GAO audits and investigations. Under its interpretation, the CIA has declined to participate in GAO reviews (as well as in some congressional oversight hearings held by panels other than the Select Committees on Intelligence). Other IC components, however, have not asserted the same proscription to GAO audits. In contrast to the CIA's stand, for instance, the Department of Defense has issued the following instructions: It is DoD policy that the Department of Defense cooperate fully with the GAO and respond constructively to, and take appropriate corrective action on the basis of, GAO reports .... [But DoD is also to] be alert to identify errors of fact or erroneous interpretation in GAO reports, and to articulate the DoD position in such matters, as appropriate. GAO has taken exception to the CIA's position, emphasizing that the Office has authority to audit the Agency independently but lacks enforcement power. If enacted, the Intelligence Community Audit Act would change this situation. These and similar proposals, which were first raised in the mid-1970s, are designed to "reaffirm the authority of the Comptroller General to audit and evaluate the programs, activities, and financial transactions of the intelligence community." GAO's budget and staffing levels have varied since the mid-1990s, experiencing both downs and ups, with a current leveling off as continuing resolutions have tended to stabilize both figures. The Government Accountability Office, like the other congressional support agencies, operates under a permanent authorization and an annual appropriation. A proposal in 1994, based on the recommendations of the Joint Committee on the Organization of Congress, would have mandated an eight-year authorization period for all congressional support agencies to replace their permanent authorizations. No action, however, was taken on the recommendation. Table 1 provides statistics on total new budget authority (gross) and on full-time equivalent employees (FTEs) for GAO from FY1995 through FY2009 (requested). GAO's budget authority and personnel levels have fluctuated since the mid-1990s. At that time, the office experienced a substantial cut in its funding, with a combined 25% reduction in total new budget authority for fiscal years 1996 and 1997, by comparison to its FY1995 total. This continued a downward trend that had begun in FY1992 and ebbed in FY1998. Since then, GAO's budget level has risen each year. And over the past decade, it has increased nearly 30%, from $358 million in FY1998 to $507.2 million in FY2008 and $545.5 million requested for FY2009. In the mid-1990s, GAO also experienced a significant reduction in its personnel levels, as a result of the budget cuts. Because employee compensation constitutes about 80% of GAO's budget, its cost-saving actions resulted in a sizable staff downsizing at the time. According to 1997 testimony by the Acting Comptroller General, the cutbacks "have necessitated a loss of people. Today, as a result of those reductions, GAO staffing is at its lowest level since before World War II." In 1999, Comptroller General David Walker elaborated on the effects of the seven-year downsizing of GAO (from FY1992 through FY1998). One result was a 39% reduction in its workforce during that span, from 5,325 in FY1992 to 3,245 in FY1998. In 1999 testimony, the CG recounted that the office also instituted a reduction-in-force; closed regional offices; imposed a 5-year hiring freeze; eliminated performance rewards; curtailed technology investments; and reduced travel, training, supplies, and other support costs to achieve the overall mandated reduction in spending. GAO is now facing a number of critical human capital, information technology, and work process challenges that it needs to address. GAO's budget and personnel requests dealt with some of these areas since then. But the office has not seen its staff size exceed the 3,275 FTEs in FY1999 and FY2000; and it witnessed smaller numbers in the two following years (with 3,110 in FY2001 and 3,210 in FY2002). By comparison to these low figures, however, personnel levels rose to 3,269 FTEs in FY2003. Nonetheless, recent final FTE statistics show a continuing downsizing each year since FY2003—from 3,269 in that year to 3,100 in FY2008, the lowest total of the past 13 years (see Table 1 ). If approved, the requested number of positions for FY2009—3,251—would reverse this trend. Legislation enacted in 2004 granted the Comptroller General certain personnel flexibilities over the GAO workforce. This augmented authority from 1980, 1988, and 2000, which provided the basis for the personnel system at GAO. The General Accounting Office Personnel Act of 1980 was designed to construct an "independent personnel system" ( P.L. 96-191 , 94 Stat. 27). The new structure replaced GAO's reliance on requirements from several executive branch entities, especially the Office of Personnel Management (OPM) and the Merit System Protection Board. According to the Senate Committee on Governmental Affairs, which reported the proposal favorably, "this independence from regulation by executive branch entities is the principal objective of the legislation." The change, requested by the Comptroller General, was seen as necessary to remove even the appearance of a conflict of interest, as GAO had increased oversight of these agencies and the federal personnel system. This first installment gave the CG authority to "appoint, pay, assign, and direct such personnel as the Comptroller General determines necessary to discharge the duties and functions of the General Accounting Office" (94 Stat. 27). Accompanying this general grant were requirements to meet specified provisions of Title 5 of the U.S. Code , which set merit system principles and prohibit certain personnel practices, among other matters (94 Stat. 27). Amendments to the personnel act were approved in 1988 ( P.L. 100-426 , 102 Stat. 1598-1602). These revised provisions concerned GAO's personnel appeals board membership and judicial review of its decisions. The amendments also changed the retirement qualifications for the Comptroller General and Deputy, allowing them to remain in office past the otherwise mandatory retirement age of 70; and the statutory changes brought the CG's survivor benefits into conformity with those available to federal judges. In 2000, the CG's powers over personnel were enhanced through a three-year pilot program allowing for specific personnel flexibilities ( P.L. 106-303 , 114 Stat. 1063-1070). This legislation gave qualified authority to the Comptroller General to offer certain voluntary separation incentives, along with early retirements, and to implement a reduction in force. The GAO Human Capital Reform Act of 2004 ( P.L. 108-271 ) granted the Comptroller General additional authority over pay and personnel. The enactment allows the Comptroller General to offer early retirement and buy-out incentives; establish an exchange program with the private sector; and make employee relocation benefits more flexible. Another far-reaching provision permits him to set annual pay raises tied more closely with performance appraisal ratings (as opposed to granting automatic yearly increases). In so doing, the CG could also use factors other than the Consumer Price Index, Employment Cost Index, and locality pay surveys to determine the amounts. Other sections, emerging after congressional committee deliberations, are designed to meet several objectives: protect the merit principle of "equal pay for work of equal value," keep the pay rates of employees who have been demoted because of workforce restructuring or job reclassification at their current levels, and set qualifications on exchanges with the private sector. As described by the Comptroller General, the overall transformation is intended to "further GAO's ability to enhance our performance, assure our accountability, and ensure that we can attract, retain, motivate, and reward a quality and high-performing workforce currently and in future years." Changes in this realm and their source—coming from Congress's largest support agency and its chief examiner of executive personnel systems—attracted widespread attention and considerations of a number of matters connected with it, both favorable and not. A followup report—issued in mid-2005 under the auspices of the IBM Center for the Business of Government—provides initial responses to these questions, based on an examination of the changes under GAO's new personnel system. The report concluded that GAO successfully used human capital management, broadly defined, to drive its organizational transformation. The authors extended this notion, recommending that "other agencies would do well to heed the lessons of the federal government's chief accountability office as they go about the critical work of reinventing their own personnel systems.... In particular, GAO has five basic lessons to teach the rest of the federal government." These are the need to move cautiously when pushing major change; the need for strong workforce planning; the need to emphasize more targeted recruitment, hiring, and retention policies; the need to beef up investments in systems for the selection and training of managers; and the need for a fair, unbiased, and transparent system for employee appeals. Despite this endorsement, the IBM study recognized that some executive agencies—the majority of whose personnel have moved out from under the traditional civil service—may be reluctant or limited in adopting the GAO model, in light of the important differences between GAO (a legislative branch support agency) and executive agencies that carry out public policy directly and immediately. By comparison to GAO, these policy-implementing organizations are usually much larger; experience different levels of autonomy for entities within the agency or department; are more organizationally varied; and exhibit more functional diversity and mission multiplicity, resulting in cross-cutting and shared jurisdictions with other executive entities. The GAO pay-for-performance implementation, along with similar efforts in executive agencies, have raised concerns over several matters in congressional hearings in the 110 th Congress and other forums, and have led to legislative proposals to modify the Comptroller General's powers in this regard (discussed above). The issues include: whether the changes are implemented fairly and impartially across the board, whether the plan's criteria and standards are clear and appropriate, whether the measurements used to compare personnel in GAO and elsewhere lead to valid and reliable conclusions, whether the changes produce the desired results, whether they have an adverse effect on employee morale, and whether they prompt (or endorse) requests for similar authority in other government entities. Earlier, the office's pay-ban determinations had been challenged by 308 employees, resulting in a favorable settlement for 12. As an outgrowth of the pay-for-performance dispute and other matters, eligible GAO analysts voted on September 19, 2007, to establish a local affiliate of the International Federation of Professional and Technical Employees (IFPTE), which will represent all bargaining unit employees on all matters that are subject to collective bargaining. The new unit, supported by a two-to-one margin of the voting employees (among the 1,813 eligible), marks the first such employee organization in GAO history. Since its inception in 1921 as the General Accounting Office, the Government Accountability Office has been headed by only seven Comptrollers General. Table 2 lists them in chronological order. When the Comptroller General post is vacant, GAO has been headed by an acting Comptroller General, as it is now. The longest absence of a confirmed Comptroller General was three years, 1936-1939. The second longest was the two-year vacancy from September 30, 1996, when Charles Bowsher ended his term, until November 9, 1998, when David Walker began his. Under GAO's current statutory charter, the Comptroller General and Deputy Comptroller General are nominated by the President, following recommendations from a special congressional commission, and are confirmed by the Senate. When a vacancy occurs in the office of the Comptroller General or the Deputy, a special congressional commission, consisting of members of both chambers and both parties, is established to recommend individuals to the President for appointment. Added by the General Accounting Office Act of 1980 (94 Stat. 314-315), this process became operational the following year. Under the arrangement, the recommending commission consists of the Speaker of the House, the President pro tempore of the Senate, the majority and minority leaders of the House and Senate, the chairmen and ranking minority members of the Senate Committee on Homeland Security and Governmental Affairs and the House Committee on Oversight and Government Reform, and, when the Deputy's post is vacant, the Comptroller General. The commission determines the criteria and standards for its nominees. The current process includes examination of the backgrounds and future plans of potential nominees, including, of course, their credentials, accomplishments, and relevant work experience in the private sector and public office. These examinations are conducted by the commission members and staff through interviews and meetings with the candidates, as well as with interested and knowledgeable parties, and a review of relevant materials and documents. Later examinations are held by the Senate Committee on Homeland Security and Governmental Affairs, which reports the nomination to the full Senate. The commission must recommend at least three individuals but the President may ask for additional names for consideration (or nominate someone else). The original bill called for five names to be submitted. However, the number was reduced, according to the report of the Senate Committee on Governmental Affairs, because "three names is a more realistic figure. Considering the high qualifications for the Office of Comptroller and Deputy Comptroller General, a requirement to generate five names might be extremely difficult to satisfy." The reporting panel also recognized that the President could still nominate an individual not recommended by the commission, in light of "the President's authority under the Appointments Clause .... However, it is expected that the President would give great weight to the Commission's recommendations." This expectation has been met. On the two occasions since the 1980 enactment when a vacancy in the office of Comptroller General arose, Presidents Reagan in 1981 and Clinton in 1998 each selected a nominee from the initial congressional list. The provision for a bicameral commission gives both chambers of Congress a formal and direct role in selecting the head of this legislative branch agency. The Senate Committee on Governmental Affairs endorsed the new arrangement: In view of the relationship between the Comptroller General and the Congress, the Committee believes it is appropriate that both Houses be given a role in the selection process.... [The new provision] reflects the special interests of both Houses in the choice of an individual whose primary function is to provide assistance to Congress. The current unique nomination process has not been used for the post of Deputy Comptroller General, which has remained vacant since the 1980 enactment. Instead of a confirmed Deputy, the Comptroller General has relied upon his own appointee(s) in one or two posts over the past several decades. Early in this period, a single special assistant to the Comptroller General served as second in command. Currently, two officials—the chief operating officer and the chief mission support officer—carry out the appropriate duties and functions. The new nomination process went into effect in 1981, resulting in the appointment of Charles A. Bowsher, whose 15-year term expired in September, 1996. A second congressional commission met afterwards, to recommend a successor. On January 22, 1998, the commission sent the names of three individuals who "had received majority support from the members of the Commission" to President Clinton for his consideration, as provided in the 1980 statute. Independently, six days later, Democratic members of the commission submitted four additional names. On October 5, 1998, President Clinton nominated David M. Walker, one of the three original recommendations of the commission majority. He was confirmed by the Senate on October 21, following hearings by the Governmental Affairs Committee on October 7, and its favorable report on October 9. Walker began his term of office on November 9, 1998. The two-year interregnum marked the second longest period without a confirmed Comptroller General. And the nearly 10 months before the President submitted a nomination based on the congressional commission's recommendation prompted interest in making the Comptroller General position exclusively a legislative branch officer. But this was not acted on. By so doing, Congress would have made the appointment itself, as it does, for instance, with the Director of the Congressional Budget Office. (By comparison, other legislative branch offices—the Librarian of Congress, Architect of the Capitol, and Public Printer, who heads the Government Printing Office—are filled by presidential nominees who are confirmed by the Senate.) The Comptroller General is limited to a single 15-year term, a statutory provision designed to protect the officer's independence, professional integrity, and objectivity. Of the seven Comptrollers General, three served the full term. (See Table 2 .) The four with shorter tenures include David Walker, who will have served for nine years and four months when his resignation takes effect (November 9, 1998, to March 12, 2008). The remaining three who left early, coincidentally in succession, were Brown, one year, resignation; Warren, 14 years, retirement; and Campbell, 10½ years, retirement. All three cited ill health as the reason for leaving. The Comptroller General or Deputy may be removed by impeachment or by adoption of a joint resolution of Congress. Removal by joint resolution can occur only after notice and an opportunity for a hearing and only for certain specified reasons: permanent disability, inefficiency, neglect of duty, malfeasance, felony conviction, or conduct involving moral turpitude. No Comptroller General or Deputy has been subject to either impeachment or removal by a joint resolution. The current requirement creates an unequaled retirement system for the Comptroller General, by comparison with other government officials and employees. It provides that a CG who retires after at least 10 years in office "is entitled to receive an annuity for life equal to the pay the Comptroller General is receiving on completion of the term or at the time of retirement" (31 U.S.C. 772(a)). In addition to this benefit, an annuity for a retired CG "shall be increased at the same time that, and by the same percent as the percentage by which, annuities are increased under section 8340(b) of Title 5" (31 U.S.C. 777(a)). As a qualification, this annuity "may not be more than the basic pay of the Comptroller General" (31 U.S.C. 777(b)). This special retirement system was added in 1953. In considering the legislation, the Senate Committee on Government Operations received the views of both the Civil Service Commission (CSC) and the Comptroller General. The Committee stated that the new retirement system for the Comptroller General was designed to conform to the particular nature of the office, which witnesses testified was similar in character, tenure and independence to the office of a Federal judge, and that its provisions are designed to conform to retirement benefits provided for Federal judges. The post was regarded as "unique," in a statement on behalf of the Chairman of the Civil Service Commission, who favored the retirement provision for several reasons. The Comptroller General is unique in that he is (a) independent of Executive control, (b) cannot be removed except by the Congress, and (c) is not eligible for reappointment after serving a 15-year term. A letter to the Committee from the CSC elaborated on these and other rationales. It noted that the Comptroller General's duties were "important and complex," demanding "the appointment of a mature man," who would not necessarily have had previous government experience and might not after leaving the post. The resulting condition is that "upon completion of his term, the Comptroller General will normally be of such advanced age as to deter, if not prohibit, his acceptance of employment in other pursuits." Lindsay Warren, the Comptroller General at the time, echoed these sentiments. The fixed 15-year term, without the possibility of reappointment, is too long for such an officer to retain other ties, and too short to provide lifetime security or sufficient longevity to buy an annuity under the Civil Service Retirement System.... Important and complex duties of the position dictate the appointment of a mature man, who, upon completion of his term, would normally be beyond the age when he might seek new fields of activity.... the Office is a part of the legislative branch of the Government, and is of a semijudicial nature. An attempt to transform the CG's retirement system was advanced by the House Appropriations Committee in the 110 th Congress. The panel included a proviso that repeals the unique Comptroller General Retirement system for any individual appointed Comptroller General after the enactment of this Act. Future appointments to this position will be covered under the standard Federal Employees Retirement System (FERS). Of the seven Comptrollers General, two—Lindsay Warren and Joseph Campbell—retired after going beyond the 10-year threshold (which was made available in 1954). Throughout GAO's history, only two of the seven Comptrollers General have resigned from office. Fred Herbert Brown served a little over one year (April 11, 1939, to June 19, 1940), leaving office after suffering a stroke. David M. Walker resigned in order to head a newly established public interest foundation. He had served as Comptroller General for nine years and four months (November 9, 1998, to March 12, 2008), thus, falling short of the 10-year threshold to be eligible for the CG's retirement annuity. Created in 1921, the General Accounting Office, now the Government Accountability Office, is Congress's largest support agency, with a budget of more than $507 million and an authorized staff of 3,100 for FY2008. The office has been headed by only seven comptrollers general over its eight-decade history; with a vacancy currently, it operates under an acting CG. GAO has been granted broad jurisdiction over the executive and substantial independence from it as well as extensive authority to gain access to its records and to investigate, audit, and evaluate its operations. These attributes support a wide variety of services and activities, most connected with legislative oversight of the executive, that GAO can initiative on its own or, more usually, at the request of Congress, its Members, and panels. Over the past decade, questions have arisen over several matters affecting GAO's structure, organization, and powers: the process (and resulting delay) for selecting the Comptroller General; the absence of a confirmed Deputy for more than twenty-five years; the unsuccessful attempt to gain access to information from a presidentially established panel, headed by the Vice President; problems in securing independent access to the records of certain agencies; and limitations on GAO auditing of all components of the intelligence community. As a result, bills have been introduced in the 110 th Congress which would enhance GAO access to executive branch information, clarify the office's jurisdiction over the intelligence community, provide reimbursement for certain audit costs, and establish a statutory inspector general in GAO. In the mid-1990s, GAO underwent a substantial downsizing—in funding and staffing—in part because of congressional criticism of its perceived orientation towards the previous two administrations and concerns about its missions and roles. In the meantime, the office has experienced a paradox between its budget and personnel levels. Its annual budget has increased regularly over the past 10 years—reaching its highest level in FY2008—while its staff has been downsized, falling to its smallest level at the same time. In 2004, the Comptroller General garnered new authority over pay and personnel in the newly-designated Government Accountability Office. A followup study a year later, under the auspices of the IBM Center for the Business of Government, found benefits in GAO's use of human capital management to drive its organizational transformation. The authors recommended that executive agencies—notwithstanding their differences with a legislative branch support agency—"heed the lessons of the government's chief accountability office as they go about the critical work of reinventing their own personnel systems." Despite this endorsement, the changes in GAO (as well as parallel ones in executive agencies) prompted concerns over the implementation and impact of the new personnel flexibilities authority and pay. These developments contributed, in 2007, to the establishment of an employee union with collective bargaining rights; in 2008, to a new contract for eligible employees; and in the same year, to legislative proposals to modify the CG's powers over such personnel matters and provide reimbursements for certain staff who did not receive pay increases in 2006 and 2007. In sum, the Government Accountability Office appears to be going through a transition period. Changes—in progress or proposed—have been prompted by a vacancy in the office of the Comptroller General; the nearly 30-year absence of an official Deputy CG; conflicts over a new personnel system and its implementation; the perceived need for certain new arrangements and organizations within GAO, such as a statutory inspector general; and restrictions on its independent access to executive branch information and its auditing of the intelligence community.

On July 7, 2004, an old congressional support agency was given a new name, while keeping the same initials (GAO): at that time, the General Accounting Office, established in 1921, was re-designated the Government Accountability Office (P.L. 108-271). The renaming, which came at the request of its head, the Comptroller General (CG) of the United States, was designed to reflect the agency's evolution and additional duties since its creation more than eight decades before. The Government Accountability Office is the largest of three agencies that provide staff support, research, review, and analysis for Congress. GAO operates under the control and direction of the Comptroller General, who is appointed by the President, with the advice and consent of the Senate, for a 15-year nonrenewable term. A unique arrangement begins the process with a special bicameral commission of legislators from both parties making recommendations to the President. The CG post is currently vacant, with the resignation of David Walker on March 12, 2008. GAO was established in 1921 as an independent auditor of government agencies and activities by the Budget and Accounting Act. The office was intended to be "independent of the executive departments," the entities it would audit and review. Sometimes called "Congress's watchdog" and its "investigative arm," GAO now provides a variety of services to Congress that extend beyond its original functions and duties, including oversight, investigation, review, and evaluation of executive programs, operations, and activities. Several proposals in the 110th Congress are seen as augmenting GAO's capabilities. These include clarifying its audit authority over the Intelligence Community (H.R. 978 and S. 82) and enhancing its powers to gain access to executive documents (H.R. 6388). In a separate matter, personnel flexibilities powers granted to the Comptroller General in 2004 have generated some controversy in Congress and among GAO employees. As an outgrowth of this and other considerations, GAO staff have set up a new bargaining unit, the first union in the office's history. Legislation has also been proposed that would, among other things, amend GAO's basic authority over personnel and pay matters for employees, provide pay adjustments and reimbursements for certain employees who had not received pay increases in 2006 and 2007, and establish an office of inspector general (H.R. 5683, which has passed the House and Senate and been sent to the President). Throughout much of its history, the office has experienced growth in its powers, duties, and resources. In the mid-1990s, however, it was the subject of congressional hearings, studies, and proposals for change, connected with its mission, roles, and capabilities; these reviews were generated in part by criticisms of its perceived orientation. As a result, GAO's budget and personnel levels were reduced and certain of the "executive powers" of the Comptroller General. In comparison to these earlier budget reductions, however, the office's funding has since risen, from $358 million in FY1998 to $507.2 million in FY2008. Nonetheless, GAO's staff size (at 3,100 in FY2008) has remained lower than in earlier years. This report will be updated as developments dictate.

Nearly 300,000 federal employees are presently in pay systems that attempt to link pay increases to job performance—which arguably may be defined as how effectively, efficiently, or thoroughly one performs his or her job. These pay systems vary considerably in their design, implementation, and outcomes. All of them, however, represent attempts to create a more productive and motivated federal workforce by linking performance to promotions, pay increases, or one-time bonuses. A basic challenge with such arrangements, whether used in the private or the public sector, is arriving at credible and objective performance measures. In addition, while the private sector is ultimately concerned that employee performance be of such effectiveness that it contributes to the profits of a business, the federal government has other objectives to which employee performance is expected to contribute—such as the efficient, economical, and effective provision of services to those who qualify for, and are otherwise entitled to, them. Diverse considerations come to play when attempting to attract and retain the most effective federal employees—pay among them. Departments and agencies that enter into a performance-based pay system attempt to provide managers flexibility in hiring and awarding pay raises to assist them in recruiting new talent and adequately compensating existing talent. Before rewards for good performance can be provided, however, a fair and objective performance evaluation system must be created. Good performance management, as one group of authors has observed, "should be an ongoing, interactive process designed to enhance employee capability and facilitate productivity." Performance appraisal, on the other hand, measures "an employee's contribution to the organization during a specified period of time," and is defined in 5 C.F.R. § 430.203 as "the process under which performance is reviewed and evaluated." Performance management is ongoing, while performance appraisal is an event—a single moment of assessing completed job performance. Because appraisals are inherently reflections on the past, some public administration experts suggest not using them. Others point out, however, that effective appraisal criteria can help align employee performance with organizational goals, and help create a more satisfied and effective workforce by offering feedback and setting attainable goals. Ineffective criteria can prompt conflict within an organization and lead to resentment and competition among workers. Performance appraisals, therefore, should be precise and assist managers in ongoing performance management efforts. Federal employees who undergo performance appraisals are often given a performance plan, or expectations of their performance, at the beginning of their appraisal cycle. The performance plan may include both critical and non-critical performance elements, which are defined in the Code of Federal Regulations. Critical element means a work assignment or responsibility of such importance that unacceptable performance on the element would result in a determination that an employee's overall performance is unacceptable. Non-critical element means a dimension or aspect of individual, team, or organizational performance, exclusive of a critical element, that is used in assigning a summary level. Such elements may include, but are not limited to, objectives, goals, program plans, work plans, and other means of expressing expected performance. At the end of the appraisal cycle, a rating official and an employee may meet for a performance evaluation, or performance rating. An employee may have an unlimited number of critical and non-critical criteria on which he or she is measured. The appraisal may be written as a narrative or as a collection of short statements, or an employee may be assessed on a nominal or numeric rating scale. The National Credit Union Administration (NCUA), for example, rates employees on roughly five performance criteria. Each criterion has a five-tier scale that ranges from "Exceptional" to "Unsatisfactory." An appraisal system, according to Fisher et al., should hold employees accountable for results that are within their control and "measure important job characteristics (relevancy) and be free from extraneous or contaminating influences; it should also encompass the whole job (not be deficient)." Moreover, the evaluation assessment should be tested to ensure that two managers evaluating the same employee create similar ratings. This test for evaluation bias, called an "inter-rater reliability test," is essential for establishing employee trust in the assessment's equity and fairness. The system must also affect all employees—regardless of race, gender, age, ethnicity, or sexual orientation—equally. Even systems that indirectly affect one group more negatively than another may face challenge. For example, in 2007, an impartial mediator determined that the pay system at the Securities and Exchange Commission (SEC) unfairly hindered the advancement and pay increases of African American employees and employees over the age of 40. On October 6, 2008, the SEC agreed to pay $2.7 million to affected employees. The SEC also agreed to adjust the current salaries of the employees who were adversely affected by the merit pay system. When the pay system was found to be unintentionally biased, the commission "temporarily" separated the performance appraisal system from employee pay. SEC is currently working with employees and the National Treasury Employees Union—which represented employees affected by the previous merit-based system—to create a new performance-based pay system. Employers must also choose what they should measure to ascertain how well employees have performed: employee traits (loyalty, ability to communicate, cooperativeness); employee behaviors (greeting customers, ability to explain complicated concepts, filling out forms properly); or results (number of units produced, number of units rejected, number of days absent). Each type of rating system has strengths and weaknesses. Ratings of employees' traits may indicate employees whose personalities are best suited to the position, but may not accurately measure effective performance. Rating an employee's behavior may capture how the employee does his or her job, but may fail to measure whether the behavior leads to effective job outcomes. Finally, measuring results may determine whether an employee completes assigned tasks, but also may create a work atmosphere in which employees attempt to acquire "results at all cost [sic]." In performance appraisals, employers determine which criteria are critical. The Office of Personnel Management (OPM) also suggests that criteria be "specific," and clearly linked to overall organizational goals. To develop specific measure(s) for each element, you must determine how you would measure the quantity, quality, timeliness, and/or cost-effectiveness of the element. If it can be measured with numbers, clearly define those numbers. If performance only can be described (i.e., observed and verified), clarify who would be the best judge to appraise the work and what factors they [sic] would look for. An organization also must decide whether the appraisal criteria will be standardized across the department or agency or if it will include individualized measures specifically tailored to each employee. Standardized criteria allow all employees to be evaluated on a common set of goals, and may facilitate a clearer link between criteria and organizational mission. Employees can assume that standardized measures are important to the organization because the measures are included agency wide. On the other hand, individualized criteria can allow the rating official to capture unique job performance elements that may be essential to the organization, but are not directly linked to the agency's mission and, therefore, may not be captured by a standardized appraisal. According to U.S. Merit Systems Protection Board, "functions within an organization may be so diverse that it becomes appropriate in many organizations" to use individual appraisal criteria. Involving employees in all parts of performance appraisals can create a system that is more trusted and can better motivate employees and "help them understand the goals of the organization, what needs to be done, why it needs to be done, and how well it should be done." Currently, most federal agencies with performance-based pay systems encourage employees to speak with their managers about their rating criteria, but very few agencies require employee input. At the end of an appraisal year, an employee may be given the opportunity to submit a self-appraisal or respond to his or her rater's appraisal. Employees who are involved in the process usually are more satisfied with it than those who are not permitted to add input. Employers also must determine whether peers, subordinates, customers, or other employee supervisors are permitted to add input to evaluations. Requiring peer input may offer rating officials additional insight into an employee's performance, but each additional assessment also carries drawbacks that could contaminate the appraisal. Peers may not want to rate one another because they may be wary of making themselves seem inferior to those whom they rate, or they may not want to jeopardize workplace cooperation by submitting a poor rating. A subordinate may have an incentive to inflate the rating score of his or her supervisor if he or she believes the supervisor will know who submitted the evaluation. By allowing additional assessments, rating officials may cede some of their authority in making decisions about an employee's performance and, therefore, may lose some of the flexibilities in rate-of-pay decisions that performance-based systems are meant to increase. Employers must determine whether to evaluate employees by comparing across colleagues or based on set performance criteria. Employers may rank their employees comparatively, create comparative forced distributions (in which "the evaluator has to place a certain percentage of employees in each of several performance categories"), or use set standards on which to evaluate each employee individually. While comparative evaluations can be performed quickly and inexpensively, they do not allow managers to determine "whether the top-ranked employee in a group is a lot or just a little better than the second-ranked person," according to Fisher et al. Moreover, comparative rankings make cross-working-group or organization-wide comparisons nearly impossible. Employees may not trust a system in which their ratings cannot be replicated across managers (inter-rater reliability). Finally, some critics have noted that comparative ratings may generate a competitive workplace, rather than foster teamwork, because employees are competing against one another for ratings. Once performance appraisal criteria are established, both managers and employees must be trained in how to use the system. Managers "can be taught how to reduce rating errors," such as leniency (awarding more positive ratings than deserved), severity (awarding more unfavorable ratings than deserved), central tendency (rating all employees near the midpoint of the performance scale), and halo errors (allowing feelings about the individual to affect positively all rating scores). Employees who will be rated by the appraisal system may be taught how it will operate to ensure their understanding of the evaluation process and to instill greater trust in the system. Finally, organizations may establish a formal process for employees to offer feedback or to challenge their appraisals. Training both employees and supervisors may increase the appraisal system's transparency, which, according to the MSPB, can promote "shared understanding of the [employee's] expectations" and "build trust" both in the system and between the supervisor and employee. Most federal performance-based pay systems operate on a broad-banded pay structure. Instead of the 15-step General Schedule (GS) scale that serves as the pay structure for most federal employees, those who are in a performance-based system have pay bands that usually encompass a wider pay range than was formerly in a single GS grade. The wider pay bands may allow mangers greater flexibility to hire promising employees at a higher rate of pay and to retain high-performing employees by increasing their pay at a faster pace than was possible under the GS scale. Pay bands, like GS grades, cap maximum—and limit minimum—pay rates. Unlike the GS scale, however, most pay bands do not have automatic increases within each band. Instead, in a banded system, funds that were formerly used to pay for within-grade and quality-step increases in the general schedule are often pooled and used to fund the pay increases determined at the end of the performance appraisal cycle. Some agencies, like the Government Accountability Office (GAO), have included additional performance elements in their pay bands. In two of its four pay bands, GAO originally established speed bumps, which are designed to intentionally slow some employees' progress through a pay band, at about the 75% mark of the bands. In one band, GAO required employees at or above the speed bump to receive ratings in the top 50% of averages for their band and team to qualify for the annual pay adjustment. In the other band, employees had to be in the top 80% of averages for their band and team. The establishment of speed bumps was controversial, and led to employee appeals and prompted federal legislation ( P.L. 110-323 ). Pursuant to P.L. 110-323 , all GAO employees with a satisfactory performance rating are now statutorily required to receive an annual pay increase that is at least equal to that of similar employees in their geographic pay area who are on the GS pay scale. Once an organization decides whether to create pay bands before implementing performance-based pay, it can begin to design the pay-out structure. An effective merit pay system, according to Fisher et al., will incorporate three components: expectancy (the employee's belief that he or she is capable of meeting expectations), instrumentality (the employee's belief that his or her actual performance does prompt the reward), and valence (the employee's belief that the reward is desirable or valued). Most effective merit-pay systems attempt to maximize each of these components by clarifying criteria, making the system transparent, and offering consistent, desirable pay increases to those who qualify for them. For most federal departments and agencies, merit pay involves taking an employee's performance evaluation and using it to determine the percentage increase an employee will receive in his or her pay. Available performance-based pay funding is often pooled. The funding may come from a variety of sources, including a line item in the organization's budget, a determination from the organization's administration, or funding formerly used to pay for within-grade and quality-step increases. Pay banding may also eliminate some costs formerly used to consider promotions because employees no longer need to receive a promotion to secure an increase in pay. The wider pay band allows employees to acquire significant pay increases without having to apply for and receive a promotion. This cost savings may also be added to the merit-pay funding pool. The size of the pool is a primary consideration when determining each employee's individual pay increase. Because the pay pool's size depends on larger macroeconomic and budgetary trends, performance-based payouts often vary in size from year to year. This variability in pay increases may lead to valence problems for the merit-based pay system. If employees do not believe their performance will lead to a pay increase of a sizeable value, the system may not operate properly. Additionally, because employee performance may stay consistent from year to year while payouts vary, employees may fail to see a solid link between their performance and their pay increase. Performance-based pay is designed to reward some employees with higher pay than others. Inherent in this design is an inequity in pay among colleagues, which may lead to an atmosphere of competition rather than teamwork. As the MPSB has observed, the structure of performance-based pay can produce a "win-lose situation" that "may create resistance among those who perceive that their incomes are falling behind and heighten competition in a negative way." In some pay systems, an employee's location along the pay-band spectrum affects his or her total pay. For example, at the Farm Credit Administration (FCA), an employee at the higher end of the pay spectrum receives a lower percentage increase in pay than someone at the lower end of the pay band with an identical appraisal score. The lower pay percentage increase for the employee with the higher pay occurs because the Department of Labor has determined that the employee's basic rate of pay is already higher than the market rate for that position. In addition, a higher basic pay rate will yield a higher pay increase than a lower pay rate multiplied by the same percentage pay raise. Employees who have already reached their pay band's pay cap may receive no pay bonus, or they may be permitted to receive their pay increase as a one-time lump sum that will not modify their rate of basic pay. In these cases, the pay increases may not be included when retirement and pension pay are calculated. Employees who have reached their pay maximum may have less financial incentive to maintain their work pace and effectiveness. Agencies with many employees at the pay cap may face higher rates of retirement, leading to both recruitment and retention concerns. Performance-based pay can be beneficial to both employees and the organization, but it also may present new issues in an organization that has historically used more traditional pay structures. In some cases, performance-based pay for federal workers may have increased retention of effective employees, increased overall employee productivity, led to cost savings for the organization, and aided in the attainment of organizational objectives in a more effective manner than under the GS pay scale. Adopting merit pay, however, takes substantial time and additional financial resources at the beginning of the implementation. In other cases, performance-based pay in federal agencies has prompted lawsuits and mistrust of pay system administrators. Experts suggest that organizations need to plan carefully the performance appraisal system that will inform merit pay, and the system must ensure that the financial rewards for effective performance are large enough to be desirable to employees. "With pay for performance, one needs to re-evaluate the motivation, retention, productivity, and organizational objectives continually, with the idea of fine-tuning the system to make sure rewards are aligned with desired performance." Experts also observe that rating officials and employees must be trained in how best to use the performance-based pay system. Supervisors, employees, and their representative unions must believe that a pay system is both fair and transparent. The most effective performance-based pay systems encourage communication throughout the process, use performance appraisals to improve performance management, and ensure that qualified employees' salaries keep pace with those of colleagues both in the public sector and in comparable private-sector positions. If an agency or department has bargaining unit employees, the agency may observe that unions generally have disliked and litigated performance-based pay systems because they believe the structures destroy solidarity and permit arbitrary or sometimes unintentionally racist, gender-biased, or ageist outcomes. Some unions fear that performance pay will force a return to the spoils system for federal personnel—that employees may be rewarded for partisan or political behavior. Members of Congress have expressed concern that giving agency managers more discretion may lead to increased misconduct by those managers. Further, the constitutional design of government leaves most agencies in the position of serving "many masters." As public administration professor Alasdair Roberts has asserted, the power struggle over control of executive branch agencies may be, in fact, a major roadblock to government-wide institution of performance-based pay.

In many occupations today, pay is intended to reflect employee performance—or how effectively, efficiently, or thoroughly one performs his or her job. The federal government is no different from the private sector in this regard. Nearly 300,000 federal employees are currently in pay systems that attempt to make pay increases contingent upon job performance—such a system is often referred to as either a merit-based pay system or a performance-based pay system. A basic challenge with such an arrangement is arriving at credible and objective performance measures. In addition, while the private sector is ultimately concerned that employee performance be of such effectiveness that it contributes to the profits of a business, the federal government has other objectives to which employee performance is expected to contribute—such as the efficient, economical, and effective provision of services to those who qualify for, and are otherwise entitled to, them. This report discusses issues related to measuring performance across the federal government and analyzes a variety of methods utilized by the government to measure employee performance and its linkage to pay. As developments warrant, this report will be updated.

Although the advent of digital technology has brought about higher quality for audio and video content, creators of such content and policy makers are concerned that, without adequate content protection measures, unlawful digital copying and distribution of copyrighted material may endanger the viability of the motion picture, television, and music industries. As a result, technological measures have been proposed that are aimed at protecting copyrighted media from, among other things, unauthorized reproduction, distribution, and performance. One of these content protection schemes is the Audio Protection Flag (APF or "audio flag"), which would protect the content of digital radio transmissions against unauthorized dissemination and reproduction. To understand digital audio, an explanation of how analog and digital technology differ is helpful. Analog technology is characterized by an output system where the signal output is always proportional to the signal input. Because the outputs are analogous, the word "analog" is used. An analog mechanism is one where data is represented by continuously variable physical quantities like sound waves or electricity. Analog audio technologies include traditional radio (AM/FM radio), audio cassettes, and vinyl record albums. These technologies may deliver imprecise signals and background noise. Thus, the duplication of analog audio often erodes in quality over time or through "serial copying" (the making of a copy from copies). The term "digital" derives from the word "digit," as in a counting device. Digital audio technologies represent audio data in a "binary" fashion (using 1s and 0s). Rather than using a physical quantity, a digital audio signal employs an informational stream of code. Consequently, the code from a digital audio source can be played back or duplicated nearly infinitely and without any degradation of quality. Digital audio technologies include digital radio broadcasts (such as high-definition radio, or "HD Radio"), satellite radio, Internet radio, compact discs, and MP3-format music files. With the advent of digital technology, content providers have been interested in using content security measures to prevent unauthorized distribution and reproduction of copyrighted works. These technology-based measures are generally referred to as "digital rights management," or DRM. As the name suggests, DRM applies only to digital media (which would include analog transmissions converted into digital format). Examples of DRM include Internet video streaming protections, encrypted transmissions, and Content Scrambling Systems (CSS) on DVD media. In 1998, Congress passed the Digital Millennium Copyright Act (DMCA). The DMCA added a new chapter 12 to the Copyright Act, 17 U.S.C. §§ 1201-1205, entitled "Copyright Protection and Management Systems." Section 1201(a)(1) prohibits any person from circumventing a technological measure that effectively controls access to a copyrighted work. This newly created right of "access" granted to copyright holders makes the act of gaining access to copyrighted material by circumventing DRM security measures, itself, a violation of the Copyright Act. Prohibited conduct includes descrambling a scrambled work, decrypting an encrypted work, and avoiding, bypassing, removing, deactivating, or impairing a technological measure without the authority of the copyright owner. In addition, the DMCA prohibits the selling of products or services that circumvent access-control measures, as well as trafficking in devices that circumvent "technological measures" protecting "a right" of the copyright owner. In contrast to copyright infringement, which concerns the unauthorized or unexcused use of copyrighted material, the anti-circumvention provisions of the Copyright Act prohibit the design, manufacture, import, offer to the public, or trafficking in technology produced to circumvent copyright encryption programs, regardless of the actual existence or absence of copyright infringement. One form of DRM technology that may be used to protect the content of digital audio transmissions from unauthorized distribution and reproduction is the "audio flag." The flag has two primary aspects: a physical component and rules and standards that define how devices communicate with flagged content transmitted from digital audio sources. For instance, a satellite digital audio radio stream of a particular broadcast music program could contain an audio flag (the mechanism) that prohibits any reproduction or further dissemination of the broadcast (the standard). The audio flag, according to its proponents, would operate in a similar manner as the broadcast video flag that has been proposed for digital television transmissions. Functionally, the audio flag system would work by embedding a special signal within transmitted digital audio data, informing the receiving device of certain copyright restrictions on the use of the content by the listener—for example, limiting the number of copies of a recording that the user may make. Those advocating the use of an audio flag for digital radio programming include musicians, songwriters, record labels, and other providers of audio content that could be broadcast to the public through digital transmissions. The Copyright Act bestows several exclusive rights upon the creator of a work (or the individual having a legal interest in the work) that permit the copyright holder to control the use of the protected material. These statutory rights allow a copyright holder to do or to authorize, among other things, reproducing the work, distributing copies or phonorecords of the work, and publicly performing the work. Parties holding a copyright interest in content transmitted through digital radio services are interested in ensuring that such content is protected from unauthorized reproduction and distribution by the broadcast recipient; the audio flag, in their view, is an effective way to achieve this objective and enforce their rights. Proponents of audio flag technology also suggest that it would help prevent certain digital radio services (like satellite radio) from becoming a music download service through the creation of recording and storage devices that allow for further reproduction and distribution of audio broadcasts. Some copyright holders argue that these broadcasters must either pay additional royalties for the privilege of offering what appears to be a music download service, or comply with an audio flag regime that will effectively prevent broadcasters from allowing the recording in the first place. Critics of the audio flag proposal raise concerns that such a government-mandated measure may stifle technological innovation and restrict the rights of consumers to record broadcast radio—conduct that, according to audio flag opponents, is protected by the Audio Home Recording Act of 1992, as well as "fair use" principles in copyright law. The introduction of the Digital Audio Tape (DAT) by Sony and Philips in the mid-1980s prompted passage of the Audio Home Recording Act (AHRA) in 1992. A DAT recorder can record CD-quality sound onto a specialized digital cassette tape. Through the Recording Industry Association of America (RIAA), sound recording copyright holders turned to Congress for legislation in response to this technology, fearing that a consumer's ability to make near-perfect digital copies of music would displace sales of sound recordings in the marketplace. The AHRA requires manufacturers of certain types of digital audio recording devices to incorporate into each device copyright protection technology—a form of DRM called the Serial Copying Management System (SCMS), which allows the copying of an original digital work, but prevents "serial copying" (making a copy from a copy). In exchange, the AHRA exempts consumers from copyright infringement liability for private, noncommercial home recordings of music for personal use. Manufacturers of audio equipment, sellers of digital recording devices, and marketers of blank recordable media are also protected from contributory infringement liability upon payment of a statutory royalty fee—royalties that are distributed to the music industry. Opponents of the audio flag contend that the AHRA created a "right" for consumers to make digital recordings, a practice that might be limited or even effectively revoked by audio flag mandates. The doctrine of "fair use" in copyright law recognizes the right of the public to make reasonable use of copyrighted material, in certain instances, without the copyright holder's consent. Because the language of the fair use statute is illustrative, determinations of fair use are often difficult to make in advance—it calls for a "case-by-case" analysis by the courts. However, the statute recognizes fair use "for purposes such as criticism, comment, news reporting, teaching, scholarship, or research." A determination of fair use by a court considers four factors: (1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market for or value of the copyrighted work. In the context of digital music downloads and transmissions, some alleged copyright infringers have attempted to use the doctrine of fair use to avoid liability for activities such as sampling, "space shifting," and peer-to-peer (P2P) file sharing. These attempts have not been very successful, as several federal appellate courts have ruled against the applicability of the fair use doctrine for these purposes. No litigation has yet settled the extent to which home recording of an audio broadcast (whether transmitted through digital or analog means) is a legitimate fair use. Critics of the audio flag also suggest that it places technological, financial, and regulatory burdens that may stifle the innovation behind digital audio technologies. They argue that the audio flag may limit the functionality of digital audio transmissions in favor of analog transmissions—thereby negatively affecting the digital audio marketplace. Legislation that expressly delegates authority to the FCC to mandate audio flags for digital radio transmissions would appear to be necessary before the FCC could take such steps, in the wake of a decision by the U.S. Court of Appeals for the District of Columbia Circuit in 2005 that vacated an FCC order requiring digital televisions to be manufactured with the capability to prevent unauthorized redistributions of digital video content. The court ruled that the FCC lacked the statutory authority to establish such a broadcast video flag system for digital television under the Communications Act of 1934. Two bills were introduced in the 109 th Congress that would have delegated such authority; these may represent legislative approaches that could be taken in the 110 th Congress. This bill would have empowered the FCC to promulgate regulations governing the licensing of "all technologies necessary to make transmission and reception devices" for digital broadcast and satellite radio. The bill directed that any such digital audio regulation shall prohibit unauthorized copying and redistribution of transmitted content through the use of a broadcast flag or similar technology, "in a manner generally consistent with the purposes of other applicable law." Title IV, Subtitle C of S. 2686 would have granted the FCC the authority to issue "regulations governing the indiscriminate redistribution of audio content with respect to—digital radio broadcasts, satellite digital radio transmissions, and digital radios." It also directed the FCC to establish an advisory committee known as the "Digital Audio Review Board," composed of representatives from several industries, including information technology, software, consumer electronics, radio and satellite broadcasting, audio recording, music publishing, performing rights societies, and public interest groups. The Board would have been responsible for drafting a proposed regulation that reflects a consensus of the members of the Board and that is "consistent with fair use principles," although the bill did not define whether such "fair use" has the same connotation as that used in the copyright law.

Protecting audio content broadcasted by digital and satellite radios from unauthorized dissemination and reproduction is a priority for producers and owners of those copyrighted works. One technological measure that has been discussed is the Audio Protection Flag (APF or "audio flag"). The audio flag is a special signal that would be imbedded into digital audio radio transmissions, permitting only authorized devices to play back copyrighted audio transmissions or allowing only limited copying and retention of the content. Several bills introduced in the 109th Congress would have granted the Federal Communications Commission (FCC) authority to promulgate regulations to implement the audio flag. The parties most likely affected by any audio flag regime (including music copyright owners, digital radio broadcasters, stereo equipment manufacturers, and consumers) are divided as to the anticipated degree and scope of the impact that a government-mandated copyright protection scheme would have on the "fair use" rights of consumers to engage in private, noncommercial home recording. Critics of the audio flag proposal are concerned about its effect on technological innovation. However, proponents of the audio flag feel that such digital rights management (DRM) technology is needed to thwart piracy or infringement of intellectual property rights in music, sports commentary and coverage, and other types of copyrighted content that is transmitted to the public by emerging high-definition digital radio services (HD Radio) and satellite radio broadcasters. This report provides a brief explanation of the audio flag and its relationship to digital audio radio broadcasts, and summarizes legislative proposals considered by the 109th Congress, including H.R. 4861 (Audio Broadcast Flag Licensing Act of 2006) and S. 2686 (Digital Content Protection Act of 2006), that would have authorized its adoption. Although not enacted, these two bills represent approaches that may be taken in the 110th Congress to authorize the use of an audio flag for protecting broadcast digital audio content.

For almost seven decades, the United States has played a leading role in global efforts to alleviate hunger and malnutrition and to enhance world food security through international food aid—primarily through either the donation or the sale on concessional terms of U.S. agricultural commodities. Since 2006, U.S. food aid has averaged nearly $2.5 billion per year—accounting for over 7% of total U.S. foreign aid. Health, economic, and security-related assistance account for most of the outlays. Current U.S. food aid programs had their origins in 1954 with Public Law 83-480, or "P.L. 480," as it was commonly known. P.L. 83-480 has since been amended multiple times and renamed as the Food for Peace Act (FFPA). One of the original purposes of "P.L. 480" in-kind food donations was to reduce large government stocks of program crops that had accumulated under U.S. Department of Agriculture (USDA) commodity price support programs while responding to humanitarian, economic development, and geopolitical goals in foreign countries. Since the end of the Cold War, U.S. food assistance goals have shifted more toward emergency response and support for long-term agricultural development. However, the United States continues to rely on domestic purchases of U.S. commodities as the basis for its food aid programs. In contrast, most other countries operating international food aid programs have converted primarily to cash-based food assistance. U.S. reliance on in-kind food aid has become controversial due to its identified inefficiencies and potential market distortions compared with cash-based assistance. Another concern regarding U.S. international food aid is how that food aid is delivered into foreign countries. In-kind food aid shipments are subject to a set of requirements that potentially limit the flexibility of the U.S. response to emergency food crises. U.S. laws require that all agricultural commodities be sourced from the United States; at least 50% of U.S. food aid must be shipped on U.S.-flag vessels; at least 20%, but not more than 30%, with a minimum of $350 million, of FFPA funding must be available for non-emergency food aid; at least 75% of in-kind food transfers dedicated to non-emergency assistance must be in a processed, fortified, or bagged form; at least 50% of any bagging must consist of whole-grain commodities bagged in the United States; and at least 15% of non-emergency food aid funding must be made available to qualifying nongovernmental organizations (NGOs) for monetization—that is, the process of selling donated U.S. commodities in recipient-country markets to generate cash for development programs. Both the George W. Bush and Obama Administrations have sought greater flexibility in the use of U.S. food aid funding, particularly for cash-based assistance, in order to respond with greater expediency, at lower cost, and with more interest in meeting cultural food preferences when responding to international food emergencies. A majority of NGOs working in the realm of international food assistance and development, as well as some Members of Congress, support the goals of these efforts. U.S. commodity groups and food processors continue to advocate strongly for retention of in-kind transfers of U.S. commodities. A vocal minority of NGOs that benefit from the monetization of in-kind commodity transfers also support retention of in-kind transfers. In addition, U.S. maritime interests are strong advocates for retention of agricultural cargo preference (ACP) requirements associated with in-kind food aid. This report includes three principal sections: the first section is a description of U.S. international food aid programs under current law; the second section discusses several important policy issues related to U.S. international food aid; and the third section describes Administration and congressional proposals intended to change the nature of U.S. international food assistance. The U.S. government provides international food aid through a variety of programs administered by either USDA's Foreign Agricultural Service (FAS) or the U.S. Agency for International Development (USAID). Table 1 lists each international food assistance program, the year it was enacted (or first instituted in the case of the Emergency Food Security Program [EFSP]), the statutory authority, and the administering agency. The two implementing agencies, USDA and USAID, are under different congressional jurisdiction for authorization, oversight, and appropriations. Table A-1 (at the end of this report) provides a breakout of annual outlays by program since FY2006. Average annual spending on U.S. international food aid programs increased gradually over the past six decades ( Figure 1 ). During the FY2000 to FY2009 period ( Table 2 ), average food assistance outlays were approximately $2.2 billion annually, with FFPA Title II activities comprising the largest share (77% of outlays). More recently, FY2010-FY2014, new cash-based outlays under the EFSP have supplemented traditional FFPA Title II program outlays to push total U.S. international food aid program spending up slightly to about $2.4 billion annually while lowering Title II's share to 65%. When adjusted for inflation using year-2013 dollars (as shown in Figure 2 ), total U.S. food assistance outlays peaked in 1964 at $8.4 billion (2013 dollars) then declined to a low of $1.54 billion (2013 dollars) in 1996. In 2014, U.S. food assistance outlays were at $2.5 billion (2013 dollars), thus having somewhat recovered from the 1990s level. However, outlays remain well below the inflation-adjusted levels of the 1960s. The Agricultural Act of 1949 (P.L. 81-439; §416) permanently authorized the Section 416(b) program. As such, it represented the first permanent, large-scale U.S. international food aid program; however, its original intent was more than humanitarian response. The Cold War was beginning to influence foreign policy decisions, and policymakers viewed international food aid as an important foreign policy tool. U.S. agricultural producers were looking for new foreign markets to replace the now faded war-driven international demand of the 1940s. By the late 1940s, USDA's Commodity Credit Corporation (CCC) was accumulating substantial stocks of wheat and corn as part of its commodity price support programs. These large CCC-owned stocks depressed domestic market prices and contributed to a cycle of government support payments and stock accumulation. Policymakers designed the Section 416(b) program, in part, to help draw down government stocks by donating and shipping surplus government-owned commodities to foreign countries that lacked sufficient buying power to participate in commercial markets. USDA (via the CCC) made surplus commodities available for donation through agreements with foreign governments, NGOs, cooperatives, and IOs. In the early years, Section 416(b) donations supplemented food supplies in food deficit countries. However, over time Section 416(b) food donations became a source of U.S. commodities for FFPA Title II and Title III programs, as well as for the Food for Progress program (described later in this report in " Food for Progress "). As a result, depending on the agreement, the cooperating sponsor could use commodities donated under Section 416(b) directly for distribution to a target population, or they could be sold (i.e., monetized) in the recipient country with the proceeds then used to support emergency and non-emergency activities, such as agricultural, economic, or infrastructure development programs. USDA administers the Section 416(b) program. It has been a highly variable component of food aid because it is entirely dependent on the availability of surplus commodities in CCC inventories. Thus, the program's utility has changed along with changes to federal price support programs. In particular, Congress instituted special marketing loan program benefits in the mid-1980s and decoupled price and income support programs in the mid-1990s to prevent further government stock accumulation of program crops. These changes eventually led to the depletion of government-owned grain stocks by 2006. The Section 416(b) program has been inactive since FY2007 because of the unavailability of CCC-owned stocks. The Food for Peace Act (FFPA), historically referred to as P.L. 480, is the main legislative vehicle that authorizes U.S. international food assistance. Under FFPA programs (with the exception of Title V, Farmer-to-Farmer), cooperating sponsors (i.e., implementing partners) ship U.S. commodities to recipient countries either for direct use in food distribution programs or for monetization. The Agricultural Trade Development Assistance Act of 1954 (P.L. 83-480) originally authorized FFPA in 1954 as the first comprehensive U.S. international food aid program. Since 1970 FFPA has been reauthorized as part of subsequent farm bills. Funding for FFPA programs is authorized in annual agriculture appropriations bills. FFPA food aid has five statutory objectives: combating world hunger and malnutrition and their causes; promoting sustainable agricultural development; expanding international trade; fostering private sector and market development; and preventing conflicts. The FFPA is comprised of four program areas, each listed under a different title and having a different objective. FFPA authorities for these programs are in the following titles. Title I, administered by USDA's FAS, authorizes concessional sales (i.e., using long-term, low-interest loans) of U.S. agricultural commodities to developing country governments and private entities to support specific non-emergency food security and development projects. Title I has been inactive since FY2006. Title II, administered by USAID, provides for the donation of U.S. agricultural commodities to IOs and NGOs to support specific emergency or non-emergency food needs either by monetization or for direct food distribution. Title III, administered by USAID, makes government-to-government grants of U.S. agricultural commodities for monetization in support of non-emergency projects targeting long-term growth in least-developed countries. Title III has been inactive since FY2002. Title V, administered by USAID, finances non-emergency activities under the Farmer-to-Farmer Program to provide short-term volunteer technical assistance to farmers, farm organizations, and agribusinesses in developing and transitional countries. During the first 35 years of the FFPA (FY1955 through FY1989), Title I funding was the largest program in terms of outlays, but since the mid-1980s it has slowly been phased out of operation ( Figure 1 ). Successive Administrations have not requested funding for any new Title I food aid programs since FY2006. In contrast, since the late 1980s Title II has emerged as the largest funding source for U.S. food aid shipments. This pattern was reinforced by the 1990 farm bill, when strengthening global food security was made a formal objective of American food aid. Since 2000, Title II outlays have accounted for 73% of total U.S. annual international food aid spending. A partial motive behind the funding shift from Title I to Title II was international pressure from major trading partners who argued that U.S. use of concessional sales terms for exporting surplus commodities was displacing normal commercial activity. These concerns influenced the development of an international framework to monitor and discipline international food aid. In anticipation of these international commitments and to avoid potential conflict with trading partners over what constitutes an export subsidy, the United States began shifting funding away from Title I concessional sales in the mid-1980s, and toward Title II grants. A Food Aid Consultative Group (FACG) advises the USAID Administrator on food aid policy and regulations, especially related to Title II of the FFPA. The Administrator meets with the FACG at least twice per year. The 1990 farm bill ( P.L. 101-624 , §1512) first established the FACG. It has been reauthorized under subsequent farm bills. The 2014 farm bill (§3005) reauthorized the FACG and added representatives from the processing sector. FACG membership consists of the USAID Administrator; USDA's Under Secretary of Agriculture for Farm and Foreign Agricultural Services; the Inspector General for USAID; a representative of each PVO and cooperative participating in FFPA programs; representatives from African, Asian, and Latin-American indigenous NGOs as determined appropriate by the Administrator of USAID; representatives from U.S. agricultural producer groups; representatives from the U.S. agricultural processing sector involved in providing agricultural commodities for FFPA programs; and representatives from the maritime transportation sector involved in transporting agricultural commodities overseas for FFPA programs. The 2014 farm bill specified that USAID is to consult with FACG on the implementation of food aid quality provisions (discussed below in " Food Aid Quality ") and also required that FACG review and comment on any changes to USAID's regulation handbook implementing FFPA. Title I of the FFPA provides for sales on concessional credit terms of U.S. agricultural commodities to developing country governments and to private entities for monetization in recipient country markets. Loan agreements under the Title I credit program may provide for repayment terms of up to 30 years with a grace period of up to 5 years. Donations of Title I commodities can also be made through Food for Progress grant agreements (described below in " Food for Progress "). The local currency derived from such concessional sales has been used to support specific non-emergency food security and development projects. Congress has given no new funding for Title I credit sales and grants since FY2006, although some funding has been provided to administer Title I program agreements entered into prior to FY2006. Title II of the FFPA provides for the donation of U.S. agricultural commodities (referred to as "in-kind" donations) to IOs and qualifying NGOs to support specific emergency or non-emergency food needs either by monetization or for direct food distribution. The 2008 and 2014 farm bills authorized appropriations for Title II programs at $2.5 billion annually. However, because all FFPA funding is discretionary, it is up to annual appropriations bills to set the actual amount of annual Title II funding. Over the five-year life of the 2008 farm bill (FY2008-FY2012), Title II funding averaged $1.9 billion annually (see Table A-1 for actual Title II annual outlays) but trended lower each succeeding year. In FY2014, $1.324 billion was spent on Title II activities. FFPA Title II in-kind donations may be used for both emergency and non-emergency assistance. In 2002, emergency food aid accounted for a majority of U.S. food aid flows for the first time in history. Since then, the volume of Title II emergency food aid has far exceeded the amount of non-emergency or development food aid ( Figure 3 ). This divergence highlights the divide between conflicting interests—emergency versus non-emergency—in the use of U.S. international food aid in general and Title II funds in particular. USAID targets emergency food aid to vulnerable populations in response to malnutrition, famine, natural disaster, civil strife, and other extraordinary relief requirements. Emergency assistance is provided through recipient governments and public or private agencies, including IOs, particularly the WFP. Non-emergency food assistance involves multi-year (generally three to five years) development programs—made through eligible PVOs, cooperatives, or IOs—that target chronically food-insecure populations. These programs include monetization and/or direct distribution of food aid. Under monetization—and depending on the agreement with the recipient country—proceeds from the sale of donated U.S. commodities are used by cooperating sponsors either to fund distribution expenses in the case of direct feeding programs or to implement various development projects that address chronic food shortages and food security. Title II food aid is subject to several requirements (see box below) including an in-kind mandate, coupled with processing and monetization requirements. The 2014 farm bill authorized the use of up to $17 million annually for the monitoring and assessment of non-emergency food aid programs. The 2014 farm bill also required that USAID prepare an annual report for Congress that addresses how funds are allocated to and used by eligible organizations as well as the rate of return on aid funds—defined as the sum of the proceeds from monetization of food aid commodities relative to the total cost of procuring and shipping the commodities to the recipient country's local market. Sponsors and projects with rates of return below 70% are to come under special scrutiny. The 2014 farm bill (§3007) authorized appropriations of $10 million for shelf-stable (i.e., not easily spoiled) prepackaged foods—70% of the funds are for their preparation and stockpiling in the United States, and the balance is for their rapid transportation, delivery, and distribution to needy individuals in foreign countries. USAID may also use funds appropriated for FFPA Titles II and III to procure on the open market, transport, and store agricultural commodities in pre-positioned locations at various sites in the United States—for example, near major port facilities—and around the world to expedite their delivery in the event of emergency need. The 2014 farm bill (§3009) reauthorized pre-positioning of commodities through FY2018, increased the annual funding for pre-positioning to $15 million from $10 million, and allowed USAID to have discretion over whether to establish additional prepositioning sites based on the results of assessments of need, technology, feasibility, and cost. USAID maintains that pre-positioning enables it to respond more rapidly to emergency food needs. USAID issues guidance that PVOs must follow when developing and implementing Title II programs. For food emergencies, USAID responds based on a proposal from a PVO, an appeal from an IO, or a disaster declaration by the U.S. embassy in the affected country. Similarly, for Title II funded non-emergency programs, eligible NGOs and IOs submit proposals to USAID based on Food for Peace guidance. Since IOs (e.g., WFP) are not subject to U.S. regulations, they receive food aid according to a special agreement established with the U.S. government. Once USAID approves a Title II project, the partnering institution orders commodities for delivery at the foreign location. USAID provides a list of eligible U.S. agricultural commodities. Choosing from the list, and based on their local assessments of markets and needs, partners identify the types and amounts of commodities required and a schedule for delivery. USDA procures the requested commodities by issuing a tender to commodity suppliers and processors. All Title II commodities are purchased on the open market. The implementing partner (working with USAID and subject to agricultural cargo preference requirements discussed later in this report) arranges shipment of the cargo from a U.S. port to the recipient country, again using a tender process. In emergencies, USAID can expedite the response by tapping into prepositioned food supplies of up to 100,000 tons—situated in warehouses at U.S. Gulf ports and at additional sites overseas. The 2014 farm bill (§3003) amended current food aid law to place greater emphasis on improving the nutritional quality of food aid products. This issue is discussed in more detail later in this report in the section entitled " Issues for Congress ." Title III of the FFPA—entitled "Food for Development"—provides for government-to-government grants of U.S. commodities to support non-emergency long-term economic development in least developed countries. Under this program, implementing partners can monetize donated commodities in the recipient country and use the resulting revenue to support programs that promote economic development and food security, including development of agricultural markets, school feeding programs, nutrition programs, and infrastructure programs. The U.S. government also pays for the costs of procurement, processing, and transportation under Title III. No funding request has been made for Title III activities since FY2002. Title IV of the Food for Peace Act of 1966 (P.L. 89-808) created the Farmer-to-Farmer program. However, the program was first funded by the 1985 farm bill ( P.L. 99-198 ; §1107). Funding levels were doubled in the FFPA by the 1990 farm bill ( P.L. 101-624 ; §1512) and reauthorized in subsequent farm bills, including the 2014 farm bill (§3014). The 2014 farm bill assigned minimum funding for the program as the greater of $15 million or 0.6% of the funds made available to FFPA programs for each year from FY2014 through FY2018. In addition, the 2014 farm bill added a requirement for a Government Accountability Office (GAO) report to review the program and provide recommendations to improve the monitoring and evaluation of the program. The Farmer-to-Farmer program does not provide commodity food aid but instead provides technical assistance to farmers, farm organizations, and agribusinesses in developing and transitional countries. The program mobilizes the expertise of volunteers from U.S. farms, land grant universities, cooperatives, private agribusinesses, and nonprofit organizations to carry out short-term projects overseas. The 1985 farm bill ( P.L. 99-198 ; §1110) authorized the Food for Progress program. USDA's FAS administers the program. USDA undertakes multi-year agreements with cooperating sponsors (i.e., eligible organizations include PVOs, cooperatives, IOs, and recipient-country governments). These agreements require monetization of donated U.S. commodities in support of certain developing countries and emerging democracies. Qualifying countries must have made commitments to agricultural policy reforms that incorporate free enterprise elements through changes in commodity pricing, marketing, input availability, distribution, and private sector involvement. Program activities focus on private sector development of agricultural infrastructure, such as improved production practices, marketing systems, farmer training, agro-processing, and agribusiness development. Cooperating sponsors request commodities from USDA. In response, USDA's CCC purchases the requested commodities from the U.S. market and ships them to the recipient country using either appropriated Title I funds or CCC financing. Upon arrival, USDA transfers them to the implementing organizations for monetization. Since Congress has not appropriated any new Title I program funds since FY2006, the Food for Progress program now relies entirely on CCC financing. The Food for Progress program includes a requirement that not less than 400,000 metric tons (mt) of commodities shall be provided each fiscal year; however, actual purchases have averaged 212,600 mt since 2010. Because the commodity requirement is based on weight, the actual cost of the program will vary from year to year with commodity prices. The program is limited by statute to pay no more than $40 million annually for freight costs, which limits the amount of commodities that can be shipped, particularly in years with high shipping costs. In addition, up to $15 million of program funds are available to assist the implementing partners to set up and run program activities. In FY2014, Food for Progress programs involving 195,900 mt of U.S. commodities valued at $127.5 million were targeted through various implementing partners in 10 developing countries. For FY2016, USDA announced eight international Food for Progress projects valued at $153.2 million. The 2002 farm bill ( P.L. 107-171 , §3107) first authorized the McGovern-Dole IFECN program. USDA's FAS administers the program. Under the McGovern-Dole IFECN program, implementing partners use U.S. commodities and financial and technical assistance to carry out school feeding programs and maternal, infant, and child nutrition programs in foreign countries identified as having critical food needs. The 2014 farm bill (§3204) reauthorized the program through FY2018 with discretionary funding of "such sums as are necessary" to be determined by annual appropriations. USDA provides the commodities used in the program through agreements with qualifying PVOs, cooperatives, IOs, and foreign governments. The implementing partners, in turn, use the commodities for direct feeding or, in limited situations, for local sale to generate proceeds to support school feeding and nutrition projects. Priority countries must demonstrate sufficient need for improving domestic nutrition, literacy, and food security. In FY2014, the program provided 78,860 mt of commodities (e.g., soybean oil, rice, potatoes, lentils, wheat, dark red kidney beans, soybean meal, and corn soy blend), valued at $164.8 million, to an estimated 2.5 million beneficiaries in 9 developing countries in Asia, Africa, and Latin America. Under an LRP program, the administering agency (either USDA or USAID) awards cash grants to eligible organizations—a PVO or cooperative that is registered with USAID or an IO—to carry out field-based projects to purchase eligible commodities from markets close to the target population in response to food crises and disasters. Both USDA and USAID have funded LRP activity. The 2008 farm bill ( P.L. 110-246 , §3206) authorized USDA to develop a four-year (FY2009-FY2012) LRP Pilot Project with a mandatory authorization for $60 million of CCC funds (i.e., not from FFPA appropriations). In response to the success of the LRP pilot projects, the 2014 farm bill ( P.L. 113-79 ; §3207) converted the expired pilot project into a permanent LRP program to be administered by USDA. Congress authorized funding levels for LRP at $80 million annually for FY2014 through FY2018, but instead of mandatory CCC funding, the LRP program is now subject to annual appropriations. This budget sourcing has proven crucial since, in FY2014 through FY2016, Congress has made no appropriations for LRP, and, thus, it remains unused. In 2008, in the Supplemental Appropriations Act ( P.L. 110-252 ) Congress provided USAID with $50 million for LRP activities in response to emergencies, including the global food crisis of 2008. This initial $50 million of LRP funding was augmented by another $75 million in International Disaster Account (IDA) funding for USAID LRP activities. Then, in 2009, Congress provided $75 million for USAID LRP activities in the Omnibus Appropriations Act ( P.L. 111-8 , Div. H). Since 2010, USAID has used EFSP funds to finance LRP and other cash-based assistance ( Table 3 ). The primary motive behind LRP is to expedite the provision of food aid to vulnerable populations affected by food crises and disasters. A secondary motive is to realize substantial economies by purchasing locally rather than trans-shipping commodities from the United States, thus allowing LRP funding to reach more people. Because cash transfers can occur electronically, LRP food acquisitions are not delayed by international shipping operations. Instead, potential limitations include the availability of field staff as well as regional market supplies and infrastructure. To the extent possible, LRP activities must both expedite the provision of food aid to affected populations and not significantly increase commodity costs for low-income consumers who procure commodities sourced from the same markets at which the eligible commodities are procured. In addition, USDA (and USAID) require from each eligible organization commitments designed to prevent or restrict (1) the resale or trans-shipment of any eligible commodity procured under this section to any country other than the recipient country; and (2) the use of the eligible commodity for any purpose other than food aid. USDA, in administering LRP projects, may give preference in carrying out this program to eligible organizations that have, or are working toward, projects under the McGovern-Dole IFECN program. Under the 2014 farm bill, USDA must submit an annual report to Congress on the LRP projects' implementation time frames; costs; and impacts on local and regional producers, markets, and consumers. The Bill Emerson Humanitarian Trust (BEHT) is a reserve of U.S. commodities and/or cash authorized under the Africa: Seeds of Hope Act of 1998 ( P.L. 105-385 ). BEHT is not a food aid program per se. It is a reserve of commodities (up to 4 mmt of grains—rice or wheat) or funds owned by the CCC for use in the FFPA programs to meet unanticipated humanitarian food aid needs in developing countries. BEHT replaced the Food Security Commodity Reserve established in the 1996 farm bill and its predecessor, the Food Security Wheat Reserve, originally authorized by the Agricultural Trade Act of 1980. The 2014 farm bill reauthorized BEHT through FY2018. The program is administered under the authority of the Secretary of Agriculture. However, a request for use of BEHT would generally be initiated by the USAID administrator to USDA. USDA's CCC may be reimbursed for the value of U.S. commodities released from BEHT from either FFPA appropriations or direct appropriations for reimbursement. The CCC may use reimbursement funds to replenish commodities released or simply hold them as cash. Reimbursement to the CCC for ocean freight and related non-commodity costs occurs through the regular USDA appropriations process. Since 1980, wheat has been the only commodity held in reserve. During 2008, USDA sold the remaining wheat in the trust (about 915,000 mt) and is currently holding only cash. USDA can use the cash to finance activities or purchase commodities to meet emergency food needs when FFPA Title II funds are not available. The BEHT was last used in FY2014, when cash disbursements of $173.8 million were used to purchase 189,970 mt of U.S. agricultural commodities—vegetable oil, yellow split peas, sorghum, and ready-to-use supplementary foods—for South Sudan. The Emergency Food Security Program (EFSP) is a cash-based food-assistance program administered by USAID. It provides grants to eligible organizations for rapid response to the highest priority emergency food security needs. The Foreign Assistance Act of 1961, as amended (FAA; P.L. 87-195) authorizes, among other things, the provision of disaster assistance such as EFSP. USAID initiated EFSP in FY2010 as a complement to FFPA Title II emergency in-kind food aid donations. In July 2016, EFSP was permanently authorized as part of the FAA (22 U.S.C. 2292(c)) by the Global Food Security Act (GFSA, P.L. 114-195 ; §7). The GFSA provided the authority for appropriations (i.e., discretionary funding dependent on annual appropriations) of $2,794,184,000 for each of FY2017 and FY2018. USAID used funds from its International Disaster Assistance (IDA) account, also authorized under the FAA, to finance EFSP activities. According to USAID, from FY2010 through FY2015, USAID awarded EFSP grants totaling $3.3 million for cash-based food assistance, with the majority of this aid going to Syria ( Table 3 ). Implementing partners include U.S. and foreign NGOs, cooperatives, and IOs. USAID uses EFSP primarily when U.S.-purchased, in-kind food aid cannot arrive fast enough to respond to an emergency or when other interventions may be more appropriate than U.S. in-kind food aid due to local market conditions. EFSP funds have relied on three principal forms of emergency food security assistance: local and regional procurement (40% of outlays), food vouchers (26%), and cash transfers (14%). Local and Regional Procurement (LRP ) : Implementing partners use EFSP funds to purchase food commodities within the disaster-affected country or from a nearby country for distribution to the disaster-affected population. LRP is most effective when adequate supplies of food are available regionally such that large-scale purchases will not significantly impact prices or commercial trade. The WFP uses LRP extensively in its operations. Cash Transfers : Implementing partners distribute cash to disaster-affected people for use in purchasing essential food items to meet their food security needs. Cash transfers can take the form of a physical payment or an electronic transfer through mobile providers or debit cards from financial institutions. Cash transfers work well when the recipient population is widely spread out such that a feeding center would not work, when an acute food crisis requires immediate response, or when the recipient population is so indigent that most new income is spent on food. Food Vouche r s : Local food vendors supply specific, essential food items to beneficiaries through paper or electronic food coupons. Vendors are then able to redeem the vouchers for payment from USAID. Food vouchers have proven to be an effective way to reach recipient populations that may reside in regions with high security risk due to civil strife or armed combat where there are specific security concerns associated with the transfer of either cash or in-kind commodities, or when there is a need to ensure that people receive a specific set of foods. Commodities requested under a U.S. food assistance program may be furnished from the inventory of USDA's CCC, if available, or purchased in the U.S. domestic market. USDA's Farm Service Agency (FSA) serves as the buying agent for the CCC for all U.S. food aid programs. FSA issues separate tenders to both prospective sellers of food commodities and providers of freight service for commodity delivery to overseas ports. In emergencies, USAID can tap into up to 100,000 metric tons of food that it has prepositioned in warehouses at U.S. Gulf ports and additional sites overseas to expedite the response. In addition to the purchase of U.S. commodities, USDA's CCC finances storage and distribution costs for commodities, including pre-positioned commodities, and transportation costs. Such costs include both ocean freight and overland transport when appropriate. Once a shipment of food aid arrives in the recipient country, additional funding to move it to the final point of sale or use depends on the program and its administrator. USAID provides its implementing partners with support for administrative costs (other than commodity procurement and ocean shipping) from two potential sources: (1) internal transportation, shipping, and handling (ITSH) funds and (2) funding available through §202(e) of the FFPA. The 2014 farm bill (§3002) amended the FFPA both to expand the portion of Title II §202(e) funds allocated to foreign program support—specified as a range of "not less than 7.5% nor more than 20%" (up from an earlier range of 7.5% to 13%)—and to allow for greater flexibility in the nature of that support to include cash-based activity to enhance ongoing food distribution under certain conditions. In accordance with an amendment included in the FFPA by the International Development and Food Assistance Act of 1977 ( P.L. 95-88 , §212)—referred to as the "Bellmon" requirements—use of U.S. commodities for food assistance is prohibited under two specific conditions: (1) if the recipient country does not have adequate storage facilities to prevent spoilage or waste of the donated commodities at the time of their arrival; or (2) if the distribution of U.S. commodities in the recipient country would result in substantial disincentive to or interference with domestic production or marketing of agricultural commodities in that country. As a result of the Bellmon requirements, cooperating sponsors must conduct a Bellmon analysis to ensure that existing in-country conditions will not result in food aid monetization interfering with the agricultural economy of the recipient country. By statute, recipients—whether governments or private entities—of U.S. commodities under the FFPA are expected to widely publicize, to the extent possible, that such commodities are being provided by the friendship of the American people. In particular, commodities provided under FFPA Title II must be labelled on the package, bag, or container as being furnished "by the people of the United States of America." USAID offers tenders for international freight shipping providers in a competitive process, subject to U.S. agricultural cargo preference requirements. In accordance with permanent authority contained in the Cargo Preference Act of 1954 (P.L. 83-644) and §901 of the Merchant Marine Act of 1936 (both as amended), at least 50% of the gross tonnage of U.S. agricultural commodities financed under U.S. food aid programs must ship via privately owned, registered U.S.-flag commercial vessels. In November 1985, an amendment (offered by then-Senator Dale Bumpers) included in a supplemental appropriations act ( P.L. 99-349 , §209) prohibited the use of U.S. foreign assistance funds for any activities—including any testing or breeding feasibility study, variety improvement or introduction, consultancy, publication, conference, or training—that would encourage the export of agricultural commodities from developing countries that might compete with U.S. agricultural products in international markets. The Bumpers Amendment was preceded by USAID Policy Determination 71 in 1978, which required review by USAID "at the earliest possible stage" of any development project that would involve sugar, palm oil, or citrus for export. Following enactment of the Bumpers Amendment, USAID issued Policy Determinations 15 (September 13, 1986), which states that "it is USAID policy to avoid supporting the production of agricultural commodities for export by developing countries when the commodities would directly compete with exports of similar U.S. agricultural commodities to third countries and have a significant impact on U.S. exporters." Exceptions to the so-called Bumpers Amendment include food-security activities, research activities that directly benefit U.S. producers, activities in acutely indigent countries, and activities in a country that the President determines is recovering from widespread conflict, a humanitarian crisis, or a complex emergency. The following sections present some of the arguments both in favor of and against in-kind food aid as compared with cash-based food assistance and a suite of related issues—including agricultural cargo preference, monetization of non-emergency food aid, food aid quality, and how food aid fits within international trade agreements. Donors can provide international food assistance in two primary forms: in-kind, as commodities purchased in the donor country and shipped to a foreign country, or as cash transferred directly to the foreign country and used to acquire food or provide access to food for a target population. Despite the growth in recent years of cash-based assistance under USAID's EFSP and some initial LRP activity by USDA, the United States remains one of the few countries that continue to rely primarily on in-kind transfers of domestically purchased commodities as the basis for international food assistance (referred to as "food aid tying"). FFPA Titles I, II, and III programs, the Food for Progress program, and the McGovern-Dole IFECN programs involve such tied in-kind food aid, usually for monetization, but occasionally for direct food distribution programs. Such in-kind food shipments represented 92% of the value of U.S. food aid during FY2006 to FY2013. Only the Title V Farmer-to-Farmer and the cash-based EFSP programs do not involve in-kind food assistance. As an alternative to in-kind food aid, the United States and other international donors have used three primary types of cash-based food assistance programs to help food-needy populations acquire access to food supplies: (1) local and regional procurement (LRP), (2) food vouchers, and (3) direct cash transfers. Since the 1960s, both the international development and U.S. agricultural communities, as well as academics, policymakers, and others, have debated whether U.S. international food aid should be provided in the form of in-kind, U.S.-purchased commodities or more directly in the form of cash-based assistance. In the past decade several studies and GAO reports have provided evidence of economic inefficiencies and potential market distortions associated with in-kind food aid compared with cash-based assistance. Several questions have emerged from this debate, including the following: Is in-kind food aid the best or most appropriate form of humanitarian assistance in time of emergencies? Are there situations where cash-based assistance is preferable? Is there an optimal balance between in-kind and cash-based assistance? If so, is the current allocation representative of that balance? Similarly, in an era of tight budgets, what is a reasonable balance between emergency and non-emergency international aid? Cash-based food assistance is not a new concept. From 2001 to 2008, through programs funded under the authority of the Foreign Assistance Act, the U.S. government provided approximately $220 million in cash contributions to the WFP to purchase foreign-grown commodities. WFP has seen its cash and voucher programs significantly increase since 2010, growing from $139 million to $1.37 billion in 2014—with the largest increases occurring between 2012 and 2014, owing primarily to the civil war in Syria. The December 2004 Indian Ocean tsunami helped shift thinking in favor of cash-based food assistance. The highly visible disaster required rapid, large-scale assistance to populations that eat mainly rice—a commodity with scant domestic surpluses from North Atlantic food aid donors—and maintained access to commercial food distribution systems. Cash donations allowed the international community to establish cash and food voucher distribution and LRP of food aid. The success of the 2004 cash-based emergency response reinforced Europe's commitment to cash-based food assistance and expedited a similar shift in Canada's international food aid policy. Most other major donor countries—including Australia, Canada, and the European Union and its member countries—have switched away from in-kind donations to cash-based forms of aid targeted primarily to emergency response rather than non-emergency development programs. Several other major donor countries, such as Saudi Arabia, Norway, and Switzerland, have always relied on cash-based assistance. Some PVOs, think tanks, academics, U.N. organizations, and U.S. trade partners advocate for following the lead of other major donor countries and switching over to a cash-based system of food assistance. In recent years, the United States has joined other major donors in increasingly providing food assistance in the form of cash or vouchers. The 2008 farm bill (§3206) authorized USDA to develop a four-year (FY2009-FY2012) LRP pilot project with a mandatory authorization for $60 million of CCC funds. Subsequent evaluations of the pilot project indicated that LRP could both lower the costs and improve the timeliness of providing food aid in most emergency situations. Evaluations of U.S. and other LRP projects recommended that such procurement should be accompanied by careful assessment and monitoring to address concerns about food quality, local market disruption, and assuredness of supply. In response to the success of the LRP pilot projects, the 2014 farm bill (§3207) converted the expired pilot project into a permanent LRP program to be administered by USDA with authorized funding levels of $80 million annually for FY2014 through FY2018. However, the LRP program is now subject to annual appropriations and remains unfunded and unused through FY2015. In addition to the LRP program, the 2014 farm bill (§3002) also amended current food aid law to allow for greater flexibility in the use of FFPA 202(e) funds. This flexibility includes cash-based assistance in recipient countries where a Title II program is already operating. Prior to the 2014 farm bill, none of FFPA Title II appropriations could be used to purchase foreign-grown food. In addition to LRP, since 2010 USAID has used EFSP to provide food assistance as both cash and vouchers ( Table 3 ). Proponents of cash-based food assistance argue that, because cash transfers can occur electronically, food acquisitions are not delayed by international shipping operations. In addition, they contend that the increased flexibility of cash-based assistance allows U.S. aid to reach situations that would otherwise be difficult to access with in-kind food aid. According to USAID, flexible cash-based interventions have proven critical to effectively respond to complex and logistically challenging emergencies—such as the humanitarian crises in Syria, because of the ongoing civil war there, and in the Philippines, because of the aftermath of Typhoon Haiyan. Accordingly, they contend that cash-based food assistance offers several potential advantages over transoceanic in-kind food aid, including the following. Timeliness : In-kind food shipments take an average of 4 to 6 months to reach their recipient destination; LRP food reaches beneficiaries in 1 to 2 months; food vouchers and cash transfers can occur in less than a month. Research has shown that cash-based food security assistance can get food to people in critical need 11 to 14 weeks faster than commodity shipments from the United States. Less costly : By avoiding expensive ocean shipping (subject to cargo preference requirements), a larger share of each taxpayer dollar can reach the intended recipient country, thus allowing a larger number of beneficiaries to be reached. In a 2001 report, GAO found that USAID's average cost recovery per taxpayer dollar expended on monetized in-kind food aid was 76%, while USDA's was 58%. Both USDA and USAID in various budget requests have proposed that some portion of Title II funds be made available to purchase commodities in areas near the emergency so as to lower the time and cost of delivery. Because freight and other transportation costs must be paid out of Title II appropriations, they limit the amount of funds available for actually purchasing commodities. In addition, ocean freight rates vary from year to year, making it difficult for USDA and USAID to plan their annual programming. In a 2009 study, GAO concluded that between 2001 and 2008, food aid obtained by the U.N.'s WFP using LRP substantially reduced costs and improved timeliness of delivery, relative to similar food aid that USAID purchased and shipped from the United States to the same countries. LRP was less costly in sub-Saharan Africa (SSA) and Asia by 34% and 29%, respectively, and reduced aid delivery time by over 100 days for many countries in Sub-Saharan Africa. In FY2006, USAID estimated that almost half of its food aid allocations went to paying the cost of transportation (ocean transport and internal shipping costs). Other studies have found savings in cash-based assistance—LRP for bulk commodities can save over 50% compared with in-kind food aid (LRP for processed commodities may be less effective). Less disruptive to local agricultural producers and markets : In-kind food aid—particularly when monetized—can encourage black market activity and cause price distortions and volatility in local markets with harmful effects on agricultural producers in recipient countries. Less disruptive to global commercial markets : In-kind food aid—whether monetized or distributed directly—can impede or displace commercial exports depending on the extent of distribution leakages or the economic viability of food aid recipients. In-kind food aid has engendered international concerns from key trade partners that the United States is using international food donations as part of a domestic supply-management, price-support strategy, interfering with commercial market activity and potentially violating international trade agreements. Support local market channels and food preferences : Whether LRP, food voucher, or cash transfer—procuring food locally can bolster local marketing channels, support farmers, and better comply with local food preferences. Flexibility —Food vouchers and cash transfers can be used when a rapid response is needed, people are physically spread out or highly mobile, or there are security concerns about moving in-kind food or making cash transfers into the affected region. Cash-based food assistance has its potential hazards. If LRP acquisitions occur in a food-deficit region or a region where commercial markets are not well developed, they could induce inflationary pressures and distort trader behavior. In addition, in cases of particularly acute food needs, local foods may not have adequate nutritional quality for therapeutic treatment and rehabilitation activities, particularly for highly vulnerable recipients such as children and lactating or pregnant mothers. In such cases, fortified or specialized foods may be preferable and require importation. Further, LRP and cash-based assistance are limited by the availability of trained field staff as well as regional market supplies and infrastructure. In poorly controlled settings, recipients of cash transfers and food vouchers may use them for non-food items. Congressional and other critics of cash-based assistance also maintain that allowing non-U.S. commodities to be purchased with U.S. funds would result in undermining the coalition of commodity groups, PVOs, and shippers that support Title II in-kind donations, and thus lead to reductions in overall U.S. food aid funding. Other concerns related to LRP are that buying commodities locally or regionally could result in local or regional price spikes. The price spikes might make it difficult for people living in the affected areas to buy the supplies they need. Other concerns include that local or regional procurement cannot guarantee the reliability and quality of food supplies used for LRP-based programs. Ocean transport of all U.S. government-impelled cargoes—including food aid shipments—is permanently authorized by the Cargo Preference Act of 1954 (P.L. 83-644). This act requires that at least 50% of the volume of U.S. agricultural commodities financed under U.S. food aid programs ship on U.S.-flag vessels. The debate surrounding agricultural cargo preference (ACP) is related to concerns about the costs added to U.S. food aid delivery by complying with ACP (costs which are paid by the CCC out of annual food aid appropriations) versus maintaining a viable U.S. merchant fleet with military-readiness capability. Excess shipping costs are incurred because freight rates on U.S.-flag vessels are generally higher than on foreign commercial ships due to taxes, as well as safety, health, and environmental regulations, and higher labor costs associated with a requirement that at least 75% of crew members be U.S. citizens while the remaining crew must be resident aliens. The Cargo Preference Act of 1954 (P.L. 83-644) mandated that at least 50% of U.S. food aid must ship on U.S. registered vessels. Qualifying ships must be privately owned, U.S.-flagged commercial vessels that have been registered in the United States for at least three years and employ a crew of at least 75% U.S. citizens while the remaining crew must be resident aliens. The Department of Transportation's Maritime Administration (MARAD) monitors and enforces ACP compliance. An amendment to the act in the 1985 farm bill ( P.L. 99-198 ; §1142) increased the cargo preference share to 75% and required that MARAD reimburse the CCC for 1. the "excess" ocean freight costs on U.S.-flag vessels—referred to as the ocean freight differential (OFD)—incurred by complying with the additional 25% cargo preference requirement, and 2. any excessive shipping costs incurred during periodic spikes in transport prices when the cost of shipping exceeds 20% of the value of the commodities shipped—called the Twenty Percent Excess Freight (TPEF). Excess costs are incurred because freight rates on U.S.-flag vessels are generally higher than on foreign commercial ships. In 2012, the cargo preference share was reduced from 75% to 50% in the surface transportation reauthorization act (MAP-21, P.L. 112-141 ). The 2012 act also eliminated the reimbursement requirement for OFD. The Congressional Budget Office (CBO) estimated that repeal of this provision would save $108 million annually or $540 million over the period FY2013-FY2017. In 2013, the Bipartisan Budget Act of 2013 ( P.L. 113-67 , §602) repealed the requirement that MARAD reimburse USDA for TPEF associated with the transportation of food aid shipments on U.S.-flag vessels. Again enacted as a cost-saving measure, the repeal, according to CBO estimates, would save about $75 million annually or $356 million over the period 2014-2018. However, the effect was to reduce funds available for purchasing food for use in FFPA programs. A provision in the 113 th Congress's Coast Guard and Maritime Transportation Act of 2014 ( H.R. 4005 , §318) would have repealed the reduction in the cargo preference requirement contained in MAP-21, and reinstated the provision requiring that 75% of U.S. food aid be shipped on U.S.-flag vessels. The bill passed the House on a voice vote, but no action was taken by the Senate during the 113 th Congress. According to MARAD, cargo preference laws are intended to provide a revenue base that will retain and encourage a privately owned and operated U.S.-flag merchant marine because the U.S.-flag merchant marine is a vital resource providing: essential sealift capability in wartime or other national emergencies; a cadre of skilled seafarers available in time of national emergencies; and to protect U.S. ocean commerce from total foreign domination and control. USA Maritime—an organization that represents shipper and maritime unions—also argued that the cargo preference mandated for U.S. food aid exports contributes to the maintenance and retention of a strong merchant marine and that the combination of handling, processing, and transporting U.S. international food aid from the farm to foreign ports supports substantial economic activity. Critics argue that, according to published research, ACP increases the costs of shipping U.S. commodities to other countries. These costs—which come directly out of Title II appropriations—potentially reduce the volume of food aid provided. In addition, they contend that preference requirements potentially delay arrival of food aid compared with an open, competitive bidding process in the absence of ACP. An analysis in 2010 found that cargo preference requirements did not succeed in meeting the law's objectives of maintaining a U.S. merchant marine and that eliminating cargo preference could enable an increase in food aid commodities provided. Similarly, a 1994 GAO report found that shipments of food aid on U.S.-flag vessels did little to meet the law's objective of helping to maintain a U.S. merchant marine, while adversely affecting operations of the food aid programs, chiefly by raising the cost of ocean transportation and reducing the volume of commodities that can be shipped. Monetization is the act of selling U.S.-donated food aid commodities—purchased in the United States and shipped primarily on U.S.-flag vessels—in the local or regional markets of a recipient country. The sales are generally undertaken by implementing partners—that is, qualifying PVOs and cooperatives, many of which are U.S.-based NGOs, or an IO or recipient-country government (when eligible). Monetization is used by implementing partners under the FFPA Title II, Food for Progress, and McGovern-Dole IFECN programs and accounts for approximately 60% of non-emergency food aid. Over time, many of the participating PVOs have become dependent on monetized funds as one of their major sources of development finance. Implementing partners use the funds generated by monetization to transport, store, distribute, and otherwise enhance the effectiveness of the use of such Title II agricultural commodities; implement income-generating, community development, health, nutrition, cooperative development, agricultural, and other developmental activities; or be invested and any interest earned on such investment used for the aforementioned development projects. There are two types of monetization: (1) large-volume sales and (2) small-scale, timed sales referred to as targeted monetization. However, nearly all monetization of U.S. international food assistance is of large-volume sales. Targeted monetization is more costly to undertake, in terms of both personnel and infrastructure. Monetization is perceived by many as being an economically inefficient cash transfer. Fast cash (i.e., direct cash transfers to fund the development programs of implementing partners) is being replaced with slow cash that loses value along the transfer process—where in-kind commodities are first purchased in the United States, then shipped subject to cargo preference requirements to an implementing partner located in a recipient country, and sold in local markets to generate cash which is then used to operate food-security-related programs. Current law requires that at least 15% of FFPA Title II non-emergency in-kind food aid be available for monetization to generate development funds. The 1985 farm bill ( P.L. 99-198 , §1104) first authorized monetization by PVOs and cooperatives for use in funding their development activities. Furthermore, the 1985 farm bill required such monetization for at least 5% of the total amount of commodities distributed under Title II non-emergency programs in any fiscal year. The currency generated by these sales could then finance internal transportation, storage, or distribution of commodities under FFPA programs. The 1985 farm bill (§1110) also authorized a new program—Food for Progress—administered by USDA and financed entirely by monetized food aid by implementing partners, that is, PVOs, cooperatives, IOs, and recipient-country governments. In 1988, the list of authorized uses of FFPA Title II monetization funds was expanded to incorporate funding of food-security-related development projects. The 1990 farm bill ( P.L. 101-624 , §1512) increased the FFPA Title II monetization requirement to not less than 10% of Title II, non-emergency funds. The 1996 farm bill ( P.L. 104-127 , §208) required that PVOs and cooperatives be permitted to monetize at least 15% of Title II, non-emergency funding. The 2002 farm bill ( P.L. 107-171 ) extended monetization to include the McGovern-Dole IFECN program in-kind food aid shipments. The 1977 farm bill ( P.L. 95-88 ), included the Bellmon Amendment (§212) to the FFPA (as described in the preceding section of this report). As a result, both USAID and USDA must ensure that monetization transactions do not entail substantial disincentives to, or interfere with, domestic production or marketing in the recipient country—referred to as Bellmon analysis. Initially, the U.S. government used CCC-owned commodities to meet its food aid and monetization quantities. However, the Food for Peace Act of 1966 (P.L. 89-808) authorized the use of purchased commodities in the program in addition to surplus commodities. Then, as the availability of CCC-held stocks diminished, the government could switch to purchasing commodities from the U.S. commercial market and shipping them abroad, subject to cargo preference requirements, to generate cash. Due to the obvious inefficiencies in using monetization to convert taxpayer dollars into development funding, USAID sought to achieve an average cost recovery of 80%. However, the 2002 farm bill (§3009) eliminated USAID's cost recovery goal and, instead, required that USAID and USDA achieve a "reasonable market price" for monetization sales—the term "reasonable market price" has never been clearly defined. Critics of monetization contend that the practice of converting U.S. taxpayer dollars into commodities, shipping them to foreign markets subject to stringent cargo preference requirements, then converting the commodities back to cash in local currency is an inefficient use of resources that may also have adverse market impacts in recipient countries. Studies have found monetization to be an economically inefficient form of providing development support because the "cost recovery" of an original taxpayer dollar is less than one due to the shipping and transaction costs needed to move the commodities to foreign markets. According to GAO, research comparing in-kind with cash-based food assistance found that switching to a cash-based approach can generate savings of 25% to 50% depending on the situation—that is, bulk versus high-valued commodities and the distance to be shipped. Critics of monetization argue that it is an inefficient way to meet the objectives of relieving emergency food needs or fostering economic and agricultural development in receiving countries. Unlike targeted food distribution, which is given directly to food-needy persons who are often unable to participate in commercial markets, monetization involves selling U.S. commodities in commercial markets. Thus, critics charge that it has a greater potential to distort markets by both depressing commodity prices and increasing their volatility. Low prices can encourage black market activity and discourage local agricultural producers from expanding their production, thus reinforcing a dependency on the imported food assistance. Furthermore, monetized food aid can impede or displace commercial activity from U.S. trading partners or other commercial exporters that might vie for a share of that recipient country's market. Finally, if monetization only occurs episodically and in large batches, it can inject substantial price volatility into the marketplace, thus discouraging investment in the agricultural sector and making it difficult for households to plan their budgets. Despite legislation that imposes assessments of the potential impact of food aid on local markets—referred to as usual marketing requirements (UMRs) undertaken by USDA and Bellmon analyses undertaken by USAID —GAO reports that USAID and USDA cannot ensure that monetization does not cause adverse market impacts because they monetize at high volumes, conduct weak market assessments, and do not conduct post-monetization evaluations. In contrast, advocates argue that monetization can be an effective tool to meet long-term development needs of chronically food-insecure people in many developing countries. Several PVOs, potentially affected by a decrease in monetization, organized themselves as the Alliance for Global Food Security (referred to as the Alliance). The Alliance currently represents 9 PVOs (and the Congressional Hunger Caucus) involved in implementing FFPA non-emergency programs. The Alliance contends that monetization can lead to benefits beyond those created via direct program funding. These benefits include addressing credit, hard currency, small volume, and other constraints to buying on the international market. They assert this creates business opportunities and increases the availability of the commodity in the recipient country. However, to achieve such results, the monetization must be in small volumes and specifically targeted to avoid market distortions. Under such conditions, monetization may help develop the capacity of smaller traders to participate in markets, increase competition, and potentially combat price volatility. A survey of U.S. and other food aid programs over a 50-year period identifies few examples of targeted monetization, as opposed to open market sales to generate cash. In summer 2006, CARE International (a large U.S.-based NGO), which had supported monetization in the past, announced that it would transition away from the practice of monetization and refuse food commodity donations worth tens of millions of dollars starting in 2009. According to CARE, monetization is management-intensive, costly, fraught with legal and financial risks, and economically inefficient; when monetization involves open-market sale of commodities to generate cash, which is almost always the case, it inevitability causes commercial displacement. As such, it can be harmful to traders and local farmers, undermine the development of local markets, and be detrimental to longer-term food security objectives. Another NGO, Catholic Relief Services, has taken a similar position with respect to monetization, but continues to use it. It sells commodities only when it has determined that no alternative methods of funding exist and that the sale will have no negative impacts on local markets and local production. Catholic Relief Services says that its policy is to seek to replace monetization with cash funding to cover program costs. Historically, most U.S. food aid has been delivered in the form of general rations composed of unfortified grains and legumes (wheat, corn, sorghum, rice, soybeans, peas, lentils, and vegetable oils). Estimates are that about 25% of the volume of U.S. food aid is in the form of fortified blended foods (FBFs). Advances in food and nutritional sciences in recent years, including the development of improved product formulations and new products, have enhanced the capacity of food aid providers to deliver more nutritious foods to target groups, such as children, lactating mothers, and HIV-positive individuals. In addition to FBF formulations, new products such as ready-to-use therapeutic foods, including lipid-based products, have been developed. Two studies—a GAO report and a study by Tufts University—released in 2011 raised concerns about the nutritional quality and safety of U.S. food aid programs. These studies pointed to reduced food aid budgets, high and volatile food prices, and frequent and protracted humanitarian emergencies as factors underlying a need for greater attention to the nutritional content of U.S. food aid. GAO's 2011 report noted two significant challenges in delivering more nutritional products to food aid recipients. First, specialized food products are generally more expensive than food rations used in general distribution feeding programs. According to GAO, a typical ration consisting of rice, cornmeal, wheat, or sorghum could range in cost from $0.02 per day for a six-month-old child to $0.09 per day for a two-year-old child. A daily ration of FBFs could cost between $0.06 and $0.12 per day, depending on the size of the ration. Within a fixed budget, providing more expensive specialized products would reduce the number of people fed. Second, U.S. food aid agencies poorly target the specialized food aid products provided. In this connection, GAO noted that USAID provides implementing partners with limited guidance on how to target more nutritious foods to ensure they reach intended recipients. As a result, GAO recommended that USAID and USDA issue guidance to implementing partners on addressing nutritional deficiencies, especially during protracted emergencies, and evaluate the performance and cost effectiveness of specialized food products. The Tufts report suggested, among other recommendations, that USAID should adopt new specifications for FBFs and explore the use of new products such as new lipid-based products. In addition, it should provide new program guidance to implementing partners and convene an interagency food aid committee to provide technical guidance about specialized products and to interface with industry and implementing partners. In response to these studies, the 2014 farm bill (§3003) requires that USAID use Title II funds to assess types and quality of agricultural commodities donated as food aid; adjust products and formulation as necessary to meet nutrient needs of target populations; test prototypes; adopt new specifications or improve existing specifications for micronutrient food aid products, based on the latest development in food and nutrition science; develop new program guidance for eligible organizations to facilitate improved matching of products to purposes; develop improved guidance on how to address nutritional efficiencies among long-term recipients of food aid; and evaluate the performance and cost-effectiveness of new or modified food products and program approaches to meet nutritional needs of vulnerable groups. The managers' joint statement to the 2014 farm bill maintains that they expect USAID to set verifiable goals and to maximize strong public-private partnerships with food manufacturers and other stakeholders to more quickly address the deficiencies highlighted in the GAO 2011 report by using currently available studies on food aid quality and nutrition. Also, the managers encouraged USAID to establish multi-year approaches to the procurement of high-value products. Managers expected longer-term procurement to encourage investment of specialized equipment needed to deliver critical products in a timely and cost-effective manner. In recognition of the importance associated with close collaboration between USDA and USAID on approving new products, the managers stated that they expect both agencies to adopt clear guidelines to facilitate the swift adoption of new products in order to quickly capture the benefits of the research and testing undertaken in this area. The United States continues to rely primarily on domestically sourced, in-kind food donations, whereas most other major donors have shifted away from in-kind to cash-based donations. The substantial volume of in-kind food aid donated by the U.S. government each year has engendered international concerns from key trade partners—in particular, the European Union (EU) and members of the Cairns group —that the United States uses international food donations as part of a domestic supply-management, price-support policy. The concern is that by purchasing commodities from the domestic market, the U.S. government is potentially supporting domestic prices; and by donating large volumes of U.S. commodities in foreign markets, the U.S. government is potentially implementing an implicit export subsidy program to capture those markets. In short, other export nations have become skeptical of U.S. in-kind food aid and contend that it interferes with commercial market activity and potentially violates international trade agreements. In the 1950s, the United States, Canada, and Europe donated or sold their agricultural surpluses at subsidized prices to developing countries. Beyond the rationale of supporting food-short countries, food aid in this form acted as a de facto export subsidy for donor countries. This implicit export subsidy became a highly critical issue among competing food-exporting nations. In response, the food-exporting countries (later joined by food-importing nations) gradually contributed to an international structure to harmonize food aid with international trade. This structure included the Consultative Subcommittee on Surplus Disposal (CSSD), a subcommittee in the U.N. Food and Agricultural Organization (FAO); the U.N.'s WFP; the international Food Aid Convention (FAC); and multilateral trade negotiations that resulted in the creation of the World Trade Organization (WTO) and its set of legal texts governing international trade. CSSD was created within the FAO in 1954 to define and monitor uses of surplus disposal as food aid. It arose largely due to fears expressed by Canada, Australia, and other grain exporters that the United States would use food aid as a pretext for dumping large government-held agricultural surpluses. The CSSD established the first international code of conduct safeguarding the interests of commercial exporters as well as those of agricultural producers in the recipient countries—the Principles of Surplus Disposal and Guiding Lines for Dealing with Agricultural Surpluses. The concept of a "usual marketing requirement (UMR)," based on average commercial imports of the previous five-year period, was created to ensure that food aid was "additional to," rather than replacement of, commercial trade. However, the CSSD's UMR recommendations and safeguards were non-binding and lacked enforcement provisions, thus limiting their effectiveness. WFP was created in 1961 to convert the United States' bilateral food aid into a multilateral asset—thus, its principal activity is food distribution. It is governed by an executive board through which the United States plays a leadership role; the executive director of the WFP is traditionally an American. The WFP has established a permanent international infrastructure (with a staff of about 11,500) for distribution of both in-kind and cash-based food assistance. In 1967, the major food aid donors created the FAC. It was a legally binding agreement that defined minimum tonnage commitments of food aid to be supplied by each signatory. The FAC designed these food aid quotas to ensure that such aid was both predictable and timely for response to international food crises and that such food transfers followed the FAO's Principles of Surplus Disposal. The FAC is date-specific and must be renegotiated and renewed periodically. The FAC of 1986 included a provision that prohibited the explicit use of food aid as an export subsidy. Although the FAC is a treaty whose signatories have legal obligations, it lacks enforcement provisions. The Agreement on Agriculture of the WTO was the outcome of multilateral trade negotiations that culminated in the successful Uruguay Round in 1994. The agreement spells out the rules governing both domestic support to the agricultural sector as well as for market access and export competition. Under Article 10, "Prevention of Circumvention of Export Subsidy Commitments," of the agreement, 4.Members donors of international food aid shall ensure: (a)that the provision of international food aid is not tied directly or indirectly to commercial exports of agricultural products to recipient countries; (b)that international food aid transactions, including bilateral food aid which is monetized, shall be carried out in accordance with the FAO "Principles of Surplus Disposal and Consultative Obligations", including, where appropriate, the system of Usual Marketing Requirements (UMRs); and (c)that such aid shall be provided to the extent possible in fully grant form or on terms no less concessional than those provided for in Article IV of the Food Aid Convention 1986. The Doha Round of multilateral trade negotiations began in 2000 in an effort to build on the achievements made in the three pillars of agricultural trade by the Uruguay Round—that is, limitations on domestic support, expanded market access, and stringent controls on various non-competitive forms of export competition. Food aid became one of the key contested issues. The United States was inclined to preserve its full range of tied food aid programs, whereas the EU and other European donors proposed to move entirely to untied food aid. In particular, the EU indicated a willingness to eliminate its own direct subsidies for agricultural exports on the condition that all forms of export subsidies, both explicit and implicit, are disciplined as well. The Ministerial Declaration made in Hong Kong on December 18, 2005, stated: On food aid ... we will ensure elimination of commercial displacement. To this end, we will agree to effective disciplines on in-kind food aid, monetization, and re-exports so that there can be no loop-hole for continuing export subsidization. The Doha Round was never completed; however, negotiators produced a working text that may serve as a guide for future trade rules. With respect to food aid, the Doha texts propose additional rigor to defining and proscribing international food aid as detailed in Annex L to the draft modalities with a strong emphasis on moving to untied cash-based food aid. The United States has always been a leader in both global agricultural trade and international trade negotiations to establish a transparent and unified set of standards to govern international commerce. The United States openly declares its commitment to international trade and the international set of rules governing that trade in the Food for Peace Act (§3(c)) where it declares its intent to (C) ensure, to the maximum extent practicable, that options for providing food aid for emergency and non-emergency needs shall not be subject to limitation, including in-kind commodities, provisions of funds for agricultural commodity procurement, and monetization of commodities, on the condition that the provision of those commodities or funds— (i) is based on assessments of need and intended to benefit the food security of, or otherwise assist, recipients, and (ii) is provided in a manner that avoids disincentives to local agricultural production and marketing and with minimal potential for disruption of commercial markets, and (2) the United States should increase its contribution of bona fide food assistance to developing countries consistent with the Agreement on Agriculture. The FFPA Title II program has been embroiled in a long-running debate between successive Administrations and Congress over how Title II funds may be used. Both the George W. Bush and Obama Administrations have sought greater flexibility in their use of Title II funds. Both Administrations claimed that this flexibility would allow them to direct food to international points of crisis more quickly and at lower cost (primarily as cash-based food assistance), thus helping to better respond to international emergencies while meeting U.S. foreign policy goals. In contrast, Congress has favored using Title II funds to purchase U.S. commodities, ship them on U.S.-flag vessels to foreign countries with food deficiencies, and then monetize the commodities by selling them in recipient country markets for local currency, which is subsequently used to fund food security and development activities. FFPA programs are under the authority of the House and Senate Agriculture Committees, which reauthorize FFPA programs in periodic farm bills. Proponents for change in U.S. food aid policy have expressed concerns that the agriculture committees are too close to U.S. commodity groups, food processors, and maritime interests, all of whom have a vested interest in the status quo. Recognizing this, most proposals for change have attempted to move FFPA program authority away from the agriculture committees and to the House Foreign Affairs Committee and Senate Foreign Relations Committee, which have authority over U.S. foreign relations as well as most forms of international economic assistance and disaster response activities. Both the previous and current Administrations (in their annual budget requests) have proposed changes to the structure and intent of U.S. international food assistance, especially involving FFPA Title II resources. The 2014 farm bill made some modest changes to international food aid programs. However, it did not adopt the larger Obama Administration FY2014 proposals (described below). In addition to Administration proposals, some Members of Congress have introduced bills in both the House ( H.R. 1983 ) and Senate ( S. 2421 ) in the 113 th Congress and the Senate ( S. 525 ) in the 114 th Congress that proposed alterations to U.S. food aid programs—including shifting select food aid authorities away from the agriculture committees and their periodic farm bills and into the Foreign Assistance Act, as well as the elimination of the requirements related to U.S.-only procurement of commodities, cargo preference, and monetization. In 2007, the Bush Administration proposed that Congress provide authorization in the farm bill to use up to 25% of annual Title II funds (approximately $300 million) to procure food from selected developing countries near the site of a crisis. The Administration justified this proposal on the grounds that the U.S. response to food emergencies would be more efficient and cost-effective if commodities could be procured locally. The Administration's farm bill proposal cited instances in which the U.S. food aid response to emergencies would have been enhanced with this kind of authority, particularly for Iraq in 2003, the Asian tsunami in 2004, southern and West Africa in 2005, and East Africa in 2006. The Administration noted that "U.S. grown food will continue to play the primary role and will be the first choice in meeting global needs." Local and regional purchases would be made only where the speed of the arrival of food aid is essential, according to USDA. These proposals did not advance in Congress. In its FY2014 budget request, made in advance of the 2014 farm bill, the Obama Administration proposed changes to the structure and intent of U.S. international food assistance, especially involving FFPA Title II resources. These changes included (1) shifting funds from the FFPA, as authorized by the farm bill, to three USAID accounts—International Disaster Assistance (IDA), Development Assistance (DA), and Emergency Food Assistance Contingency Fund (EFAC), described below—authorized in foreign assistance legislation; (2) eliminating the monetization procedure; (3) providing greater flexibility to procure commodities in local and regional markets overseas; and (4) reducing the volume of commodities subject to cargo preference legislation. The Administration proposed to replace funding previously requested for FFPA Title II, estimated at $1.47 billion annually, with an equivalent amount divided among the three USAID foreign assistance accounts as follows: Shift $1.1 billion to IDA for emergency food response . This shift would have augmented IDA's Emergency Food Security Program for cash-based food security assistance. The total available for IDA emergency food security assistance after such a shift would be $1.4 billion. Shift $250 million to DA for a Community Development and Resilience Fund (CDRF) . The CDRF would address chronic food insecurity in areas of recurrent crises such as in the Horn of Africa or the West African Sahel. The CDRF also would receive $80 million of DA from USAID's Bureau of Food Security, which administers the Feed the Future program. Total funding for this program after such a shift would be $330 million. Shift $75 million to EFAC. The newly created EFAC would serve as a fund to provide emergency food assistance for unexpected and urgent food needs. According to USAID, the type of food assistance intervention—in-kind versus cash-based food assistance—depends on overall program goals, cost, and several factors related to the affected region. These factors include food insecurity causes, the severity of the food crisis, timeliness of response, the functioning of markets, security conditions, and local diet preferences. USAID argued that the proposed shifts would result in gains of flexibility, timeliness, and efficiency in the provision of emergency food aid. These gains would allow U.S. international food assistance to reach at least 2 million to 4 million more people each year with equivalent funding. Rather than a commodity-only response, USAID would be able to select from a menu of options that could include local or regional procurement in countries or regions where food aid emergencies are occurring and other forms of cash-based assistance, like food vouchers or cash transfers. CDRF would continue to engage PVOs as implementing partners of non-emergency development programs. In addition, USAID argued that the $330 million in the CDRF would be the equivalent of the non-emergency funding guarantee in the FFPA because of cost savings associated with the end of monetization. According to USAID, the food aid reform proposal would guarantee that in FY2014 no less than 55% of the requested $1.4 billion for emergency food assistance would be used for procurement, transport, and related costs of U.S. commodities. Going forward, USAID said that U.S. commodities would continue to make up a significant portion of purchases, especially for many processed foods and bulk commodity procurements, which might not be available elsewhere in the world. Further, inflation concerns or food price volatility may make U.S. commodities a more feasible option in certain situations. In addition, $25 million of "efficiency savings" would be devoted to an increase for the Maritime Security Program (MSP), administered by MARAD, thus serving as a partial offset for reduced U.S. food aid shipments. Increasing the direct subsidies to the maritime sector with additional MSP funding was intended to help retain militarily useful U.S.-flag vessels and facilitate the retention of mariners in the workforce. Critics of the Administration's food aid proposal included the Alliance for Global Food Security and the U.S. maritime sector. In early 2013, prior to the release of the Administration's FY2014 proposal, a group of 70 organizations—representing maritime interests, commodity groups, and the Alliance—who support the current food aid program wrote the President a letter urging continuation of the FFPA and other U.S. food aid programs in their current form based on in-kind shipments and monetization. Then, in response to the Administration FY2014 budget request, the Alliance sent another letter recommending the continuation of the current in-kind food aid procurement system and monetization. However, the Alliance said it agreed with the use of IDA funds (including increased funding "as needed") for LRP or cash-based assistance pending arrival of either pre-positioned FFPA commodities or deliveries of U.S. commodities. The Alliance contends that monetization provides benefits other than the cash generated to finance PVO projects. Those include increased economic activity that helps alleviate credit, hard currency, or small-volume constraints that limit procurement of sufficient food supplies on international markets. The Alliance recommended using USAID's Development Assistance (DA) funds to support FFPA Title II development programs where monetization is not feasible or appropriate. As mentioned earlier, USA Maritime also opposed transforming the current food aid programs from a commodity-based to a cash-based program. It argued that the proposed food aid changes would jeopardize future funding by losing its current support network of farmers, international relief and development organizations, ports, and inland and ocean transporters. Although the 2014 farm bill made some modest changes to U.S. international food assistance, it did not adopt the Administration's broader FY2014 proposals. In a revised version of its international food aid proposals, the President's FY2015 budget requested that up to 25% of total Title II funding be available for cash-based interventions. USAID claimed that the cost savings and improved timeliness associated with such a shift in use of Title II funds from shipping U.S. commodities on U.S.-flag vessels to cash-based assistance would allow USAID to reach an additional 2 million people. As under its FY2014 budget request, the Administration again proposed that $25 million of the "efficiency savings" obtained from the transfer of FFPA funds be devoted to an annual increase of the Maritime Security Program (MSP), administered by MARAD, thus serving as a partial offset for reduced shipping related to smaller U.S. food aid shipments. Congress did not include the Administration's proposals in its FY2015 appropriations. In its FY2016 budget request, the Administration repeated the proposed changes to U.S. international food aid made in its FY2015 budget request—allow up to 25% of total Title II funding to be available for cash-based interventions and increase annual MSP funds by $25 million as a partial offset for reduced shipping related to smaller U.S. food aid shipments. The Administration's FY2017 budget request proposed $1.35 billion in Title II funding, of which 25% ($337.5 million) would be exempt from any U.S. purchase requirement and would instead be available as cash-based food assistance for emergencies. Both the House and Senate bills would appropriate larger Title II funding for FY2017—the House bill ( H.R. 5054 ) proposes $1.466 billion, while the Senate bill ( S. 2956 ) proposes $1.6 billion—but without the in-kind purchase exemption. The Administration's FY2014 food aid proposal raised issues of congressional committee and subcommittee jurisdiction over food aid appropriations and authorizing legislation ( Table 4 ). In the Senate, food aid authorizing legislation currently is with the Agriculture, Nutrition, and Forestry Committee, while appropriations jurisdiction is with the Agriculture Appropriations Subcommittee. In the House, jurisdiction over authorizing legislation currently is with the Agriculture Committee, periodically shared with the Foreign Affairs Committee. Appropriations are the purview of the Agriculture Appropriations Subcommittee. Shifting food aid funding to programs authorized in foreign assistance legislation (e.g., IDA and DA) as proposed by the Administration suggested that responsibility for food aid appropriations might shift to the Foreign Operations Appropriations Subcommittees in both chambers. Similarly, authorizing legislation might become the responsibility of the House Foreign Affairs Committee and Senate Foreign Relations Committee. Members introduced two bills to change U.S. international food aid programs during the 113 th Congress ( H.R. 1983 and S. 2421 ), although no action was taken on either. The Senate food aid bill has been reintroduced in a modified form in the 114 th Congress as S. 525 . In May 2013, Representative Royce, chairman of the House Foreign Affairs Committee, and then-Ranking Member Bass, introduced a bill ( H.R. 1983 ) that would have altered U.S. food aid programs by eliminating monetization and the U.S.-only commodity purchase requirement. It would have transferred the Title II non-emergency program authority away from farm legislation and USDA, and to the Foreign Assistance Act, where it might allow USAID greater flexibility in responding to foreign emergency situations through local and regional purchase of food in a food-crisis area. In addition, H.R. 1983 would have exempted FFPA Title II food assistance from cargo preference requirements. The 113 th Congress took no action on H.R. 1983 . In June 2014, then-Ranking Member Corker and Senator Coons from the Foreign Relations Committee introduced a bill, S. 2421 , that also proposed eliminating monetization, cargo preference requirements (but only as they relate to FFPA food assistance), and the U.S.-only commodity purchase requirement. It would have transferred the Title II program authority away from farm legislation and USDA, and to the Foreign Assistance Act. S. 2421 also proposed retaining the funding allocation for non-emergency assistance to between 20% to 30% of FFPA funds, but not less than $375 million for any fiscal year. Finally, S. 2421 included a "Sense of Congress" provision recognizing the "critical" role the Merchant Marines play in maintaining U.S. defense capability. The 113 th Congress took no action on S. 2421 . In February 2015, Chairman Corker and Senator Coons reintroduced their food-aid bill in the new 114 th Congress as S. 525 . Similar to their 2014 reform bill ( S. 2421 ), S. 525 proposes eliminating monetization, cargo preference requirements, and the U.S.-only commodity purchase requirement but only for FFPA Title II program activity. As with S. 2421 , S. 525 does not address cargo preference requirements as they relate to other food aid programs. As such, the current requirement for agricultural cargo preference, as well as current practices of reliance on in-kind commodity transfers with subsequent monetization, would remain relevant for these food aid programs. Instead, S. 525 would allow FFPA Title II funds to be used for both in-kind and cash-based assistance—whichever is deemed by USAID as the preferred option for the given situation. To accomplish this, the bill would transfer the Title II program authority away from farm legislation and USDA, to the Foreign Assistance Act and USAID. Finally, S. 525 proposes lowering the authorized annual appropriations level for Title II programs by $100,000 to $2.4 billion per fiscal year to reflect the efficiencies that would be gained from the increased flexibility in use of Title II funds. The Senators estimate that their proposed changes would supplement existing funds by as much as $440 million annually through greater efficiencies in delivering aid. As a result, U.S. food assistance could potentially reach an additional 8 million to 12 million people than under current programs. S. 525 also proposes retaining the allocation for non-emergency assistance of between 20% to 30% of FFPA Title II funds, but not less than $375 million for any fiscal year. Finally, S. 525 includes a "Sense of Congress" provision that recognizes the "critical" role the Merchant Marines play in maintaining U.S. defense capability. With respect to the cargo preference requirement change, S. 525 would allow USAID the flexibility to ship any U.S.-sourced commodities under FFPA Title II on vessels that are the most suitable to the task—that is, readily available and most cost-effective—irrespective of the vessel's registry. On July 20, 2016, President Obama signed into law the Global Food Security Act ( P.L. 114-195 ). The GFSA represents a codification of the Obama Administration's Feed the Future (FTF) program into the Foreign Assistance Act (FAA) of 1961. FTF is a U.S. international development program launched in 2010 that invests in food security and agricultural development activities in a select group of developing countries in an effort to reduce hunger, malnutrition, poverty, and food insecurity. Since its origin, FTF has expanded into a whole-of-government effort that coordinates previously existing U.S. agricultural development policies into a single framework. The GFSA continues the FTF's global food security initiative under a "whole-of-government" strategy. In GFSA (Section 5) the President is directed to develop a Global Food Security Strategy (GFSS) by not later than October 1, 2016. Furthermore, the President is directed to coordinate—through a whole-of-government approach—the efforts of all relevant federal departments and agencies involved in the U.S. global food security initiative. Thus, the GFSA subsumes the USDA in-kind food aid programs discussed in this report, along with those food-security-related programs of other federal agencies. Under FTF, U.S. international food assistance programs have often been run jointly or in close association with each other when occurring in common regional settings. The GFSA grants coordinating authority to the President for the GFSS. However, the GFSA includes a provision (Section 9) that specifically precludes the GFSS from superseding or otherwise affecting the authority of USDA to carry out its various food assistance programs. The programs subject to this exclusion are explicitly listed in the GFSA, Section 9(b), as the Food for Peace Act; Food for Progress, Section 416(b); McGovern-Dole Food for Education Program; Local and Regional Procurement Program; Bill Emerson Humanitarian Trust; and any other food and nutrition security and emergency and non-emergency food assistance program of USDA. The GFSA (Section 6) authorized appropriations of about $1.0 billion for each of FY2017 and FY2018 for those portions of the GFSS that relate to the Department of State and USAID. In addition, the GFSA (Section 7) permanently authorized the Emergency Food Security Program (EFSP) as part of the Foreign Assistance Act (FAA) of 1961 and authorized appropriations of nearly $2.8 billion for each of FY2017 and FY2018 for humanitarian assistance under EFSP.

For almost six decades, the United States has played a leading role in global efforts to alleviate hunger and malnutrition and to enhance world food security through international food assistance—traditionally through either the donation or sale on concessional terms of U.S. agricultural commodities but in recent years also by direct cash transfers targeting emergency situations and by investing in host-country nutrition and agricultural development activities. Historically, U.S. international food assistance has been distributed through four main program authorities: (1) the Food for Peace Act (FFPA, also known as P.L. 480); (2) the Section 416(b) program (which has been inactive since 2007); (3) the Food for Progress Act of 1985; and (4) the McGovern-Dole International Food for Education and Child Nutrition Program. The Section 416(b) program is permanently authorized by the Agricultural Act of 1949. The other programs are reauthorized in periodic farm bills, most recently (through FY2018) by the 2014 farm bill. A common feature of these programs is that they rely primarily on U.S.-sourced commodities (i.e., in-kind food aid) for their operations. The 2014 farm bill (P.L. 113-79) added an additional permanent international food assistance program—the Local and Regional Purchase (LRP) project—but based on cash transfers to purchase commodities from markets near the source of international food need. Since 2010, the U.S. Agency for International Development (USAID) has also used its authority under the Foreign Assistance Act of 1961 (FAA) to initiate cash-based food assistance in response to international crises under the Emergency Food Security Program (EFSP) as a complement to FFPA Title II emergency in-kind food aid donations. In July 2016, EFSP was permanently authorized by the Global Food Security Act (P.L. 114-195). These six food assistance programs are administered either by the Foreign Agricultural Service of the U.S. Department of Agriculture (USDA) or USAID. Since FY2006, annual spending on U.S. international food assistance programs has averaged $2.5 billion, with FFPA Title II outlays averaging $1.8 billion (74%). Despite growth in cash-based assistance under EFSP, the United States continues to rely heavily on in-kind transfers of domestic commodities for international food aid. In contrast, most other countries operating international food aid programs have converted primarily to cash-based food assistance. U.S. reliance on in-kind food aid has become controversial due to its identified inefficiencies and potential market distortions compared with cash-based assistance. In addition to domestic sourcing, U.S. food aid is subject to a suite of legislative requirements that potentially limit the U.S. response to emergency food crises. These include minimum levels of non-emergency program funding; domestic processing, bagging, and packaging; monetization—that is, the process of selling donated U.S. commodities in recipient-country markets to generate cash for development programs—by eligible NGOs; and ocean shipping on U.S. registered vessels (referred to as cargo preference). The 2014 farm bill made modest changes to U.S. food aid programs. However, the past two Administrations—that is, George W. Bush and Obama Administrations—as well as certain Members of Congress, via bills in the 113th (H.R. 1983 and S. 2421) and 114th (S. 525) Congresses, have proposed making more significant changes to the structure and intent of U.S. food aid programs. Proposed changes include, among others, expanding flexibility in the use of cash-based forms of assistance and eliminating both cargo preference and monetization. In addition to its food assistance activities, the United States provides funding for investment in international food security programs under the Global Food Security Act (GFSA, P.L. 114-195). The GFSA represents a codification of the previous Feed the Future program. This report focuses on U.S. international food assistance activities, including the EFSP. The GFSA and its predecessor—Feed the Future—are discussed in CRS Report R44216, The Obama Administration's Feed the Future Initiative.

In its budget proposal for FY2014, the Obama Administration proposed a "strategic review" of the Tennessee Valley Authority (TVA), a federal government corporation established by the Tennessee Valley Authority Act (TVA Act) (16 U.S.C. 831). Reform TVA. Since its creation in the 1930s during the Great Depression, the federally owned and operated Tennessee Valley Authority (TVA) has been producing low-cost electricity and managing natural resources for a large portion of the Southeastern United States. TVA's power service territory includes most of Tennessee and parts of Alabama, Georgia, Kentucky, Mississippi, North Carolina, and Virginia, covering 80,000 square miles and serving more than nine million people. TVA is a self-financing Government corporation, funding operations through electricity sales and bond financing. In order to meet its future capacity needs, fulfill its environmental responsibilities, and modernize its aging generation system, TVA's current capital investment plan includes more than $25 billion of expenditures over the next 10 years. However, TVA's anticipated capital needs are likely to quickly exceed the agency's $30 billion statutory cap on indebtedness. Reducing or eliminating the federal Government's role in programs such as TVA, which have achieved their original objectives and no longer require Federal participation, can help put the Nation on a sustainable fiscal path. Given TVA's debt constraints and the impact to the Federal deficit of its increasing capital expenditures, the Administration intends to undertake a strategic review of options for addressing TVA's financial situation, including the possible divestiture of TVA, in part or as a whole. In proposing the strategic review, the Administration says that TVA has achieved its original objectives, and thus no longer requires federal participation. However, some have expressed their disagreement with the Administration's position, and support TVA's current role. The strategic review (to be conducted by the Office of Management and Budget) may thus consider options for addressing TVA's financial situation and its effect on the federal deficit, with divestiture of TVA (in whole or part) to be considered among the potential alternatives. TVA, for its part, is cooperating with the strategic review. This report will discuss the history and role of TVA mostly from an energy standpoint, considering current and future obligations, and other issues related to TVA's provision of electrical energy. Issues for Congress may involve consideration of whether a federal role is still necessary to achieve the TVA Act's objectives. TVA is a federal government corporation originally established by Congress in response to the Great Depression, essentially to "exist in perpetuity." The preamble to the TVA Act of 1933 lists flood control, reforestation, and agricultural and industrial development as primary considerations in the original establishment of the TVA. To improve the navigability and to provide for the flood control of the Tennessee River; to provide for reforestation and the proper use of marginal lands in the Tennessee Valley; to provide for the agricultural and industrial development of said valley; to provide for the national defense by the creation of a corporation for the operation of Government properties at and near Muscle Shoals in the State of Alabama, and for other purposes. TVA has incorporated the preamble into its mission statement, which lists these duties essentially in terms of TVA priorities. The mission of the Tennessee Valley Authority is to develop and operate the Tennessee River system to improve navigation, minimize flood damage, and to provide energy and related products and services safely, reliably, and at the lowest feasible cost to residents and businesses in the multi-state Tennessee Valley region. TVA's integrated management of the entire Tennessee River watershed optimizes the benefits of the water resource. Major functions of the corporation include: Management of the Tennessee River system for multiple purposes including navigation, flood control, power generation, water quality, public lands conservation, recreation, and economic development; Generation of electricity; Sale and transmission of electricity to wholesale and large industrial customers; Stimulation of economic development activities that generate a higher quality of life for citizens of the Tennessee Valley; Preservation and environmentally-sensitive management of TVA assets and federal lands entrusted to TVA; and Research and technology development that addresses environmental problems related to TVA's statutory responsibilities for river and land management and power generation. The operation of the Tennessee River system to improve navigation and minimize flood damage arguably remains TVA's primary obligation. Power generation at TVA was a part of the industrial development mission of TVA, with hydroelectric generation possibly being viewed as an opportunity which arose from dams mostly built for flood control and navigation purposes. While the focus of TVA's activities originally was largely on its flood control and economic development roles, TVA is now essentially a power generation company. TVA's business metrics are focused on optimizing TVA's financial position, and its operational goals are focused on providing electricity at the lowest feasible rates to its wholesale customers in the multi-state Tennessee Valley region. Initially, federal appropriations funded all TVA operations. Appropriations for the TVA power program ended in 1959, and appropriations for TVA's environmental stewardship and economic development activities were phased out by 1999. TVA is now fully self-financing, funding operations through electricity sales and power system bond financing. TVA makes no profit and receives no tax money. As shown in Figure 1 , TVA's electric power service territory covers almost all of Tennessee, and portions of Alabama, Georgia, Kentucky, Mississippi, North Carolina, and Virginia. TVA is overseen by a Board of Directors with nine members (appointed by the President and confirmed by the U.S. Senate), each of whom serves a staggered five-year term. The Board of Directors sets TVA's wholesale electric power rates without approval by any other regulatory body. TVA provides electricity in an area that is largely free of competition from other electric power providers. This service territory is defined primarily by two provisions of federal law: the "fence," and the "anti-cherrypicking" provision. The fence limits the region in which TVA or distributors of TVA power may provide power. The anti-cherrypicking provision limits the ability of others to use the TVA transmission system for the purpose of serving customers within TVA's service area. From time to time there have been unsuccessful efforts to modify the protection of the anti-cherrypicking provision. Table 1 lists TVA's electric power generation capacity by category. As of 2010, TVA owned 11 coal-fired power generating stations, with a net summer capacity of 14,573 MegaWatts (MW). Units range in size from 107 MW (Johnsonville Units 1-6) to Cumberland Unit 1 at 1,239 MW. TVA operates 92 natural gas-fired combustion turbines with a net summer capacity of about 5,270 MW, mostly co-located at the coal power stations. Five combined cycle units are located at three stand-alone power stations, adding a further 2,143 MW of capacity. TVA also operates three nuclear power stations with six units currently operating with a total net summer capacity of 6,632 MW. TVA is currently completing construction of a second nuclear unit at the Watts Bar station, which will add a further 1,180 MW of net summer capacity. TVA's conventional hydropower system consists of 109 generating units at 28 sites mostly along the Tennessee River, with a total net summer capacity of approximately 4,157 MW. Pumped storage hydropower adds a further 1,653 MW from the Raccoon Mountain facility. TVA also sells hydropower produced by eight U.S. Army Corps of Engineers dams, and four dams owned by Alcoa on the Little Tennessee River. TVA owns very little non-hydro renewable generation itself, opting to rely instead on a "Standard Offer" (SO) for purchasing renewable energy. TVA says the SO "will help support TVA's vision and long-term strategy to emphasize cleaner air and greater energy efficiency." TVA buys various amounts of renewable energy throughout the year, varying generally by season and time of day for fixed rates of 4 to 16 cents per kiloWatt-hour (kWh) of energy produced. Power purchase agreements (PPAs) are available for up to 20 years for projects between 200 kiloWatts and 20 MW in capacity located within the TVA footprint. The SO resulted in four renewable projects with the potential for approximately eight MegaWatts of generating capacity. To connect generating facilities to its customers, TVA's transmission system consists primarily of approximately 15,940 circuit miles of transmission lines operating at the 500 kiloVolt (kV) and 161 kV levels, supported by 498 transmission substations, switchyards, and switching stations. The sale of electric power by the TVA is governed by the Tennessee Valley Authority Act of 1933, which requires electricity rates to cover power system operating costs, debt service, and other costs at rates as low as feasible. The Corporation shall charge rates for power which will produce gross revenues sufficient to provide funds for operation, maintenance, and administration of its power system; payments to States and counties in lieu of taxes; debt service on outstanding bonds, including provision and maintenance of reserve funds and other funds established in connection therewith; payments to the Treasury as a return on the appropriation investment pursuant to subsection (e) hereof; payment to the Treasury of the repayment sums specified in subsection (e) hereof; and such additional margin as the Board may consider desirable for investment in power system assets, retirement of outstanding bonds in advance of maturity, additional reduction of appropriation investment, and other purposes connected with the Corporation's power business having due regard for the primary objectives of the Act, including the objective that power shall be sold at rates as low as are feasible. Most of the power generated by TVA is sold at wholesale rates to electric distribution utilities. Rates for electricity are established by the TVA Board, in accord with the TVA Act. There are 155 distribution companies—municipal utility companies and cooperatives—that resell TVA power to end-use consumers. The municipal utilities make up the largest block of TVA customers. Cooperatives are customer-owned companies, many of which were originally formed to bring electricity to the most remote parts of the TVA region. Municipals and cooperatives represent the wholesale base of TVA's business, accounting for 85% of total revenue. TVA also sells power directly to 50 large industrial customers, and 6 federal government installations, and sells power to 12 utilities outside TVA's service territory. When comparing rates for electricity with electric utilities in other states, it should be noted that these are often the result of a number of local factors. Rates in two neighboring states in a region can differ measurably due to regulatory regime, types and sizes of power generation plants, costs of fuel, infrastructure, local geography, and other factors. TVA provided retail rate data for purposes of comparison with other states, submitting the following summary information for a "residential average effective rate," and a "non-residential average effective rate" (which represent retail residential and commercial rates). Both sets of rates are shown in Table 2 . TVA states that it has a goal to have its overall effective retail rate in the top quartile (with regard to being among electric utilities with the lowest rates) as benchmarked against the top 100 electric utilities by 2020. This is intended to help ensure that TVA's rates are competitive and conducive to its economic development goals. Effective residential rates may be directly compared to residential rates reported to the U.S. Department of Energy's Energy Information Administration (EIA) by electric utilities. Figure 2 shows electric utility residential rates for the period 2000 to 2010 reported from states surrounding TVA's service territory, compared to TVA's reported effective residential rate. As the figure shows, the residential electricity rates for the TVA are lower in the early years of the period than all compared states except Kentucky, and rise to mid-range for the latter years in the period. Given the overlap of TVA's service territory into several states (principally Mississippi, Alabama, and Kentucky), some of the state rates include TVA rates as a component. A similar representation of commercial customer rates from electric utilities is shown in Figure 3 . As shown in the graph, the TVA non-residential average effective rate (e.g., commercial rate) is the lowest band for all compared states for most years in the period. As also directed by the TVA Act, TVA has a role in providing economic and agricultural development, environmental stewardship, and the mission which is closest to electricity provision—technological innovation in the use of electric power. TVA's technology innovation mission comes from Section 10 of the TVA Act: ... the Board is hereby authorized and directed to make studies, experiments, and determinations to promote the wider and better use of electric power for agricultural and domestic use, or for small or local industries, and it may cooperate with State governments, or their subdivisions or agencies, with educational or research institutions, and with cooperatives or other organizations, in the application of electric power to the fuller and better balanced development of the resources of the region. TVA appears to have embraced this mission, with current initiatives including grid modernization and the Smart Grid, energy utilization (focused on technologies that can lead to new and potentially more efficient ways of using electricity in residential, commercial, and industrial settings, and the transportation sector), clean energy (investigating the performance, cost, sustainability, and availability of clean energy technologies), and electric vehicles and support systems. TVA is also preparing for the deployment of four small modular nuclear reactors (SMRs) at its Clinch River site, in connection with the mPower America consortium, which received a U.S. Department of Energy (DOE) cost-sharing award in 2012 for design and licensing. DOE will reimburse TVA for up to 50% of the eligible costs toward licensing the SMRs. Past TVA initiatives in technology innovation have helped with development of synchronous compensators, which can regulate voltage without expensive external capacitors or reactors, and can provide voltage support in the form of reactive power to the transmission grid. TVA also conducts an environmental research program at the TVA Environmental Research Center in Muscle Shoals, AL. The electric power industry in the United States is in a period of transition. The average age of power plants in the United States is now over 30 years, with the average life expectancy of most power plants being about 40 years. As with electric power plants, electric transmission and distribution system components are also aging, with power transformers averaging over 40 years of age, and 70% of transmission lines being 25 years or older. New environmental regulations under development at the U.S. Environmental Protection Agency (EPA) are imposing additional costs, and lower prices for natural gas resulting from new supplies of shale gas are bringing competition with regard to power generation choices. New and proposed EPA regulations would impose new requirements on fossil fuel-fired power plants. Some of these rules would be implemented at the federal level, while others would be implemented at the state level. They include the Cross-State Air Pollution Rule (which replaced the Clean Air Interstate Rule); the Mercury and Air Toxics Standards (MATS) (also known as the Utility Maximum Achievable Control Technology [MACT]) rule to reduce emissions of mercury, other metallic toxics, acid gases, and organic air toxics; proposals to regulate coal combustion residues; and the Clean Water Act Section 316(b) cooling water intake rule. However, only the Utility MACT rule is currently in effect. EPA also proposed standards in April 2012 for greenhouse gas (GHG) emissions which would require all new power plants to meet carbon dioxide emissions standards. President Obama recently announced a new climate change initiative in June 2013 which directed EPA to re-propose GHG emission standards for new electric power plants, and directed the agency to develop GHG standards for existing power plants by June 2015. Electric power generation is responsible for approximately 37% of U.S. domestic carbon dioxide emissions (the primary anthropogenic GHG), and over one-third of all U.S. GHG emissions. While most of these plants are well-maintained, they are generally not as efficient as newer power plants. With electric plant aging and new environmental requirements necessitating investment to continue operations, many utilities are looking at retirement or replacement decisions, especially for older coal plants. TVA is facing the same forces driving change as is the rest of the electric power industry. To plan for the future of its system, TVA was required by the Energy Policy Act of 1992 ( P.L. 102-486 ) to use a least-cost planning process to select energy resources for system use. TVA thus employs the integrated resource plan (IRP) methodology to account for system costs which set the cost of service used as the basis for its electricity rates. The [IRP] will equip TVA to meet its customers' needs effectively while addressing the substantial challenges that face the electric utility industry. The planning direction it recommends will give TVA flexibility to make sound choices amid economic and regulatory uncertainty. This recommended planning direction balances costs, energy efficiency and reliability, environmental responsibility and competitive prices for customers. In the 2011 IRP, TVA states that it expects growth in the demand for electricity in its service territory, but not at the levels in past periods. However, when considering overall growth in demand and the levels of power generation it can expect from its viable generation resources, TVA identified a need for additional resources. TVA listed increasing competition, technological change, fuel costs, and environmental concerns as issues it faces. A primary concern has been the cost of complying with existing and anticipated emissions reduction requirements, which could make continued operation of many of TVA's aging coal-fired generation units not cost-effective, possibly resulting in their removal from service, perhaps permanently. TVA faces challenges related to fluctuating fuel prices and compliance with current and emerging environmental laws and regulations. In order to comply with these laws and regulations, TVA may install clean air equipment on coal-fired units and replace generating capacity of idled coal-fired units with cleaner-emissions nuclear and gas-fired units. Meeting these needs will require significant capital expenditures on TVA's part ... TVA states its goal in the IRP process is to "[c]reate a flexible plan that allows for uncertainty and permits adjustment in response to changed circumstances." The 2011 IRP developed a "recommended planning direction," which TVA has accepted as being consistent with its environmental policy and strategic vision. Among other actions, the IRP anticipates the idling of 2,400 MW to 4,700 MW of coal-fired capacity, replacing it with a variety of sources (as summarized in Table 3 ). TVA's 2011 IRP also plans for the addition of 850 MW of pumped-storage hydropower in the 2020 to 2024 timeframe to "increase reliability and operational flexibility." It should be noted that while the IRP presents a range of options for generating resource development, it does not present a specific commitment or timeline for new generating resources. Table 4 lists TVA's current estimate of costs and its planned expenditures for dealing with current and expected environmental requirements related to its coal-fired power plants. However, with new and proposed environmental requirements for power plants, the long-term costs of meeting these requirements and modernizing TVA's power plants are expected to be much greater. The Obama Administration's 2014 budget projects that the capital costs to fulfill TVA's environmental responsibilities and modernize its aging generation system will likely cause TVA to exceed its $30 billion statutory cap on indebtedness. As of March 2013, TVA recorded provisions for almost $11 billion in regulatory assets, which it regards as "incurred costs that have been deferred because such costs are probable of future recovery in customer rates." They include funds for decommissioning of its nuclear plants, non-nuclear decommissioning, clean-up of the coal ash spill at its Kingston coal plant, and unrealized losses on its commodity and interest rate derivatives. TVA's largest regulatory asset, accounting for over $5 billion of the total amount, is for deferred pension and other post-retirement benefits costs. TVA describes the process for recording regulatory assets, and the probability of recovering these costs (subject to approval by the TVA Board of Directors), as follows: TVA assesses whether the regulatory assets are probable of future recovery by considering factors such as applicable regulatory changes, potential legislation, and changes in technology. Based on these assessments, TVA believes the existing regulatory assets are probable of recovery. This determination reflects the current regulatory and political environment and is subject to change in the future. In the event that accounting rules for rate regulation were no longer applicable, TVA would be required to write off its regulatory assets and liabilities, resulting in charges to net income and other comprehensive income. If TVA is to undergo privatization or some change of its status as a government corporation, it is possible that a write-down or write-off of these regulatory assets will occur, as large deferred regulatory assets and costs present a potential financial risk to any acquiring entity in terms of cost recovery. TVA is required by the TVA Act to be self-supported using funds from the sale of electric power. The TVA Act also authorizes TVA to issue bonds, notes, or other forms of indebtedness up to $30 billion (total outstanding amount) at any one time. These instruments of indebtedness are used to provide financing for construction of power plants and other related capital needs. The Corporation [i.e., TVA] is authorized to issue and sell bonds, notes and other evidences of indebtedness (hereinafter collectively referred to as "bonds") in an amount not exceeding $30,000,000,000 outstanding at any one time to assist in financing its power program and to refund such bonds. The Corporation may, in performing functions authorized by this Act, use the proceeds of such bonds for the construction, acquisition, enlargement, improvement, or replacement of any plant or other facility used or to be used for the generation or transmission of electric power (including the portion of any multiple-purpose structure used or to be used for power generation); as may be required in connection with the lease, lease-purchase, or any contract for the power output of any such plant or other facility; and for other purposes incidental thereto. TVA recognizes the challenge that this limit poses to its plans to comply with environmental requirements and modernize its power plants, and has begun to explore ways to fund these needs. TVA faces challenges related to fluctuating fuel prices and compliance with current and emerging environmental laws and regulations. In order to comply with these laws and regulations, TVA may install clean air equipment on coal-fired units and replace generating capacity of idled coal-fired units with cleaner-emissions nuclear and gas-fired units. Meeting these needs will require significant capital expenditures on TVA's part, but TVA is constrained by the TVA Act which authorizes TVA to issues bonds, notes, or other evidences of indebtedness ("Bonds") in an amount not to exceed $30.0 billion outstanding at any one time. Without a legislative solution, this limitation may require TVA to seek alternative financing arrangements. ... The TVA Act authorizes TVA to issue Bonds in an amount not to exceed $30.0 billion outstanding at any time. Due to this limit on Bonds, TVA may not be able to use Bonds to finance all of the capital investments planned over the next decade. However, TVA believes that other forms of financing not subject to the limit on Bonds, including lease financings (such as the lease-purchase transaction involving the John Sevier [combined cycle facility]), can provide supplementary funding. Also, the impact of energy efficiency and demand response initiatives may reduce generation requirements and thereby reduce capital needs. TVA had revenues of $11.2 billion in FY2012, but had a net income on those revenues of only $60 million, with fuel costs and purchased power being TVA's single largest expense at $3.9 billion, followed by operations and maintenance expense at $3.5 billion. TVA currently has approximately $24.1 billion in indebtedness in outstanding bonds and notes, which counts toward the statutory cap of $30 billion (which has been in place since 1979). TVA's debts are paid solely from TVA's net proceeds for the sale of electricity. TVA's debts are not guaranteed by, nor are they obligations of, the federal government. However, while TVA pays for this debt principally using (non-federally guaranteed) bonds, the federal government still records TVA's debt as part of the federal deficit since it is a federal government corporation. TVA's principal mission is arguably the minimization of flood damage and stewardship of navigation, with the dams on TVA's system being key to this mission. Hydropower may thus be seen as a secondary opportunity arising from the control of the Tennessee River and its tributaries. However, revenues from the sale of electricity are now required to fund TVA water resource programs which were previously funded by federal appropriations and user fees. In 2011, TVA received almost $12 billion from sales of electricity. Multiple purpose dams and reservoirs are designed to balance water flows, taking in water during periods of high flow when rainfall is high to prevent or reduce downstream flooding, and releasing water during periods of low flow. During dry periods, hydroelectric generation may be curtailed to allow reservoirs to fill. The dam and reservoir system must maintain sufficient water volumes to accommodate other water resource needs, including drinking water, navigation, maintenance of fish habitats, and maintaining downstream water quality. The operation of multiple use dams must therefore accommodate several objectives, and releases of water for hydroelectric generation must include these other uses. If the hydropower assets were to be sold to private owners, how the navigation, flood damage mitigation, water quality, recreation, water supply, and land use missions could be safely and legally accomplished would be at question. Maximization of water flows for optimum power generation may not always be consistent with other demands of the river and reservoir system. In its FY2014 budget, the Obama Administration proposed a strategic review of the TVA, concerned that the agency is likely to incur substantial future costs as it seeks to modernize and meet environmental requirements. The strategic review may involve the definition of various options affecting the structure of TVA, and may involve some type of cost vs. benefits analysis of these options. At this time, however, the details and direction of the Administration's review of TVA are not publicly known. The opinion of most TVA stakeholders seems to be in favor of keeping TVA as a federal government corporation, and they would likely oppose any proposal which might result in higher electricity rates. However, implementation of the current or a revised IRP is likely to result in increased electricity rates, even without a change in TVA's status. The Energy Policy Act of 1992 required TVA to institute a least cost planning program, which is manifested in TVA's current IRP process. Under the TVA's 2011 IRP, certain capital expenditures were envisioned requiring TVA to plan for more than $25 billion over the next 10 years in capital investment. This projected level of investment could mean that the agency's $30 billion statutory limit would be quickly exceeded, given that current indebtedness is approximately $24 billion. TVA's own concerns on how to fund the costs of meeting anticipated environmental requirements and modernizing power plants highlighted the issue, with cost reductions, higher rates, creative lease and leaseback agreements, or raising the $30 billion statutory cap on indebtedness suggested as possible solutions. While the potential for a sale of TVA's assets (in whole or part) has been raised, Congress may wish to examine the issue of TVA's indebtedness and investigate whether it should: Raise the statutory limit. This option would allow TVA to fund the projected capital investment plan recommended by the 2011 IRP. The current $30 billion statutory limit has been in place since 1979. An average expected service life for a fossil or nuclear steam power plant is approximately 40 years. Such an option would allow TVA to continue functioning as it does now, but would increase the federal deficit. Another option would be to allow other electricity providers or competition within TVA's service territory, thus reducing the need for new TVA-owned or leased generation resources. A revision to the TVA Act would likely be required. Maintain the current statutory limit. Such an option may require a reduced power generation mission, with strict limits on power plants or related infrastructure built to replace retired units. A new IRP would be focused on a reduced capital investment plan. The TVA Act would likely have to be revised to allow other or competing entities to supply power in TVA's service territory to make up for lost TVA generation. Reduce the statutory limit. Such an option would likely involve a federal plan to restructure TVA's indebtedness, with a goal of either reducing or paying off TVA's indebtedness. Such a plan may ultimately reduce the power generation mission of TVA. Funding of TVA's navigation, flood damage control, and other water resource missions may have to revert to federal government appropriations. The TVA Act would likely have to be revised to allow other or competing entities to supply power in TVA's service territory to make up for lost TVA generation. TVA's electric power mission requires that "power shall be sold at rates as low as are feasible." Largely because of this directive, TVA's electric rates have been among the lower rates for electricity. However, given TVA's projected capital requirements identified by the IRP process, and TVA's statutory limit on indebtedness, Congress may want to consider: Whether to amend the TVA Act, allowing TVA to sell (either in whole or in part) its wholesale power at market-based rates. Such an option may modify the mission to provide power at costs as low as possible, but may reduce the need for TVA to finance some portion of its future power plant construction needs, and thus may reduce TVA indebtedness. The Administration has stated its belief that TVA has achieved its original objectives, and these original objectives no longer require federal participation. However, keeping TVA as a federal government corporation appears to be the preference of most TVA stakeholders. In looking at the issue, Congress may want to: Allow TVA to continue as it does, funding its needs from operating revenues, power program financing, and creative approaches to financing new power plant construction. No change to the current mission of TVA would be made. However, given the ongoing strategic review, some type of administrative determination may be required at some point to ensure that TVA has the means to capably address its projected future cost obligations. Redefine TVA's status and designation as a government corporation. Since TVA debt securities are not obligations of the U.S. government and do not carry a government guarantee, TVA's current indebtedness has arguably little or no real impact on the federal budget. Since no single definition of "government corporation" currently exists, a potential definition of a new "self-sustaining" entity may be designed to remove TVA's indebtedness from the balance sheets of the federal government. New legislation would likely be required. Among other implications, such an approach is likely to increase TVA's financing costs, since any perceived backing of TVA's debt by the federal government would be removed. Consider modifying TVA's missions. For example, TVA's navigation, flood control, and related obligations and funding could be separated from its economic development, power generation, and technology innovation missions, perhaps investing these roles in at least two separate federal corporations. Such an option would likely require legislation to revise or repeal the TVA Act. Examine TVA's diverse missions, and determine itself whether these missions have been accomplished to such an extent that, going forward, federal participation is no longer warranted. Ending the federal role may mean a substantial portion of TVA's debt could be removed from being counted under the federal deficit. Such an option would likely require legislation to revise or repeal the TVA Act. If privatization were to follow, dissolution of TVA as a single entity may ensue. A market-based valuation of TVA's assets would likely be required, with possible write-downs of some of these assets. It is possible that some of TVA's nuclear or fossil power generation may remain under federal ownership or trust, as decommissioning or other obligations related to these plants may inhibit sale at a fair market price or discourage private ownership altogether. If the hydropower assets were to be sold to private owners, how the navigation, flood damage mitigation, water quality, recreation, water supply, and land use missions could be safely and legally accomplished would be at question. Maximization of water flows for optimum power generation may not always be consistent with other demands of the river and reservoir system.

In its budget proposal for FY2014, the Obama Administration proposed a "strategic review" of the Tennessee Valley Authority (TVA), a federal government corporation established by the Tennessee Valley Authority Act (TVA Act) (16 U.S.C. 831) in 1933. The preamble to the TVA Act lists flood control, reforestation, and agricultural and industrial development as primary considerations in the original establishment of the TVA. TVA is now required by the TVA Act to be self-supported using funds from the sale of electric power. The TVA Act authorizes TVA to issue bonds, notes, or other forms of indebtedness up to $30 billion at any one time. These instruments are used to provide financing for construction of power plants and other related capital needs. TVA currently has approximately $24.1 billion in indebtedness in outstanding bonds and notes which counts toward the statutory cap of $30 billion (which has been in place since 1979). TVA's debts are paid solely from TVA's net proceeds for the sale of electricity. TVA's debts are not guaranteed by, nor are they obligations of, the federal government. However, while TVA pays for this debt principally using bonds, the federal government still records TVA's debt as part of the federal deficit since it is a federal government corporation. The electric power industry in the United States is in a period of transition, and TVA is facing the same forces driving change as is the rest of the electric power industry. Primary concerns include fuel cost issues of coal-fired power generation vs. natural gas, and the cost of complying with existing and anticipated environmental requirements, which could make continued operation of many of TVA's aging coal-fired generation units not cost-effective, and perhaps result in their retirement. The Obama Administration's FY2014 budget projects that the capital costs to fulfill TVA's environmental responsibilities and modernize its aging generation system will likely cause TVA to exceed its $30 billion statutory cap on indebtedness. In proposing the strategic review, the Administration says that TVA has achieved its original objectives, and thus no longer requires federal participation. The strategic review may thus consider options for addressing TVA's financial situation and its effect on the federal deficit, with divestiture of TVA (in whole or part) to be considered among the potential alternatives, most of which would require amending the TVA Act. Congress may want to consider various options for TVA, which range from allowing TVA to continue as it does, funding its capital needs from operating revenues and power program financings, to modifying TVA's missions. Congress may also opt to redefine TVA's status and designation as a government corporation. Since TVA debt securities are not obligations of the U.S. government and do not carry a government guarantee, TVA's current indebtedness has arguably little or no real impact on the federal budget. Congress may also wish to examine the issue of TVA's indebtedness and investigate potential options. These may include raising the statutory limit thus allowing TVA to fund the projected investment, examining TVA's capital investment plans and process, investigating ways to reduce TVA's statutory cap with an eye to reducing the impact on the federal deficit, or looking at ways to restructure TVA's indebtedness, with a goal of either reducing or paying off TVA's indebtedness. TVA's principal mission is arguably the minimization of flood damage and stewardship of water resources and navigation, with the dams on TVA's system being key to this mission and power generation arguably being a secondary concern. The operation of multiple use dams must be designed to accommodate several objectives, and releases of water for hydroelectric generation can also contribute to other water uses. Congress may want to consider how the navigation, flood control, and related missions may be safely and legally accomplished under a privatized scenario, since maximization of flows for optimum power generation may not be consistent with other demands of the river and reservoir system.

The Department of Housing and Urban Development (HUD) has provided housing assistance for low-income households through numerous programs. In some programs, HUD provided assistance by entering into financial arrangements with private owners (both for-profit and nonprofit), who in turn developed and continue to own rental housing projects. In exchange for assistance from HUD, owners agreed to provide affordable housing to tenants for a period of time, anywhere from 20 to 50 years depending on the program. These HUD programs are no longer active, but they created hundreds of thousands of units of affordable housing from the late 1950s through the late 1980s, and these units continue to provide affordable housing to nearly 1.4 million families. The affordability terms agreed to by property owners participating in these programs, sometimes referred to as "affordability restrictions," began to come to an end in the 1980s. When the restrictions on these properties end, there is a risk that they will become unaffordable to low- and moderate-income tenants, and that those tenants will be displaced. Efforts to maintain the affordability of the remaining HUD-assisted properties as their affordability restrictions come to an end are often referred to as "assisted housing preservation." This report focuses on assisted housing preservation efforts involving six specific HUD programs, three of which provided financing assistance to private owners through low-interest loans and/or mortgage insurance, and three of which provided rental assistance to owners. These programs were often used in combination with each other, with a property owner receiving both financing assistance and rental assistance. The following financing assistance programs are covered in this report: The Section 202 loan program, active from 1959 to 1990. HUD extended low-interest, direct loans to property owners for durations of 40 or 50 years. The Section 202 loan program helped finance the development of approximately 216,000 units of affordable housing; today, about 145,000 units are in properties that still have active loans. The Section 221(d)(3) BMIR (Below Market Interest Rate) program , active from 1961 to 1968. HUD provided mortgage insurance for low-interest, 40-year loans to private developers. The Section 221(d)(3) BMIR program helped finance the creation of approximately 159,000 units of affordable housing, more than 15,000 of which are in properties that still have active loans insured through the BMIR program. The Section 236 program , active from 1968 to 1974. HUD provided mortgage insurance for 40-year loans along with mortgage subsidy payments to private developers. The Section 236 program helped finance the development of approximately 400,000 units of affordable housing, more than 150,000 of which are in properties that still have active loans insured through the Section 236 program. The following rental-assistance programs are also covered in this report: The Rent Supplement program , active from 1965 to 1973. HUD provided long-term (up to 40 years) rental-assistance contracts to owners of properties with HUD-assisted financing. Most Rent Supplement contracts were converted to Section 8 project-based contracts (described below), although nearly 13,000 units continue to receive Rent Supplement assistance. The Rental Assistance Payment (RAP) program , active in the mid-1970s. HUD provided long-term (up to 40 years) rental-assistance contracts to owners of Section 236 properties. Most RAP contracts have been converted to Section 8 assistance (described below), although nearly 16,000 units continue to receive RAP assistance. The Section 8 project-based program , active from 1974 to 1983. HUD provided long-term (up to 40 years) rental-assistance contracts to owners of newly constructed or substantially rehabilitated properties, as well as existing properties (including Section 202, Section 221(d)(3) BMIR, and Section 236 properties). Roughly 1.2 million units continue to receive Section 8 project-based rental assistance. While other affordable housing programs also face expiring use restrictions, this report focuses on these six programs for several reasons: (1) Many of the property owners are private for-profit organizations that may have interests other than providing affordable housing when their affordability restrictions come to an end. This contrasts with, for example, the Public Housing program, where owners are quasi-governmental entities whose primary purpose is providing affordable housing. (2) The majority of the affordability restrictions in these six programs will come to an end during the next 5-15 years, depending on the program. This contrasts with newer housing production programs, such as the Section 202 Supportive Housing for the Elderly capital grants program, the Section 811 Supportive Housing for Persons with Disabilities program, or Low Income Housing Tax Credits, where affordability restrictions may extend many years into the future. (3) In past years, Congress has enacted laws that attempted to address housing preservation related to many of these six programs. These attempts met with varying success. This report does not address the programs of the Department of Agriculture's Rural Housing Service. Figure 1 illustrates the universe of rental units that were created as part of the six programs discussed in this report. The large circle in the center represents the housing units that receive rental assistance through the Section 8, Rent Supplement, and RAP programs. The circle on the left represents housing units that continue to have active financing through the Section 221(d)(3) BMIR and Section 236 mortgage insurance programs, and the circle on the right represents units that continue to have active financing through the Section 202 loan program. As can be seen in the diagram, the area of overlap between the left and center circles represents Section 221(d)(3) BMIR and Section 236 units that also receive some form of rental assistance, while the overlap between the right and center circles shows Section 202 units that receive some form of rental assistance. See also Table A -1 , in Appendix A , which provides a summary of the properties at issue in assisted housing preservation and their characteristics. This report is divided into six main sections. The first section provides greater detail about the six programs for which housing preservation is an issue. The second section describes how affordability restrictions come to an end. In the case of financing assistance, this can occur through mortgage prepayment or maturation, and in the case of rental assistance, it can occur when contracts expire. And in cases of both financing and rental assistance, properties may become unavailable as affordable housing due to physical deterioration. The second section also discusses what happens to tenants when affordability restrictions end. In the third section, the report describes efforts by both Congress and HUD to extend affordability restrictions in these programs. Some of these efforts have been successful, and some have not. The fourth section discusses preservation priorities—factors that interested parties (owners, tenants, local communities, HUD, Members of Congress) may take into consideration when determining whether a property should be preserved as assisted housing. In the fifth section, the report presents data about the numbers of properties and units of housing involved in the six programs discussed throughout the report. The final section of the report discusses various options regarding how to preserve assisted housing, including current legislation. Additionally, a review and summary of the properties at issue can be found in Appendix A , and a glossary of key terms can be found in Appendix B . Numerous HUD programs have used subsidies to private owners as a way to develop affordable rental housing units. HUD first began to interact with private developers and owners in the early 1960s, largely by providing low-interest loans, and later, Federal Housing Administration (FHA) insurance on mortgages, to developers so that they would have lower debt payments and would in turn be able to charge lower rents to tenants. Units in developments that resulted from these arrangements were considered rent restricted, with property owners agreeing to keep rents at an affordable level. Later, primarily with the creation of Section 8 project-based rental assistance in 1974, the federal government began to pay a portion of tenant rents directly to owners. In some cases, property owners received both financing and rental assistance from HUD. This section of the report discusses six HUD programs through which private owners (both for-profit and nonprofit) received assistance from HUD and for which housing preservation is now a concern. For a number of years during the 1960s and 1970s, HUD subsidized the production of affordable housing through incentives to private developers, including low-interest direct loans and, later, mortgage insurance through the Federal Housing Administration (FHA). The loan and mortgage insurance assistance was meant to lower building owners' costs so that the owners could charge rents that would be affordable to low- and moderate-income families. In exchange for HUD assistance, building owners agreed to maintain their properties' affordability for a period of time—generally anywhere from 20 to 50 years. The primary programs that used these incentives were the Section 202 loan program, the Section 221(d)(3) BMIR program, and the Section 236 program, each named for the section of the housing acts under which they were created. Although most of these units did not initially receive rental assistance, over the years HUD has provided rental assistance for some units to ensure that they are affordable to low-income households. (See discussion under " Rental Assistance " later in this report.) The Section 202 Supportive Housing for the Elderly program, enacted as part of the Housing Act of 1959 (P.L. 86-372), was initially a direct loan program in which the government loaned money to nonprofit organizations to develop affordable housing for elderly households—defined as those with a family member age 62 and older. (For-profit entities were not eligible to participate in the Section 202 loan program.) The Section 202 program operated as a direct loan program until 1990, when the structure of the program changed and HUD began to offer capital grants to developers instead of direct loans. This report focuses on the loan program because the affordability restrictions attached to the properties funded by capital grants will not begin to expire until approximately 2030. The Section 202 loan program had two different phases. From the program's inception until 1974, HUD extended loans with low interest rates (generally 3%) to developers. These pre-1974 loans funded the development of housing for moderate-income, elderly households. Some units were also set aside to serve tenants with disabilities. In exchange for the assistance provided through government loans, building owners agreed to ensure that their units were affordable for 50 years. In 1974, the Housing and Community Development Act ( P.L. 93-383 ) made changes to the Section 202 loan program. The law changed the interest rate charged on government loans from 3% to the U.S. Treasury's cost of borrowing. P.L. 93-383 also made Section 8 project-based rental assistance available to owners so that units would be affordable for low-income tenants. The initial duration of the Section 8 rental-assistance contracts was 20 years. (For more information about Section 8 rental assistance, see the " Section 8 Project-Based Rental Assistance " section of this report.) The income eligibility for tenants in Section 202 housing varies based on the phase at which a Section 202 property was developed. Units developed in the earliest years of the program, prior to 1962, have no income restrictions. Those developed from 1962 to 1974 serve tenants with low incomes—at or below 80% of area median income. In general, those developed after 1974 serve tenants with low- or very-low incomes—at or below 50% of area median income. During the loan phase of the Section 202 program (through the early 1990s), approximately 216,204 units were developed. Currently, the number of Section 202 units with active loans (versus those funded through capital grants) is approximately 144,506. The Section 221(d)(3) Below Market Interest Rate (BMIR) program was enacted as part of the Housing Act of 1961 (P.L. 87-70) in order to provide housing for those families with incomes too high for public housing but too low for market-rate rents. Through the program, private lenders extended FHA-insured loans with interest rates of 3% and durations of up to 40 years to developers of multifamily rental housing projects of at least five units. Lenders then sold the mortgages to the Federal National Mortgage Association (Fannie Mae). The program continued until 1968, when the Section 236 program replaced it as a vehicle for producing multifamily housing for low-income families. Section 221(d)(3) BMIR units are available to households with incomes up to 95% of the area median income. HUD approves a BMIR rent for each property, and that rent is set and adjusted based on the budget for the property, including actual operating costs, debt service, and any allowable dividend. Most residents pay the BMIR rent; however, if, after moving in, a tenant's income increases and exceeds 110% of the BMIR income limit, then the household must pay 110% of the BMIR rent. Some units are subsidized to assist tenants with low incomes through the Rent Supplement Program, though many Rent Supplement subsidies have been converted to Section 8 project-based assistance. The Section 221(d)(3) BMIR program created approximately 159,000 units in 845 properties. Today, there are roughly 15,218 units in 124 properties with active Section 221(d)(3) BMIR financing. The Section 236 program was enacted as part of the Housing and Urban Development Act of 1968 (P.L. 90-448). The program, which was active in providing funds to produce new housing units from 1969 through 1973, provided mortgage insurance to housing developers for the construction and rehabilitation of multifamily housing that would be affordable to low- and moderate-income families. Private nonprofit organizations, limited dividend corporations, and cooperative housing corporations were eligible to participate. In addition to mortgage insurance, the program provided (and continues to provide) mortgage subsidies to building owners through a mechanism called Interest Reduction Payments (IRPs). At the time developers built their housing, they borrowed funds at the market interest rate. The government then provided an IRP subsidy that ensured that owners would only pay a 1% interest rate on their mortgages. The low interest payments were meant to reduce the financing costs paid by owners, which would, in turn, permit owners to pass the savings on to tenants by charging lower, more affordable rents. Contracts between HUD and building owners for IRPs were initially supposed to last 40 years. However, in order to attract developers to the Section 236 program, some contracts enabled owners to prepay their mortgages after 20 years. The Section 236 program serves households with low incomes—those earning 80% or less of the area median income—although owners may admit over-income tenants in certain circumstances. Tenants pay one of two rent levels: basic rent or market rate rent, depending on income. The basic rent is the amount the owners need to support the facilities at a 1% mortgage interest rate. Market rate rent is the amount needed to support the facilities at the mortgage interest rate without the IRPs. Both the basic rent and market rent are set by the property owner based on the budget of the individual property and are subject to HUD's approval. Tenants pay the basic rent or 30% of their income, whichever is higher, but rent cannot exceed the market rate. In addition, some tenants in Section 236 housing have their rents subsidized. HUD initially provided subsidies through either the Rent Supplement or Rental Assistance Payment (RAP) programs, but when Section 8 project-based assistance was introduced in 1974, many of the subsidies were converted to Section 8 assistance. The Section 236 program created approximately 400,000 units of affordable housing in more than 3,600 properties; today, approximately 155,449 units in 1,418 properties continue to be insured through the Section 236 program. As many as 249,000 units continue to receive IRPs; this number is higher than the number of insured units as a result of IRP "decoupling," a process in which owners may prepay their insured mortgages and continue to receive IRPs. The process is discussed later in this report, in the section " IRP Decoupling ." As discussed previously, the early federal housing programs provided financing assistance to private developers of affordable housing with the idea that the reduced capital and/or debt service costs would allow owners to charge low rents that would be affordable to lower-income families. Over time, it became clear that the financing assistance was not sufficient to make rents low enough to be affordable to the poorest families while still maintaining the financial viability of the properties. In order to more deeply target housing assistance to the poorest families while also ensuring that property owners received sufficient rental income to successfully operate their properties, the federal government began providing rental assistance contracts to private property owners for all or a portion of their units. The rental assistance contracts—referred to as project-based rental assistance because the assistance is tied to specific units in a project—permitted tenants to pay a lower, income-based rent, with the federal government making up the difference between a tenant's contribution and the rent for the unit, as set by HUD. With the creation of the Section 8 project-based rental assistance program in the mid-1970s, rental-assistance contracts became the primary form of federal assistance for new affordable multifamily housing developments until the program was ended in the mid-1980s. The Rent Supplement program was enacted as part of the Housing and Urban Development Act of 1965 (P.L. 89-117) to subsidize the rent payments of low-income households living in certain federally assisted properties, including those with Section 221(d)(3) mortgage insurance and Section 202 loans. Under the Rent Supplement program, HUD entered into contracts with building owners to make up the difference between 25% of tenant income (later raised to 30%) and the rent for the unit. Generally, up to 20% of units in a building were eligible for Rent Supplement payments, although the Housing and Urban Development Act of 1969 (P.L. 91-152) made up to 40% of units eligible for subsidy payments if the HUD Secretary determined it was necessary. Rent Supplement contracts were written for the duration of the HUD-insured mortgage. The Rent Supplement program was suspended in 1973 when President Nixon imposed a moratorium on the new construction of subsidized housing (the "Nixon Moratorium"). Most Rent Supplement contracts were converted to Section 8 contracts in the mid-1980s. The main exception was properties that were financed with state funds rather than an FHA-insured mortgage. At its peak, the Rent Supplement program assisted 179,908 units. Between conversions to Section 8 and contract expirations, there are far fewer contracts today. According to HUD, the remaining Rent Supplement contracts are primarily found in state-aided properties. Today, there are about 12,847 Rent Supplement units. In the Housing and Community Development Act of 1974 ( P.L. 93-383 ), Congress created the Rental Assistance Payment (RAP) program. The RAP program was designed to provide additional rental-assistance contracts to Section 236 properties. As with Rent Supplement contracts, RAP contracts were meant to allow property owners to serve lower-income families than they otherwise might be able to serve. Since no new Section 236 commitments were entered into following the Nixon Moratorium, RAP contracts were made available to existing Section 236 properties. RAP contracts were limited to 20% of a property's units (or more at the discretion of the Secretary), and were written for the duration of the FHA-insured mortgage or 40 years, whichever was shorter. As with the Rent Supplement program, most RAP contracts were converted to Section 8 contracts in the mid-1980s. Today, there are about 15,870 RAP units remaining. In addition to creating the Rental Assistance Payment program for existing Section 236 properties, the Housing and Community Development Act of 1974 also created a new program called the Section 8 program. The Section 8 program consisted of three components: new construction, substantial rehabilitation, and existing housing certificates. The first two components were designed to promote the development of new housing, whereas the latter was designed to subsidize rents in the existing housing stock. Later, HUD expanded the use of Section 8 project-based rental assistance by making it available to properties with HUD financing assistance, including those with Section 202 loans and Section 221(d)(3) and Section 236 mortgage insurance. Under the new construction and substantial rehabilitation components of the early Section 8 program, HUD entered into long-term (20- or 40-year) contracts with private property owners who were willing to construct new units or rehabilitate older ones to house low- and very low-income tenants. Owners could be for-profit or nonprofit entities and the contracts could cover all or part of the units in their developments. Some of these new properties were financed with FHA-insured mortgages, some were financed with state-based financing, and some were built without insured or assisted financing. Under the Section 8 program, HUD agreed to make housing assistance payments (HAP) toward each unit covered under the contract for the duration of the contract. Those assistance payments made up the difference between a previously agreed-upon rent and the tenants' required contribution toward rent (initially 25%—later raised to 30%—of their adjusted income). The rents were generally not to exceed 110% of the Fair Market Rent (FMR) established by HUD, although they could go as high as 20% above FMR if the Secretary determined it to be necessary in special circumstances. In order to receive assistance, all assisted units had to be rented to low-income families, and some proportion of the units had to be rented to very low-income families. The existing housing portion of the Section 8 program—also called the Section 8 certificate program—was tenant-based, meaning that the assistance was tied to a tenant rather than a unit. Under the certificate program, HUD would provide the local public housing authorities (PHAs) that own and manage public housing with renewable contracts for a specified number of certificates. PHAs would then award those certificates to eligible families, who could use them to rent the housing of their choice in the private market. HUD would pay the difference between the tenant's contribution toward the rent (30% of family income) and the rent for the unit. The contract rent was generally limited to the HUD-set FMR for the area. The Housing and Community Development Amendments of 1978 ( P.L. 95-557 ) added a moderate rehabilitation component to the Section 8 program. Under Section 8 Moderate Rehabilitation (Mod-Rehab), rental assistance was provided to projects that were in need of repairs costing at least $1,000 per unit to make the housing decent, safe, and sanitary. By the early 1980s, concern about the Section 8 program was growing, particularly about the development of new units under the new construction and substantial rehabilitation portions of the program. The program was perceived as having per-unit costs that were too high and development times that were too slow, which was leading to the accumulation of large amounts of unused funding. Concern was also growing about the implications of project-based assistance models, which resulted in properties with high concentrations of poverty. Also, because contracts were written for such long terms, appropriators had to provide large amounts of budget authority each time they funded a new contract. As the budget deficit grew, many Members of Congress became concerned with the high costs associated with Section 8 new construction and substantial rehabilitation, and these segments of the Section 8 program were repealed in the Housing and Urban-Rural Recovery Act of 1983 ( P.L. 98-181 ). The 1983 act also created a new, tenant-based housing voucher program, similar to the Section 8 existing certificate program. The Section 8 existing program was eventually replaced by the Section 8 Housing Choice Voucher program, which is the largest direct housing assistance program in use today. Several other forms of Section 8 project-based rental assistance, or uses for existing Section 8 project-based rental assistance, were developed following the 1974 act, several of which were targeted to properties that had been constructed with HUD-assisted financing through the Section 202, Section 221(d)(3)BMIR, and Section 236 programs. HUD created the Section 8 Loan Management Set Aside (LMSA) initiative in 1976 as a way to reduce claims on HUD's FHA insurance fund and to reduce the rent burdens on low-income families. Financially troubled FHA-insured properties (including properties with Section 202 loans and Section 221(d)(3) and Section 236 insured financing) were eligible to apply to receive an allocation of Section 8 rental assistance for up to 100% of their units. This allowed tenants to pay income-based rents (up to 100% of FMR, or 120% with prior HUD permission). The federal government paid the difference between the tenant rents and a rent level necessary to help the property avoid a default and subsequent claim on the FHA fund. Rents could be adjusted annually, or more frequently at HUD's option. Adjustments were based on a written request of an owner or on an Annual Adjustment Factor (AAF). Owners would also be paid 80% of their rent for units vacant for up to 60 days. Section 8 contract terms under LMSA were initially five years, renewable in five-year increments. Congress stopped providing funding for LMSA in FY1994. The Housing and Community Development Act of 1987 ( P.L. 100-242 ), as a part of broader preservation proposals, required HUD to provide Section 8 contracts in several additional circumstances. Title I required HUD to facilitate the sale to a third party of FHA-insured properties that HUD had acquired through foreclosure. These properties included those financed through the Section 221(d)(3) BMIR program and the Section 236 program. HUD met the requirement by providing rental-assistance contracts to purchasers through the Section 8 Property Disposition program. In 1995, HUD stopped entering into new Section 8 property disposition contracts and began using Section 8 tenant-based vouchers once properties were sold. Title II of the Housing and Community Development Act authorized the provision of new Section 8 contracts as a part of preservation transactions. Under the Housing Preservation Program , HUD entered into project-based Section 8 contracts with owners of HUD-assisted multifamily properties (including Section 221(d)(3) and Section 236 insured mortgages) at risk of leaving the affordable housing stock as an incentive to owners keep their properties affordable. The program ran from 1987 to 1996; in 1997, Congress discontinued the use of these contracts as a cost-saving measure and the program was terminated in 1998. While HUD does not have authority to enter into new Section 8 project-based rental-assistance contracts, there are roughly 1.2 million Section 8 project-based units still under contract. Of those units, about two-thirds were subsidized through the new construction, substantial rehabilitation, and moderate rehabilitation versions of Section 8. About a quarter were subsidized through the LMSA version, and about half the remaining units were subsidized through the property disposition and preservation versions. The Annual Contributions Contracts between owners and HUD describe how many units in an owner's property are subsidized, as well as how the rent level was set and how rent is to be adjusted. Owners are required to maintain their properties according to HUD-set quality standards, and are required, generally, to contribute to a replacement reserve account. For the most part, HUD has contracted with third parties, referred to as Performance-Based Contract Administrators (PBCAs), to manage Section 8 project-based contracts. As discussed later in this report (" Mark-to-Market and Section 8 Renewal "), when project-based Section 8 contracts expire, the owner can choose to either renew the contract with HUD or leave the program and charge market rents for units. When an owner ends a HAP contract with HUD, the tenants in the building are provided with vouchers designed to allow them to stay in their unit. (See " Implications for Tenants " later in this report.) A variety of circumstances may lead owners to stop providing affordable housing and leave HUD subsidized housing programs. In high-rent areas, owners may decide to pay off their assisted mortgages or choose not to renew a Section 8 rental-assistance contract in order to convert a property to market-rate housing or to sell the building at a profit. In cases where a property has been allowed to deteriorate significantly or the owner has violated the HUD program rules in other ways, HUD may choose to end a contract with an owner. This section details these possibilities. The federal affordability restrictions on assisted housing come to an end when owners prepay their mortgages (if prepayment is an option), when the mortgages mature, or if HUD chooses to terminate its contract with a housing provider. The circumstances under which affordability restrictions may come to an end depend on the program under which the property was developed. Section 236 and Section 221(d)(3) program contracts can come to an end through both mortgage prepayment and mortgage maturation. In both programs, the initial term of the affordability restrictions was to be 40 years, the same as the duration of the mortgages. However, in order to attract property owners to the programs, HUD inserted clauses in many mortgage contracts allowing owners to prepay their mortgages after 20 years without HUD approval. The ability to prepay is limited to for-profit owners; units owned by for-profit owners made up about 62% of the total Section 236 housing stock and 59% of the total Section 221(d)(3) BMIR inventory. Because Section 221(d)(3) and Section 236 properties were funded prior to 1974, owners became eligible to prepay by the mid-1990s. An owner's ability to prepay is also dependent on whether there is a rental-assistance contract attached to all or a portion of the units. Owners with no rental-assistance contracts can prepay the mortgage, at which point tenants receive enhanced Section 8 vouchers that allow them to either stay in their units or move elsewhere. (For more information about enhanced vouchers, see the " Implications for Tenants " section of this report.) Owners with Rent Supplement contracts cannot prepay their mortgages. For owners with Section 8 contracts, rental-assistance payments are to continue through the contract term, at which point the owner can opt out of the Section 8 program. At that point, income-eligible tenants receive enhanced Section 8 vouchers. According to HUD, between 1998 and 2004 approximately 1,409 Section 236 and Section 221(d)(3) BMIR property owners prepaid their mortgages. Section 236 and Section 221(d)(3) owners also can choose to convert units to market-rate housing at the end of the 40-year mortgage term. At that point, if any Rent Supplement contract is still in place, it will be terminated. Section 8 contracts continue until their expiration, at which point tenants receive enhanced vouchers. If units are not rent assisted, then tenants do not receive Section 8 vouchers upon mortgage maturation. Although Section 202 owners may prepay their loans under certain circumstances, in general, prepayment does not result in the end of affordability restrictions. As part of an FY1984 supplemental appropriations act ( P.L. 98-181 ), Section 202 owners were given the option of prepaying their loans with HUD permission. However, under the law's provisions, owners are required to continue to operate the property through the date of the original loan under terms at least as advantageous to tenants as those under the original loan. The American Homeownership and Economic Opportunity Act of 2000 ( P.L. 106-569 ) added that, if there is a rental-assistance contract in place, the property owner must continue to operate under the terms required by the rental-assistance contract through loan maturity. Then, in 2010 the Section 202 Supportive Housing for the Elderly Act ( S. 118 ) provided that HUD would approve prepayment of existing Section 202 loans if owners agreed to maintain affordability under the terms of the original loan or existing project-based rental assistance contract for 20 years beyond the date of the original loan's maturation. While most Section 202 owners may only prepay their loans with HUD permission, there is an exception for some properties that were financed between 1977 and 1982 where owners had written into the contract the right to prepay their loans without permission from HUD. However, because most Section 202 units financed during this time period also received Section 8 assistance, prepayment does not necessarily mean an end to tenant assistance because Section 8 rental-assistance contracts continue in place until contract expiration. If units have Rent Supplement contracts, those contracts terminate at the time of prepayment and tenants receive regular Section 8 vouchers. If owners with the right to prepay without notice choose instead to follow HUD guidelines and give notice of intent to prepay, then the Rent Supplement and Section 8 contracts continue in place. Section 202 units may also convert to market-rate housing when the loans reach the end of the 40- or 50-year maturation period. As with the Section 236 and Section 221(d)(3) programs, if any Rent Supplement contract is in place, it will be terminated at the end of the loan. Section 8 contracts continue until their expiration, at which point tenants receive enhanced vouchers if owners choose not to renew. If units are not rent assisted, then tenants do not receive Section 8 vouchers upon mortgage maturation. When Section 8 project-based housing assistance payment (HAP) contracts expire, the property owner can, generally, either renew the contract with HUD or leave the program. If the owner chooses not to renew the contract, and faces no further restrictions on the property, the owner can choose to charge whatever rent the market will bear, or sell or convert the property to another use. As discussed later in this report, a number of factors can influence a property owner's decision to either stay in the Section 8 program or to leave, such as the state of the housing market, other available options, and the mission/profit orientation of the owner. However, if the property is in poor condition, then the owner may not have the option to renew the contract, as HUD may choose not to renew. When a HAP contract with HUD ends, the tenants in the building are provided with some form of voucher designed to either allow them to stay in their unit or move to a new home. According to a HUD analysis, from 1998-2004, owners of over 11,000 properties (nearly 800,000 units) chose to renew their Section 8 contracts and owners of 1,363 properties (nearly 80,000 units) chose to opt-out of their Section 8 contract. Another 1,367 properties (almost 110,000 units) had been foreclosed upon or enforcement action had been taken. Unlike Section 8 project-based rental assistance, HUD has no authority to renew RAP and Rent Supplement contracts when they expire. These contracts generally expire at the same time that the assisted mortgages mature. Upon expiration, tenants being assisted under RAP contracts are not eligible for tenant protection vouchers; tenants being assisted under Rent Supplement contracts are eligible for tenant protection vouchers, and in some cases, enhanced vouchers. Another way that properties can leave the assisted housing stock is when HUD chooses to sever the contract with a troubled property or through an owner's default on an FHA-insured mortgage or HUD loan. HUD regularly assesses both the physical and financial health of the multifamily insured and assisted housing stock through its Real Estate Assessment Center (REAC). As a condition of receiving mortgage assistance, rental assistance, or both, property owners agree to maintain their properties according to both local building codes and HUD's Uniform Physical Condition Standards (UPCS). If owners fail to maintain their properties, HUD can find them in default of their contracts. Properties are periodically inspected to ensure that they comply with the UPCS. Based on the findings of those inspections, each property is assigned a numeric score. Any score below 60 is considered at risk, and these properties are referred to the Departmental Enforcement Center (DEC). Once a property has been referred to the DEC, the owner meets with the DEC staff and then has 60 days to make repairs necessary to raise the score above the failing point. If the owner cannot or will not repair the property within 60 days, then HUD will find the property in default of its assistance contract. When a property defaults on its contract, HUD has a number of options. In the case of a project-based rental-assistance property, HUD can choose to abate, or end, the Section 8 contract and issue vouchers to the tenants. In the case of a property with an assisted mortgage, HUD can choose to pursue foreclosure of the property and take ownership. HUD can also encourage the owner to pursue a transfer of the property to another owner. Federal regulations give HUD broad flexibility to use its discretion in these cases. According to HUD's FY2009 Performance and Accountability Report, 93.3% of privately owned, HUD-insured properties met HUD's physical condition standards in FY2009. While the majority of the stock passed inspection, some units among those that failed were found to have multiple exigent health and safety concerns. HUD can also choose to take action against a property owner for financial reasons. All owners of HUD-insured, HUD-held, and assisted properties must submit annual financial statement and audit information to REAC. REAC reviews the statements to determine the financial health of properties in their various portfolios, protect the Department from financial loss (through claims on the FHA insurance fund), ensure proper use of revenues and federal subsidies, and assess owner compliance with Business Agreements (e.g., use restrictions, Housing Assistance Payment Contracts, etc.). If an owner is found to be improperly managing its federal funds in the program, then HUD can find the owner in default of the assistance contract and take action against the owner. That action could include financial penalties, but could also lead HUD to terminate the assistance contract. Again, HUD has broad discretion in determining how to handle properties with financial irregularities. According to HUD's FY2009 Performance and Accountability Report, 98.6% of multifamily assisted and/or insured properties had no compliance issues or audit findings, or had any such issues or findings resolved by the end of the fiscal year. From 1998 through 2004, according to HUD, 2,385 properties with 182,945 units had left the assisted housing stock as a result of HUD enforcement action or foreclosure. In some cases, when an affordability restriction on a HUD-assisted property ends, low-income tenants may receive a rent subsidy to help protect them from rent increases or allow them to move to a new unit and pay an affordable rent. These rent subsidies are provided in the form of Section 8 Housing Choice Vouchers. Families receiving Section 8 vouchers generally pay 30% of their income toward their rent for the unit of their choice in the private market, and HUD makes up the difference between the tenant's payment and rent for the unit. Vouchers are portable, which means if a family chooses to move, they can take their voucher subsidy with them. When vouchers are provided to families who are losing other forms of HUD-assisted housing (such as when affordability restrictions end), they are referred to as tenant protection vouchers. One difference between tenant protection vouchers and regular Section 8 vouchers is that families who receive tenant protection vouchers must pay at least as much rent as they were paying under their previous assistance program, even if it exceeds 30% of their income. Some tenant protection vouchers, called enhanced vouchers, have special features that allow them to increase to values higher than normally allowed in the voucher program in order to allow families to remain in their units as rents increase. Tenant protection vouchers are generally provided to families who are losing their assistance as a result of HUD enforcement and property disposition actions (through foreclosure or abatement of a Section 8 contract) and when certain Rent Supplement contracts end (where there is not also a Section 8 project-based contract in place). Enhanced vouchers are generally provided to families who are losing their assistance because an owner decided to opt-out of renewing a project-based Section 8 rental-assistance contract. Enhanced vouchers are also provided to tenants in certain properties when owners prepay their assisted mortgages. Generally, tenants in properties with mortgages that can be prepaid without prior HUD approval are eligible to receive enhanced voucher assistance. When enhanced vouchers are issued following a prepayment, all eligible families receive a voucher, not just those who were receiving assistance prior to the prepayment. In order to be eligible, families must be low income, or have moderate incomes if they are elderly or disabled, or must live in a low-vacancy area. Enhanced vouchers lose their enhanced nature and convert to regular vouchers when and if a family moves from its original property. In some cases, families do not receive tenant protection or enhanced vouchers when affordability agreements end. Families who live in properties where the affordability agreement would be terminated upon mortgage prepayment, and prior HUD approval to prepay is required, would not generally receive tenant protection or enhanced vouchers upon mortgage prepayment. The types of properties that fit this category include those with nonprofit owners, those with certain limited-dividend owners, and those with certain for-profit owners, including those with Rent Supplement contracts and those with other assistance. Additionally, families living in properties with maturing mortgages without Section 8 assistance and tenants with assistance through the old Rental Assistance Payment (RAP) program do not currently receive either tenant protection or enhanced vouchers. By the mid-1980s, Congress and HUD had become concerned about the potential loss of hundreds of thousands of units of privately owned, assisted housing serving low-income families. Under the direction of Congress and HUD, a "National Housing Preservation Task Force" was convened. The Task Force's final report, issued in 1987, identified four primary threats to the inventory: expiration of rental-assistance contracts, maturation of secondary financing, an aging housing supply with limited incentives for owners to maintain properties, and owners becoming eligible to prepay. Of the more than 2 million units in the assisted housing inventory at the time, the Task Force identified 645,000 as being the most vulnerable to loss. In response to these concerns about the loss of the assisted housing inventory, Congress enacted several laws that gave private owners of HUD-assisted housing incentives to maintain the affordability of their properties. One of these laws, the Multifamily Assisted Housing Reform and Accountability Act ( P.L. 105-65 ) is currently in effect and addresses the renewal of Section 8 contracts between HUD and property owners. Two other laws, neither of which are currently in effect, addressed mortgage prepayments by private owners. These are the Emergency Low-Income Housing Preservation Act ( P.L. 100-242 ) and the Low-Income Housing Preservation and Resident Homeownership Act ( P.L. 101-625 ). While these laws are no longer in effect, the properties that went through their preservation processes are still governed by the agreements that were established at the time. This section describes these laws and their current status. Congress initially attempted to address mortgage prepayments and the loss of affordable housing units by enacting Title II of the Housing and Community Development Act of 1987 ( P.L. 100-242 ), the Emergency Low-Income Housing Preservation Act (ELIHPA). The law prevented owners from prepaying their mortgages in many circumstances, and was described by some as a moratorium on mortgage prepayment. ELIHPA was designed to be a temporary measure, and intended to give Congress time to develop a permanent plan for addressing prepayments. The ELIHPA restrictions applied to owners of properties insured under the Section 236 program, to owners of Section 221(d)(3) market rate properties that also received rental assistance through Section 8 or the Rent Supplement program, owners of Section 221(d)(3) BMIR projects, and those properties held by the HUD Secretary and formerly insured under one of these programs. The law required owners to obtain HUD approval prior to prepayment, even in cases where the mortgage contract allowed prepayment without HUD approval. Owners that wished to prepay their mortgages were required to submit to HUD a notice of intent to prepay, together with a plan explaining their proposed changes to the mortgage, the low-income affordability restrictions, and ownership of the building. The plan was also to include an assessment of how prepayment and other actions would affect existing tenants and how they would affect the general availability of affordable housing in the community. HUD was to allow the prepayment of the mortgage, along with the termination of affordability restrictions, only if certain conditions were met. In cases where comparable affordable housing was not available for current tenants, the plan could not, without good cause, "materially increase economic hardship" or displace current tenants who wanted to stay. The prepayment could not affect the supply of decent, safe, and sanitary housing that was affordable for low- and very low-income families in the area, the ability of families to find housing near employment, or the housing opportunities for minorities in the community. Alternatively (if a plan did not meet this requirement), a state and local jurisdiction could approve the plan as being in accordance with the state plan developed pursuant to ELIHPA. For owners who wanted to maintain affordability or could not meet prepayment requirements, ELIHPA gave HUD the authority to offer incentives to owners to maintain affordability. Among the incentives were an increase in the return that owners could receive on their investment; increased access to residual receipts accounts or project reserves; additional Section 8 assistance or increases in Section 8 rents for units with existing contracts; and capital improvement loans. Owners that accepted incentives agreed to continue providing affordable housing for the period of time covered by the original mortgage—generally an additional 20 years. ELIHPA's provisions were originally slated to sunset two years after enactment (on February 5, 1990), however, the law was extended by Congress through November 1990, when it was superseded by the Low-Income Housing Preservation and Resident Homeownership Act (described below). However, owners that entered into preservation agreements with HUD under the terms of ELIHPA were bound by the terms of those agreements. In 1990, Title VI of the Cranston-Gonzalez National Affordable Housing Act ( P.L. 101-625 ), the Low-Income Housing Preservation and Resident Homeownership Act (LIHPRHA), replaced the temporary ELIHPA law with what was intended to be a permanent preservation program. The new program covered the same types of housing developments and, like ELIHPA, limited the occasions on which owners could prepay their mortgages and terminate affordability restrictions, and it also provided incentives for building owners to offer affordable housing. However, LIHPRHA differed from ELIHPA by providing owners with a third potential option: selling their properties to qualified purchasers under certain circumstances. Regardless of the option an owner selected, LIHPRHA—similar to ELIHPA—instituted requirements that owners notify HUD, state or local governments, and residents of their intent. Both laws also developed tenant protections for residents whose properties were prepaid or (in the case of LIHPRHA) sold, in the form of Section 8 vouchers. LIHPRHA was similar to ELIHPA in limiting the ability of owners to prepay their mortgages and terminate affordability restrictions. As with ELIHPA, HUD could only permit owners to prepay if HUD determined that the prepayment would not materially increase economic hardship or displace current tenants without good cause, and would not affect the supply of housing for low-income and very low-income households, housing near employment, and housing for minorities. Owners wishing to prepay were required, as they were in ELIHPA, to file a notice of intent to prepay with HUD and to certify that the aforementioned conditions were met. If owners prepaid their mortgages, tenants could remain in the housing at the same rental rates for three years, and if tenants moved, the owners were responsible for paying half of the moving costs. If owners did not meet these conditions for prepayment, one of three scenarios could occur. An owner could (1) maintain affordability, assisted by incentives from HUD, generally in the form of higher rents; (2) sell the property to a qualified purchaser who would maintain affordability; or (3) prepay the mortgage and convert units to market rate housing, though this was only allowed in a limited number of circumstances—such as when HUD approved a plan for preservation incentives but did not provide them or when no qualified purchaser could be found. For owners that chose to stay in the program and maintain their properties as affordable housing—either because they were not permitted to prepay, or because they wanted to remain in the program—LIHPRHA modified the preservation incentives under ELIHPA. The ELIHPA preservation incentives included Section 8 rental assistance, rent increases paid by tenants, HUD-insured loans for equity take-outs, and grants and deferred-payment loans for capital improvements. Under LIHPRHA, some preservation incentives were expanded: the value of Section 8 rents increased to 120% of FMR (from 100% under ELIHPA), and families eligible to receive Section 8 assistance expanded to those at 80% of area median income (up from those at 50% under ELIHPA). However, LIHPRHA limited the amount of assistance that could be provided to a property in other ways. The amount of annual returns an owner could realize was limited to 8% of equity (from no specified limit under ELIHPA), access to residual receipts was limited (there were no restrictions under ELIHPA), and loan limits for owners who stayed in the program were reduced. LIHPRHA created a third option for property owners: sale to a qualified purchaser—a buyer that would maintain the affordability of the property. This option could occur in situations where owners were not permitted to prepay, where they were unable to receive sufficient preservation incentive funding to stay in, or where they wanted to sell their properties. Owners wishing to pursue this option were also required to submit a notice of intent to HUD. There were a number of ways in which a sale could occur. (1) In the first six months, owners were required to attempt to find a "priority purchaser" that was either a resident council or community-based nonprofit organization that had the support of the majority of tenants. (2) If no buyer could be found during the first six-month period, during the subsequent six months the owner could sell to any priority purchaser, including nonprofits or state and local housing agencies. (3) If a priority purchaser could not be found, owners could sell to "qualified purchasers"—for-profit entities that agreed to continue providing affordable housing. (4) If an owner could not find a qualified purchaser after three additional months had elapsed, the owner could decide to stay in as the owner of the property and accept incentives, or the owner could sell the building and convert units to market rate rent. In all sales, LIHPRHA authorized HUD to provide purchasers with rental incentives similar to those received by owners that retained the property. By the mid-1990s, concern was growing among housing advocates, HUD, and Congress about the cost of HUD's preservation efforts. Under ELIHPA and LIHPRHA, 751 properties with more than 90,000 units had completed plans of action (POAs) and received preservation funding through FY1996. According to GAO testimony in 1995, the average cost to preserve a unit of housing was about $19,000, and a GAO survey of 40 properties found that HUD preservation funding exceeded the value of the properties in more than half of the cases. In addition to concerns about cost, LIHPRHA presented legal issues. Some property owners contested the provisions of both ELIHPA and LIHPRHA, arguing both that the laws violated the contracts under which the owners had agreed to participate in the program, and that the laws constituted a taking of private property by the government. The lawsuits contesting ELIHPA and LIHPRHA have had varying outcomes. Some have been settled; according to HUD, three cases have been settled and payments of $35 million, $2 million, and $1.25 million have or will be made. Some cases have been decided in favor of owners and some cases continue to be litigated. In the FY1996 HUD appropriations law, Congress reinstated the right of owners to prepay their mortgages without prior HUD permission, effectively overriding the central provision of LIHPRHA. In the FY1997 appropriations laws, Congress imposed caps on the amount of funding HUD could provide in preservation incentives for owners undergoing LIHPRHA preservation transactions. In FY1998, Congress stopped providing funding to HUD for preservation incentives to owners under LIHPRHA, effectively ending the LIHPRHA program. When Section 236 owners initially began prepaying their mortgages, the prepayment also brought an end to the interest reduction payments (IRPs). HUD paid IRPs to owners of Section 236 properties to ensure that the effective interest rate on the mortgage was 1%. However, as part of the FY2000 HUD Appropriations Act ( P.L. 106-74 ), Congress implemented a process known as "IRP decoupling," through which Section 236 owners may prepay their mortgages but continue to receive IRPs. Owners must agree to maintain the affordability of the property for five years beyond the time period in which they receive the IRPs. Owners may continue to receive IRPs either through the balance of the term of the original Section 236 mortgage or longer if the owner requests it; however, if the term of IRPs is lengthened, then the amount of each IRP is reduced. By the late 1970s, some assisted housing properties were facing financial distress and risking default on their HUD-assisted financing. If the properties defaulted, the federal government would face financial losses through FHA as well as the loss of affordable housing units. In response, Congress created a new Operating Assistance for Troubled Multifamily Housing Properties program as part of the Housing and Community Development Amendments of 1978 ( P.L. 95-557 ). The program was designed to "restore or maintain the financial soundness, assist in the improvement of the management, and to maintain the low- to moderate-income character" of certain assisted multifamily housing properties. The assistance was later expanded to include loans for capital improvements. Initially, projects assisted under the Section 236 IRP program, the Section 221(d)(3) BMIR program, and the Rent Supplement program were eligible to receive the assistance. Later, Congress expanded eligibility to certain Section 8 properties (those that were converted from RAP or Rent Supplement) and Section 202 properties, among others. While the program was initially funded with appropriations, a revolving fund—the Flexible Subsidy Fund—was established later to provide assistance. This fund consisted of Section 236 excess residual receipts, as well as proceeds from loan repayments and interest. HUD provided Flexible Subsidy assistance through two programs. The Operating Assistance Program (OAP) provided temporary funding to replenish project reserves, cover operating costs, and pay for limited physical improvements. The assistance was provided as a non-amortizing "contingent loan" that could be repaid with excess residual receipts or upon the sale of the property. The Capital Improvement Loan Program (CILP) provided assistance intended to cover the cost of major capital improvements that could not be accomplished with program reserves. The assistance was provided in the form of amortizing loans, generally with an interest rate of 6%. Properties that received Flexible Subsidy assistance were required to maintain affordability for the life of their original mortgage. New obligation authority for Flexible Subsidy assistance was last provided in FY1995. According to HUD, the Flexible Subsidy program was no longer needed after Congress created the authority for assistance through the Multifamily Assisted Housing Reform and Accountability Act (described in the next section of this report). Both ELIHPA and LIHPRHA were primarily focused on the stock of housing eligible for mortgage prepayment; neither law addressed another threat to the assisted housing stock identified in the 1987 Preservation Task Force report: the cost of renewing project-based rental-assistance contracts. Most Section 8 contracts—which were originated between 1974 and 1983—had terms of 20 years and were funded with up-front appropriations. By the mid-1990s, the contracts had begun expiring. Renewing the contracts would require new budget authority, for which Congress would have to provide new appropriations. In a tight budget environment, there was a concern that the cost of renewing Section 8 contracts could take up an expanding share of the HUD budget, leading to less funding for other priorities. Not renewing the contracts would save money, but it would mean that low-income families would lose their housing assistance. Further complicating matters, many of these properties were FHA-insured and many were receiving above-market rents. If the owners faced a drop in rent as a result of the loss of assistance, they could end up in default on their loans and the federal government—through the FHA insurance fund—would face a financial loss. Congress also discovered that many of these FHA-insured and rent-assisted properties were financially or physically distressed, including a number that were being mismanaged. The policy problem facing Congress was how to restructure the program in a way that would be beneficial to the families living in these properties, cost-saving for the federal government, and attractive to project owners. Ultimately, Congress designed a restructuring program that reduced the federal subsidies to owners of properties insured by FHA, lowered the above-market rents payable to these owners, and restructured the mortgages of properties so that owners could operate effectively on less income. This restructuring plan—referred to as Mark-to-Market—was created by the Multifamily Assisted Housing Reform and Affordability Act. It was passed by Congress as Title V of the VA-HUD Appropriations Act for FY1998 ( P.L. 105-65 ). The act was signed into law on October 27, 1997, and it expired on September 30, 2001. The program was reauthorized through a series of continuing resolutions until January 10, 2002, when it was amended and reauthorized through FY2006 under Title VI of the Labor, Health and Human Services, Education, and Related Agencies Appropriations Act for FY2002 ( P.L. 107-116 ). Section 21043 of the Revised Continuing Appropriations Resolution, 2007 ( P.L. 110-5 ) extended the authorization through October 1, 2011. Ultimately, at the end of a Section 8 contract an owner has two options: renew the contract, or opt out of renewing the contract. Under the terms of MAHRA, as implemented by HUD, owners wishing to renew their Section 8 contracts face different renewal procedures depending on the circumstances of the property. Those circumstances include the original subsidy type, the type of property owner, the property's rents relative to market, and the financial state of the property. The owner generally has six options: renew at existing rents (if rents are at market), be referred for renewal through a full Mark-to-Market restructuring (if rents are above market), renew at higher rents (if rents are below market), renew subject to special rules (if exempted from restructuring), renew based on terms of earlier preservation initiatives, or opt-out of the program by not renewing. These processes are detailed in the Section 8 Renewal Policy Guidebook, and are generally summarized below. The Mark-to-Market restructuring process is targeted to FHA-insured properties owned by for-profit owners receiving above-market rents. Owners of such properties with contracts up for renewal are referred to the Office of Affordable Housing Programs at HUD to be evaluated for Mark-to-Market eligibility. The Mark-to-Market process is designed to reduce rents to market rates. Owners participating in Mark-to-Market have two options: they can either accept the reduced rents and renew for a one-year term (referred to as Mark-to-Market "lite"); or they can accept the reduced rents and have their outstanding debt restructured (referred to as "full"). In a Mark-to-Market full restructuring, the owner's debt and income is renegotiated so that the income the owner receives is sufficient to cover rehabilitation needs, operating expenses, and reserve replenishment. This is accomplished through a full or partial payment of claim from the FHA insurance fund. The lower mortgage debt level can then be supported with lower rents. Mark-to-Market full renewals are subject to 30-year affordability restrictions, meaning that the owner must commit to maintain the property under a project-based contract (subject to the availability of appropriations) for 30 years. Owners undergoing a Mark-to-Market "lite" transaction are not subject to long-term affordability agreements. The new rents are adjusted each year using Annual Adjustment Factors (AAFs) published by HUD. According to HUD, as of January 21, 2010, over 2,000 Section 8 properties had gone through full Mark-to-Market mortgage restructurings, and almost 800 properties had been through Market-to-Market "lite" transactions. Mark-up-to-Market was created in 1999 to provide an incentive for owners of below-market properties in strong markets to renew their contracts at market-comparable rents. In order to be eligible, properties must be owned by for-profit or limited-distribution owners, they must be in good physical condition, and if the property has an affordability restriction, the owner must be able to terminate it without prior HUD permission. In exchange for higher rents, owners that choose to go through Mark-up-to-Market renewals must agree to contract terms of at least five years. During that time, rents are adjusted each year using HUD's published AAFs. Some properties are not eligible for Mark-to-Market or Mark-up-to-Market, even if their rents are above or below market. These properties include properties that are owned by nonprofits, that were financed with state or local funding in lieu of FHA mortgage insurance, that have Section 202 or rural housing loans (unless it was refinanced with an FHA-insured mortgage), that participate in the Section 8 Moderate Rehabilitation Single Room Occupancy program, or that otherwise do not have an FHA-insured mortgage. Exception projects are renewed at rents that are the lesser of current rents plus the local Operating Cost Adjustment Factors (OCAFs) established by HUD, or the rent level needed to meet operating expenses. If the owner signs a multiyear contract, the rents can be set either via OCAF or based on the needs of their budget (referred to as budget-based rent increases). Some properties have rents at market levels or have rents below market but the owners choose not to participate in Mark-up-to-Market. In these cases, owners can submit a Rent Comparability Study (RCS) and have their rents renewed at their current level, plus an OCAF adjustment or a budget-based rent increase. Unlike in Mark-up-to-Market cases, owners renewing under this option are not required to commit to five-year renewals or use agreements. If an owner chooses not to renew an expiring Section 8 contract, he or she is considered to be "opting-out." Owners who opt out are subject to federal notification requirements and must notify tenants and HUD at least one year before the end of the contract of their intention to renew or not renew. Then, four months before contract termination, owners must formally notify HUD in writing if they are going to renew or opt out. As noted earlier, tenants living in properties whose owners "opt out" are eligible for enhanced vouchers (see " Implications for Tenants " earlier in this report). Enhanced vouchers are tenant-based Section 8 vouchers with special attributes. Their values can increase to the gross rent for the unit, as long as it is reasonable, even if it exceeds local standards. Families must continue to contribute at least as much toward rent as they were before they received their voucher, even if it was above 30% of their income. And tenants who receive enhanced vouchers have the right to remain in their units as long as the units continue to be offered as rental housing, and as long as the tenants are in compliance with their leases (and state and local law). In recent years, Congress has adopted two new preservation policies through the annual appropriations process, beginning with the FY2006 HUD appropriations law ( P.L. 109-115 ). The first addresses HUD's treatment of HUD-owned or managed properties with Section 8 project-based rental assistance contracts. Section 311 of P.L. 109-115 required HUD, to the extent feasible, to maintain Section 8 project-based rental assistance contracts when managing or disposing of multifamily properties owned or held by the Secretary as a result of foreclosure. Prior practice had often been to terminate Section 8 project-based contracts and replace the assistance with vouchers. In cases where the Secretary determined that continued rental assistance payments for the existing property were not feasible, the provision permitted HUD to transfer the rental assistance to another multifamily property or replace it with vouchers. The second policy permits HUD to approve the transfer of rental assistance contracts and use restrictions from one property to another under certain circumstances. Section 318 of P.L. 109-115 authorized the Secretary to approve the transfer of mortgage debt, project-based rental assistance, and use restrictions from one HUD-assisted multifamily housing property to another property in cases where the transferring property is either physically obsolete or economically nonviable. In order to approve the transfer, among other requirements, the receiving project must exceed physical standards and the Secretary must determine that the transfer is in the best interests of the tenants. Because these authorities were provided through an appropriations act, they expire at the end of the fiscal year unless they are renewed. The FY2007 year-long continuing resolution ( P.L. 110-5 ) extended the two preservation-related provisions through FY2007, and the FY2008 appropriations law ( P.L. 110-161 , Sections 220 and 215) made changes to the transfer authority and extended both provisions through the end of FY2008. The authorities have subsequently been extended in FY2009 and FY2010. According to HUD, as of March 2010, the transfer authority has been used less than a dozen times since it was created in 2006. The American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5 ) provided $250 million to fund retrofit investments in HUD-assisted multifamily properties that will reduce ongoing utility consumption, benefit resident health, and/or benefit the environment. HUD used the funding to create the Green Retrofit Program (GRP). Through GRP, HUD provided competitive grants and loans to owners of properties assisted through the Section 8 project-based rental assistance program, as well as the Section 202 and 811 programs. Owners receiving GRP funds are required to extend their affordability agreements for an additional 15 years. Discussions around the issue of affordable housing preservation assume that properties are at risk of being lost to the affordable housing stock, whether through mortgage prepayment, expiring contracts, or the financial or physical health of the property, unless there is some kind of intervention. However, not all properties present the same level or type of risk, and situations vary based on numerous factors, including existing subsidy structures, the condition of the property, the type of ownership, and the property location. For example, some assisted properties may not be at risk of being lost to the affordable housing stock at all. Mission-oriented owners of properties in good financial and physical condition may be likely to extend affordability agreements and may have little motivation to convert their properties to another use. In other cases, assisted properties may not be immediately at risk, but they may be in the future. For example, some properties have owners who would like to use the property for other purposes, but they are bound by extended affordability agreements. Other owners may wish to leave the affordable housing business, but cannot find a purchaser willing to pay the asking price for the property or commit to the long-term affordability agreements. Other owners may wish to sell, but they face economic disincentives, such as large capital gains taxes. Some properties are more immediately at risk. Where properties face financial or physical distress, the owner may wish to maintain the property as affordable housing, but the income and subsidy structure may render the property unsustainable. And some properties are at risk because the owners have other, more desirable options at the end of their affordability restrictions. For example, a for-profit owner may have the option to profit from higher rents at the end of the affordability restriction. Or a mission-oriented owner, such as a church, may decide that it would rather use its property for another mission-related purpose, such as a school or other facility, at the end of the affordability restriction. In these various circumstances, different interventions may be necessary to preserve the properties as affordable housing, and those interventions could be costly. Given limits to federal resources, priorities may need to be established when determining whether and how to preserve affordable housing. The next section of the report discusses some of these priorities. An initial question in discussing preservation is whether the government should intervene to maintain federally assisted housing beyond its original contract term at all. The modes of subsidy that led to the creation of these properties—subsidized multifamily mortgages and project-based rental-assistance contracts—have been replaced with different models of assistance, such as the Section 8 tenant-based voucher program and the Low-Income Housing Tax Credit. The original HUD subsidy programs were ended, in part, because of their perceived limitations, particularly their high costs and concerns that they concentrated poverty. Today, Section 8 housing vouchers have become the primary form of deeply targeted housing assistance; there have even been proposals to replace the stock of federally assisted housing with vouchers. Vouchers are considered less expensive than project-based assistance and provide families with mobility and housing choices. However, the voucher program has its limitations. Landlords are not required to accept vouchers, and for some populations, especially persons who are elderly or have disabilities, accessible housing may not be available in the private market. These critiques of the voucher program are used to support calls for the preservation and development of project-based housing assistance. With few exceptions, no statutory authority exists to create new, deeply targeted HUD-assisted housing. The Low-Income Housing Tax Credit, and, to a lesser degree, the HOME Investment Partnerships Block Grant program, help to fund the creation of new affordable housing developments; however, they are not as deeply subsidized as the older, HUD rent-assisted properties. Given the limited funding and authority for developing new, deeply subsidized housing, the stock of federally assisted housing is currently irreplaceable. Further, in many cases, it would be more expensive to build new housing than it would be to preserve the existing stock. As evidenced by the history of federal housing preservation policy discussed earlier in this report, Congress and the federal government have generally taken the position that preserving assisted housing is a desirable federal housing policy goal. However, even if it is less expensive than new construction, preservation can be costly. Many properties were built in the 1960s and 1970s and may be in need of repair in order to be habitable for an additional 20 to 40 years. As a result, funds are often needed for rehabilitation and improvements, possibly requiring federal grants or insured loans. Another cost could be funds for ongoing or new rental assistance. In cases where units already receive rental assistance (principally through Section 8), continued rental assistance is needed to maintain affordability for low-income tenants. In addition, some currently unassisted units may need rental assistance to help pay for increased operating costs after rehabilitation has occurred. A third possible cost may be providing incentives to owners to encourage them to maintain affordability or to sell to a purchaser who will. In addition to the costs of preservation, a transaction may require the cooperation of multiple parties—building owners, tenants, the local community, and HUD—each of whom could have their own interest in whether and how a property is preserved. In addition, each property may have characteristics that make its preservation more or less costly and feasible. These characteristics can include the property location, its physical condition, the needs of the tenants, and the type of owner organization (nonprofit versus for-profit), together with the effectiveness of the owner. These factors, in turn, can create different options for owners, present the federal government with varying preservation costs, and affect community interest in maintaining the property as affordable housing. This section of the report discusses several of the factors that may play a part in the decision to preserve federally assisted housing: property location, property condition, tenant needs, and type of owner. Given the reality of limited federal resources, HUD and Congress may have to weigh competing priorities to determine which preservation strategies are the most cost effective and which properties should be preserved. The location of a property can affect its value, both positively and negatively. A well-located property may have many potential benefits for tenants, making its preservation a priority. For example, some assisted housing properties are located in desirable areas near public transportation or other community assets such as parks, schools, shops, medical providers, and community and senior centers. Access to public transportation may make it easier for low-income families to find and maintain employment or for families with special needs (such as those that include persons who are elderly or have disabilities) to be able to live independently. An assisted property might also be the only affordable rental housing in an otherwise low-poverty neighborhood. If it were no longer available, families may be required to move from an area of economic opportunity to one of concentrated poverty. In rural areas, an assisted housing property might be the only affordable housing available, or perhaps even the only rental housing available. At the same time, however, owners of properties that are desirably located may have an incentive to convert the property to a more profitable use when affordability restrictions end, making it difficult for potentially displaced families to find comparable housing. Conversely, other federally assisted properties are located in areas with high concentrations of poverty and crime and with limited access to reliable public transportation and other community amenities. These properties may serve to limit the opportunities of their tenants. Preserving well-located properties may be a higher priority than preserving properties in distressed areas with limited opportunities. The physical condition of an assisted property can also affect the feasibility of its preservation. Some properties have deteriorated to the point that they have difficulty passing annual housing quality inspections. It may be very expensive to repair these properties so that they can provide adequate housing for families. There can be many reasons that a property has fallen into physical disrepair, and those reasons may influence the cost and feasibility of its preservation. Most physically distressed properties are also financially distressed. They have operating income that is low or negative, leading to underinvestment in routine maintenance and replacement reserves. These properties may be financially distressed because they were not designed in ways that would allow them to succeed. For example, demand for efficiency units is low, making it hard for properties featuring only efficiency units to compete with other properties, even in a subsidized market. If a property's units are not desirable or well matched to demand in the surrounding community, it could have occupancy problems. High vacancy rates can lead to financial distress, which can ultimately lead to physical decline. While some owners may be unwilling or unable to maintain properties, in some cases a property may be physically well designed and desirable, but the financing and/or subsidy structure has led to a financial imbalance. For example, many for-profit property owners took accelerated depreciation and mortgage interest tax deductions early in their property ownership. This allowed them to have strong and positive cash flow. But, over time, if the owner was unable to recapitalize the property (secure new funding for improvements), those deductions became unavailable, leaving the owner with insufficient income to cover operating expenses, replacement reserves, and tax liability later. This may be due to poor planning on the part of the owner, or to changing market conditions. Whether or not a physically distressed property is worth preserving may depend on the level of deterioration, the overall relevance and desirability of the design of the property, and other factors. The needs of a tenant population may make preservation a priority in some cases, principally in the case of elderly tenants and tenants with disabilities. When the alternative to preservation is providing tenants with Section 8 vouchers, tenants who are elderly or have a disability may have difficulty finding housing that meets their needs, particularly if their mobility is impaired. The difficulty of relocating, combined with potential accessibility features of HUD-assisted properties, could weigh in favor of preservation. In addition, some properties offer supportive services through a service coordinator or other means; if those properties are not preserved, tenants may not be able to find replacement housing where services are offered. According to CRS analysis of resident characteristics data from HUD, about 62% of families living in HUD rent-assisted properties were elderly and/or disabled. The characteristics of property owners may affect their willingness or ability to maintain affordability after their contracts with HUD expire. Profit-motivated owners may be more likely to sell their property or convert it to market-rate housing than mission-driven, nonprofit organizations. In 2006, HUD released an analysis of properties that had left HUD programs, comparing their characteristics to those properties that remained part of the assisted housing stock. Of those owners that either prepaid their mortgages or opted out of Section 8 contracts, 86% were for-profit organizations (compared to 55% of total owners that were for-profit) while only 9% were nonprofits. HUD commented on the fact that nonprofit owners have been less likely to leave HUD-assisted housing: "many nonprofits are motivated by the goal of providing affordable housing to low-income people, and would not opt out even if they could leave the stock." Properties with for-profit owners may require more costly preservation incentives than those with nonprofit owners. Another factor could be an owner's ability to operate and maintain the property. If an owner has not operated a property well or has allowed it to deteriorate, HUD may not be willing to continue subsidies or extend preservation incentives to the existing owner. Weighing the costs and benefits of preserving an assisted housing property can be difficult. This is due, at least in part, to the wide range of stakeholders in the property. For any given property, the stakeholders include the property owner, the tenants, the surrounding neighborhood, the state and local government, the federal government (specifically HUD), and, potentially, Members of Congress. These stakeholders may have different views about the relative costs and benefits of preserving the property. Owners are generally focused on maximizing their financial investments, although nonprofit owners may have mission-oriented goals (which may or may not involve affordable housing). Residents' concerns could include preventing their own displacement or improving their own living environments; however, thoughts about the best way to achieve either goal could vary from resident to resident. Local community leaders, and local and/or state government officials, could see the property as a valuable community asset, or as a blight and a tax on local resources. Similarly, HUD may see the property as a high-performing federal asset, or as a low-performing risk to the FHA insurance fund. Some Members of Congress may consider it important to preserve existing subsidies due to limited authority to create new project-based housing, but other Members may see the cost of preservation as being too high given their desire to limit discretionary spending. The heterogeneity of the assisted housing stock further complicates efforts to consider the costs and benefits of preservation. As outlined earlier, some properties are better located than others, some are in better physical conditions than others, some serve particularly vulnerable populations, and their owners have varying levels of commitment and capacity. The subsidy status of the properties also varies widely. Some have received relatively large amounts of federal funding over the years through rental-assistance contracts and subsidized mortgages; others have received much less, perhaps only an interest rate that was initially below market, but is now at or above market. These factors influence both the potential cost of preserving the property as well as the potential implications of not acting to preserve the property. Ultimately, when it comes to assisted housing preservation, owners can choose what to do with their properties. However, these choices are constrained by federal, state, or local laws and may be influenced by the availability of preservation incentives. For example, as described earlier, property owners cannot terminate rental-assistance contracts without first providing at least one year's notification to tenants. This policy is designed to give tenants time to organize an attempt to launch a preservation effort, or to prepare for a change in their subsidy status. In terms of incentives, HUD has historically held the primary role in determining which properties have access to preservation incentives, although the agency may take into account the views of other stakeholders. As noted earlier, there are several different types of assisted housing properties at issue in terms of preservation. Some have assisted financing (through FHA or the Section 202 loan program), some have rental-assistance contracts, and some have both. The level of affordability of the property, the length of time the affordability must be maintained, and the options at the end of the assistance contract all vary depending on the type of subsidy provided. This section of the report presents detailed characteristics of properties at issue in preservation, organized around types of assistance. The first section presents data regarding the Section 202 loan program, the second section covers the Section 236 and Section 221(d)(3) BMIR programs, and the third section presents data regarding units receiving rental assistance through the Rent Supplement, RAP, and Section 8 programs. Note that there may be some overlap among data presented in the three sections. For example, Table 1 includes Section 202 units that receive rental assistance; these units are also included in Table 7 , which shows all rent-assisted units. See Table A -1 in Appendix A for disaggregated units. As can be seen in Table 1 , there are 2,786 properties with active Section 202 loans. The majority of units in those properties receive rental assistance. As noted earlier in this report, once a Section 202 loan matures, the affordability agreement between the owner and HUD generally ends, unless the property has a rent-assistance contract that is extended. As is shown in Table 2 , the majority of Section 202 properties have loans that will not mature until more than 15 years from now. As discussed previously, HUD inspects properties annually, biannually, or every three years, depending on the property's most recent inspection score. Under HUD regulations, properties with scores below 30 are automatically referred to the Departmental Enforcement Center (DEC) for corrective action, and recently, HUD has adopted a policy that properties with scores above 30 but below 60 should also be referred, unless there are mitigating circumstances. Properties in poor physical condition are at risk of default on their HUD assistance contracts and of being lost to the affordable housing stock. Less than 3% of properties with Section 202 loans have scores low enough to require referral to the Departmental Enforcement Center, and more than 60% have inspection scores high enough to require inspection only every three years. As shown in Table 4 , there are about 1,542 properties with mortgage insurance through the Section 236 and Section 221d(3) BMIR programs. As discussed earlier in this report, these mortgage insurance programs conferred affordability restrictions on the properties and their owners. The properties with active Section 236 or BMIR financing provide more than 170,000 units of housing subject to affordability restrictions; about 56% of those units also have rental assistance. As discussed earlier in this report, upon maturation of Section 236 and BMIR insured loans, owners have the authority to convert their properties to market uses, including charging market-rate rents. Upon such a conversion, any units with rental assistance will continue to receive rent assistance under the terms of the rent-assistance contract while it is in effect. If the owner does not renew the rent-assistance contract, except in the case of units with Rent Supplement contracts, the residents will receive tenant protection vouchers, and in many cases, they will receive enhanced vouchers. Renters in unassisted properties are not eligible for tenant protection vouchers upon maturation under current law. As shown in Table 5 , most of these properties are facing mortgage maturation in the next five years, with about 57,835 units at risk of unassisted rent increases. As shown in Table 6 , about 7% of FHA-insured, rent-restricted properties had inspection scores low enough to require referral to the Departmental Enforcement Center for corrective action. The highest percentage of properties (45.8%) have scores high enough to require inspections only every three years. As shown in Table 7 , there are 17,207 properties that have rental-assistance contracts with HUD. Note that in a given property, it is possible that some units are not covered by a rental-assistance contract. In aggregate, of the more than 1.4 million units in the rent-assisted properties, 88% are covered by rental-assistance contracts. It is also possible that a property can have contracts for more than one type of rental assistance. Most rent-assisted properties have only Section 8 assistance; only about 2% of properties have only RAP assistance or Rent Supplement assistance. A small number of properties have a combination of the different types of rental assistance (for example, both a Section 8 and RAP contract). Not surprisingly, the percentage of units assisted in RAP-only and Rent Supplement-only properties is much lower than the percentage of units assisted in Section 8-only properties, since both the RAP and Rent Supplement programs had limits on the percentage of units that could be assisted in a property. Including those units in properties with a mix of contracts, there are 15,870 RAP units, 12,847 Rent Supplement units, and 1.2 million Section 8 units. From a preservation standpoint, the type of assistance is important. HUD has no authority to renew RAP and Rent Supplement contracts, which assist nearly 30,000 units, and only has the authority to provide tenant protection vouchers upon contract termination to tenants in Rent Supplement units, not tenants in RAP units. Table 8 provides information on the expiration period for rent-assistance contracts, broken down by type. As is shown in the table, most Rent Supplement expirations will happen within the next five years, whereas most RAP expirations will happen within the next 10 years. Under current law, these contracts cannot be renewed. Most Section 8 contracts will expire in the next five years. For the most part, owners can choose to renew Section 8 contracts if they wish. As noted earlier in this report, the ownership type of a property can be indicative of the likelihood that the owner will choose to exit an assisted housing program. As shown in Table 9 , approximately 41% of properties with rental-assistance contracts are owned by nonprofit owners. Roughly 42% are owned by for-profit owners. Another 15% are owned by limited-dividend owners. Limited-dividend owners face caps on the return they can receive on their investment in a rent-assisted property. As a result, limited dividend may be the ownership type with the greatest incentive to leave the program, depending on other factors. Another factor that can affect whether a property remains part of the assisted housing stock is the physical condition of the property. As can be seen in Table 10 , the majority of properties with rent-assistance contracts have high enough inspection scores to allow them to be inspected only every three years. However, 6% of properties, at their last inspection, had scores low enough to require corrective action. As presented in these data (including the data presented in Table A -1 in Appendix A ), almost 17,700 properties containing more than 1.33 million subsidized units (with financing or rental assistance) have some form of federal affordability restrictions that are scheduled to end. In some cases, those agreements will be renewed and continued, in other cases, they will be terminated at the owner's choice, at HUD's choice, or because there is no authority to renew the agreements. Those in the latter category are the easiest to identify. Just under 29,000 units of housing are subsidized by RAP and Rent Supplement contracts that HUD has no authority to renew. More than 10,000 of those contracts will expire in the next five years. However, HUD does have authority to provide ongoing rental assistance, in the form of tenant protection vouchers, to those families living in units with expiring Rent Supplement contracts. These represent just under 13,000 total units, well over half of which will expire in the next five years. HUD does not have the authority to provide ongoing rental assistance to those families living in units with expiring RAP contracts; these represent more than 16,000 total units, of which just under 10% will expire in the next five years. HUD also does not have any current tools to extend affordability agreements on properties with maturing HUD-assisted financing through the Section 202, Section 221(d)(3) BMIR, and Section 236 programs. While those properties with HUD-assisted financing together with Section 8 contracts can extend their federal affordability agreements through renewal of their Section 8 contracts, properties without Section 8 contracts do not have this option. There are 315 properties with FHA-insured loans through the Section 236 or Section 221(d)(3) BMIR programs containing over 31,000 units, and 176 properties with Section 202 loans containing just under 15,000 units that have no rental-assistance contracts. While some of these owners may not increase their rents to market rates once the affordability restrictions end, there is no federal law preventing them from doing so and there is no federal rent assistance available to the families living in these units if their rents increase. For those properties that have the option to extend their affordability agreements, it can be difficult to determine what may happen at the end of their current agreements. Of the more than 1.2 million units with Section 8 assistance that can be renewed, over half have rental-assistance contracts that will expire over the next five years. As long as the property is not in default of its assistance contract (and, as shown in Table 10 , most properties have at least passing physical inspection scores), the owner can decide whether or not to renew the contract. Well over half of these rent-assisted properties are owned by for-profit entities, including the 15% owned by for-profit owners who receive "limited-dividends," or caps on their profits. While all for-profit owners may be at greater risk of opting-out of renewing their contracts than nonprofit owners, limited-dividend owners may be the most likely not to renew if they can receive comparable rents, and greater profits, in the private market. As described earlier in this report, the federal government has a limited set of preservation tools. HUD has the authority to renew expiring rental-assistance contracts for those properties that have them, and, in some circumstances, restructure the outstanding debt on a property if it has FHA-insured financing. In other circumstances, HUD has the authority to provide residents facing displacement with rental assistance. For properties with maturing mortgages, HUD has no preservation authority. Earlier preservation laws gave HUD additional tools, including the authority to provide new rental-assistance contracts, secondary financing to shore up troubled properties, and enhanced restrictions on property owners' rights to exit certain programs. These additional preservation tools are no longer available; they were eliminated out of concern about their high cost and about their infringement on property owners' rights. In recent years, particularly as concern about maturing mortgages has grown, there have been calls from low-income housing advocates, tenants'-rights organizations, and property owners to adopt policies that encourage preservation and expand the set of preservation tools available to HUD. A number of proposals that would encourage housing preservation have been made as part of legislation or through recommendations from interested groups. These proposals generally fall into two broad categories: (1) incentives for current owners to maintain their properties or sell them to preservation purchasers, and (2) restrictions on owners. It is important to note that federal efforts are not the only preservation efforts. In recent years, state and local governments, along with affordable housing preservation advocates, have increased the local role in affordable housing preservation. Several states and localities have set aside their own funds, or prioritized the use of their federal funds, for preservation incentives. For example, according to CRS analysis of 2008 state Low-Income Housing Tax Credit (LIHTC) Qualified Allocation Plans, 27 states awarded additional points to preservation projects in their competitions for tax credits, and an additional 17 states set aside a portion of tax credits for preservation purposes. The following section of the report discusses current federal preservation policy options. There are a number of methods through which the government could provide incentives for existing owners to maintain their properties as affordable housing. These options include reducing owner debt, increasing the amount of rent subsidies owners receive, allowing owners to access reserve funds, or providing funds to rehabilitate and improve properties. One consideration when offering incentives is what strings to attach to them. Generally, when owners have received preservation incentives in the past they have been required to extend any affordability restrictions (for between five and 30 years, depending on the incentive) and, in some cases, renew any expiring rental-assistance contracts. Incentive options include the following: Debt reduction—Reducing owners' debt may reduce their operating costs, freeing up funds for needed repairs, or it may make it more feasible for owners to enter into new loans, the proceeds of which could be used to rehabilitate properties. HUD could be given explicit authority to subordinate or forgive loans that it made to property owners over the years. For example, HUD extended Flexible Subsidy loans to Section 236 and Section 202 owners, among others, to help "restore or maintain the financial or physical soundness of the project." If HUD waived this debt in the case of a refinancing, an owner would not have to use loan proceeds to pay off the debt and would have more funds available to improve the property. HUD could also be given authority to make partial payments of claim from the FHA insurance fund to reduce the debt of FHA-insured properties. HUD already has the authority to do this in certain circumstances; that authority is primarily used in Mark-to-Market transactions. Increased rents and/or rent assistance—If owners were to receive higher rents, they might be better able to pay for improvements to their properties or may be willing to continue to provide affordable housing. In the case of rent-assisted units, the federal government would likely pay the cost of increased rents. In the case of units without rent assistance, lower-income tenants could end up paying the cost of increased rents unless additional rent subsidies were provided. Access to reserves—Some property owners with rental-assistance contracts are required to establish residual receipt accounts. In some circumstances, HUD can permit owners to access these funds for reinvestment in the property. Expanding access to these reserves could give owners the incentive to maintain their properties as affordable housing. Loans or grants for recapitalization—HUD could make loans or grants directly to building owners to enable them to improve their properties. This has happened in the past through the Flexible Subsidy Program. Currently, HUD does not receive any funding for this purpose. Another method of preserving housing is to give owners incentives to sell their properties to organizations that will continue to maintain affordability for some period of time. This could occur with owners who no longer wish to participate as affordable housing providers or where owners are not considered "good" owners by the residents, the local community, and HUD. The potential buyers in this scenario are sometimes referred to as "preservation purchasers" and are often nonprofit organizations or state housing finance agencies, and, in some circumstances, organizations of residents. Incentives to sell to preservation purchasers could come in different forms: Exit tax relief—Congress could enact a law to reduce the tax liability of owners that sell their properties to preservation purchasers. Some for-profit owners face large tax bills when they sell their assisted properties due to capital gains taxes. In cases where owners have held property for decades, capital gains taxes may be quite high and act as a disincentive for the owner to sell the property. Financial assistance for preservation purchasers—In some cases, potential preservation purchasers do not have the technical expertise or access to funding necessary to allow them to purchase a property. In order to aid preservation purchasers, federal funding could be used to provide technical assistance and/or pre-development grants that would aid preservation purchasers in putting together financing to purchase a property. Funding could also be provided for direct grants or loans to help preservation entities purchase and rehabilitate a property. Another option is to fund additional rental-assistance contracts, which can serve to both provide ongoing operating assistance and act as a credit enhancement when a purchaser is seeking private market financing. Another way to preserve affordable housing would be to impose requirements on property owners. Such requirements could include limiting an owner's options in selling the property, giving tenants the right to enforce existing housing quality standards, and expanding tenant notification requirements. An advantage of owners requirements is that they can accomplish the goal of preservation without costly incentives. However, requirements that restrict an owner's ability to sell or convert a property to market-rate housing could result in legal challenges. As discussed earlier in this report (" Previous and Ongoing Efforts to Preserve Assisted Housing "), in the late 1980s and early 1990s Congress enacted laws designed to limit the ability of owners to end affordability restrictions. The laws resulted in years of litigation over whether these restrictions resulted in a constitutional "takings" claim. The federal government has lost several of these lawsuits and some are still pending. Owner requirement options include the following: Right of first refusal or right of first purchase for preservation purchaser —One proposal is to give preservation purchasers a right to purchase properties in order to prevent them from being converted to market-rate housing. In this scenario, if an owner wanted to sell the property he or she would first have to attempt to sell the property to an organization that would maintain affordability, or would have to accept a fair market offer by a preservation purchaser over other offers. Right of first refusal or right of first purchase for tenants—Another option similar to the right of first purchase or right of first refusal for a preservation purchaser would be offering the same rights to tenants. The idea is that, with sufficient notification, tenants can get technical assistance, organize themselves, and purchase the property in which they live. Tenant enforcement of HUD contracts—A criticism preservation advocates have made of current policy is that tenants have no way to compel HUD to enforce its rules, such as those meant to ensure that properties do not deteriorate to the point that they fail inspection. It has been proposed that if tenants were given the standing to compel enforcement with contract rules, properties may be better maintained and may not be at risk of loss due to HUD enforcement action. This type of private right of action exists in fair housing law and would give tenants greater power in negotiation with private property owners. Tenant notification—In cases where owners plan to convert units to market-rate housing or sell the property to an owner that will not maintain affordability, they must notify tenants. Proposals have been made to expand these notification requirements; this would help resident groups organize in case they wish to purchase the property or contest a sale, or it would give them ample time to find alternative arrangements with their vouchers. Current law requires that owners give a minimum notification of at least 150 days before prepaying an FHA-insured mortgage and at least a one-year notice before choosing not to renew a Section 8 contract. In some cases, a property either cannot be preserved with existing incentives, or should not be preserved, perhaps due to its physical condition or location. In circumstances where an individual property will not be preserved, there may be options to either transfer the assistance to another property or provide residents with ongoing assistance. Transferring Section 8 assistance—If a property is significantly deteriorated, outdated, or poorly located, one preservation option is to transfer the assistance attached to the property (its rental-assistance contract and/or its affordability restriction) to another, better-suited property. The idea is to preserve the existing assistance, since there is no authority for new rental-assistance contracts or affordability restrictions. In recent years, Congress has given HUD limited authority to undertake these types of transfers, and there has been interest in further expanding that authority. Expanded Enhanced Voucher Eligibility—In the case of mortgage prepayment or termination of a Section 8 contract, the tenants receive vouchers in some circumstances. These vouchers are designed to provide ongoing rent assistance to tenants and to protect them from rent increases, which may allow them to remain in their current rental units. In the case of the expiration of RAP and Rent Supplement contracts, as well as in the case of mortgage maturation or HUD-approved prepayments (in the absence of rental-assistance contracts), the residents are not eligible for vouchers. There have been proposals to expand enhanced voucher eligibility to those groups that are not currently eligible. The FY2012 appropriations law ( P.L. 112-55 ) included funding for expanded eligibility for tenant protection and enhanced vouchers, specifically for certain properties with maturing mortgages, expiring RAP contracts, and expiring affordability restrictions under ELIHPA/LIHPRA. In the 111 th Congress, one extensive preservation bill was introduced, the Housing Preservation and Tenant Protection Act ( H.R. 4868 ), and another was enacted, the Section 202 Supportive Housing for the Elderly Act ( P.L. 111-372 ). While comparable legislation has not been introduced in the 112 th Congress, HUD has issued several notices announcing policy changes that are designed to help owners rehabilitate and preserve existing properties. In addition, the Administration has proposed a Rental Assistance Demonstration that is meant, in part, to preserve Rental Assistance Payment (RAP) program and Rent Supplement-subsidized units. These initiatives, as well as legislation from the 111 th and 112 th Congresses, are described below. Toward the end of 2010, HUD began publishing notices regarding policy changes that enable multifamily property owners to make improvements to their housing developments. These policy changes are designed to preserve affordable units that would otherwise fall into disrepair. One notice, published on December 20, 2010, gives HUD the discretion to subordinate Section 202 loans when owners have "immediate needs for rehabilitation, significant or emergency repairs," but are unable to go through the refinancing process to pay off the Section 202 loan. Owners must be able to show that the subordination is necessary in order to preserve the project, and must enter into extended use agreements for the longer of 20 years beyond the loan's original maturity date or the date on which the subordinated loan is repaid. Similarly, HUD issued a notice that gives it the authority to defer the repayment of flexible subsidy debt in circumstances that would assist in preserving properties. From the late 1970s to the mid-1990s, the flexible subsidy program provided loans to properties with HUD-assisted financing that were having financial difficulties (the last year in which Congress gave new obligation authority was FY1995). Under the terms of the notice, HUD may approve deferral of payment in cases where an owner refinances a loan but the funds are not sufficient to pay off the flexible subsidy debt. As with subordination of Section 202 loans, an owner has to show that the deferral is necessary to ensure preservation of the project and must agree to an extended use agreement for the longer of 20 years beyond the flexible subsidy loan's original maturity date or the date on which the subordinated loan is repaid. Another HUD notice, issued on February 1, 2011, allows multifamily project owners to convert efficiency units to one-bedroom units, even if conversion results in fewer total units in the building. Owners may wish to pursue conversion because efficiency units are undesirable in some markets and owners are unable to rent them, resulting in lack of income to keep properties operational. In order to be able to convert units under the terms of the notice, owners must demonstrate that the local market demand is such that conversion is necessary and that it will put the property in a better financial position. As part of its FY2012 budget, HUD proposed a new Rental Assistance Demonstration (RAD) that would convert rental assistance provided through several rental assistance programs to a new form of Section 8 project-based rental assistance. Two of the programs would be Rent Supplement and RAP, which were discussed earlier in this report. Under current law, HUD does not have the authority to renew Rent Supplement and RAP contracts, so when the contracts expire, owners are no longer eligible to receive rental assistance for the previously subsidized units. While tenants living in units assisted through Rent Supplement may receive tenant-protection vouchers, those in RAP-assisted units are not eligible for vouchers. Under the proposed legislation, Rent Supplement and RAP assistance contracts could be voluntarily converted to this new form of Section 8 contracts, which would allow units to maintain their subsidies. In its budget, HUD requested authorizing language for the demonstration and $200 million to cover the expected cost of the conversions. The FY2012 appropriations law ( P.L. 112-55 ) included a modified version of RAD, which limits participation to public housing properties and Section 8 Moderate Rehabilitation properties. An extensive preservation bill, the Housing Preservation and Tenant Protection Act ( H.R. 4868 ) was introduced in the House on March 17, 2010, by the then-chairman of the House Financial Services Committee. The bill was similar to a draft preservation bill that had been circulated as part of a hearing held by the Subcommittee on Housing and Community Opportunity of the House Financial Services Committee in July 2009. The bill was marked up and approved by the House Financial Services Committee in July 2010; however, it was not considered on the House floor before the end of the 111 th Congress. The bill included versions of most of the proposals discussed in the previous section of this report. Among others, the bill included the following provisions: Regarding Section 221(d)(3) BMIR and Section 236 properties with maturing mortgages, H.R. 4868 would have authorized HUD to make grants or loans available to rehabilitate the property if owners so chose, and would have extended enhanced voucher protections to unassisted tenants upon mortgage maturation. The bill would also have created a "Preservation Exchange Program," through which HUD could facilitate the transfer of a property with a maturing mortgage to a preservation purchaser. The bill would have authorized HUD to provide incentives both to current owners and purchasers, including the forgiveness of outstanding Flexible Subsidy loans. H.R. 4868 would have authorized the conversion of RAP and Rent Supplement contracts to Section 8, which would have allowed them to be renewed and would have expanded certain owners' access to their residual receipts accounts. The bill would have established a form of right of first refusal/right of first purchase for HUD (or its assignee) whereby HUD could match the offer of a third party and purchase a HUD-assisted property in order to maintain its affordability. H.R. 4868 would have permitted owners to request project-based assistance in lieu of enhanced vouchers, and would have required HUD to provide such assistance, as long as the owner agreed to extend the contract at least 20 years. In terms of tenant protection and assistance, H.R. 4868 would have authorized funding for technical assistance for tenant organizations and given tenants a private right of action to enforce program rules. The bill also contained a version of the Section 202 preservation legislation (discussed in the next section of this report), as well as an authorization and modification to rural housing preservation initiatives that have been authorized and funded through recent appropriations acts. The legislation would have authorized "such sums as necessary" to fund various preservation incentives, making it dependent on the Appropriations Committees to fund most of the new initiatives. Both low-income housing advocates and industry organizations representing assisted property owners provided feedback on the draft legislation during the hearings in 2009. While many of the proposals contained in the draft legislation were supported by both advocates and owners groups, provisions related to restrictions on owners (right of first purchase/right of first refusal and private right of standing for residents) proved controversial, with tenant advocates in support of the provisions and owners groups opposed. Based on testimony given during a hearing on March 24, 2010, property owners continued to be concerned about the right of first refusal and private right of standing provisions and tenant advocates continued to support such provisions in the introduced version of the bill. At the end of 2010, Congress passed the Section 202 Supportive Housing for the Elderly Act ( P.L. 111-372 ), a law that gives owners of older Section 202 developments the ability to refinance, improve, and potentially preserve their properties, and that also extends the term of affordability in cases of refinancing. The law allows owners of older Section 202 developments (those financed with low interest rate loans) to refinance without the requirement of a lower interest rate and reduced debt service, as had previously been the case. In addition, P.L. 111-372 extended the term of affordability to 20 years beyond the term of the original Section 202 loan. Previously, owners who refinanced were required to maintain affordability only through the term of the original Section 202 loan. Another change to existing law contained in P.L. 111-372 is a new "preservation project rental assistance" program, which is to be available to owners who refinance their Section 202 loans in order to prevent displacement of tenants. Not all Section 202 units receive rental assistance, particularly those financed prior to 1974, and if owners have to increase rents due to increased debt service, the rental assistance may prevent displacement of tenants. For more information about P.L. 111-372 , see CRS Report RL33508, Section 202 and Other HUD Rental Housing Programs for Low-Income Elderly Residents , by [author name scrubbed]. The FY2012 HUD appropriations law ( P.L. 112-55 ) contained several preservation-related provisions. As noted earlier, the law authorized a modified version of the President's RAD initiative, which will be available to Section 8 Moderate Rehabilitation properties. Further, the law funds tenant protection vouchers for residents of some properties with maturing mortgages, expiring RAP contracts, or expiring ELIHPA/LIHPRHA use restrictions. It also authorizes the conversion of tenant protection vouchers to project-based vouchers for some residents in RAP and Rent Supplement properties, permits HUD to extend for one year expiring RAP and Rent Supplement contracts, and extends the authority for the Mark-to-Market program through October 1, 2015. Finally, the law continued provisions from previous years requiring HUD to maintain project-based assistance contracts on HUD-held properties and permitting the transfer of project-based assistance contracts between properties. Appendix A. Preservation Properties at a Glance Appendix B. Glossary

The term "assisted housing preservation" refers to public policy efforts to maintain the affordability of rental properties financed or subsidized by the Department of Housing and Urban Development (HUD) but owned by private for-profit or nonprofit organizations. Beginning in the late 1950s, HUD extended mortgage and/or rental assistance to owners, in exchange for which the owners agreed to make their units affordable to low- and, in some cases, moderate-income tenants. The agreements to maintain affordability, sometimes called "affordability restrictions," were to last between 20 years and 50 years depending on the program. When these affordability restrictions come to an end, owners have the option to stop providing affordable housing to tenants. In some, but not all, cases, tenants living in units that are leaving the assisted housing stock receive housing vouchers that are meant to prevent their displacement. Properties at issue in assisted housing preservation were developed through various programs. HUD provided mortgage assistance or direct loans to owners through the Section 202 loan program and the Section 236 and Section 221(d)(3) Below Market Interest Rate (BMIR) mortgage insurance programs, all named for the sections of the housing acts under which they were created. HUD also subsidized tenant rents through programs such as the Rent Supplement program, the Rental Assistance Payment program, and the Section 8 project-based rental-assistance program. In some cases, owners received both mortgage financing assistance and rental assistance. Property owners that received mortgage financing assistance can end their federal obligation to provide affordable housing early by prepaying their mortgages (in some cases), or end it when the mortgage terms come to an end. Owners that entered into rental-assistance contracts with HUD can choose not to renew their contracts when they end. In some cases, HUD can choose to terminate assistance contracts with owners when properties are in poor physical or financial condition. In the past, Congress attempted to reduce the number of property owners that leave HUD-assisted housing programs by restricting owners' abilities to prepay their mortgages. However, these laws (known by their acronyms, ELIHPA and LIHPRHA) faced legal challenges and are no longer in effect. Currently, the primary preservation tool available to HUD is the ability to restructure debt and rental assistance in Section 8 contracts, as authorized by the Multifamily Assisted Housing Reform and Accountability Act (MAHRA). There have been several proposals to expand the tools available to HUD to help preserve assisted housing. Recent proposals would, in general, focus on incentives to owners to remain in HUD programs or to encourage "preservation purchasers" to buy the properties and maintain affordability. However, any new incentives will require additional funding. In a limited funding environment, questions regarding preservation include whether all properties can and should be preserved, and, if not, which should be the highest priority. This report introduces the concept of assisted housing preservation; provides background information; and discusses current public policy issues, HUD actions to promote preservation, and proposed legislation.

On November 19, 2012, the Revolutionary Armed Forces of Colombia (FARC), the country's largest and oldest guerrilla organization, announced a two-month unilateral ceasefire as peace talks continued in Havana, Cuba. A month earlier, the Colombian government began formal peace talks with the FARC in Oslo, Norway. (For more details, see " Peace Talks " below.) On September 18, 2012, Colombian drug kingpin Daniel Barrera (also known as "El Loco") was captured in Venezuela in a joint Colombian-Venezuelan operation assisted by the U.S. and British intelligence agencies, with support from the U.S. Drug Enforcement Administration. The Barrera arrest—hailed as the demise of the "last of the great kingpins" by President Santos—signifies intensified counternarcotics cooperation between Venezuela and Colombia. (See " Relations with Venezuela and Ecuador " below.) On September 4, 2012, President Santos and FARC leader Rodrigo Londoño Echeverri, (also known as "Timochenko") announced that official peace talks would begin in Oslo, Norway, and continue in Cuba. In late August, President Santos surprised many when he announced that the government had begun "exploratory peace talks" with the FARC. President Santos said that the Colombian military would retain its presence in every part of the country and that a smaller insurgent group was interested in joining in the negotiation process. (See " Peace Talks " below.) On July 30, 2012, the U.S. Office of National Drug Control Policy (ONDCP) announced that in its estimates Colombia's potential cocaine production capabilities had fallen below Peru's. According to the estimate, Colombia's 2011 potential cocaine production fell to 195 metric tons, 25% below the prior year estimate and 72% below the U.S. government estimate for 2001. (See " Colombia and Global Drug Trends " below.) On June 27-28, 2012, the Colombian Congress, in a special session, voted to annul judicial reform legislation just approved in the prior regular session. President Santos refused to sign the final bill, which he claimed had been altered with "surprise" amendments. The legislation, which was widely criticized, would have restricted the Supreme Court from investigating crimes committed by legislators, among other provisions. The government had originally sponsored the judicial system reform. (See " Reforms under the Santos Administration " below.) On May 15, 2012, the U.S.-Colombia Free Trade Agreement (CFTA) went into force. Implementing legislation for the bilateral trade agreement had been approved by the U.S. Congress in October and signed by President Obama on October 21, 2011 ( P.L. 112-42 ). (See " U.S.-Colombia Free Trade Agreement " below.) On April 14-15, 2012, Colombia hosted democratic leaders from 30 Latin American countries, the United States, and Canada at the sixth Summit of the Americas held in Cartagena. On April 2, 2012, the FARC released its last 10 military and police hostages, some of whom had been held in the jungle for more than a dozen years. The release of these kidnap victims, announced in February, was intended to show FARC's willingness to engage in a peace process to end the armed conflict. (See " Current Status of the FARC " below.) Colombia is a South American nation of roughly 47 million people, the third-most populous country in Latin America. It is an ethnically diverse nation—58% of the population is mestizo, 20% white, and 14% mulatto. According to the U.S. Department of State, official statistics suggest that Afro-Colombians and indigenous people are about 10% of the population, with 3% of the people self-identifying as indigenous. At the same time, some nongovernmental organizations (NGOs) and human rights groups estimate that indigenous people and Afro-Colombians may make up 25% or higher. Colombia has one of the oldest democracies in Latin America, yet it has been plagued by violence and a conflict that has lasted nearly five decades. The country's rugged terrain historically made it difficult to establish state control over large swaths of the nation's territory. High rates of poverty have also contributed to social upheaval in the country. But Colombia's economic picture has in recent years improved fairly steadily. In 2011, approximately 34% of Colombians lived in poverty, down from 50% in 2002. Colombia's economic growth rates have been strong, reaching 5.9% in 2011 and projected at 4.4% in 2012. Security improvements and a more stable economy have attracted foreign direct investment (FDI), which more than doubled in five years from roughly $6.5 billion in 2006 to more than $14 billion in 2011, largely in the oil, manufacturing, and mining sectors. Nevertheless, income inequality and land ownership concentration are still significant problems. The unemployment rate has hovered near or above 11% over the last five years, but is forecast to fall below 10% in 2012 according to some analysts. The large, unregulated informal sector accounts for 50% to 60% of Colombian workers. Drug trafficking has helped to perpetuate Colombia's conflict by providing earnings to both left- and right-wing armed groups. The two main leftist guerrilla groups are the FARC and the National Liberation Army (ELN), both of which kidnap individuals for ransom, commit serious human rights violations, and carry out terrorist activities. Most of the rightist paramilitary groups were coordinated by the United Self-Defense Forces of Colombia (AUC), which disbanded in 2006 after more than 31,000 of its members demobilized. All three groups (the FARC, ELN, and AUC) were designated Foreign Terrorist Organizations (FTOs) by the U.S. government in the late 1990s and early 2000s. Members of the AUC were accused of gross human rights abuses and collusion with the Colombian Armed Forces in their fight against the FARC and ELN. New illegally armed groups, including criminal bands some of which include re-armed paramilitaries, are now a significant challenge in Colombian cities and towns. Drug production and trafficking continue to generate many millions of dollars annually for illicit groups. As a result of the conflict and drug-related violence, Colombia has one of the largest populations of internally displaced persons in the world, with more than 3.9 million displaced since 1997. From the 19 th century through much of the 20 th century, the Liberal and Conservative parties have dominated Colombian politics. But in recent years, these parties were weakened by their perceived inability to resolve the root causes of the violence in the country. In 2002, Colombians elected an independent, Álvaro Uribe, as president, largely because of his aggressive plan to reduce violence in Colombia. Uribe served two terms. In 2010, Juan Manuel Santos was elected president from the National Unity party (described below). The major political parties represented in the bicameral Colombian Congress include the Liberal, Conservative, Alternative Democratic Pole, National Unity, Green and Radical Change parties, and several smaller political movements. The leftist Alternative Democratic Pole is the only major party in opposition to a "national unity" coalition that backs the Santos government. During his first term (2002-2006), President Uribe began to fulfill his campaign promises to address the paramilitary problem, defeat leftist guerrilla insurgents, and combat narcotics trafficking. He took a hard-line approach to negotiations with illegally armed groups, declaring that the government would only negotiate with those groups who were willing to give up terrorism and agree to a ceasefire. These included paramilitary groups with whom former President Andrés Pastrana had refused to negotiate. Negotiations with the AUC paramilitaries resulted in a July 15, 2003, agreement in which the AUC agreed to demobilize its members by the end of 2005. President Uribe endorsed a controversial Justice and Peace Law that provided a framework for those demobilizations. Uribe also built up the Colombian military and police, which stepped up their counternarcotics operations and activities against the FARC. High public approval ratings, largely due to reductions in violence as a result of his security policies, prompted Colombia to amend its constitution in 2005 to permit Uribe to run for reelection. On August 7, 2006, Álvaro Uribe was sworn in for his second term as president. Pro-Uribe parties had won a majority in both houses of congress in the elections of March 2006, giving President Uribe a strong mandate. His government improved the security situation in Colombia under a policy called "Democratic Security," demobilized the AUC, and made headway in defeating the FARC and ELN. According to U.S. State Department figures, kidnappings in Colombia declined by 83%, homicides by 40%, and terrorist attacks by 76% between 2002 through 2008. Police regained a presence in all of Colombia's municipalities, including areas from which they had been ousted by guerrilla groups. President Uribe oversaw the demobilization and disarmament of more than 31,000 AUC paramilitaries, although the demobilization process has been criticized for failing to provide adequate punishments for perpetrators and provide reparations to victims of paramilitary violence. On March 1, 2008, the Colombian military raided a FARC camp in Ecuador killing a top FARC leader and capturing his computer files. This was followed by the July 2, 2008, rescue of 15 hostages long held by the FARC, including 3 U.S. defense contractors and a former Colombian presidential candidate. Despite this progress under the Uribe government, Colombia faces serious challenges. While the FARC's numbers are dramatically reduced, it still has thousands of fighters capable of carrying out terrorist attacks, kidnappings, and other illicit activities. Not all paramilitaries demobilized, and others have returned to paramilitary and criminal activities since demobilizing. One weakness of the demobilization program has been the difficulty reintegrating demobilized forces into law-abiding civilian life. Moreover, a new generation of paramilitaries has formed that is more criminal than political in nature. These groups, which contain many former combatants as well as new recruits, are involved in drug trafficking, kidnapping, extortion, and other violent crime and reportedly have a presence in about one-third of Colombian municipalities. Although former President Uribe has not been personally implicated, the Colombian Supreme Court is investigating suspected links between Colombian politicians, many from pro-Uribe parties, and paramilitary groups. Since the 2006 elections, there have been several scandals involving extrajudicial killings by Colombian security forces. The most significant of these scandals broke in October 2008 when 27 soldiers and military officers (including three generals) were fired over the discovery that 13 murdered civilians had been dressed by their killers in order to appear to be guerilla fighters to increase military body counts (the "false positives" scandal). As a result, General Mario Montoya, the commander of the Colombian army, stepped down on November 4, 2008. President Uribe's high approval ratings led many of his supporters to urge him to seek a third presidential term. For Uribe to be reelected, the Colombian constitution would have had to be amended again. For months, the 2010 presidential election campaign was virtually suspended as Colombians anticipated the possibility of President Uribe running for a third term. But on February 26, 2010, Colombia's Constitutional Court ruled 7 to 2 to deny a referendum to allow President Uribe to run for reelection. President Uribe immediately stated that he "accepted and respected" the court's decision, removing himself as a candidate in the 2010 race. Legislative elections for the entire 268-member bicameral Congress took place on March 14, 2010. The elections were the least violent of recent times with a high turnout of more than 13 million voters. Voters gave a strong victory to pro-Uribe parties, indicating their support for continuing President Uribe's democratic security policies. Two parties in the pro-Uribe coalition, the National Unity Party (also known as the Partido de la U or the U Party) and the Conservative Party, won the most seats. The pro-Uribe coalition secured a majority in both the Senate and the Chamber of Representatives. Observers thought this election outcome was a good sign for presidential candidate Juan Manuel Santos (see box), who headed the National Unity party and had been leading in the polls. However, the field of candidates for president was complex. A successful candidate had to win at least 50% of the votes cast, or compete and win in a runoff held on June 20. Antanas Mockus, Green Party candidate and twice former mayor of Bogotá, rose dramatically in popularity between March and May 2010. Other presidential hopefuls included Naomi Sanín of the Conservative Party; Gustavo Petro of the leftwing Democratic Pole; Germán Vargas Lleras, a right wing senator who split with Uribe over his bid for a third term; and Rafael Pardo of the Liberal Party. In the May 30, 2010, election, Santos received more than twice as many votes as did Mockus in an election in which slightly over 49% of eligible Colombians voted. Although Santos came close to winning the majority of votes, he had to compete in the June 20 runoff against second-highest vote-getter Antanas Mockus. In the ensuing weeks, Santos won the backing of nearly every candidate who responded to his call to create a government of national unity, giving him a strongly favorable position. Mockus fared poorly in the debates and refused to accept a formal alliance with the leftwing Democratic Pole party. On June 20, 2010, Santos won the Colombian presidency by the largest margin in recent history, taking 69% of the vote. Santos's landslide victory earned him the backing of a unity coalition in Congress, providing him a stronger mandate than even Uribe had following his two elections. The ruling coalition included the center-right National Unity and Conservative parties, the centrist Radical Change Party, and the center-left Liberal Party. (In July 2011, the centrist Green Party left the opposition and joined the governing coalition.) When President Santos was inaugurated on August 7, 2010, he pledged to continue the successful security strategies of his predecessor while pursuing democratic, economic, and social reforms. He stated that the door to negotiations to end the armed conflict was not shut. In general terms, President Santos and Vice President Angelino Garzón have promoted a more rigorous protection of human rights than the Uribe Administration, and denounced threats against human rights defenders. President Santos has reached out to the judiciary in Colombia, ameliorating tensions that had grown between former President Uribe and the Supreme Court. He secured an anti-corruption law and some labor formalization laws. He has led a reform of the executive branch that included fiscal reforms, and the redistribution of royalties from land and mineral development so that funds were distributed nationwide, not just to producing regions. The Santos Administration proposed legislation in 2010 to compensate victims of the internal conflict (including victims of state forces) and to restore land to those who were forcibly displaced. The Colombian Congress approved the Victims' and Land Restitution Law (hereinafter Victims' Law) in May 2011, which was signed by President Santos in June. The legislation calls for the return of property to those forced off their land by armed groups during the conflict. Many observers are eager to see how these reforms will result in actual changes on the ground. While the Victims' Law has been lauded as historic by international organizations, including U.N. agencies and U.N. General Secretary Ban Ki-moon, many caution that ensuring the safety of the displaced victims will be a major challenge. Since President Santos came to office, the pace of assassinations of land return advocates has not diminished. The government said it will increase protection for these leaders and has been providing protection to some 393 land rights leaders and activists as of October 2012. Because the law's restitution program is taking place during an ongoing conflict, it also pledges assistance to those who may yet be victimized, through 2021. It provides economic reparations to victims of the conflict going back to 1985, and proposes to return land to those who had it stolen after 1991. The government has estimated over its 10-year time frame that the initiative will cost $30.5 billion to implement. In January 2012, implementation of the Victims' Law was launched with the handover of lands to displaced families in the northern department of Córdoba. The policy is expected to meet resistance from local officials and others who may have played a role in the illegal land seizures that the law is attempting to reverse. Some U.S. and Colombian nongovernmental organizations (NGOs), however, have criticized the scope of the law, maintaining that its definition of victims was not sufficiently broad and identifying other gaps. The U.S. government announced $50 million of support to strengthen the law's implementation in July 2012. Establishing the institutions to deliver both the reparations and land restitution programs will be an ongoing administrative challenge with 37 national agencies playing a part. The Colombian government has developed a Victims Unit within the Department of Social Prosperity to coordinate compensation and services and a Land Restitution Unit within the Ministry of Agriculture to coordinate the restitution of land to the dispossessed. A new court system to adjudicate land claims is to be established, and municipal and departmental (state) coordination for handling victims' compensation requires participation from multiple layers of government. By late October 2012, approximately 113,000 Colombians who were registered as victims of violence received compensation, totaling approximately $360 million. The Colombian government reported that 755 Regional Transitional Justice Committees had formed in 31 of Colombia's 32 departments. These committees, which are to have victims represented on them, are critical for the implementation of the law at the local level. However, early reports are that victims are sometimes not involved, or only selectively, and some victims have been threatened because of their participation. As of late October 2012, more than 26,000 claims had been filed for land restitution, although the first judgments to resolve the claims are just beginning to be issued according to the government. In April 2011 the Colombian Congress authorized President Santos to reorganize the executive branch and split three ministries into six. The new ministries are Interior, Justice, Health, Labor, Environment, and Housing. The formation of an independent Labor Ministry to better institutionalize labor protections was a requirement of the Action Plan Related to Labor Rights jointly announced by President Obama and President Santos on April 7, 2011. The plan included a number of "major, swift and concrete steps" that the Colombian government agreed to take to address remaining issues of U.S. concern with regard to labor. Measures included steps to reduce violence against trade unionists and to ensure prosecution of such violence. (For more, see " U.S.-Colombia Free Trade Agreement .") As part of the government reorganization, the discredited Department of Administrative Security (DAS) was dissolved. The scandal-plagued national intelligence agency, charged with ties to paramilitary groups and conducting a campaign of illegal wiretapping, was replaced in early 2012 by a new, considerably streamlined intelligence agency, with fewer personnel and more oversight. Other reforms spearheaded by the Santos Administration include a peace framework law passed by the Colombian Congress in June 2012. The law is a constitutional amendment that provides a transitional justice structure for an eventual peace process if the Colombian Congress passes enacting legislation. Under the framework, leftist rebels are recognized as combatants in an internal conflict, and may become eligible for a reduced sentence if they demobilize. Cases against perpetrators of the most heinous crimes would be prioritized and fully prosecuted. Although controversial with critics on both the left and the right, the measure passed with a large majority on its final vote in the congress that signaled there was political support for a future peace process. One major reform effort of the Santos government ended in political controversy. A proposal to reform the clogged justice system was amended to a point, such that when it passed Congress in June 2012, the president found it unacceptable. One amendment limited the Supreme Court's power to investigate legislators suspected of crimes, and another weakened rules for unseating convicted legislators. Santos called Congress into an extraordinary session in late June requesting that the law be annulled, and Congress complied. As a result, the national unity coalition backing President Santos was strained, his relations with Congress were weakened, and his popularity suffered. During the affair, Santos's justice minister was pressured to resign. The Santos government has backed another constitutional reform bill, likely to be voted on by Colombian Congress before the end of 2012, which would expand the jurisdiction of military courts. Several of the bill's provisions have been criticized by human rights advocates for shifting jurisdiction of serious human rights crimes allegedly committed by public security forces from the civilian courts back to military courts increasing the likelihood of impunity for such crimes. According to current conditions on U.S. military aid, human rights cases involving Colombian Armed Forces must be transferred to civilian courts. Former President Uribe has become his successor's strongest critic. The former president has questioned some of the key Santos government reforms, his appointments, and his administration's security approach. As President Santos passed the two year mark in office, feuding between the two former allies sharpened. Uribe's criticism of the Santos government centers on what he sees as a conciliatory approach to the FARC and the government of Venezuela, but Uribe has also expressed negative views on the judicial reform that was initially backed by the Santos government, the law to compensate victims of the internal conflict, and the peace framework law passed by the Colombian Congress in June 2012. The former president has even reportedly launched an effort to block President Santos from a second term if he chooses to run. President Santos retained high popularity ratings during his first year and a half in office, sometimes exceeding 70%. In mid-2012, however, his support fell to 47% in July due to the perception of growing insecurity and the judicial reform effort that floundered and was later voided. President Santos announced a major cabinet re-shuffle in late August, reportedly to bolster sagging popularity. Some observers speculate that fissures in the national unity coalition may restrain President Santos from completing his reform agenda. Nevertheless, polling done in September and October 2012 indicated his approval ratings had recovered somewhat following his announcement of new peace talks. On August 27, 2012, President Santos disclosed that exploratory discussions to end the nearly half century internal conflict were underway with the FARC, which confirmed widely circulated rumors. In a brief statement, he said that three principles guided his conduct in searching for peace: (1) the errors of past negotiation efforts would not be repeated; (2) all measures would be taken to end the conflict and not to prolong it; and (3) the Colombian military would not cede any territory (which was widely interpreted to mean there would not be a demilitarized zone inside the country as in past peace talks). He also acknowledged that the smaller rebel group, the National Liberation Army (ELN), may also join the peace process. An ELN leader later said he welcomed joining unconditional peace talks but that the ELN would not end its military campaign prior to such negotiations. While there was broad albeit cautious public support for the peace initiative according to early polls, former President Uribe decried the effort as a concession to terrorists that would demoralize the military. The initiative received praise from the U.S. State Department, from the Secretary General of the Organization of American States (OAS), and from U.N. Secretary General Ban Ki-moon. In early September 2012, the government and the FARC's supreme leader, Rodrigo Londoño (also known as "Timochenko"), announced that formal talks would begin in October in Oslo, Norway, and then move to Cuba. Subsequently, both sides announced their negotiating teams (5-member lead negotiators to represent a 30-member team). The FARC urged a ceasefire, but the government did not agree to one. A framework agreement for the talks signed by both parties identified the principal themes for the talks: (1) rural development policy; (2) guarantees on political participation once FARC guerrillas laid down their arms; (3) illegal drug trafficking; (4) ending the armed conflict, including a plan to integrate the guerrillas into civil society; and (5) support for the rights of victims of the armed conflict. The framework agreement also identified a role for the countries of Norway and Cuba as "guarantors" of the talks, and Venezuela and Chile to "accompany" the talks. The official talks are the first in a decade since the FARC held talks with the government of President Andrés Pastrana between 1998 and 2002. President Santos also announced that he envisioned the peace process taking months rather than years, and that if progress toward ending the conflict was not made he would shut down the negotiations. In mid-October 2012, the peace negotiations formally began in Oslo. In a press conference held at the opening of the talks, the FARC spokesperson made some strident remarks about the organization's many grievances with the Colombian government beyond the scope of the negotiated framework, dimming the hopes of some optimists. The brief opening ceremonies held in Norway were followed by a month interlude as the talks moved to Cuba. Since the announcement of the peace initiative, civil society groups stepped up their mobilization to have their perspectives on the peace process represented in the negotiations. A minor delay of the peace talks' start-up in Cuba was attributed to arranging civil society participation in the talks, according to a joint statement issued by both sides. On November 19, 2012, as peace talks resumed in Cuba, the FARC announced a two-month, unilateral ceasefire they described as a goodwill gesture. The government responded it would continue normal operations against rebel forces. The Santos peace initiative is seen by many as a political gamble for the president, although polling suggests that a majority of Colombians are cautiously optimistic. In a poll conducted for some leading media outlets in Colombia in early September (released September 11, 2012), 77% of Colombians approved of the president's decision to engage in peace negotiations with the FARC. However, not as many respondents thought the talks were likely to succeed. While popular support has moderated some since that time—a Gallup poll found in late October 2012 that 72% supported the talks—public opinion is certain to fluctuate as the closed-door meetings proceed in Cuba. The agreed-upon first topic for discussion, providing rural populations with access to land, illustrates the ambition of the negotiators to address some of the profoundly contentious issues that are at the root of the decades-long internal conflict. A hallmark of the Santos Administration has been improving relations with neighboring Ecuador and Venezuela. Improved relationships with both countries have led to greater cooperation on trade, counternarcotics, and security. The Santos Administration has also broadened Colombia's relations with other countries in the region. Sharing its considerable experience, Colombia has provided counternarcotics and security training to more than a dozen countries in Latin America, including Mexico, Haiti, Honduras, Guatemala, and others. Colombia's rising leadership in regional affairs was demonstrated when it hosted the sixth Summit of the Americas in Cartagena on April 14-15, 2012, with the participation of 30 of the 34 democratically elected leaders in the region. At the summit, President Obama and President Santos announced that the U.S.-Colombia Free Trade Agreement (FTA), approved by the U.S. Congress in October 2011, would enter into force on May 15, 2012. The agreement will drop nearly all tariffs and barriers to bilateral trade over the next decade. Beyond the FTA with the United States, the Santos government has sought to diversify regional relations and continued the market-opening strategies of former President Uribe. In late May 2011, Colombia, Peru, and Chile opened an integrated stock market. The same three countries, along with Mexico, have launched a trading block called the Pacific Alliance to facilitate the free flow of investment, trade, and people. As tension with Venezuela has eased, trade between the two countries has significantly recovered from an embargo imposed by President Hugo Chávez in 2009. The Santos government has actively pursued and concluded free trade agreements. A free trade agreement with the European Union is expected to be implemented by the end of 2012, and an agreement with Canada went into effect in August 2011. A free trade agreement was concluded with South Korea in 2012 and a conclusion with Japan is pending. A number of agreements signed with China have strengthened bilateral ties. Colombia has a long tradition of civilian democratic rule, yet has been plagued by violence throughout its history. This violence has its roots in a lack of state control over much of Colombian territory, and a long history of poverty and inequality. Conflict between the Conservative and Liberal parties led to two bloody civil wars—The War of a Thousand Days (1899-1903) and The Violence (1946 to 1957)—that killed hundreds of thousands of Colombians. A power sharing agreement (the so-called National Front pact) between the Liberal and Conservative parties ended the civil war in 1957, but it did not address the root causes of the violence. Numerous leftist guerrilla groups inspired by the Cuban Revolution formed in the 1960s as a response to state neglect and poverty. Right-wing paramilitaries formed in the 1980s when wealthy landowners organized to protect themselves from the leftist guerrillas. The shift of cocaine production from Peru and Bolivia to Colombia in the 1980s increased drug violence, and provided a source of revenue for both guerrillas and paramilitaries. The main paramilitary organization, the AUC, began demobilization in 2003 and disbanded in 2006 in a controversial process devised under the Uribe Administration. Uribe also took aggressive measures against the guerrilla insurgency. Major armed groups today are the FARC, the ELN, and the new generation of paramilitary groups. In May 2011, the Santos Administration announced a new security policy that aimed to dismantle all illegal groups by 2014. Nevertheless, as discussed above, President Santos revealed in August 2012 that exploratory peace talks had begun with the FARC, surprising many although rumors about government contacts with the FARC had been widely circulated. He later said that preliminary talks with FARC's leadership had been underway for about six months to establish a framework for the formal peace talks that would open in Norway in October and then move to Cuba. The announcement of official negotiations marked the fourth attempt in 30 years to negotiate with the insurgents. Some observers were optimistic about conditions for the new effort. For example, the International Crisis Group, an NGO that focuses on conflict resolution, maintains that the military superiority of the government and the relative weakness of the FARC provide "a more promising constellation" of conditions than existed during the last negotiations effort that ended in failure a decade ago. The FARC can trace its roots to armed peasant self-defense groups that had emerged during "the Violence" of the 1940-50s. By the 1960s, those groups—located in the remote, mountainous regions between Bogotá and Cali—had developed into a regional guerrilla movement. In 1964, the guerrillas announced the formation of the FARC, a group dedicated to rural insurgency. The FARC is the oldest, largest, and best-equipped and financed guerrilla organization in Latin America. It mainly operates in rural areas, but has shown its ability to execute attacks in urban areas, including Bogotá. It conducts bombings, murders, mortar attacks, kidnappings, extortion, and hijackings, mainly against Colombian targets. The FARC is fully engaged in the drug trade, including cultivation, taxation of drug crops, and distribution, from which it reaps significant profits. In recent years, the FARC has increased its activities along Colombia's borders with Ecuador and Venezuela. The Pastrana Administration (1998-2002) attempted to negotiate a peace agreement with the FARC during which FARC was granted control of a Switzerland-size territorial refuge during the peace process. The FARC was widely perceived to use the demilitarized zone as a way to re-arm, regroup, and build up its forces. With continued FARC military activity, including the hijacking of a commercial airliner and the kidnapping of a Colombian senator, President Pastrana halted the negotiations in early 2002 and ordered the military to retake control of the designated territory. During the inauguration of President Uribe on August 7, 2002, the FARC launched a mortar attack on the presidential palace that killed 21 residents of a nearby neighborhood. In mid-2003, the Colombian military's Plan Patriota campaign to recapture FARC-held territory began with a largely successful effort to secure the capital and environs of Bogotá. In 2004, military operations by up to 17,000 troops tried to regain territory from FARC in the southern and eastern regions of the country. The FARC launched a counter-offensive in February 2005. The conflict with the FARC has since largely remained in the countryside. The FARC was unable to disrupt President Uribe's August 2006 inauguration. In 2006 the FARC controlled an estimated 30% of Colombian territory. Plan Patriota reduced FARC ranks, recaptured land held by the FARC, and confiscated large amounts of material used to process cocaine. Despite those advances, critics pointed out that large numbers of civilians were displaced during the campaign. On March 1, 2008, the Colombian military bombed a FARC camp in Ecuador, killing at least 25 people including Raúl Reyes, the terrorist group's second-highest commander. This was the first time in the 44-year struggle against the FARC insurgency that the Colombian military killed a member of the FARC's seven-member ruling secretariat. A few days later, Ivan Rios, another member of the FARC's secretariat, was murdered by his own security agent. FARC's top commander, Manuel Marulanda, also died in March, of a heart attack. These three deaths dealt a significant blow to the FARC. During the raid in Ecuador, information extracted from captured laptops suggested Venezuela was providing support for the FARC. The files also included information that President Rafael Correa of Ecuador received campaign donations from the FARC in 2006. Both Presidents Chávez and Correa vigorously rejected these claims. Venezuelan officials dismissed the data as having been fabricated even though Interpol verified in May 2008 that the files had not been tampered with since they were seized. In 2007-2008, prisoner escapes, hostage deaths, and later hostage releases focused international attention on the plight of hundreds of hostages held by the FARC. In June 2007, 11 departmental deputies who had been held since 2002 were executed by the FARC. In December 2007, Fernando Araujo, a former minister of development, escaped from the FARC after being held hostage for more than six years. From February through July 2008, Araujo then served as Colombia's foreign minister. Six hostage releases occurred during early 2008. On February 27, 2008, the FARC released four former members of the Colombian Congress to Venezuelan officials in Colombian territory. On July 2, 2008, after months of planning and tracking the FARC, the Colombian military tricked the FARC into releasing 15 of its prized hostages. Those hostages included three U.S. defense contractors—Marc Gonsalves, Thomas Howes, and Keith Stansell—held since February 2003 and former Colombian presidential candidate Ingrid Betancourt, held since February 2002. This bloodless rescue was widely cited as an example of the Colombian military's increasing professionalism and intelligence capabilities, which was largely a result of years of U.S. training and security assistance programs provided through Plan Colombia. Most government estimates are that FARC forces have declined to between 8,000-9,000 fighters today. The FARC is roughly half of what it was at its peak in the early 2000s, when the FARC had as many as 16,000 to 20,000 members. The decline has come along with government victories in taking out some of the guerrilla organization's top leadership. Despite many reverses over its 48-year history, the FARC has shown a capacity to revive itself and continue to pose a serious security threat. The State Department's Country Reports on Terrorism 2011 (issued in July 2012) maintains that Colombia faced increased attacks by the FARC in 2011 and a decrease in the number of FARC troops that demobilized, or who were killed or captured. The successful reversion to the hit and run tactics of guerrilla warfare, despite the government's taking down two of the FARC's top leaders in 2011, resulted in increased casualties. The Santos Administration has kept up strong pressure on the FARC yet some public concern persists that the administration has faltered on security. In September 2010, the Colombian military and police bombed the camp of FARC military strategist Jorge Briceño (also known as "Mono Jojoy"), killing him and other guerrillas. Briceño was the operational second-in-command of the FARC and the military leader of its powerful Eastern bloc. In early November 2011, the Colombian government killed the FARC's top leader, Alfonso Cano. A week later, the FARC announced their new leader would be Rodrigo Londoño Echeverri (known as "Timoleón Jiménez" or "Timochenko"). The new leader quickly made overtures to open a political dialogue with the Santos government, including an announcement in late February 2012 that it would release all high-value hostages and halt future kidnapping. In recent years, the FARC has unilaterally released some hostages in an attempt to win popular support. For example, in March 2010, the FARC unilaterally released two of their high-value "exchangeable" hostages, including Sergeant Pablo Emilio Moncayo, who had spent 12 years in captivity. Unilateral releases continued as the Santos government settled in. In February 2011, the FARC released six more hostages in operations coordinated by former Senator Piedad Córdoba with international assistance. However, on November 27, 2011, the FARC killed four hostages who were members of Colombia's security forces who had been held hostage for more than a decade. The FARC executed the men as the Colombian military approached a FARC camp in a remote part of southern Colombia. A fifth hostage, Luis Alberto Erazo, survived the melee and escaped. Erazo, a police sergeant, had been held since 1999. In response there was wide public outcry. On December 6, 2011, demonstrations involving thousands of demonstrators in cities across Colombia expressed widespread public disgust with the FARC. In early April 2012, the FARC released its 10 remaining police and military hostages, following through on its announcement weeks before. The FARC had held individuals from the Colombian military and police as "exchangeable" hostages who they hoped to trade for some 500 imprisoned FARC combatants they considered political prisoners. However, the FARC continues to hold a disputed number of other kidnap victims beyond its "exchangeable" hostages. Reportedly, the FARC has diversified from kidnapping into illegal mining and logging, cattle rustling, and extortion to supplement its income after drug trafficking. FARC's leader Timochenko expressed interest in opening a dialogue with the government, although he did not appear to be ready to meet possible government demands such as the release of all hostages, implement a ceasefire, or ban the use of landmines. In 2011 and the first half of 2012, the FARC and ELN reportedly increased their attacks. According to the State Department's 2011 Country Reports on Terrorism , the FARC alone was responsible for 377 attacks in 2011 (79% of all terrorist attacks in the Western Hemisphere). There has been a sharp increase in infrastructure attacks. Pipeline attacks reportedly grew by more than 250% between the first half of 2011 and 2012, for example. Targets of the recent spate of attacks include electricity infrastructure, trains carrying coal, and gas pipelines. These attacks threaten the energy sector, a key source of the country's booming economy. (The energy and mining sectors generate about 70% of the country's exports with oil alone accounting for about 12% of the country's gross domestic product.) In 2012, the FARC and the Santos government began secret exploratory talks that led to the September 2012 announcement that formal peace talks would commence. (For more on the status of the negotiations, see " Peace Talks .") The smaller ELN was formed in 1965, inspired by the ideas of Fidel Castro and Che Guevara. The ELN today is estimated to have less than 2,000 fighters (some observers suggest the membership may be under 1,300), but the group has still been able to carry out high profile kidnappings and bombings. In addition to terrorizing the rural civilian population, the ELN has targeted the country's infrastructure, especially its oil and electricity sectors. Its operations are mainly located in the rural areas of the north, northeast, the Middle Magdalena Valley, and along the Venezuelan border. The ELN earns funds from the taxation of illegal crops, extortion, attacks on the Caño-Limón pipeline, and kidnapping for ransom. Its size and military strength have been dramatically reduced since the late 1990s. One measure is the reduction in sabotage attacks on the Caño-Limón pipeline from 171 attacks in 2001 to only five attacks in 2009. However, infrastructure attacks began to rise again in 2011 and early 2012. Over the years, the ELN has periodically engaged in peace discussions with the Colombian government. The last round of talks ended in June 2008, after which former President Uribe stepped up operations against the insurgent group. In the first two years of the Santos Administration, the ELN commander Nicolas Rodriguez Bautista, alias "Gabino," has repeatedly expressed interest in a "political solution" to the conflict. Following the president's announcement of the FARC-government peace talks, Gabino expressed interest in the ELN joining the peace negotiations; this was acknowledged by President Santos in his late August broadcast announcing the exploratory talks. The ELN leader offered to participate but stated that there would be no ceasefire or cessation of kidnapping and extortion before talks got underway. Later, in November 2012, the ELN announced it was interested in joining the peace talks "without preconditions." How and when the ELN might participate in the FARC-government formal talks remains to be further defined. As mentioned above, there has been recent evidence that the ELN has raised its level of violence. Some analysts believe that the ELN has been able to build up its forces because a truce between the ELN and the FARC agreed to in December 2009 may have finally gone into effect in 2011 following years of clashes between the two leftist guerrilla organizations. The ELN has also reportedly made pacts with some of the criminal bands (or Bacrim, see below) that pursue drug trafficking and other criminal activities. The modest "comeback" of the ELN and increased attacks by the FARC in 2011 and 2012 come at a time when there is a growing threat from former paramilitaries. Paramilitary groups originated in the 1980s when wealthy ranchers and farmers, including drug traffickers, organized armed groups to protect themselves from kidnappings and extortion plots by the FARC and ELN. In 1997, local and regional paramilitary groups felt the need for an umbrella organization and formed the AUC, which became the largest paramilitary group. As discussed in more detail below, the AUC disbanded in 2006. Not all paramilitary groups had joined the AUC umbrella. The AUC massacred and assassinated suspected insurgent supporters and directly engaged the FARC and ELN in military battles. The Armed Forces of Colombia have long been accused of ignoring and at times actively collaborating with these activities. The AUC, like the FARC, earned most of its funding from drug trafficking. Jane's World Insurgency and Terrorism estimated that in 2006 paramilitaries handled 40% of Colombian cocaine exports. On July 15, 2003, the AUC agreed with the Colombian government to demobilize its troops. At that time, the State Department estimated that there were between 8,000 and 11,000 members of the AUC, although some press reports estimated up to 20,000. The demobilization, begun in 2004, officially ended in April 2006. By that time, more than 31,000 AUC members had demobilized and turned in over 17,000 weapons. AUC leaders remained at large until August 2006 when President Uribe ordered them to surrender to the government to benefit from the provisions of the Peace and Justice Law. Not all paramilitaries demobilized. Some former paramilitary fighters have re-joined or re-organized into paramilitary groups since demobilizing. Some former AUC members continue to be active in the drug trade in spite of the demobilization process. The U.S. State Department and U.N. both note that the new illegal groups do not share the political objectives of the AUC, which sought to defeat leftist guerrillas, but have shifted to purely criminal purposes, predominantly drug trafficking, extortion, kidnapping and other crime. Despite their ad-hoc nature, the new illegal groups—labeled "emerging criminal gangs" or "Bacrim," (the Spanish acronym), by the Colombian government—pose a threat to Colombian civilians. The level of violence generated by these paramilitary successor groups and their expansion and consolidation have led many observers to consider them the primary security threat to Colombia today. According to the Annual Report of the U.N. High Commissioner for Human Rights (UNHCHR) covering 2010, these groups commit murders, massacres, threats, extortion, and acts of sexual violence, and cause individual and mass displacement. Several human rights groups have raised concern that the Bacrim are tolerated by Colombian security forces and some local authorities due to corruption, intimidation, and threats. Police reports indicate that more than 50% of the members of these groups who have been captured or killed to date had been demobilized paramilitaries, according to the UNHCHR in its 2011 annual report issued in January 2012. Another issue raised in the report is the control by Bacrim or successor groups of illegally seized land (either because it was re-stolen by the successor groups or it was acquired through their links to paramilitary networks). According to the report, these groups have violently defended their control of land and pose a threat to the government's land restitution program under the Victims' Law. Leaders of land return efforts and others involved in land restitution processes have been targeted and killed by the Bacrim. One group calls itself the "Anti-Land Restitution Army" and has made threats against land restitution activists in northern Colombia. In early 2012, one of the most powerful Bacrim groups, Los Urabeños, staged an armed strike that paralyzed businesses and shut down transportation in six northern departments of Colombia for two days in response to the killing of their leader Juan de Dios Usaga by the Colombian police. The armed strike cost local businesses and governments millions of dollars. A series of terror attacks in early February 2012 may have resulted from collaboration between the FARC and criminal bands such as the Rastrojos according to the government. There are about a half dozen dominant Bacrim groups including Los Urabeños, Los Ratrojos, the Popular Revolutionary Anti-Terrorist Army of Colombia (ERPAC), Los Machos, Los Paisas, and the Aguilas Negras. It is unclear how many smaller groups there are. As noted, the organized criminal groups both compete and cooperate with the FARC and the ELN. The Santos government has adopted an integrated strategy to target these groups and has captured or killed some of its main leaders. Nevertheless, the violence they generate, and the growing number of massacres and victims attributed to this violence, suggests that government success in dismantling the Bacrim structures has been limited. Reportedly the Bacrim groups are present in more than a third of Colombia's 1,100 municipalities. A scandal alleging paramilitary ties to politicians, especially members of the Colombian Congress that erupted in November 2006 has continued to affect Colombian politics after more than five years. On November 9, 2006, the Colombian Supreme Court ordered the arrest of three congressmen for their alleged role in establishing paramilitary groups. Since then, numerous Colombian politicians have been charged with ties to paramilitary groups in what is called the "para-political" scandal. In April 2008, Mario Uribe, a former senator, second cousin, and close ally of former President Uribe, was arrested for colluding with the paramilitaries. On February 21, 2011, Mario Uribe was convicted of aggravated conspiracy to commit a crime and sentenced to seven and a half years in prison. Illustrating the widespread fallout from the para-political scandal, the State Department has reported that of Colombia's 2006-2010 Congress, 128 former representatives (out of the 268 total) were accused of having paramilitary ties. Of the representatives elected to the 2010-2014 Congress, 13 who were re-elected were under investigation by the Supreme Court. The para-political scandal increased tensions between former President Uribe and the Supreme Court, which is charged with investigating the politicians accused of having paramilitary ties, many of whom were from what were then pro-Uribe parties. In July 2008, representatives from the two branches met to discuss President Uribe's concern that the paramilitary investigations were advancing too quickly. Despite those meetings, the Supreme Court ordered the arrest of Senator Carlos Garcia, head of Uribe's main coalition party, in late July. Government critics questioned President Uribe's decision in May 2008 to extradite key paramilitary figures to the United States, suggesting it was intended, in part, to thwart investigations into government-paramilitary ties. They also questioned the motives behind a judicial reform package submitted by Uribe to the Congress that would remove the Supreme Court's power to investigate legislators. The judicial reform bill was withdrawn by the government after it received strong criticism from the courts and from members of Colombia's Congress. In October 2008, Human Rights Watch released a report that said that the Uribe Administration had harassed the Supreme Court as it investigated politicians, security forces, and others with alleged paramilitary ties. The Santos Administration moved quickly to repair relations between the executive and the judiciary. The improved relations may have been demonstrated by the prompt election by the Supreme Court of a new Prosecutor General in December 2010. There had been an impasse of 16 months during which the Supreme Court would not approve anyone proposed by President Uribe. (However, in late February 2012, the Council of State decided to unseat the prosecutor general because of irregularities in the voting procedure which put her in office.) In late March 2012, Santos's nominee to be prosecutor general Luis Eduardo Montealegre Lynett was again elected promptly by the Colombian Supreme Court. In February 2008, Jorge Noguera, the head of Colombia's Department of Administrative Security (DAS) during President Uribe's first term, was formally charged with collaborating with paramilitaries, including giving paramilitaries the names of union activists, some of whom were subsequently murdered. Noguera was convicted in September 2011 by the Colombian Supreme Court for the murder of a university professor and conspiracy with illegal paramilitary death squads and other charges; he received a 25-year prison sentence. Noguera has been at the center of a scandal involving the DAS's illegal wiretapping and other criminal activities. The "DAS scandal" generated other investigations and convictions and led to the dismantling of the DAS by the Santos Administration. In August 2012, General Mauricio Santoyo, chief of security for President Uribe between 2002 to 2006, pled "guilty" to collaborating with illegal paramilitaries. While he admitted to cooperation with the AUC, he rejected drug trafficking charges in U.S. court. Santoyo is the highest ranking Colombian official to be extradited to the United States to face criminal charges. He is now collaborating with U.S. authorities in an ongoing investigation. The para-political scandal and other abuses of power related to paramilitary influence continue to reverberate in Colombian politics. As part of the paramilitary demobilization process, President Uribe proposed a Justice and Peace Law (JPL) granting conditional amnesties to illegal combatants. The law would also apply to FARC and ELN fighters if they entered into negotiations with the government. Colombia's Congress approved the legislation in 2005. The Justice and Peace Law requires demobilized fighters to provide an account of their crimes and to forfeit illegally acquired assets in exchange for a penalty of up to eight years' imprisonment, as an alternative penalty to longer terms usually imposed for murder, kidnapping, terrorism and other crimes. If the accused was found to have intentionally failed to admit to a crime, the alternative penalty could be revoked and the full sentence for the concealed crime would be imposed. Critics contended that the penalties were too lenient and amounted to impunity. The Uribe Administration argued that without the inducement of the new law, paramilitary leaders and fighters would be unwilling to demobilize and the violence would continue. In July 2006, Colombia's Constitutional Court upheld the constitutionality of the law. In the ruling, however, the Constitutional Court limited the scope under which demobilizing paramilitaries can benefit from the reduced sentences. Paramilitaries who commit crimes or fail to fully comply with the law will have to serve full sentences. The law affirmed that paramilitaries must confess all crimes and make reparations to victims using both their legally and illegally obtained assets. Paramilitary leaders reacted by stating that they would not comply with the law. In response, President Uribe ordered paramilitary leaders to turn themselves in. By October 2006 all but 11 paramilitary leaders had complied with this order. The merits of the Justice and Peace Law have been fiercely debated in Colombia and the United States. Supporters believe it has been an effective means to end paramilitary activities. The George W. Bush Administration supported the law, noting that it facilitated the collective demobilization of more than 31,000 paramilitary members. In addition, some 20,000 FARC, ELN, and former paramilitaries have individually laid down their arms. Other supporters of the law observe that paramilitaries must act in good faith and stop further participation in illegal activities in order to benefit from alternative sentencing. Nevertheless, the OAS Mission to Support the Peace Process in Colombia and other observers have expressed concern about the institutional frailty of the Justice and Peace process. Today more than 377,000 victims have registered under the JPL. Many observers have expressed reservations about the Colombian government's efforts to provide reparations to victims effectively. Human rights organizations are concerned that the paramilitaries have not been held accountable for their crimes and, that by under-reporting illegally obtained assets, have failed to provide adequate reparation to their victims. Other observers are concerned that many paramilitaries have not participated in the Justice and Peace process. Of the more than 31,000 paramilitary members that had demobilized, only 4,153 had been found potentially eligible to receive benefits under the Justice and Peace Law's framework. In response to concerns raised by NGOs that extradited former paramilitaries would stop cooperating in the JPL process and victims would be unable to participate, the U.S. and Colombian governments have collaborated to facilitate the continued participation of extradited individuals through telecommunications links. According to the State Department, several extradited former paramilitaries have continued to participate by providing their confessions through teleconferencing. Of the more than 4,000 individuals who were eligible for alternative prosecutions under the 2005 law, more than 1,800 demobilized paramilitaries are incarcerated while awaiting trial while only 14 individuals have been convicted under the JPL in seven years. In his March 2010 report, then-U.N. Special Rapporteur on Extrajudicial, Summary, or Arbitrary Executions, Philip Alston, observed "the Justice and Peace Law ... has not achieved the transitional justice intended for paramilitary crimes." Alston's observations seem to have continuing validity. In response to concerns about the JPL's many implementation challenges, the Colombian Congress passed a reform of the law in October 2012 to speed up its judicial processes. According to proponents, the reform reduced the number of hearings required to achieve sentencing under the law, clarified reasons for exclusion from the benefits of the JPL sentencing, and took other steps to increase the effectiveness of the Justice and Peace process. For several years, human rights organizations have raised serious concerns about the extrajudicial execution of civilians by the Colombian military. This issue received prominent attention when more than a dozen young men from the impoverished community of Soacha were lured to another part of the country with a promise of jobs and then murdered. In October 2008, the armed forces were linked to the murders of civilians whose bodies had been disguised as guerillas in order to inflate military body counts. As a result of an investigation, the government fired 27 soldiers and officers (including three generals), and the commander of the Colombian army, General Mario Montoya, resigned in November 2008. Named the "false positives" scandal by the Colombian press, there have been continuing revelations about this problem as the Colombian military has worked to revise a policy that rewarded high guerrilla body counts. Many observers believe that justice in the Soacha murder cases, and others, has lagged. In January 2010, more than 20 soldiers accused of carrying out the Soacha murders (of the more than 60 soldiers now implicated in the case) were released from pretrial detention by a judge who ruled that the pre-trial procedures had taken too long. Reacting to this ruling, the representative of the U.N. High Commissioner on Human Rights in Colombia expressed concern about the ruling's negative repercussions on the large backlog of cases of extrajudicial killings being investigated by the Prosecutor General's human rights team. The State Department's Country Reports on Human Rights Practices for Colombia covering 2009 stated that "political and unlawful killings remained an extremely serious problem," and that "there were periodic reports that members of the security forces committed extrajudicial killings during the internal armed conflict," although the number had decreased since the prior year. In its 2009 State of the World Human Rights report, Amnesty International asserted that between June 2007 and June 2008, at least 296 civilians were extrajudicially killed by Colombian security forces and many were disguised as guerillas who had been killed in combat ("false positives"). In June 2009, on a 10-day mission to Colombia, then-U.N. Special Rapporteur on Extrajudicial Executions Philip Alston found that the killings were not a result of official government policy. Nevertheless, according to the Special Rapporteur, "the sheer number of cases, their geographic spread, and the diversity of military units implicated, indicate that these killings were carried out in a more or less systematic fashion by significant elements within the military." The slow pace of bringing the Soacha murder cases to trial (it has been more than four years) suggests to some that the Prosecutor General's office may be overwhelmed. The first convictions in the Soacha trials came in June 2011 when eight soldiers were convicted of two murders of young Soacha residents, receiving sentences ranging from 28 to 54 years in prison. In 2012, there was another false positive case in which six soldiers were sentenced for the murder of a young man from Soacha to between 35 to 52 years in prison. According to the State Department's latest human rights certification, several cases involving victims from Soacha are pending as of August 2012. The extrajudicial killings Sub-Unit of the Prosecutor General's office has been assigned over 1,700 cases (involving more than 3,500 victims) of extrajudicial killings allegedly committed by members of the Colombian Armed Forces between 1985 through June 2012. According to some human rights advocates, the high level of incomplete cases is evidence that impunity remains the norm. There has been progress, however, in reducing the number of new cases. As noted, the number of new cases fell in 2009 and 2010, and no new cases "fitting the false positives profile" were reported in the most recent human rights certification issued by the State Department in August 2012. Colombia has one of the largest populations of internally displaced persons in the world—most estimates placing the total between 4 million to 5 million IDPs—with indigenous and Afro-Colombians disproportionately represented among those displaced. There is some disagreement over the rate of displacement. Some IDPs do not register with the Colombian government out of fear and because of procedural barriers. Therefore, estimates of new displacements put forth by NGOs tend to be higher than government figures. For 2011, the government maintained there were 143,116 new displacements (a 7% increase over 2010). The Consultancy for Human Rights and Displacement (CODHES), a Colombian NGO, reported 259,146 displacements. Many humanitarian organizations and the Colombian government reported a significant increase in mass displacements during 2011. CODHES and the government also differ on the total number displaced. The government has registered 3.9 million people as IDPs since 1997, while CODHES estimates more than 5 million have been displaced since 1985. The U.N. High Commissioner for Refugees (UNHCR) has observed that however IDPs are counted, the number of the displaced in Colombia continues to grow and is one of the largest internally displaced populations in the world. Displacement is driven by a number of factors, most linked to the internal armed conflict. It occurs frequently in more remote regions of the country where armed groups compete and seek to control territory or where armed groups confront Colombian security forces. Violence that uproots people includes threatened or actual child recruitment or other forced recruitment, and physical, psychological, and sexual violence. Other contributing factors reported by NGOs include counternarcotics measures such as aerial spraying, illegal mining of minerals and ore, and large scale economic projects in rural areas. There are increasing reports of "interurban" displacement in cities such as Medellin, resulting from violence and threats by organized crime groups. The use of landmines by Colombian guerrilla groups is a very serious ongoing problem. Although Afghanistan and Cambodia continue to have higher rates of landmine casualties (per capita) than Colombia, the International Campaign to Ban Landmines reported that Colombia had the highest number of landmine casualties in the world in 2006, with 1,106 casualties. Both Human Rights Watch and the International Campaign to Ban Landmines report that the vast majority of landmines are laid by the FARC and ELN. In 2007, Landmine Monitor cited a decline in landmine casualties to 895, the first decline since 2002. The change was attributed to setbacks suffered by the FARC. Landmine casualties in Colombia declined further in 2008 to 798, and to 741 in 2009 and 512 in 2010. In November 2012, the Colombian Minister of Agriculture maintained that much of the land being claimed for return under the Victims' Law (see " Reforms under the Santos Administration ") that was in FARC control had been mined. He noted that demining the land will be slow and costly. Colombia's prominence in the global production of cocaine and heroin has long been a U.S. focus of counternarcotics efforts in the Andean region. On July 30, 2012, the U.S. Office of National Drug Control Policy (ONDCP) announced that in its estimates Colombia's potential cocaine production capabilities had fallen below Peru's and Bolivia's. According to the estimate, Colombia's 2011 potential cocaine production fell to 195 metric tons, 25% below the prior year estimate and 72% below the U.S. government estimate for 2001. Nearly the entire world's supply of cocaine is produced by just three countries: Peru, Bolivia, and Colombia. The major components of U.S. strategy have been drug crop eradication, interdiction, and alternative development programs, all with an eye to reducing the drug supply at its source. Until the mid-1990s, Peru and Bolivia were the two major producers. Successful eradication and interdiction efforts in the 1980s and 1990s of coca and cocaine in Peru and Bolivia inadvertently pushed cultivation to Colombia. Colombia eclipsed Bolivia in 1995 and Peru in 1997. Cocaine production in Colombia increased fivefold between 1993 and 1999. But by 2010, cultivation of coca had decreased in Colombia according to estimates published by the United Nations, and pushed back into Peru and Bolivia. This suggests the so-called "balloon effect" may be responsible. This occurs when producers working to supply the illicit drug market move their operation to locations they perceive to have less enforcement—that is pressure in one part of the "balloon" moves the trade to another—yet total global production is mainly unaffected. The estimates of the area under coca leaf cultivation and the volume of potential production of pure cocaine depend upon making assumptions from limited data. The United Nations Office on Drugs and Crime (UNODC) and the U.S. government have developed varying estimates that report midpoints in a range of likely cultivation and production, but U.S. and U.N. estimates often differ considerably. The organizations also sometimes modify their estimates after more data is collected. For example, UNODC modified its 2008 calculation upward for Colombia's production of pure cocaine from 430 metric tons to 450 metric tons. On the other hand, the U.S. government changed its estimate of production of pure cocaine for 2008 downward from 295 metric tons to 280 metric tons. In its annual coca cultivation survey for Colombia published in June 2012, UNODC reported that 64,000 hectares of coca were grown in the country in 2011. This was a slight increase over the 62,000 hectares of coca detected in 2010. However, the UNODC also estimated for 2011 that Colombia's potential production of cocaine fell by 1% to 345 metric tons in 2011. In contrast, the U.S. government estimates for coca cultivation registered a 17% decline from 100,000 hectares in 2010 to 83,000 hectares in 2011. The White House Office of National Drug Control Policy announced that the U.S. government estimate for potential production of cocaine had in 2011 declined to 195 metric tons, a 72% reduction over the high point in 2001 of an estimated 700 metric tons. The new U.S. production estimate placed Colombia behind both Peru and Bolivia in pure cocaine production. Some observers maintain the divergent estimates are contradictory and do not present a coherent picture. Nevertheless, according to the State Department's 2012 International Narcotics Control Strategy Report (INCSR) published in March 2012, Colombia produces about 95% of the cocaine seized in the United States. In recent years, the Colombian government, with significant U.S. assistance, has stepped up its eradication efforts. ONDCP has credited ongoing aerial spraying and manual eradication programs with recent declines in the cocaine productivity of the coca cultivated in Colombia. In the 2011 INCSR , the State Department notes that the eradication efforts goals were set lower based on what was accomplished in 2009. Manual eradication in 2010 declined considerably to below its goal of 70,000 hectares, when the government managed to manually eradicate about 45,000 hectares of coca "due to budgetary disbursement delays, security concerns, and the dispersion of coca crops to smaller fields." In 2010, the government eradicated nearly 102,000 hectares by spraying, slightly above its stated aerial eradication target. In 2011, according to the latest INCSR , Colombia manually eradicated 34,592 hectares and sprayed slightly over 102,000 hectares. After a long period of stable prices, purity, and availability of illegal drugs in the United States, evidence indicated that the price of cocaine rose significantly between January 2007 and September 2010. According to the Department of Justice's National Drug Intelligence Center (NDIC) report, National Drug Threat Assessment 2011 , the average street price for a pure gram of cocaine rose from $97.71 to just under $165 in that time period, while average street sale purity declined from 67% to 47%, a decline of 30%. The supply of drugs is often judged by changes in price, with higher prices signifying decreased supply (or increased demand which does not appear to be the case in the United States). Declining purity also measures decreased availability. The NDIC report , published in August 2011, found a sharp decline in cocaine availability in the United States since 2006 that may have been responsible for price increases and purity declines. The report identifies no single factor for the decline in cocaine availability. Rather, a combination of factors, including decreased ability to move cocaine from South America due to intercartel fighting in Mexico and counterdrug activity, decreased production of cocaine in Colombia, and cocaine flowing to non-U.S. markets (such as Europe), all likely contributed to decreased amounts being smuggled into the United States. Some observers express caution in interpreting recent trends in price, purity, and availability. They maintain that short-term fluctuations are not uncommon and may not be sustainable. Analysts note that over the longer term retail cocaine prices have dropped dramatically since the mid-1980s. Even with the significant increase in price for a pure gram of cocaine between 2007 and 2010, the price has still not surpassed the level of 2001 (a year after the inception of Plan Colombia), when it was $194 per gram. Most heroin consumed in the United States comes from Mexico and a lesser quantity from Colombia. In an October 2008 report on Plan Colombia, the U.S. Government Accountability Office (GAO) reported that opium poppy cultivation and heroin production had declined in Colombia by about 50% between 2000 and 2006. In 2008, the U.N. reported that opium production dropped to 394 hectares in Colombia, the lowest figure in the last 14 years of reporting. In 2009 and 2010, the number of hectares under cultivation continued to decline dropping to a low of 346 hectares in 2010. Another U.S. policy focus in the Andean region is helping Colombia deal with armed insurgencies that are involved in drug trafficking and have a destabilizing effect on regional security. Colombia shares a 1,367-mile border with Venezuela, approximately 1,000 miles each with Peru and Brazil, and much smaller borders with Ecuador and Panama. With porous borders amid rugged territory and an inconsistent state presence, all of Colombia's border regions have been particularly problematic. The conflict in Colombia and its associated drug trafficking have led to spillover effects in Colombia's neighboring countries, especially Venezuela and Ecuador. Colombia's relations with its neighbors have been strained by the spillover from Colombia's counter-insurgency operations, including cross-border military activity. Colombia has asked both Venezuela and Ecuador for assistance in patrolling border areas where the FARC and, in some cases, the ELN are strong. Cooperation between Colombia and its neighbors, Venezuela and Ecuador, who had tense relations with the Uribe Administration, has markedly increased under President Santos. Both governments re-established diplomatic relations with Colombia following the Santos inauguration. Ties with Ecuador were severed for 33 months because of the 2008 bombing raid by the Colombian military on a FARC camp located inside Ecuador near the border. In response to that raid, Venezuela also broke off relations and sent troops to its border with Colombia. Following a diplomatic intervention, Venezuela restored relations. Personal relations between Venezuelan President Hugo Chávez and President Uribe were quite tense as both leaders accused one another of undermining their governments. In July 2009, Venezuela withdrew its ambassador and imposed a trade embargo following Colombian accusations that Venezuelan government military equipment had been discovered in a FARC camp. By the year's end, bilateral trade fell by one-third as a result of the trade cut off, weakening one of Colombia's most important trade relationships. In October 2009, a U.S.-Colombia base agreement that was signed that permitted U.S. troops to use seven military facilities in Colombia further inflamed President Chávez. He claimed that the placement of U.S. troops in Colombia was a threat and described the now stalled base agreement as "fanning the winds of war" across the region. In its last month in office, in July 2010, the Uribe government presented evidence at the Organization of American States (OAS) that the Venezuelan government was harboring FARC and ELN fighters in numerous camps inside its territory. These charges brought relations to a nadir. After President Santos took office, Venezuela and Colombia restored diplomatic ties in late August 2010, and Ecuador renewed full diplomatic relations with Colombia in December 2010. Since then, bilateral cooperation on issues such as trade, cross-border crime, and counternarcotics has been strengthened. In 2011, several FARC operatives have been captured in both countries and extradited to Colombia. A number of alleged drug kingpins wanted in Colombia have been arrested in Venezuela, including Maximiliano Bonilla (known as "Valenciano") in November 2011 and Daniel Barrera (alias "El Loco") in September 2012. Barrera's arrest in the Venezuelan border state of Táchira involved a joint Venezuelan-Colombian operation with support from U.S. and British intelligence agencies. Barrera was allegedly deeply involved in drug trafficking for more than two decades and served as a bridge between leftist insurgents, rightwing paramilitaries, and some of Colombia's largest drug trafficking organizations. The State Department's Country Reports on Terrorism 2011 , issued in July 2012, cites the increasing bilateral cooperation of Venezuela and Colombia on security. According to the report, President Chávez made statements that illegal armed groups will not be tolerated on Venezuelan territory. However, the report also notes that four Venezuelan government officials are targets of U.S. sanctions for their direct links to the FARC's drug and arms trafficking activities. Despite government denials, many observers believe that Venezuela is used for rest, resupply, and drug transit by the FARC and to a lesser degree the ELN. To Colombia's south, the report states "Ecuador's greatest counterterrorism and security challenge remained the presence of Colombian terrorist groups in the extremely difficult terrain along the porous 450-mile border with Colombia." Ecuador's ability to combat these groups has been limited by resources and capabilities. Ecuador has other issues with Colombia. It receives high numbers of refugees from Colombia's conflict and opposes aerial spraying of coca in southern Colombia that it fears drifts into Ecuador and damages licit Ecuadorian crops. However, relations between Colombia and Ecuador have steadily improved under the Santos Administration, a process that began in the later months of the Uribe Administration. Many analysts see this regional diplomacy by President Santos as an effort to build a more balanced approach to neighboring countries and to end Colombia's relative isolation in the region that had grown during the Uribe Administration. Others maintain that future relations with Venezuela are uncertain, given the unpredictability of recently re-elected President Chávez and concerns about his health. The supportive role of Venezuela to the peace negotiations with the FARC also elevates the relationship, which is decried by former President Uribe and other critics of the peace talks. The rapprochement with Venezuela has had its trade offs for the United States. When drug kingpin Walid Makled Garcia was arrested in Colombia on a U.S. warrant in August 2010 and requested for extradition by both Venezuela and the United States, the Colombian government honored the Venezuelan request and returned Makled to Venezuela in May 2011. Plan Colombia was developed by President Pastrana (1998-2002) as a strategy to end the country's 40-year-old armed conflict, eliminate drug trafficking, and promote development. The initial plan was a $7.5 billion six-year plan, with Colombia providing $4 billion of the funding and requesting $3.5 billion from the international community. The U.S. Congress approved legislation in support of Plan Colombia in 2000, as part of the Military Construction Appropriations Act of 2001 ( P.L. 106-246 ) providing $1.3 billion for counternarcotics and related efforts in Colombia and neighboring countries. Plan Colombia was never authorized by Congress. Subsequent funding has been appropriated for Plan Colombia and follow-on plans annually. President Bush continued support for the plan under the Andean Counterdrug Program (ACP) aid account. The ACP account funded counternarcotics programs in Bolivia, Brazil, Ecuador, Panama, Peru, and, until FY2008, Venezuela. The U.S.-Colombian partnership, initially focused on counternarcotics, shifted in 2002. Because narcotics trafficking and the guerrilla insurgency had become intertwined problems, Congress granted the Administration flexibility to use U.S. counterdrug funds for a unified campaign to fight drug trafficking and terrorist organizations. Formerly, the ACP and Foreign Military Financing (FMF) accounts supported the eradication of coca and opium poppy crops, the interdiction of narcotics shipments, and the protection of infrastructure through training and material support for Colombia's security forces. U.S. assistance supports alternative crop development and infrastructure development to give coca and opium poppy farmers alternative sources of income, and institution building programs to strengthen democracy. In FY2008, alternative development programs were shifted from the ACP account to the Economic Support Fund (ESF) account. U.S. assistance includes human rights training programs for security personnel in response to Congressional concern about human rights abuses committed by Colombian security forces. Congress has prohibited U.S. personnel from directly participating in combat missions. It has also capped the number of U.S. military and civilian contractor personnel who can be stationed in Colombia in support of Plan Colombia at 800 and 600 respectively, although numbers deployed have been well below the 1,400-person cap in recent years. The United States also supports the interdiction of drug shipments through the Air Bridge Denial (ABD) Program. The Air Bridge Denial program began as a joint interdiction effort between the United States, Peru, and Colombia to identify drug flights from Peru to Colombia and to interdict them by forcing them to land, or, if necessary, by shooting down suspect aircraft. The program was suspended in 2001 after a small airplane carrying American missionaries was mistakenly shot down over Peru. Following the establishment of new safeguards against accidental shootdowns, the program was renewed in Colombia in 2003. In 2008, the United States began turning over operational and financial responsibility for Plan Colombia programs to the Colombians in a process of nationalization. Over the last four years, as U.S. funding for Plan Colombia has gradually declined, several programs were successfully nationalized, including the ABD program and several police and military aviation operations. The nationalization efforts are not intended to end U.S. assistance, but rather reduce it to pre-Plan Colombia levels adjusted for inflation. Upon taking office, President Uribe announced that aerial eradication, along with alternative crop development, would form a significant basis of the government's efforts to reduce cocaine production. The Plan Colombia eradication spraying program began in December 2000 with the U.S.-funded counternarcotics brigade in Putumayo. It should be noted, however, that spraying does not prevent, although it may discourage, the replanting of illicit crops. According to the 2012 International Narcotics Control Strategy Report , manual eradication in Colombia fell to 45,000 hectares in 2010 and was just over 34,000 hectares in 2011 not reaching the targets set due to "security concerns, budget issues, and the dispersion of coca to smaller fields." The report notes that 9 manual eradicators were killed in 2011 (and 32 injured) due to attacks from traffickers and other illegally armed groups. As discussed above, the United Nations and United States use different methodologies to estimate annual coca cultivation levels in Colombia. The different methodologies yield results that not only show different levels of cultivation, but sometimes different trends as well. The area of cultivation is measured in hectares, and a hectare is equivalent to 2.47 acres. The UNODC maintains that if an adjustment is made for the prevalence of small fields that Colombia's coca cultivation declines from a base estimate of 73,000 hectares in 2009 to 62,000 hectares in 2010. According to the State Department's 2012 INCSR , the U.S. government estimated that Colombia's coca cultivation declined from 116,000 hectares to 100,000 hectares in 2010, a 14% decline. The U.S. government estimates for 2011 show another decline to 83,000 hectares whereas the UNODC showed a slight increase to 64,000 hectares. Aerial eradication has been controversial both in Colombia and the United States. Critics have long charged that it has unknown environmental and health effects, and that it deprives farmers of their livelihood, when carried out without coordination with alternative development programs. With regard to environmental and health consequences, the Secretary of State, as required by Congress until FY2012, has reported that the herbicide, glyphosate, does not pose unreasonable health or safety risks to humans or the environment. In consultation for the certification, the U.S. Environmental Protection Agency has confirmed that application procedures and concentration of the aerial spray program in Colombia are within the parameters listed on U.S. glyphosate labels. Nevertheless, press reports indicate that many Colombians believe the health consequences of aerial fumigation are grave, and many international NGOs criticized the prior certification process for being analytically inadequate. The U.S. Agency for International Development (USAID) funds alternative development programs to assist farmers of illicit crops in the switch from illicit to licit crops, and provides assistance with infrastructure and marketing. The approach includes job creation for rural families in coca-growing and conflict-prone areas with economic development potential. From 2002 through September 2009, the United States completed 1,290 social and productive infrastructure projects with communities that agreed to remain free of illicit crops according to the State Department. The USAID Mission in Colombia reports significant progress since funding started flowing for alternative development through Plan Colombia. By the end of FY2010, alternative development programs had benefitted 479,221 families and supported 476,215 hectares of licit crops (cumulative totals) in both coca and poppy areas. The success of alternative development in Colombia has been limited both by security concerns and the limited scope of the program. The 2008 GAO report, among others, that examined the progress of Plan Colombia identified weaknesses in the program. For example, a majority of the USAID alternative development projects in Colombia were not located in areas where the majority of coca is grown and they have not been evaluated for meeting drug reduction goals or for their sustainability. Security concerns were blamed for the proposed withdrawal of USAID assistance from five departments where coca production was increasing, according to a USAID memo leaked to the press in October 2006. UNODC reported in June 2006 that alternative development programs have been successful, but only reach 9% of Colombian coca growers. The organization called for a tenfold increase in international donor support for alternative development programs. In 2006, USAID redesigned its strategy to lure coca growers to relocate to geographic zones that offered economic opportunities from zones where coca had been grown. The two core projects of the USAID strategy that ran between 2006 and 2011 were the More Investment for Sustainable Alternative Development (MIDAS) and Areas for Municipal Level Alternative Development (ADAM). Both projects have generated thousands of hectares of licit crops and jobs. In FY2010, USAID reported that it helped rural families produce more than 95,000 hectares of licit agricultural products and to create more than 150,000 jobs. However, the USAID projects have been criticized for neither reaching those most vulnerable to coca cultivation nor providing adequate income substitution during the comparatively long time needed for alternative crops to mature and generate sufficient and sustainable income. Several assessments of USAID's alternative development program under Plan Colombia cite the "zero coca" policy of the Colombian government as actually a barrier to reaching those impoverished farmers most vulnerable to coca growing. For example, in one assessment, researchers were told "alternative livelihoods assistance reaches only a small segment of the population in need, i.e. either cultivating coca or vulnerable to coca cultivation." Proponents of U.S. policy argue that both eradication and alternative development programs need time to work and that alternative development programs do not achieve drug crop reduction on their own. Alternative development in Colombia was designed to support the aerial and manual eradication programs. An integrated approach to alternative development was one element of the National Consolidation Plan officially launched by the Colombian government in 2008. In early 2007, the Colombian Ministry of Defense announced a "Policy of Consolidation of Democratic Security" to guide security policy for the Uribe Administration's second term (2006-2010). The new strategy was intended to consolidate the gains of the Democratic Security policies that were successful in reducing violence in the first term and to consolidate state presence in marginal areas where insurgent activity by illegal armed groups, drug trafficking, and violence converged. Called "integrated action" and later the National Consolidation Plan (PNC), the strategy combines security, counternarcotics, and development in a sequenced approach targeting remote, but strategically important, areas where illegal armed groups continue to operate. First, security forces enter a contested zone to stabilize and hold the area so that civilian state institutions can come in to provide social services such as justice, education, health, and housing to establish a positive state presence. The doctrine is based on the premise that all military and social actions are interdependent and no effort can be successful if the complementary efforts are not. Led by civilian and defense officials in the Ministry of Defense, this major shift in approach was declared to be a "strategic leap" forward by then- Colombian Defense Minister Juan Manuel Santos in March 2009. At the local level, this strategy is carried out at regional consolidation centers staffed by civilian, police, and military personnel. The two best-known pilot projects, which have each received considerable U.S. and international support, are the regional coordination centers established in the Macarena in the Meta department and Montes de María near the central Caribbean coast. Both are intended to function as models for consolidation efforts in other municipalities located in priority zones in Colombia. Six municipalities in the Macarena region (formerly a high coca growing area) reduced their coca cultivation by 85% between 2007 and August 2012 with minimal replanting, suggesting the consolidation efforts have been effective. Early critics argued that the blurring of lines between military and civilian activities poses some dangers and that there is a need for increased civilian leadership and greater representation of community interests. USAID programs and the U.S. Department of Defense have strongly supported this approach and provided funding to consolidation programs since 2007. The Colombia Strategic Development Initiative aligns U.S. assistance with the new strategy. According to the State Department, the U.S. government collaborated with Colombia since 2008 to pilot integrated counternarcotics initiatives in three regions that combined security, eradication and development. In September 2010, President Santos "relaunched" the National Consolidation Plan so it dovetails with Colombia's development plans and targets zones that can become the source of new economic growth in Colombia. The PNC has been refocused to concentrate on 51 priority municipalities (out of a national total of 1,100), and the current USAID "consolidation and livelihoods" programming goes to 40 of the priority municipalities. According to the 2012 INCSR , the U.S. government provides alternative development assistance for communities as they transition in the consolidation process. In zones that have recently been recovered, the U.S. government provides support for immediate and short-term activities designed to meet immediate needs, such as quick impact projects to establish roads, bridges, health posts, and electrification to help communities recover from the impact of conflict and eradication. For PNC municipalities that have been in the program longer, the U.S. government assistance includes strengthening producer associations, increasing marketing opportunities for licit crops, and technical assistance to Colombian civilian agencies that are working to establish a permanent presence. The 2012 INCSR comments that coca cultivation and cocaine production reductions in Colombia have demonstrated the success of a counternarcotics strategy that uses an "integrated, broad-based approach." It also warns, however, that Colombia's counternarcotics gains are not irreversible. From FY2000 through FY2012, U.S. funding for Plan Colombia and its follow-on strategies totaled over $8 billion in State Department and Defense Department programs. From FY2000 to FY2009, the United States provided foreign operations assistance to Colombia through the Andean Counterdrug Program (ACP) account, formerly known as the Andean Counterdrug Initiative (ACI), and other aid accounts. In FY2008, Congress continued to fund eradication and interdiction programs through the ACP account, but funded alternative development and institution building programs through the Economic Support Fund (ESF) account. In the FY2010 request, the Obama Administration shifted ACP funds into the International Narcotics Control and Law Enforcement (INCLE) account. In addition, support for aerial eradication programs is provided from the State Department's Air Wing account. The Defense Department requests a lump sum for all counternarcotics programs worldwide under Sections 1004 and 1033, and under Section 124, of the National Defense Authorization Act. DOD can reallocate these funds throughout the year in accordance with changing needs. While not considered a formal component of the ACP Program, the Defense Department has provided Colombia with additional funding for training and equipment for a number of years, as well as the deployment of personnel in support of Plan Colombia. In its October 2008 report, the GAO stated that Plan Colombia had only partially fulfilled its drug reduction goals. In the years 2000-2006 coca cultivation and production of cocaine had actually increased by about 15% and 4%, respectively. The report concluded that while significant security gains were achieved by the Colombian government with U.S. assistance, coca farmers had taken effective countermeasures against eradications, and alternative development programs had not been implemented where the majority of coca is grown. Moreover, the report criticized the "nationalization" of Plan Colombia programs—the transfer of U.S.-administered programs to the Colombians—as advancing too slowly and lacking coordination. In 2008, there was significant debate in Congress about the proper balance between so-called "hard-side" security assistance (i.e., equipment and training to the Colombian military and police) and "soft-side" traditional development and rule of law programs. While some Members of Congress supported the Bush Administration's emphasis on security-related assistance to Colombia, others expressed concerns that the Administration put too much of an emphasis on the security assistance component. Many Members have expressed a desire to see a more rapid transfer of responsibility for the military operations associated with Plan Colombia from the United States to Colombia. Since FY2008, Congress has reduced assistance for security-related programs and increased economic and social aid in the annual foreign assistance appropriations legislation. For example in the FY2012 foreign operations appropriations measure, the balance between "soft-side" traditional development and rule of law assistance and "hard-side" security and counterdrug assistance was close to 50/50. Total assistance in support of Plan Colombia includes significant DOD support. The combined estimated assistance appropriated to Colombia from State Department and DOD in FY2012 was $490 million (see Table 1 ). In FY2013, the State Department's budget request, in line with other foreign aid cuts, fell to about $332 million, approximately 13% lower than the amount appropriated for State Department accounts in FY2012. Table 1 provides a more detailed breakdown of U.S. assistance to Colombia from FY2000 through the FY2013 request. The Obama Administration's FY2013 budget request of roughly $332 million for Colombian foreign assistance from State Department accounts has broad support. The Senate Appropriations Committee version of the FY2013 foreign aid appropriations measure, S. 3241 , would provide additional funding exceeding the request in economic support and slightly more in counternarcotics (including funds targeted at strengthening the Colombian Prosecutor General's office). The House Appropriations Committee version of the bill, H.R. 5857 , would provide an additional $10 million over the request for Foreign Military Financing (FMF), and would increase support under the International Narcotics Control and Law Enforcement (INCLE) account by $18.6 million to fund security and counternarcotics training and technical support by the Colombian government to partners regionally and worldwide. In September 2012, Congress passed a Continuing Appropriations Resolution (CR) FY2013 ( H.J.Res. 117 , P.L. 112-175 ), which was signed into law on September 28, 2012 and which expires on March 27, 2013. Under the CR, regular aid accounts are funded at the same level as in FY2012 plus .612%. On October 30, 2009, the United States and Colombia signed the Defense Cooperation Agreement (DCA) to provide the United States access to seven military facilities in Colombia to conduct joint counternarcotics and anti-terrorism operations over a 10-year period. The U.S. Congress authorized $46 million for construction at the Palanquero air base in Central Colombia in the defense authorization for FY2010 signed into law in October 2009 ( P.L. 111-84 ). However, on August 17, 2010, the Colombian Constitutional Court declared the agreement unconstitutional because it had not been submitted to the Colombian Congress for approval. Since then, the Santos Administration has not submitted the agreement to Congress. The agreement had generated hostility toward Colombia from some neighboring countries, such as Venezuela and Ecuador. Not moving ahead with the agreement appears to have lowered regional tensions. The DCA did not change the cap on the number of U.S. personnel deployed in Colombia which remains the same as set by Congress in 2004 ( P.L. 108-375 )—800 military personnel and 600 contractors. U.S. personnel presence in recent years has declined to a level below half of the authorized 1,400-person cap, which is a trend that is expected to continue. Debate in the U.S. Congress has continued to focus on allegations of human rights abuses by the FARC and ELN, paramilitary groups, and the Colombian Armed Forces, and the extent of the investigation and prosecution of such crimes. For example, as previously discussed (see " Human Rights Violations by Colombian Security Forces "), the Prosecutor General's office has been assigned over 1,700 cases (involving more than 3,500 victims) of extrajudicial killings allegedly committed by members of the Colombian Armed Forces between 1985 through June 2012. The United Nations and many NGOs and human rights groups are deeply concerned that progress in reducing the backlog of cases of extrajudicial killing has proceeded slowly. They are also alarmed that while allegations of extrajudicial executions by the security forces have declined sharply in recent years, there continues to be reports that the practice has continued. Since 2002, Congress has required that the Secretary of State certify annually to Congress that the Colombian military and police forces are severing their links to the paramilitaries, investigating complaints of human rights abuses, and prosecuting those against whom credible charges have been made. Since 2002, Congress has made funding to the Colombian military contingent on these certifications. In the latest certification, issued on August 20, 2012, Secretary Clinton reported again that the Colombian government and armed forces are meeting the statutory requirements with regard to human rights. Over the years, many NGOs have criticized the positive certifications and report that they have presented evidence to U.S. State Department officials that contradict U.S. findings. Some human rights groups have called the human rights certification "a flawed but useful tool" because the certification process requires regular consultation with Colombian and international human rights groups by the U.S. government, and because over time the conditionality can improve human rights compliance. Congress has also regularly enacted another mechanism to prevent human rights abuses: the so-called Leahy Amendment in foreign operations appropriations legislation. Specifically, this provision states that units of a foreign country's security forces are prohibited from receiving assistance if the Secretary of State receives credible evidence that such units have committed "a gross violation of human rights." (The restriction had been designated as Section 620J of the Foreign Assistance Act, but re-designated as Section 620M and amended by the Consolidated Appropriations Act of 2012, ( P.L. 112-74 )). The Secretary may continue funding if she determines and reports to Congress that the foreign government is taking effective measures to bring the responsible members of these security forces to justice. A similar provision applies to DOD training of foreign security forces if the Secretary of Defense receives "credible information" that units of foreign security forces have committed "a gross violation of human rights." The most recent restriction on DOD funding appears in Section 8058 of P.L. 112-74 . There have been Colombian units that have been disqualified from receiving assistance and training under these provisions, or "not vetted for cause." Despite these measures, human rights organizations contend that the U.S. government often ignores questionable activities of Colombian security forces. In 2003, the George W. Bush Administration announced its intention to begin negotiating an Andean region free trade agreement (FTA) with Colombia, Peru, Ecuador, and Bolivia. In its announcement, the Administration asserted that an FTA would reduce and eliminate barriers to trade and investment, support democracy, and fight drug activity. After regional talks broke down, the United States separately pursued bilateral trade agreements with Colombia and Peru. The United States and Colombia signed the U.S.-Colombia Trade Promotion Agreement on November 22, 2006, also called the U.S.-Colombia Free Trade Agreement (CFTA). Nearly five years later, the U.S. Congress approved implementing legislation for the CFTA ( H.R. 3078 / S. 1641 ) on October 12, 2011, and President Barack Obama signed the measure on October 21, 2011 ( P.L. 112-42 ). Congressional approval of the implementing legislation for the agreement was delayed because of controversy. Proponents argued that the FTA with Colombia would improve market access for U.S. businesses, increase bilateral trade in a way that benefited both countries, and reward a close ally in South America. Critics of the agreement countered that Colombia had a weak record on labor rights, unacceptably high levels of violence allegedly targeted at union members, and that perpetrators of such crime were rarely investigated or prosecuted (as described in more detail below). In congressional debate, human rights considerations raised by opponents included the victimization of labor activists and other human rights defenders. Some opponents also pointed to concerns that Colombian workers in some sectors would be displaced. Proponents maintained that Colombia had made progress over the past decade in reducing violence and enhancing security overall. The Obama Administration, as part of its export development and job growth strategy, indicated an interest in 2011 in concluding pending Bush-era free trade agreements with South Korea, Panama and Colombia once "key issues" in each agreement were addressed. The Administration introduced implementing legislation for the three agreements in early October 2011. On a same-day vote on October 12, 2011, Congress approved the U.S.-Colombia agreement with a bipartisan vote of 262-167 in the House and 66-33 in the Senate. Debate surrounding passage of the agreement centered on labor issues, including allegations of violence against trade unionists and inadequate government prosecution of such violence. As part of the CFTA legislation, Congress renewed the Andean Trade Preference Act (ATPA) through July 2013 for Colombia and Ecuador. The law provides eligible countries with unilateral preferential access to the U.S. market for certain products to encourage legitimate economic activity in place of a dependence on the illegal narcotics trade. The ATPA renewal, which along with other trade preference measures allows about 90% of Colombian imports to enter the United States duty free, gave Colombia time to transition while awaiting the CFTA's entry into force. Acknowledging that one of the key concerns of opponents of the U.S.-Colombia Free Trade Agreement involved the status of labor rights in Colombia, on April 7, 2011, President Santos and President Obama announced they had agreed upon an Action Plan Related to Labor Rights (Action Plan). This detailed plan addressed U.S. concerns about protection of labor rights in Colombia, violence against labor leaders, and improving the investigation and prosecution of labor-related violence. The Obama Administration stated that implementation of most of the measures in the plan, which consists of a series of actions the Colombian government must take within defined time frames, would be a precondition for the President to declare the CFTA's entry into force. The Action Plan can be found on the website of the Office of the United States Trade Representative (USTR). Reaction to the Action Plan has been mixed. Although many contend that the plan, if fully implemented, would represent progress on some of the problems facing labor in Colombia and view it favorably, others are concerned that weak enforcement may limit its prospects. On April 15, 2012, at the Summit of the Americas held in Cartagena, Colombia, President Obama and President Santos announced that the CFTA would enter into force on May 15, 2012. They affirmed that the commitments of the Action Plan Related to Labor Rights had been substantially met and that both countries had reviewed and revised their laws and regulations to meet their obligations under the agreement. Following its entry into force in May, the trade agreement immediately eliminated duties on 80% of the U.S. exports of consumer and industrial products, and will eliminate most remaining tariffs within 10 years of implementation. Although it is too early to evaluate its impact, U.S. investment in Colombia and trade between the two countries has grown since the agreement entered into force. The predominant concern that the Action Plan addressed was violence against labor unionists. Labor activist killings in Colombia declined during 2002-2005, but rose again in 2006 (see Figure 2 ). Data on the number of labor unionists murdered in any given year vary by source. In 2009, the government reported a decline to 28 murders and the National Labor School (a respected Colombian NGO) reported a slight decline to 47 murders of labor unionists. In 2010, the Colombian government recorded 34 murders, while the ENS recorded 51. For more information about the reasons for the discrepancy between government and NGO counting of these murders, see CRS Report RL34759, U.S.-Colombia Free Trade Agreement: Labor Issues , by [author name scrubbed]. In 2011, both the government and ENS recorded a drop in labor unionist homicides. For the year in which the Action Plan was signed, ENS reported 29 homicides, but a continuing pattern of threats, including death threats, violence, harassment, and other practices against trade union representatives that inhibited their ability to exercise their right to free association including to engage in union activities. Violence against labor union members is in a context of high violence levels in the society in general. Colombia has greatly reduced its homicide rate over the past decade, but even in 2010 there were more than 15,400 homicides, with a rate of 34 homicides per 100,000 inhabitants (far exceeding Mexico's rate of 18.1 per 100,000 in 2010). The 51 homicides of labor unionists recorded by ENS in 2010 were less than one-half of 1% of total homicides. Critics of the Colombian government's record on protecting labor note that the politically intimidating effect of a labor murder is not equivalent to a random murder. One unknown related to the controversy about these crimes is whether individual labor union members were killed because of their union activity or for some unrelated issue. The Colombian government has responded to U.S. concerns by pointing to the improvements in curbing violence overall. Total homicides dropped by 46% from a peak in 2001 to 2010 according to data from the Colombian Ministry of Defense. As presented in Figure 2 , the reduction in labor union homicides from a peak in 2001 to 2010 is about a 70% decrease according to the ENS data and more than 80% according to the government data. Some Members of Congress who opposed the CFTA concede that the Colombian government has made progress but maintain that continued violence against labor leaders and human rights defenders make it an unfit trade partner. Other critics have raised concerns about the continued high rates of violence endured by other vulnerable groups, such as Afro-Colombian activists, land return advocates, and indigenous leaders. A major concern is the impunity for past acts of violence against labor leaders. Very few investigations have been completed. More than 2,000 incidents of violence involving killings and threats between 1991 to 2006 have been alleged. A Special Labor Sub-Unit of the Colombian Prosecutor General's office, set up in 2006, employs 25 prosecutors and 150 investigators as of August 2012 assigned to investigate and process 1,465 labor-related cases. A vast majority of these labor cases are either under investigation or in preliminary phases of the prosecutorial process. According to the State Department, the Labor Sub-Unit has achieved 499 convictions against 597 individuals who committed violent acts against trade unionists (including 91 convictions in 2011). Labor groups argue much more needs to be done to end impunity for crimes targeting trade unionists. Human Rights Watch in its World Report 2012 notes that closure of recent cases has been especially difficult. Out of the 195 trade unionist killings that Human Rights Watch reports occurred since 2007 when the Labor Sub-unit became operational, the unit has only achieved convictions in six cases. Several measures in the April 2011 Action Plan include steps to strengthen the Colombian judicial system with regard to labor violence prosecutions. Until investigations and prosecutions are completed, it is very hard to determine the motive behind killings and if indeed labor union members are targeted. Several human rights organizations, including Human Rights Watch, have urged the Colombian government to resolve labor cases that have languished in impunity. In addition to the Action Plan's measures to prevent violence against labor activists, and to strengthen the prosecution of such violence, the Action Plan sets out steps to protect internationally recognized labor rights. For instance, the Action Plan restricts the use of Colombian "labor cooperatives" (a form of labor contracting that can be exploitative which is frequently found in the sugar, flower, palm oil, mining and port industries) and imposes sanctions on businesses that are violating Colombian laws. It requires an increased presence of the International Labor Organization (ILO), an invitation that the ILO has accepted. One of the few incomplete steps laid out in the Action Plan is the hiring of an additional 380 labor inspectors which must be accomplished by 2014. When President Obama announced the U.S.-Colombia Free Trade Agreement's entry into force he asserted that most of the requirements of the Action Plan had been substantially met. The U.S. Trade Representative's office, tasked with reviewing the documentation to ensure that Colombia has completed the Action Plan steps, maintained that Colombia had met all the important milestones to date. Technical meetings between the two governments and meetings between senior labor officials from each country are being held through 2013 to ensure ongoing compliance. In the U.S. Congress, some Members have expressed continuing concern about Labor Action Plan implementation. With approval by the U.S. Congress of the U.S.-Colombia Free Trade Agreement in 2011 and its entry into force in May 2012, the U.S.-Colombia partnership passed a major milestone. Congress is currently engaged in oversight of continued implementation of the related Labor Action Plan in addition to its oversight of overall U.S. policy toward Colombia. Supporters of the current U.S. policy towards Colombia continue to express the importance of Colombia as a regional partner of the United States in the counternarcotics effort. Colombia has also emerged as a regional leader, providing police and justice training to nations around the world including many in Latin America. Proponents point to the progress that has been made in improving security conditions in Colombia and in weakening the FARC guerrillas. They favor maintaining security assistance to Colombia in order to help Colombian security forces continue to combat the FARC and ELN, solidify their control throughout rural areas, and eradicate illicit narcotics. Many supporters accept a gradual decline in U.S. assistance in line with across-the- board foreign aid reductions and the gradual "nationalization" of Plan Colombia programs. At the same time, they remain concerned about the use of neighboring countries' territory for refuge and re-supply by the leftist guerrillas, and that this has a potentially destabilizing effect in the region. Critics of current U.S. policy in Colombia respond that the counterdrug program has used a repressive approach to curb drug production that has provoked a negative popular reaction in some rural areas. They argue for halting aerial spraying of drug crops and limiting aid to the Colombian military. They maintain that interdiction and reducing illicit drug demand in the United States, rather than eradication, are more effective and less costly to peasant producers. Some critics of U.S. policy support a policy that focuses on providing economic and social aid to address what they consider to be the conflict's root causes, on curbing human rights abuses by successor paramilitary groups and security forces, and on providing support for a negotiated end to the fighting. Some Members of Congress, acknowledging the improvement in security conditions in Colombia, continue to have grave concerns about labor activist killings and labor rights; extrajudicial killings of Colombian civilians by the Colombian military; and the para-political scandal (linking Colombian politicians with illegal paramilitaries). Many of these human rights issues were central in the debate over the CFTA that took place in the fall of 2011 and will likely remain part of Congress's oversight agenda.

Colombia, a key U.S. ally, has made measurable progress in providing security despite having endured the longest internal armed conflict in the Western Hemisphere. It has long been a source for both cocaine and heroin. Drug trafficking has helped to perpetuate civil conflict by funding both left-wing and right-wing armed groups. Over the years, Colombia and the United States forged a close partnership focused initially on counternarcotics and later counterterrorism. Building on that cooperation, the U.S.-Colombia partnership has broadened to include development, human rights, and trade. Colombia has emerged as a regional leader providing training in security and counternarcotics throughout the hemisphere and elsewhere. President Juan Manuel Santos, inaugurated in August 2010, has governed with the backing of almost 90% of the Colombian Congress in a "national unity" coalition. In a policy he calls "democratic prosperity," Santos has continued the mission of his popular predecessor of accentuating security, while promoting economic development, creation of jobs, and poverty reduction. He has repaired relations with Ecuador and Venezuela, which had been strained under the former government. He has promoted legislative reforms, including a landmark law to compensate victims of the internal conflict; a justice reform bill that ultimately failed; and controversial "peace framework" and military justice reforms that appeared to be laying the groundwork for an eventual peace settlement. In October 2012, formal peace talks opened with the dominant leftist guerrilla organization, the Revolutionary Armed Forces of Colombia (FARC), following a surprise announcement that the government had been conducting secret exploratory talks for months. Colombia, in close collaboration with the United States, through a strategy known as Plan Colombia, has made significant progress in reestablishing government control over much of its territory, combating drug trafficking and terrorist activities, and reducing poverty. Between FY2000 and FY2012, the U.S. Congress appropriated more than $8 billion in assistance to carry out Plan Colombia and its follow-on strategies. As Colombia's security and development conditions improved, former U.S.-supported programs have been nationalized to Colombian control. Consequently, U.S. assistance with its counternarcotics, counterterrorism, judicial reform, economic development, humanitarian, and human rights components has gradually declined. The National Consolidation Plan, the current Colombian security strategy, updates Plan Colombia with a whole-of-government approach that integrates security, development, and counternarcotics by consolidating state presence in previously ungoverned areas. The 112th Congress has maintained a strong interest in Colombia's progress in trade, security, counternarcotics, and human rights. In October 2011, the U.S. Congress approved implementing legislation for the U.S.-Colombia Free Trade Agreement, which went into force on May 15, 2012. Members of Congress will continue to monitor the associated Action Plan Related to Labor Rights that addressed U.S. concerns related to labor rights and violence in Colombia. In addition to the larger debate about what role the United States should continue to play in Colombia's ongoing struggle with drug trafficking and illegal armed groups, Congress has expressed concern with a number of related issues. These include funding levels for Plan Colombia's follow-on strategies; continuing allegations of human rights abuses; and the effectiveness of counternarcotics policies such as aerial eradication and alternative development. Members will likely monitor Colombia's peace negotiations and their effect on security conditions in the country. For additional information, see CRS Report RL34470, The U.S.-Colombia Free Trade Agreement: Background and Issues.

President George W. Bush has stated that comprehensive immigration reform is a top priority of his second term, and his principles of reform include increased border security and enforcement of immigration laws within the interior of the United States, as well as a major overhaul of temporary worker visas, expansion of permanent legal immigration, and revisions to the process of determining whether foreign workers are needed. Some are advocating to replace or supplement the current legal immigration preference system with a point system that would assign prospective immigrants with credits if they have specified attributes (e.g., educational attainment, work experience, language proficiency). Replacing or supplementing the current preference system for admitting legal permanent residents (LPRs) with a point system is garnering considerable interest for the first time in over a decade. Briefly, point systems such as those of Australia, Canada, Great Britain, and New Zealand assign prospective immigrants with credits if they have specified attributes, most often based upon educational attainment, skill sets used in shortage occupations, extent of work experience, language proficiency, and desirable age range. Proponents of point systems maintain that such merit-based approaches are clearly defined and based upon the nation's economic needs and labor market objectives. A point system, supporters argue, would be more acceptable to the public because the government (rather than employers or families) would be selecting new immigrants and this selection would be based upon national economic priorities. Such a system would distribute qualifying points from various "merit-based" categories, thereby making the system analogous to the "skilled immigration" point systems of other countries. Opponents of point systems state that the judgement of individual employers are the best indicator of labor market needs and an immigrant's success. Some warn that the number of people who wish to immigrate to the United States would overwhelm a point system that is comparable to those of Australia, Canada, Great Britain, and New Zealand. In turn, this predicted high volume of prospective immigrants, some say, would likely lead to selection criteria so rigorous that it would be indistinguishable from what is now the first preference category of employment-based admissions (persons of extraordinary ability in the arts, science, education, business, or athletics; outstanding professors and researchers; and certain multi-national executives and managers) and ultimately would not result in meaningful reform. Four major principles underlie current U.S. policy on permanent immigration: the reunification of families, the admission of immigrants with needed skills, the protection of refugees, and the diversity of admissions by country of origin. Each of these four principle constitutes its own stream, or column, of immigrants. Thus, for example, the queue for family-based immigrants generally functions independently of the queue for employment-based admissions. The Immigration and Nationality Act (INA) specifies a complex set of numerical limits and preference categories that give priorities for permanent immigration reflecting these principles. Prospective immigrants must first meet the eligibility requirements for the specific visa category, and then form a queue based upon numerical limits set by visa category and country of origin. These preference categories are detailed in Appendix A , Current U.S. Legal Immigration Preference System. Under the INA, immigrants are legal permanent residents (LPRs) who are foreign nationals living lawfully and permanently in the United States. During FY2005, a total of 1.1 million aliens became LPRs in the United States. Of this total, 57.8% entered on the basis of family ties. Other major categories in FY2005 were employment-based LPRs (including spouses and children) at 22.0%, and refugees/asylees adjusting to LPR status at 12.7%. A point system is a criteria-based immigrant selection process wherein each criterion is assigned a certain value or range. Those qualities in an applicant which are valued more highly, or are more sought after, are given a higher point value. In order to qualify, or "pass," an applicant must receive a predetermined number of points or fall within the top end of the point distribution. The scope and complexity of point systems offer a range of possibilities. Three elements are central to devising a point system: the factors/criteria; the scoring/scaling dimensions; and the possible use of tiers. As noted above, points systems are based upon a list of criteria or factors. Most often, the factors are based upon the prospective immigrant's educational attainment, work experience, language proficiency, occupation, and age. Other factors that arise, albeit less frequently, link a prospective immigrant to the destination country, such as offers of employment, close family ties, prior work or educational experience in the destination country. These factors are typically focused on criteria that predict economic success, but also might include factors that are geared toward adaptability, social acculturation or assimilation. Another element of points systems is how they are scored or scaled. For example, the factor of education may be scaled according to the years of schooling (e.g., 2 points for each year of schooling beyond high school) or scored according to a specific number of points given to the prospective immigrant who meets the educational requirements (e.g., 25 points for an advanced degree). A tiered approach to points systems organizes the factors into separate streams. For example, there might be a tier for shortage occupations, a tier for recent graduates in science, technology, engineering, and mathematics, and a tier for extended family of U.S. citizens. Within each of these tiers there might be separate scoring mechanisms that assign points, for example, according to age, work experience, or language proficiency. As the discussion below reveals, points systems may be devised to draw on a constellation of these elements. That is, within a tier, there may be factors and sub-factors given differing weights. Or, some factors may be scaled and other factors may be scored within the same tier or overall point system. There are theoretical approaches that underlie the debate over any system to select immigrants, and these theories particularly arise in the context of point systems. There are a variety of economic, social, and public policy theories that often shape the discussion. By adjusting the point values to favor admissions of immigrants with skill sets that are in highest demand, the point systems rooted in classical economic theory might aim to maximize the probability that the migrant will be a net contributor to the country's economy—both in the short and long term. Moreover, by keeping the immigrant labor force supply at or slightly below market demand, a point system based upon economic theory might attempt to approximate a labor market equilibrium without the potential for severe adjustment costs (e.g., "overheating" housing market) or exogenous shocks to the labor market (e.g., large influx of foreign nationals). Classical economists would note that despite such governmental efforts at pinning down labor market demand for skill sets, the use of a government agency to determine market forces will incur the loss of efficiency. The most efficient outcome, classical economists argue, is always going to be achieved through the free flow of individuals in an open market (and thus by having open borders). Yet, scholars will also note that such inefficiency may serve as incentives in the marketplace for desirable economic change, such as technological innovation and wage growth. The objective to maximize the likelihood of immigrant assimilation might lead to a point system which values those social factors correlated to acculturation. Family ties and relatives residing in the United States might be highly valued for the community and social linkages they provide to the immigrant. Some factors (such as being within a certain age range, higher levels of education and language skills) might be chosen for social assimilation as well as economic reasons. If the societal goal is to increase the ethnic and racial diversity of the immigrant stream, then a point system might add credits for immigrants coming from countries that are traditionally under-represented in the migrant flow. Finally, a point system might be designed with a public policy underpinning to maximize public support. In theory, an immigrant selection system might be more efficacious with the public if it is one in which elected officials (rather than individual employers or families) are establishing priorities at the national level to choose new immigrants. One strand of recent research characterizes point systems as potentially inspiring public confidence by appearing to use universal, data-driven, and objective selection criteria that convey to the public that the government is being proactive in ways that put national economic interests first. Among the countries that currently employ a merit-based point system, the four highest profile systems are those of Canada, Australia, New Zealand, and the United Kingdom. Generally, such merit based criteria are referred to by these countries as "skilled immigration." Each of these countries employs a point system in assessing candidates for skilled immigration. In the four different systems, those skilled immigration applicants with the most points according to various characteristics would immigrate ahead of applicants with lower point totals. In addition, each of these four countries employs a preference system for family-based immigration. They also employ quotas to determine levels of family and humanitarian immigration. These family and humanitarian immigrants are thus placed in separate immigration queues. Although the categories vary for each country, each of these countries generally requires that the potential applicant demonstrate some sort of official language competence, educational qualifications, and be within a certain age range. Although failing to meet one of these qualifications may automatically disqualify applicants in some countries, these criteria are not basic requirements in every country. While the United Kingdom, for example, requires a basic knowledge of English for every applicant, skilled immigrants to Canada can technically qualify without knowledge of either of the country's official languages (English or French). Generally, an applicant who receives a passing mark in any of the four countries discussed below is believed to possess skills that are in sufficient demand to ensure ample employment opportunities (if such an offer has not already been extended). In New Zealand, which has skilled immigration criteria that are detailed in Appendix B , an applicant for skilled migration must accumulate 140 points (out of a possible 290 points) to qualify for permanent admission. In order to even be assessed on these criteria, the applicant must meet health, character, and basic English language requirements, in addition to being under the age of 56. The New Zealand immigration service evaluates a candidate for skilled employment on the basis of four broad criteria: (1) existing skilled employment, or an offer thereof; (2) work experience; (3) educational qualifications; and (4) age. During adjudication, he or she can receive a minimum of 50 points and a maximum of 95 points, including bonus points, for the skilled employment criterion. Additionally, candidates who have at least two years of previous employment can receive a minimum of 10 points and a maximum of 65 points, including bonus points, depending on length and type of experience. Candidates with basic educational qualifications may receive a minimum of 50 points, while those with higher qualifications may receive up to a maximum of 100 points, including bonus points. Finally, all skilled employment applicants who pass the basic requirements receive points for their age, from a minimum of five points for the age group of 50-55, to a maximum of 30 points for 20-29 year-olds. Although the qualifying point total for skilled immigration may appear permissive (with a qualifying mark of less than half of the available points under New Zealand's point structure), the prospect is difficult without an employment offer. Many of the categories include a large number of bonus points for immigrants attempting to settle in low growth and rural areas, or for previous experience in New Zealand. Achieving a maximum score without bonus points in the non employment offer categories (totaling 115 points) will not net an applicant a passing mark for skilled immigration. Thus, the distribution of points and the level of the passing mark for New Zealand's skilled immigration makes an employment offer or existing New Zealand employment a de facto requirement for skilled immigration. However, an applicant may still qualify to submit an expression of interest for skilled immigration, and the New Zealand government may choose to admit some of these applicants if its skilled immigration quotas are not met. In the United Kingdom, which has skilled immigration criteria that are detailed in Appendix C , an applicant for skilled migration must accumulate 75 points (out of a possible 125 points) to qualify for permanent admission. In order to even be assessed on these criteria, the applicant must meet health, character, and basic English language requirements, in addition to being able to support himself without recourse to public funds. Current British policy assesses high skilled migrants utilizing a point system known as the "Highly Skilled Migrant Program" (HSMP). The HSMP is designed to be a flexible system for attracting well qualified individuals to the British labor market. Under the HSMP, an applicant can receive between 30-50 points for educational qualifications, between 5-45 points for past earnings, between 0-20 points for age, and five points for any previous work or educational experience in the United Kingdom. A passing mark under the British system is 75 points. Additionally, the United Kingdom has a basic English language qualifying requirement for the HSMP, wherein the individual must receive a certificate of level six or above on the International English Language Testing System (IELTS) examination. A distinction with the British skilled immigration system is that it contains a special Master of Business Administration (MBA) provision. Graduates from one of the 50 eligible MBA programs from around the world who graduated since December 2004 are automatically granted the 75 points necessary to qualify. Yet, these candidates must still meet any other basic requirements of the visa, such as English language skills. This MBA provision was put into effect in 2005, and the website listing the eligible MBA programs the British Treasury maintains is included in Appendix C . The United Kingdom's immigration system additionally distinguishes itself from other points systems in that it is scheduled to become an entirely tiered point system. Under the planned scheme, there will be five new tiers to replace all existing worker and student visa categories and replace them with a point system. These five tiers would include (1) high skilled workers, (2) medium skilled workers, (3) low skilled workers, (4) students, and (5) temporary workers and youth mobility. Family reunification and humanitarian immigration would not be affected by the point system. The new point system is set to take effect in April 2008. The Australian skilled immigration program, which uses criteria that are outlined in greater detail in Appendix D , does not have a universal set of points to serve as a qualifying mark. Instead, the passing mark varies between 110-120 points, depending upon the type of skilled immigration the individual is attempting to qualify for. Additionally, Australian authorities maintain a reserve pool of applicants who score between 70-120 points. If the immigration quotas are not filled by passing applicants, Australian authorities may choose to fill the quota with applicants from the reserve pool. In order to even be assessed on these criteria, the applicant must meet health, character, age and basic English language requirements, in addition to education and work requirements. Australia has the most diverse set of categories of the point systems discussed in this report. Australian authorities maintain a skilled occupations list (SOL) that assigns a certain number of points (between 40-60 points) to each occupation considered as skilled. Every applicant for skilled immigration must have a nominated occupation that appears on the SOL and have the necessary work experience in this occupation. A candidate who has work experience in skilled employment may receive between 5-10 points depending on type of experience. If the nominated occupation is on the government's Migration Occupations in Demand List (MODL), the individual may receive between 15-20 points. Moreover, an applicant must be under the age of 45 to qualify, and will receive between 15-30 points in the age category, with the points awarded decreasing as age increases. In addition to such work and skill-related criteria, there are also a number of points that are distributed specifically on the basis of involvement in Australia and ability to adapt. One of these criteria is for regional study or residence, wherein an applicant may receive five points for having lived in a designated region or low population growth metropolitan area. An additional five points may be provided for either (1) providing a minimum $100,000 (AUS) capital investment in Australia, (2) Australian work experience of six months or more within the previous four years, or (3) fluency in one of Australia's community languages, other than English. Moreover, if an applicant has received educational training in Australia, the applicant may receive between 5-15 points, depending upon the type of education. An applicant may also receive five points if his or her spouse receives qualifying marks in a sufficient number of categories. The final category for which an applicant may receive points is for competency in the English language. Although basic skills in the English language is a fundamental requirement for receiving a skilled immigrant visa, greater levels of competency will receive a higher number of points. Applicants who receive a score of at least five on all components of the International English Language Testing System (IELTS) will receive 15 points, while native speakers and those scoring six and higher on all component of the IELTS receive 20 points. In Canada, which has skilled immigration criteria that are detailed in Appendix E , an applicant for skilled migration must accumulate 67 points (out of a possible 100 points) to qualify for permanent admission. In order to even be assessed on these criteria, the applicant must meet health and character requirements, as well as demonstrate that he will be able to support himself without recourse to public funds. Current Canadian skilled immigration policy depends on a set of six selection criteria—education, language, experience, age, arranged employment, and adaptability—for determining admission eligibility for skilled immigrants. The categories of education, language, and experience in an approved occupation are seen by Canadian authorities as the key elements to integrating into Canadian society and becoming a productive member of its economy. Therefore these three categories account for up to 70 points cumulative maximum—three points above the passing mark. Having an actual employment offer accounts for an additional ten points. Age and adaptability criteria can each net an applicant up to an additional ten points, respectively. In terms of competence in the official languages, Canada is the only country considered in this section that does not require a certain competence level. Applicants that are fluent in both official languages may receive up to 24 points for their language skills, but even those without any language qualifications are still eligible to qualify. However, because of the way in which the points are distributed, an individual with no competence in either official language would have to have a confirmed permanent job offer in order to qualify. Additionally, this individual would have to receive some adaptability points to receive a passing mark. Thus, while a de jure prerequisite for official language skills does not exist, achieving a passing point score without these skills would be difficult for most applicants. For those potential migrants who wish to settle in Quebec, there are special provisions that require the potential migrant to apply directly to the government of Quebec. Under terms of the Canada-Quebec Accord on Immigration, Quebec is able to establish its own immigration requirements for admission into the province. Currently, these requirements are not the same as those of the Canadian authorities. Immigrants who wish to go to Quebec as a skilled worker must first apply to the Quebec government to receive a Certificat de sélection du Québec (Quebec selection certificate). Once this has been completed, the applicant must submit a separate application for permanent residence to the Canadian government for consideration under the Canadian requirements. Once an applicant has cleared each of these stages, he or she will be admitted as a skilled worker to Quebec. As demonstrated in Figure 1 below, the points for qualifying for skilled employment immigration vary across the four different countries. For example, in Australia having an employment offer (and the bonus points associated with it) represents 53.3% of the points available, as compared to 32.8% in New Zealand and 10.0% in Canada. Canada places a greater emphasis on the work experience category, which comprises 21.0% of the points available, while in Australia it represents 6.7% of the available points and 22.4% of New Zealand's skilled immigration points. The United Kingdom does not grant points for employment offers or work experience among its first tier applicants. As Figure 1 below demonstrates, there are six major categories which are used by most of the countries discussed in this section that employ a point system for skilled immigration: employment offer, work experience, education, age, language proficiency, and other criteria. All four countries do grant points for the age, education, and work experience categories, while the United Kingdom is the only country that does not give points directly for previous work experience. Instead, it grants points for previous earnings (which comprises the entire "other" category for that country). Canada and Australia both give points for language competency, which in Australia is in addition to the basic language requirement for skilled immigration. When looking at the patterns across Figure 1 , it is evident that the point distribution in each of the selected countries is different and therefore reflects different preferences for applicant attributes. Australia, for example, has 53% of its points tied to employment offers, and 20% of the points distributed for age. The remaining four categories receive 6.7% of the points each. Australia's relatively large point range between categories stands in contrast to that of Canada, which has the most even distribution of points across categories. The Canadian skilled immigration system grants 25% of available points to the education category, 24% to language proficiency, and 21% to work experience. The remaining 3 categories are each granted 10% of the available points. New Zealand and the United Kingdom each have point distributions with weighting schemes that fall between those of Australia and Canada. For New Zealand's system, 34.5% of the points distributed go towards the education criteria, while 32.8% goes towards employment offers. Work experience accounts for an additional 22.4% of the points total, while age has the lowest share with 10.3%. In the United Kingdom, 41.7% of the points total is allocated for the education category, while 16.7% is distributed for age. An additional 37% is allocated for past earnings (classified in the chart under the category heading of "other"). Lastly, the current British point system allocates 4.2% of its points for having a United Kingdom qualification or work experience—listed in Figure 1 under the category heading of "work experience." Although the distribution of points across categories is important for the filtering of applicants, the placement of the passing mark will also affect the ability of these categories to determine immigrant eligibility. For example, skilled immigration to Australia requires that an applicant accumulate between 73.3%-80% of the available points. Such a high passing mark ensures that applicants must receive high qualifying marks in most categories. New Zealand requires that an individual accumulates 48.2% of all available points. Yet, because the country offers a large number of bonus points for employment in rural and targeted areas, achieving a passing mark becomes more difficult for individuals who wish to settle outside these areas. The Canadian point system requires an applicant to accumulate 67% of available points, thereby ensuring that an individual must score points in at least three categories. For the United Kingdom, achieving a passing mark requires receiving at least 62.5% of all available points. The United States has weighed the option of a point system for selecting immigrants in the past, but thus far has not elected to enact one. The discussion below provides the highlights of the most recent periods when points systems were elements of major efforts to reform legal immigration. It specifically focuses on the policy debates of the 1980s that culminated in the Immigration Act of 1990. During the 1980s, point systems were one of the focal points during the debate over the proposals to reform legal immigration to the United States. The Select Commission on Immigration and Refugee Policy (SCIRP), which Congress established in 1978, did not endorse a point system as part of its comprehensive package of immigration reform recommendations in 1981. The SCIRP offered this explanation for its position: Despite considerable support for a point system, it became clear that it would be difficult for Commissioners, not to mention Congress, to decide on criteria and the specific value of points to be awarded for each. Fundamental value questions are at issue. For example, if points are given for English-language ability, certain countries would clearly be favored. Administration of a point system could also be difficult. For example, if educational achievement is given points, how does one compare among societies vastly different educational systems. For these and other reasons only two Commissioners [out of a total of 16 Commissioners] voted for a point system as a selection mechanism for independent immigrants. Interest in devising a point system for selection of immigrants continued nonetheless, and options appeared in a variety of the immigration reform bills in the 1980s. Prior to the current debate, the most extensive debate on a U.S. point system occurred as Congress considered the legislation that ultimately became the Immigration Act of 1990 ( P.L. 101-649 ). During the late 1980s, the Immigration and Naturalization Service (INS) proposed that 100,000 visas would be available for aliens according to a 150-point system. Aliens with the most points according to various characteristics would immigrate ahead of aliens with lower point totals. These proposed characteristics included points for arranged employment in a desired occupation, knowledge of English, age, education and experience or training in an occupation that was in demand. One version of the INS recommendation added a category that would have given points to citizens of an "underrepresented" country. The legislation that would become Immigration Act of 1990 was S. 358 , and many consider it the most recent comprehensive overhaul of legal immigration. As introduced, S. 358 would have allocated 55,000 visas according to a point system based on age, education, English language ability, occupational demand, occupational training and work experience. During the Senate Committee on the Judiciary consideration of S. 358 , the point system was a major issue. According to a report of that mark-up session, the selection criteria debate was especially noteworthy. The most spirited portion of the mark-up concerned an amendment by Sen. Simon to delete from the point system points for knowledge of the English language. After nearly an hour of debate, in which several Senators told stories about personal relatives who had arrived in this country not speaking English, the amendment passed by a 12-2 vote.... As passed by the Senate in 1989, S. 358 would have allocated 54,000 visas annually according to a point system. A total of 90 points would have been credited as follows: age—10 points for age 21-35 and 5 points for age 36-45 education—10 points for high school, an additional 10 points for a bachelor's degree, and further 5 points for a graduate degree; occupational demand—20 points; occupational training or work experience—20 points; and pre-arranged employment—15 points. Twenty percent of the visas in the "selected immigrant" category would have gone to those who scored the highest total points; the other 80% would have been distributed randomly to qualifying aliens who had at least 60 points. Labor market tests (such as requirements to recruit U.S. workers or offer prevailing wages) would not have been mandated for aliens entering through this point system under this bill. The House-passed version of S. 358 differed from the Senate bill, and the conferees on S. 358 ultimately opted not to include the point system in the Immigration Act of 1990 ( P.L. 101-649 ). Instead, the Immigration Act of 1990 established the current 5 tiered employment-based preference system and labeled the following as the first preference "priority workers": persons of extraordinary ability in the arts, science, education, business, or athletics; outstanding professors and researchers; and certain multi-national executives and managers. LPRs who meet these criteria are permitted entry without the labor market tests required of most other employment-based LPRs, and the law allocates up to 28.6% of the 140,000 employment-based LPRs for these priority workers. The 1990 Act also amended the INA to enable certain members of the professions holding advanced degrees or persons of exceptional abilities in the sciences, art, or business to enter without labor market tests if it is deemed to be in the national interest. It allocates up to 28.6% of the 140,000 LPR visas for the second preference category. In 1995, the U.S. Commission on Immigration Reform recommended "that immigrants be chosen on the basis of the skills they contribute to the economy," but it did not endorse a point system as the basis for this selection. The House and Senate immigration reform bills that received legislative action in the mid-1990s likewise did not include provisions for a point system. Senate action on comprehensive immigration reform legislation stalled at the end of June 2007 after several weeks of intensive debate. The bipartisan comprehensive immigration reform legislation was negotiated with Bush Administration officials and introduced in the Senate on May 21, 2007, as S.Amdt. 1150 to S. 1348 . In terms of the point system provisions, S. 1639 mirrors the comprehensive immigration reform legislation that was announced in May and offers a proposal for a "merit-based" point system to replace the current employment-based preference system's first three categories. This point system proposal, which is detailed in Appendix F , would involve two tiers, namely a tier for merit-based legal permanent residents, and a supplemental second tier for unauthorized workers who have as a prerequisite qualified for a proposed new Z visa category. On June 28, 2007, the key cloture vote on S. 1639 failed. S. 1639 would establish 3 different worldwide ceiling levels for the "merit-based" system. For the first five fiscal years post-enactment, the worldwide ceiling would be set at the level made available during FY2005—a reported total of 246,878. Of this number, 10,000 would be set aside for exceptional Y visa holders; and 90,000 would be allocated for the reduction of employment-based backlog existing on the date of enactment. In the sixth year after enactment, the worldwide level for the merit point system LPRs would drop to 140,000, provided that priority dates on cases pending has reached May 1, 2005. Of this number, 10,000 would again be set aside for exceptional Y visa holders, and up to 90,000 would be set aside for reduction of employment-based backlog existing on the date of enactment. When the visa processing of the pending family-based and employment-based petitions reach those with May 1, 2005 priority dates, it would trigger the provisions in S. 1639 that would enable the Z-to-LPR adjustments to go into effect (discussed below). At this time, the merit point system worldwide level would become 380,000. The Z-to-LPR adjustments, however, would occur outside of this worldwide level. The proposal nonetheless would continue to set aside 10,000 for exceptional Y visa holders to become LPRs. Both tiers of the S. 1639 's point system would include multiple factors. Although most factors would be one-dimensional (where scores would be based upon either meeting or not meeting a factor requirement), some factors such as "employment" would be multidimensional. These multidimensional factors would include scores as well as scales depending on the level of the applicants qualification for the factor. According to the legislative proposal, adjustments to the weighting scheme of the immigration factors and the level of the "passing mark" for applicants would each be set by a newly established Standing Commission on Immigration and Labor Markets. S. 1639 's point system for merit-based immigrants would be based upon a total of 100 points divided between four factors: employment experience in the United States, educational attainment, English language and civics proficiencies, and extended family residing in the United States. Across these four categories it would include several sub-factors, such as "age" within the "employment" factor, that would be meant to capture an applicant at an optimal time in terms of human capital. Additionally, the proposal emphasizes skill sets in the fields of science, technology, engineering, and mathematics (STEM), and would grant an individual up to 16 points for having a STEM-related education and employment. Individuals who complete a Department of Labor Registered Apprenticeship would also receive 8 points. For the merit-based immigrants, S. 1639 's point schedule would grant the largest number of points for the employment factor. This category would grant up to a maximum of 47 points, based upon occupation, employer endorsement, and experience— all with U.S. firms —as well as age and national interest criteria. Additionally, an applicant would receive up to 28 points for education, depending upon level of completed education and the field of study. Moreover, the English and civics proficiencies factor would yield up to a maximum of 15 points. The factor for extended family already in the United States would yield up to a maximum of 10 points. For individuals wishing to qualify for LPR status under a Z visa, S. 1639 's proposed point system includes a supplemental point schedule. Although the legislative language is not precise, it appears that individuals applying under the Z visa requirements would be assessed using the same schedule as the merit-based LPRs in addition to the supplemental schedule, thereby adding fifty additional points from various qualifying factors for a cumulative total of 150 points. These proposed additional factors, which are also detailed in Appendix F , are recent agricultural work experience, authorized U.S. employment experience, home ownership, and medical insurance. Legal U.S. employment experience and home ownership would each be scored on a scale dimension, where each qualifying year would yield one point, while agricultural work experience would score 21, 23, or 25 points depending upon if the applicant had been employed in agriculture for three, four, or five years, respectively. The U.S. employment experience would yield up to 15 points, while the home ownership would grant the applicant up to a maximum of 5 points. Applicants with medical insurance would receive an additional 5 points. As Figure 2 demonstrates, it appears that the percentage weighting of S. 1639 's point system would vary depending upon which tier an applicant was applying under. For merit-based immigrants, 47.0% of the available points would be in the employment in the United States category, while for Z visas the analogous employment category would account for 31.3% of the available points. Additionally, education would be weighted less for Z visas, accounting for 18.7% of available points, as opposed to 28.0% for merit-based immigrants. For Z visas, the points credited for agricultural experience would account for approximately 16.6% of the total available points. Additionally, the other three factors exclusive to Z visas—a set of factors seemingly aimed at applicant adaptability to the U.S.—would add up to 16.7% of the points total for applicants under the Z visa tier. Lastly, English and civics, as well as extended family, would both be relatively stronger weighted factors for the merit-based LPR visa tier than for the Z visa tier. The current comprehensive immigration reform proposal embodied in S. 1639 is sparking a lively discussion, and the point system is among its controversial features. The themes highlighted below are illustrative of the multifaceted aspects of this debate. Nations currently using points systems, such as those discussed above, typically seek to tailor the selection process to recruit immigrants most likely to invigorate their economies. The stated objectives are generally to encourage migration that complements shortfalls and skill mismatches in their labor forces, coupled with other factors that are thought to correlate with success. The challenge for policy makers is adapting a point system—a method that is typically used to encourage migration—to manage the high-demand migration context of the United States. In this debate, "passing marks" and per-country ceilings will become key elements. The current preference system for selecting LPRs to the United States is largely based upon relationships that are personal. More specifically, prospective LPRs qualify either through marriage and close familial relationships and through the employer-employee relationships. A point system might well move the selection process away from the judgements of individuals and needs of local labor markets to a standardized set of criteria based on national priorities. At issue in this context is who/what is perceived to be the proper people/optimal entity to determine who will be permitted to come to the United States. Whether a point system (or any new mechanism for selecting immigrants) is augmenting an existing selection system or replacing an existing selection system, it affects the debate. Establishing a new stream of immigrants is likely to spark objections among those who oppose increasing immigration levels. If, alternatively, a point system replaces an existing set of immigration preference categories then stakeholders in the current system are likely to oppose it. If a point system creates an independent stream of immigrants it might reduce the control of employers over the selection process and bypass the labor market protections for U.S. workers. Given that many policy makers as well as observers view immigration policy as a "zero-sum game," this aspect may be the most contentious of all. The challenge in formulating an immigration system is structuring it to represent the country's values, priorities and needs. The difficulty in many countries is designing a system that effectively operationalizes these specific values, priorities and needs into immigration policy. Point systems are appealing to some because they may be structured to provide a parsimonious and transparent tool defining merit-based immigrant eligibility. Yet, paradoxically, these same attributes of point systems also make them more likely to be a politically charged instrument. The objective quantification of merit itself provokes debate over what human capital, personal traits and values prospective immigrants should bring to a country. Appendix A. Current U.S. Legal Immigration Preference System Appendix B. New Zealand Point System Requirements Basic Requirements Principal applicants under the Skilled Migrant Category are assessed against: health, character and English language requirements; and employability and capacity building requirements; and settlement and contribution requirements. An application under the Skilled Migrant Category will be approved if: the principal applicant and family members included in the application meet health and character, and English language requirements where required; and the principal applicant qualifies for the points for employability and capacity building factors on the basis of which their Expression of Interest was selected from the Pool; or the principal applicant meets the criteria set from time to time by the Minister of Immigration on the basis of which their Expression of Interest was selected from the Pool; and the principal applicant is less than 56 years of age; and the principal applicant is assessed as having the ability to successfully settle in and contribute to New Zealand; and all necessary verification of the application has been completed. Summary of Points Distribution Factors PASSING MARK: 140 POINTS EXPRESSION OF INTEREST: 100 POINTS Appendix C. United Kingdom Current Point System Requirements Basic Requirements To qualify for immigration, the principal applicant must at a minimum demonstrate the following criteria: Applicant can work, or continue to work, in his chosen field in the United Kingdom. If necessary, he will need to show relevant qualifications and professional membership to work in certain occupations in the United Kingdom. Applicant can support himself without recourse to public funds (this can be demonstrated on the basis of either savings or earning potential) Applicant intends to make the United Kingdom his main home Applicant has either never been made bankrupt or is considered to be a discharged bankrupt. Applicant has never been convicted of any criminal offences Applicant is proficient in the English language. Summary of Points Distribution Factors PASSING MARK: 75 POINTS MBA Provision The United Kingdom currently has a provision for graduates of 50 top MBA programs, who have graduated since December 2004, to remain in the United Kingdom for up to 12 months in order to seek employment and gain the necessary points to qualify for permanent residence. The basic structure of the program will also be taken up in a Post-Study category for skilled overseas students who have chosen to study at an institution in the United Kingdom. These students would thus be given the same 12 month transitional opportunity. Appendix D. Australian Point System Requirements Basic Requirements In order to qualify for immigration, the principal applicant must at a minimum demonstrate the following criteria: under 45; English at least at "vocational" level; have a post secondary education; nominated occupation on skilled occupations list (SOL); and necessary work experience in his nominated occupation. Summary of Points Distribution Factors PASSING MARK: 110-120 POINTS RESERVE POOL: 70-120 POINTS Appendix E. Canadian Point System Requirements Basic Requirements In order to qualify for skilled immigration, the principal applicant must at a minimum demonstrate a sufficient number of points under the points criteria. If the applicant does not have an offer of employment, he must additionally show sufficient level of funds on hand to qualify. By household size, these levels of funds are: For a single person C$10,168 For a family unit consisting of the following: 2 persons C$12,659 3 persons C$15,563 4 persons C$18,895 5 persons C$21,431 6 persons C$24,170 7 persons or more C$26,910 Summary of Points Distribution Factors PASSING MARK: 67 POINTS Appendix F. Proposed Point System in S. 1639

Replacing or supplementing the current preference system for admitting legal permanent residents (LPRs) with a point system is garnering considerable interest for the first time in over a decade. Briefly, point systems such as those of Australia, Canada, Great Britain, and New Zealand assign prospective immigrants with credits if they have specified attributes, most often based on educational attainment, skill sets used in shortage occupations, extent of work experience, language proficiency, and desirable age range. President George W. Bush has stated that comprehensive immigration reform is a top priority of his second term, and his principles of reform include increased border security and enforcement of immigration laws within the interior of the United States, as well as a major overhaul of temporary worker visas, expansion of permanent legal immigration, and revisions to the process of determining whether foreign workers are needed. The Bush Administration is reportedly among those advocating to replace or supplement the current legal immigration preference system with a point system that would assign prospective immigrants with credits if they have specified attributes. Proponents of point systems maintain that such merit-based approaches are clearly defined and based on the nation's economic needs and labor market objectives. A point system, supporters argue, would be more acceptable to the public because the government (rather than employers or families) would be selecting new immigrants and this selection would be based on national economic priorities. Opponents of point systems state that the judgement of individual employers are the best indicator of labor market needs and an immigrant's success. Opponents warn that the number of people who wish to immigrate to the United States would overwhelm a point system comparable to those of Australia, Canada, Great Britain, and New Zealand. In turn, this predicted high volume of prospective immigrants, some say, would likely lead to selection criteria so rigorous that it would be indistinguishable from what is now the first preference category of employment-based admissions (persons of extraordinary ability in the arts, science, education, business, or athletics; outstanding professors and researchers; and certain multi-national executives and managers) and ultimately would not result in meaningful reform. The bipartisan compromise proposal for comprehensive immigration reform introduced in the Senate on May 21, 2007, as S.Amdt. 1150 to S. 1348, the Comprehensive Immigration Reform Act of 2007, includes a point system. A modified version of that compromise legislation (S. 1639), which also featured a point system, stalled in the Senate on June 28, 2007. This report will be updated as events warrant.

Discussions on the federal workforce since the late 1990s have focused on the management ofhuman capital. The term "human capital" refers to "a concept that views employees as assets in thesame sense as financial capital ... [and] presupposes that an investment in human potential will yieldsignificant returns for the organization." (1) Humancapital also "describe[s] what an organizationgains from the loyalty, creativity, effort, accomplishments, and productivity of its employees." (2) Theeconomist Lester C. Thurow defined human capital as: an individual's productive skills, talents, and knowledge. It is measured in terms of the value (price multiplied by quantity) of goods and servicesproduced. Since consumption is the ultimate goal of our economic system, the value of a man'scapital is the same as the value of the consumption goods and services which he directly or indirectlyproduces. When the value of goods and services rises, the value of human capital rises. When thevalue of goods and services falls, the value of human capital falls. (3) To the General Accounting Office (GAO), human capital is "an organization's people," "its most critical asset in managing for results," and "assets to be valued." (4) In January 2001, GAO addedstrategic human capital management to its list of high-risk areas in the federal government. According to GAO, human capital challenges met the three criteria for high risk: they "are evidentat multiple agencies"; they "affect a significant portion of the government's total budget or otherresources"; and they "should be monitored and addressed through individual agency actions as wellas through OMB [Office of Management and Budget] and OPM [Office of Personnel Management]initiatives, legislative action, and/or congressional oversight." GAO found that federal workforcereductions were conducted without sufficient planning for their effects on agency performance. Agencies also reduced investments in performance rewards, enabling technologies, and training andprofessional development programs. GAO also determined that many agencies anticipate rapidturnover of top leadership and managers. About 45% of the career Senior Executive Service willbecome eligible to retire by FY2005 and are expected to retire. (5) In a January 2003 update of the high risk designation, GAO acknowledged the administration's placement of strategic management of human capital at the top of the President's managementagenda and the authority for a new personnel system and additional governmentwide personnelflexibilities enacted in P.L. 107-296 , the Homeland Security Act of 2002. "Nevertheless, despitebuilding momentum for comprehensive and systematic reforms," according to GAO, "[t]he basicproblem, which continues today, has been the long-standing lack of a consistent strategic approachto marshaling, managing, and maintaining the human capital needed to maximize governmentperformance and assure its accountability.... [T]he problem is a set of policies that are viewed bymany as outdated, overregulated, and not strategic." (6) As the 106th Congress was drawing to a close, the then-chairman of the Senate Committee on Governmental Affairs, Senator Fred Thompson, and the then-chairman of the Senate Subcommitteeon Oversight of Government Management, Restructuring, and the District of Columbia, SenatorGeorge Voinovich, published committee and subcommittee reports that included recommendationsto address challenges in managing the federal government and its human capital, given the possibilitythat a significant number of federal employees would be eligible to retire by 2004. (7) The Administration of President George W. Bush submitted a legislative proposal entitled The Managerial Flexibility Act of 2001 to Congress on October 15, 2001. OMB described the proposalas "a key component of the Bush Administration's 'Freedom to Manage' initiative ... to eliminatelegal barriers to effective management." (8) Theproposal included provisions on personnelmanagement flexibilities, including voluntary separation incentive payments, voluntary earlyretirement, recruitment and retention bonuses and relocation allowances, academic degrees, theSenior Executive Service, personnel management demonstration projects, and direct hire. Provisions similar to those in the President's proposal were part of legislation to change various policies related to managing the federal workforce that were considered in the Senate and the Houseof Representatives in the 107th Congress. Senator Voinovich introduced S. 1603 , theFederal Human Capital Act of 2001, on October 31, 2001, and S. 1639 , the FederalEmployee Management Reform Act of 2001, on November 6, 2001. Senator Thompson introduced S. 1612 , the Managerial Flexibility Act of 2001, on November 1, 2001. (9) The bills werereferred to the Senate Committee on Governmental Affairs. The committee's Subcommittee onInternational Security, Proliferation, and Federal Services conducted two days of hearings on thelegislation on March 18 and 19, 2002, taking testimony from the Office of Personnel Management,the General Accounting Office, employee organizations, and several scholars who have studiedfederal workforce issues. (10) RepresentativeConstance Morella introduced H.R. 4580 ,the Good People, Good Government Act, on April 24, 2002, and it was referred to the HouseCommittee on Government Reform. Senator Daniel Akaka, chairman of the subcommittee, said that the hearings "continue[d] the dialogue on what needs to be done to make government service more attractive to young people andto inspire and compensate those who have chosen government as their job choice." He stated that"[t]here must be a commitment from the highest levels of government and a willingness to allocatethe resources necessary to achieve a strong and vibrant workforce." (11) During his testimony beforethe subcommittee on March 19, 2002, Paul C. Light of the Brookings Institution noted that "[p]astefforts to restore the luster of federal service have been hampered by a lack of interest in incrementalaction." He commented that the pending legislation "would clearly increase government's ability tocompete for talent" and should be "viewed as first, not final, steps in what will ultimately amountto an historic restructuring of the federal government's human capital system." (12) Following the Senate committee hearings, Senator Voinovich, joined by Senators Fred Thompson and Thad Cochran, revised some of the provisions in S. 1603 and S. 1639 , as introduced, and merged them into one bill, S. 2651 , the FederalWorkforce Improvement Act of 2002, introduced on June 20, 2002. Several of the S. 2651 provisions, including those on agency Chief Human Capital Officers, alternative ranking andselection procedures, voluntary separation incentive payments, the repeal of recertificationrequirements for the Senior Executive Service, academic degree training, and modifications to theNational Security Education Program, were enacted in P.L. 107-296 , The Homeland Security Actof 2002, signed by President George Bush on November 25, 2002, and are applicablegovernment-wide. (13) The Office of PersonnelManagement (OPM) is currently crafting a new humanresources management system for the department. No further action was taken on any of the other107th Congress bills. In the 108th Congress, S. 129 , the Federal Workforce Flexibility Act of 2003, passed the Senate with an amendment by unanimous consent on April 8, 2004. Senator Voinovichintroduced S. 129 on January 9, 2003, and the bill was referred to the Senate Committeeon Governmental Affairs. On October 22, 2003, the committee ordered the bill to be reported withan amendment in the nature of a substitute, after agreeing by voice vote to an amendment offeredby Senator Akaka making political appointees ineligible for the enhanced recruitment, relocation,and retention bonuses and adding reporting requirements on the bonuses. S. 129 wasreported on January 27, 2004. (14) The committeesubstitute, as amended, was agreed to by the Senateby unanimous consent on April 8, 2004. In the House of Representatives, the Subcommittee on CivilService and Agency Organization of the House Committee on Government Reform marked up S.129 on May 18, 2004. Before forwarding the legislation to the full committee, thesubcommittee agreed by voice vote to an amendment in the nature of a substitute offered byRepresentative Jo Ann Davis and en bloc amendments offered by Representative Danny Davis. Theen bloc amendments related to making political appointees ineligible for the enhanced recruitment,relocation, and retention bonuses and adding reporting requirements on the bonuses. On June 24,2004, the House committee ordered the bill to be reported to the House of Representatives by voicevote, after agreeing, by voice vote, to an amendment in the nature of a substitute offered byRepresentative Jo Ann Davis. Another bill related to management of the federal workforce was introduced in the House of Representatives on April 3, 2003. Representative Jo Ann Davis introduced H.R. 1601 ,the Federal Workforce Flexibility Act of 2003, and it was referred to the House Committee onGovernment Reform. As introduced, S. 129 and H.R. 1601 were identicalexcept for one provision relating to personnel demonstration projects. (15) Both bills include a numberof the provisions that were in S. 2651 (107th Congress). S. 129 , as passed by the Senate and as ordered to be reported to the House, would amend current law provisions on critical pay, civil service retirement system computation forpart-time service, agency training, and annual leave. The bill also would amend current lawprovisions on recruitment and relocation bonuses and retention allowances (which would be renamedbonuses). As ordered to be reported to the House, S. 129 would amend the current 5U.S.C. ��5753 and 5754 language on such bonuses and allowances. As passed by the Senate, itwould add new sections 5754a and 5754b on recruitment, relocation, and retention bonuses to Title5 United States Code . Therefore, if S. 129 as passed by the Senate were enacted, agencieswould be able to use the current law provisions on recruitment and relocation bonuses and retentionallowances at 5 U.S.C. ��5753 and 5754 and the enhanced authority for recruitment, relocation, andretention bonuses proposed at 5 U.S.C. ��5754a and 5754b. (16) S. 129 , as ordered to be reported to the House, would amend current law provisions on pay administration. These amendments were included in S. 129 as introduced, but theywere dropped during Senate committee markup and are not included in the Senate-passed versionof the bill. Provisions that would amend current law on retirement service credit for cadet ormidshipman service and compensatory time off for travel were added to S. 129 duringSenate committee markup and are included in the legislation as passed by the Senate and as orderedto be reported to the House. Added during Senate Committee markup as well were provisions onSenior Executive Service authority for the White House Office of Administration that are in theSenate-passed bill, but are not in the legislation as ordered to be reported to the House (theprovisions were removed from the House version of the bill during the full House committeemarkup). Other provisions that would have amended current law provisions relating to contributionsto the Thrift Savings Plan, annuity commencement dates, and retirement for air traffic controllerswere included in S. 129, as forwarded by the House Civil Service and AgencyOrganization Subcommittee to the House Government Reform Committee, but were removed duringthe full committee markup. The Congressional Budget Office (CBO) estimates that if S. 129 were enacted, direct spending would increase by $4 million in 2004, $71 million over the 2004-2008 period, and$233 million over the 2004-2013 period. Revenues would increase by less than $500,000 annuallystarting in 2005, according to CBO. For various administrative requirements, assuming that thenecessary appropriations are provided, CBO estimates that the cost of implementing the legislationwould be $351 million over the 2004-2008 period and $756 million over the 2004-2013 period. (17) On April 8, 2003, the Subcommittee on Oversight of Government Management, the Federal Workforce, and the District of Columbia of the Senate Committee on Governmental Affairs, and theSubcommittee on Civil Service and Agency Organization of the House Committee on GovernmentReform, conducted a joint hearing on the federal government's human capital challenge. (18) TheMembers took testimony on S. 129 and H.R. 1601 and suggestions foradditional legislation. (Comments related to the former are included under the relevant provisionsof the bills.) With regard to the latter, a professor of public management at Harvard University,Steven Kelman, suggested that three additional provisions be included in the pending legislation:establishment of a version of the Presidential Management Intern program for mid-careerprofessionals to increase their options for entry into government service, an amendment to 5 U.S.C.�201 to add that a candidate's "accomplishments" be considered with his or her "knowledge, skills,and abilities" as a basis for hiring and promotion decisions, and extension of the Outstanding Scholarhiring authority from the current GS-7 level to the GS-9 level to make graduates of master's degreeprograms eligible. (19) A February 11, 2004, hearing conducted by the House Subcommittee on Civil Service and Agency Organization included a discussion of H.R. 1601 . (20) Subcommittee ChairwomanJoAnn Davis stated that H.R. 1601, along with other initiatives, seeks "to address the veryreal pay, benefit and personnel issues that keep potential employees from joining the civil serviceand sometimes drive our best employees and managers away." (21) In his statement, RepresentativeDanny Davis cautioned that "[g]ranting federal agencies flexibilities that do not addresswell-documented problems or are not clear solutions to these problems is a disservice to federalemployees and the taxpayers." (22) Carl DeMaio,President of The Performance Institute, a privatethink tank, recommended that the personnel flexibilities be accompanied by a plan to coordinate allhuman capital activities. (23) The National Presidentof the American Federation of GovernmentEmployees (AFGE), John Gage, testified that his union strongly prefers S. 129 becauseit does not include the demonstration project authorities included in H.R. 1601. He alsorecommended that the exercise of any of the enhanced flexibilities be predicated on the fullimplementation of the pay comparability provisions of the Federal Employees Pay ComparabilityAct. (24) The National Commission on the Public Service, in its report to Congress issued on January 7, 2003, characterized the personnel provisions enacted in P.L. 107-296 , the Homeland Security Actof 2002, as "promising approaches to personnel reform." Among its proposals, the commissionrecommended that operating agencies develop more flexible personnel management systems to meettheir special needs and that Congress and OPM continue efforts to simplify and accelerate therecruitment of federal employees. (25) This report discusses each of the provisions in S. 129 , as passed by the Senate and as ordered to be reported to the House. Comments from the 107th Congress Senate subcommitteehearings, the 107th Congress section analyses that accompanied S. 2651 and S. 1612 , and the 108th Congress joint Senate and House subcommittee hearing and theHouse subcommittee hearing are included under the discussions of relevant provisions of the bills. For a comparison of each of the provisions in S. 129 with current law, see CRS Report RL31516 , Federal Workforce Flexibilities: A Side-by-Side Comparison of S. 129 (108thCongress) with Current Law . [author name scrubbed], Specialist in Social Legislation, Domestic Social Policy Division, Congressional Research Service (CRS), prepared the text on provisions relating to retirement. L.Elaine Halchin, Analyst in American National Government, Government and Finance Division,CRS, prepared the text on provisions relating to Senior Executive Service Authority for the WhiteHouse Office of Administration. Barbara Schwemle, Analyst in American National Government,Government and Finance Division, CRS, prepared all other text. Enhanced authority for federal agencies to pay recruitment and relocation bonuses and retentionallowances (sometimes referred to as "the three Rs") is among the changes proposed in Title I of S. 129 , as passed by the Senate and as ordered to be reported to the House. Firstenacted as part of the Federal Employees Pay Comparability Act of 1990 ( P.L. 101-509 ), bonusesand allowances of up to 25% of basic pay were viewed as an additional cash incentive to help makeagencies more successful in the competitive job market. A 1999 OPM evaluation of the use of thethree Rs found that limited funding and limited recruitment because of downsizing contributed torestricted agency use. Several of the proposed changes (allowing flexibility in the methods ofpayment and raising the maximum amounts) were suggested by agencies responding to OPM'sstudy. (26) Section 101(a) of S. 129 , as ordered to be reported to the House, would amend various provisions of current law at 5 U.S.C. �5753 on recruitment and relocation bonuses. S. 129 , as introduced, would have done the same at Section 201(a). During Senatecommittee markup, S. 129 was amended at Section 101(a) to add a new section 5754a onrecruitment and relocation bonuses to Title 5 United States Code , and these provisions are in the billas passed by the Senate. Therefore, if the Senate-passed S. 129 were enacted, agencieswould be able to use the current law provisions on recruitment and relocation bonuses at 5 U.S.C.�5753 and the enhanced authority for recruitment and relocation bonuses proposed at 5 U.S.C.�5754a. Reason for Paying Bonuses. Current law authorizes the payment of recruitment and relocation bonuses if OPM determines that the agencywould be likely, in the absence of bonuses, to encounter difficulty in filling certain positions. S. 129 would continue this provision (5 U.S.C. �5754a(b)(1) and 5 U.S.C. �5753(b)(1)). Eligible Employees. Currently, recruitment bonuses may be paid to employees who are newly appointed under the General Schedule (GS). Relocation bonuses may be paid to employees under the GS or any other pay authority in theexecutive, legislative, and judicial branches who must relocate to accept GS positions. S. 129 would provide that the bonuses would be paid only to employees covered by theGS pay system (except as discussed below, under "extending coverage to other employees") whoare newly appointed (recruitment); or who are current federal employees who move to new positionsin the same geographic areas, under circumstances OPM would describe in regulations; or are currentfederal employees who must relocate to accept positions in different geographic areas (relocation)(5 U.S.C. �5754a(b)(2) and 5 U.S.C. �5753(a)(1)(A) and (b)(2)). Service Agreement. Current law requires an employee who receives a recruitment or relocation bonus to enter into an agreement with the agencyto complete a period of employment. The required period of service is determined by OPMregulations. Repayment of a bonus on a pro rata basis is required if an employee voluntary fails tocomplete the service period or is separated for cause on charges of misconduct or delinquency beforecompleting the service period. S. 129 would amend current law to provide that anemployee would be required to enter into a written service agreement to complete a period ofemployment with the agency, not to exceed four years. OPM regulations could prescribe a minimumservice period. The service agreement would include the length of the required service period; theamount of the bonus; the method of payment; and other terms and conditions under which the bonuswould be payable, including the conditions under which the agreement could be terminated beforethe service period had been completed, and the effect of the termination. The agreement would beeffective upon employment with the agency or movement to a new position or geographic area, asapplicable. A service agreement for a recruitment bonus could be effective at a later date undercircumstances that OPM would describe in regulations, such as an initial period of formal basictraining (5 U.S.C. �5754a(c) and 5 U.S.C. �5753(c)). Limitations on, Payment, and Nature of Bonus. Current law limits the bonus to 25% of the annual basic pay rate and provides for lump sumpayment. Basic pay does not include locality pay. The bonus is not part of basic pay and can be paidbefore a newly hired employee enters on duty. S. 129 (subsection 5 U.S.C. �5754a(d))and reordered subsections of 5 U.S.C. �5753) would amend current law to provide that a bonus couldnot exceed 25% of the employee's annual basic pay rate at the beginning of the service period,multiplied by the number of years (or fractions thereof) in the service period, not to exceed fouryears. A bonus could be paid as an initial lump sum, in installments, as a final lump sum uponcompletion of the full service period, or in a combination of these forms. S. 129 doesnot include the current law provision excluding locality pay from basic pay; this would mean thatthe bonus could be calculated on the basis of the basic General Schedule rate, with locality payincluded. The current law provisions stating that a bonus is not part of basic pay and that a bonuscan be paid before a newly hired employee enters on duty are included, but "eligible individual"would be substituted for "newly hired" employee. Waiver of the Limitation. S. 129 would add new text to provide that OPM regulations could authorize an agency head to waive the25% limitation based on a critical agency need. Under a waiver, the amount of the bonus could beup to 50% of the employee's annual basic pay rate at the beginning of the service period, multipliedby the number of years (or fractions thereof) in the service period, not to exceed 100% of theemployee's annual basic pay rate at the beginning of the service period (5 U.S.C. �5754a(e) and 5U.S.C. �5753(e)). Plans for Paying Bonuses. S. 129 would add a new subsection to provide that OPM regulations would require that agencies establishplans for paying recruitment and relocation bonuses before paying such bonuses (5 U.S.C. �5754a(f)and 5 U.S.C. �5753(f)). Regulations. Current law authorizes OPM to prescribe regulations. S. 129 would amend current law by requiring that OPM wouldprescribe regulations to administer the section, including regulations on repayment of a recruitmentor relocation bonus in appropriate circumstances when the service period had not been completed(5 U.S.C. �5754a(g) and 5 U.S.C. �5753(g)). Extending Coverage to Other Employees. Current law authorizes the President to apply the section to employees otherwise not covered. S. 129 would amend current law by providing that OPM could extend coverage tocategories of employees who otherwise would not be covered at the request of the head of anexecutive agency (5 U.S.C. �5754a(h)(1) and 5 U.S.C. �5753(a)(1)(B)). Political Appointees Not Eligible for Bonuses. A bonus could not be paid to an individual who is appointed to, or who holds a position to whichhe or she was appointed by the President, by and with the advice and consent of the Senate; anoncareer appointee position in the Senior Executive Service (SES); or a position that has beenexcepted from the competitive service by reason of its confidential, policy-making, orpolicy-advocating character (5 U.S.C. �5754a(h)(2) and 5 U.S.C. �5753(a)(2)). According to staffof the Senate Committee on Governmental Affairs, the current authority at 5 U.S.C. �5753 allowspolitical appointees to be eligible for recruitment and relocation bonuses. This provision wouldexclude political appointees from being eligible for the enhanced recruitment and relocation bonusesauthorized in S. 129 . Reporting Requirement. OPM would submit to the Senate Committee on Governmental Affairs and the House Committee on Government Reforman annual report on bonuses paid. The House version would provide that the annual report wouldbe submitted for each of the first five years that the bonuses were paid. Under the Senate version,each report would include the use by each agency of recruitment and relocation bonuses, including,with respect to each agency and each type of bonus, the number and amount of bonuses by grade,including the General Schedule, SES, and Executive Schedule positions. Under the House version,each report would include a description of how the authority to pay recruitment and relocationbonuses was used by the respective agencies, including, with respect to each such agency and eachtype of bonus, the number and dollar amount of bonuses paid to individuals holding positions withineach pay grade, pay level, or other pay classification; and if applicable, to individuals who movedbetween positions that were in different agencies but the same geographic area (including the namesof the agencies involved). The report also would include a determination of the extent to which suchbonuses furthered the purposes of the statute authorizing them (5 U.S.C. �5754a(i) and Section101(c)(1)). Applying the Statute. The Senate version would provide that an individual could not be paid a recruitment or relocation bonus under the proposedSection 5754a and a recruitment or relocation bonus under 5 U.S.C. �5753 (5 U.S.C. �5754a(j)). Definitions. Under current law, the terms "agency" and "employee" are defined. "Agency" means an executive agency, the Library ofCongress, the Botanic Garden, the Government Printing Office, the Office of the Architect of theCapitol, and the government of the District of Columbia (5 U.S.C. �5102(a)(1)). (27) S. 129 does not include a definition of "agency." Currently, "employee" means an individual employed in or under an agency (5 U.S.C. �5102(a)(2)). S. 129 (5 U.S.C. �5754a(a) and 5 U.S.C. �5753(a)(3)) would amendcurrent law by providing that "employee" would mean (except as otherwise provided by 5 U.S.C.�2105 or when specifically modified): an officer and an individual who is (1) appointed in the civil service by the President; Member(s) of Congress, or the Congress, a member of a uniformedservice, an individual who is an employee under 5 U.S.C. �2105, the head of a governmentcontrolled corporation, or an adjutant general; (2) engaged in the performance of a federal functionunder authority of law or an executive act; and (3) subject to the supervision of an individual namedunder (1) above while engaged in the performance of the duties of his or her position. Certainindividuals employed at the United States Naval Academy also are covered by the term (5 U.S.C.�2105). Section 101(a) of S. 129 , as ordered to be reported to the House, also would amend various sections of current law (5 U.S.C. �5754) on retention allowances. S. 129 , asintroduced, would have done the same at Section 201(a). During Senate committee markup, S.129 was amended at Section 101(a) to add a new section 5754b on retention bonuses toTitle 5 United States Code , and these provisions are in the bill as passed by the Senate. Therefore,if S. 129 as passed by the Senate were enacted, agencies would be able to use the currentlaw provisions on retention allowances at 5 U.S.C. �5754 and the enhanced authority for retentionbonuses proposed at 5 U.S.C. �5754b. S. 129 would amend current law by renaming theallowances as bonuses. Reason for Paying Bonuses. Current law authorizes allowances for employees whose unusually high or unique qualifications or the agency'sspecial need for their services makes it essential to retain them. Additionally, the agency mustdetermine that the employee would be likely to leave in the absence of an allowance. S. 129 would add, as another reason for paying the bonuses, an agency determination that, in theabsence of a bonus, an employee would likely leave federal service or take a different federalposition under conditions which OPM would describe in regulations (5 U.S.C. �5754b(b) and 5U.S.C. �5754(b)). Eligible Employees. Current law (5 U.S.C. �5754(a)) authorizes allowances for General Schedule (GS) employees. S. 129 wouldprovide that the bonuses would be paid only to employees covered by the GS pay system (except asdiscussed under "extending coverage to other employees" below) (5 U.S.C. �5754b(d) and 5 U.S.C.�5754(a)(1)(A)). The bills would add new text (5 U.S.C. �5754b(c) and 5 U.S.C. �5754(c)) toprovide that OPM could authorize an agency head to pay retention bonuses to a group of employeesin one or more categories of positions in one or more geographic areas, subject to 5 U.S.C.�5754b(b)(1) and 5 U.S.C. �5754(b)(1), and regulations, if there were a high risk that a significantportion of employees in the group would be likely to leave in the absence of bonuses. Service Agreement. Currently, a service agreement is not required for payment of a retention allowance. S. 129 would providethat the employee would have to enter into a written service agreement to complete a period ofemployment with the agency. The service agreement would include the length of the requiredservice period; the amount of the bonus; the method of payment; and other terms and conditionsunder which the bonus would be payable, including the conditions under which the agreement couldbe terminated before completion of the service period and the effect of the termination. A writtenservice agreement would not be required if the retention bonus were paid in biweekly installmentswith the payment set at the full bonus percentage rate established for the employee with no portionof the bonus deferred. In this case, if the agency decided to terminate the payments, the agencywould inform the employee in writing of that decision. Except as OPM would provide inregulations, the employee would continue to be paid the bonus through the end of the pay period inwhich the notice would be provided. A bonus could not be based on any period of service which wasthe basis for a recruitment or relocation bonus (5 U.S.C. �5754b(e) and 5 U.S.C. �5754(d)). Limitations on Payment and Nature of Bonus. Current law limits the allowance to 25% of the annual basic pay rate (excluding locality pay) and provides for payment at the same time and in the same manner as basic pay. The allowance is notpart of basic pay. Any action to reduce or eliminate the allowance is not appealable. S. 129 would amend current law by providing that a retention bonus would be stated as a percentageof the employee's basic pay for the service period associated with the bonus, and could not exceed25% of the employee's basic pay if paid to the employee individually or 10% of the employee's basicpay if paid to the employee as part of a group. A bonus could be paid in installments aftercompletion of specified periods of service or in a single lump sum at the end of the full period ofservice required by the agreement. An installment payment could not exceed the product derivedby multiplying the amount of basic pay earned in the installment period by a percentage not toexceed the bonus percentage rate established for the employee. If the installment paymentpercentage were less than the bonus percentage rate, the accrued but unpaid portion of the bonuswould be payable as part of the final installment payment after completion of the full service periodunder the terms of the service agreement (5 U.S.C. �5754b(f) and 5 U.S.C. �5754(e)). As in current law, a retention bonus would not be part of an employee's basic pay. The current 5 U.S.C. �5754(b)(2) provision stating that reduction or elimination of the allowance is notappealable would be deleted. Waiver of the Limitation. S. 129 would provide that OPM, upon request of an agency head, could waive the 25% or 10% limitationsand permit the agency head to pay bonuses of up to 50% of basic pay based on a critical agency need(5 U.S.C. �5754b(g) and 5 U.S.C. �5754(f)). Plans for Paying Bonuses. The bill provides that OPM regulations would require that agencies establish a plan for paying retention bonuses beforepaying such bonuses (5 U.S.C. �5754b(h) and 5 U.S.C. �5754(g)). Regulations. Current law authorizes OPM to prescribe regulations. S. 129 and H.R. 1601 would continue the policy (5U.S.C. �5754b(i) and 5 U.S.C. �5754(h)). Extending Coverage to Other Employees. Current law authorizes the President to apply the section to employees otherwise not covered. S. 129 would amend current law by providing that OPM could extend coverage tocategories of employees who otherwise would not be covered at the request of the head of anexecutive agency (5 U.S.C. �5754b(j)(1) and 5 U.S.C. �5754(a)(1)(B)). Political Appointees Not Eligible for Bonuses. A bonus could not be paid to an individual appointed by the President, by and with the advice andconsent of the Senate; a noncareer appointee position in the Senior Executive Service (SES); or aposition which has been excepted from the competitive service by reason of its confidential,policy-making, or policy-advocating character (5 U.S.C. �5754b(j)(2) and 5 U.S.C. �5754(a)(2)). According to staff of the Senate Committee on Governmental Affairs, the current authority at 5U.S.C. �5754 allows political appointees to be eligible for retention allowances. This provisionwould exclude political appointees from being eligible for the enhanced retention bonuses authorizedin S. 129 . Reporting Requirement. OPM would submit to the Senate Committee on Governmental Affairs and the House Committee on Government Reforman annual report on bonuses paid. Under the House version, the annual report would be submittedfor each of the first five years that bonuses were paid. Under the Senate version, each report wouldinclude each agency's use of recruitment and relocation bonuses, including, with respect to eachagency and each type of bonus, the number and amount of bonuses by grade, including GeneralSchedule, SES, and Executive Schedule positions. Under the House version, each report wouldinclude a description of how the authority to pay retention bonuses was used by the respectiveagencies, including, with respect to each such agency, the number and dollar amount of bonuses paidto individuals holding positions within each pay grade, pay level, or other pay classification; and ifapplicable, how the authority was used to prevent individuals from moving between positions thatwere in different agencies but the same geographic area (including the names of the agenciesinvolved). The report also would include a determination of the extent to which such bonusesfurthered the purposes of the statute authorizing them (5 U.S.C. �5754b(k) and Section 101(c)). The House version at Section 101(a)(3) also includes a provision which would provide that it is the sense of Congress that the OPM Director would, each time a bonus was paid to recruit orrelocate a federal employee from one government agency to another within the same geographic areaor to retain a federal employee who might otherwise leave one government agency for another withinthe same geographic area, be notified of that payment within 60 days after the date on which thebonus was paid. The OPM Director would monitor the payment of such bonuses to ensure that theywere an effective use of the federal government's funds and had not adversely affected the abilityof those government agencies that lost employees to other government agencies (in suchcircumstances) to carry out their missions. Applying the Statute. The Senate version would provide that an individual could not be paid a retention bonus under the proposed Section 5754b anda retention allowance under 5 U.S.C. �5754 (5 U.S.C. �5754b(l)). Definitions. Under current law, the terms "agency" and "employee" are defined. "Agency" means an executive agency, the Library ofCongress, the Botanic Garden, the Government Printing Office, the Office of the Architect of theCapitol, and the government of the District of Columbia (5 U.S.C. �5102(a)(1)). (28) S. 129 does not include a definition of "agency." Currently, "employee" means an individual employed in or under an agency (5 U.S.C. �5102(a)(2)). S. 129 (5 U.S.C. �5754b(a) and 5 U.S.C. �5754(a)(3)) would amendcurrent law by providing that "employee" would mean (except as otherwise provided by 5 U.S.C.�2105 or when specifically modified): an officer and an individual who is (1) appointed in the civil service by the President; Member(s) of Congress, or the Congress, a member of a uniformedservice, an individual who is an employee under 5 U.S.C. �2105, the head of a governmentcontrolled corporation, or an adjutant general; (2) engaged in the performance of a federal functionunder authority of law or an executive act; and (3) subject to the supervision of an individual namedunder (1) above while engaged in the performance of the duties of his or her position. Certainindividuals employed at the United States Naval Academy also are covered by the term (5 U.S.C.�2105). Section 101(b) of S. 129 , as passed by the Senate, and Section 101(d)(1) of S. 129, as ordered to be reported to the House, would provide that the provisions of thesection would become effective on the first day of the first applicable pay period beginning on orafter 180 days after the act's enactment. The House version of the bill also would provide that arecruitment or relocation bonus service agreement that was authorized under 5 U.S.C. �5753 beforethe act's effective date would continue, until its expiration, to be subject to 5 U.S.C. �5753 as ineffect on the day before the act's effective date (Section 101(d)(2). Payment of a retention allowancethat was authorized under 5 U.S.C. �5754 before the act's effective date would continue, subject to5 U.S.C. �5754 as in effect on the day before the act's effective date, until the retention allowancewas reauthorized or terminated (but no longer than one year after the act's effective date) (Section101(d)(3)). (29) The proposed amendments would give agencies more flexibility in implementing recruitment, relocation, and retention bonuses. For instance, the reasons for using the bonuses would beexpanded; the methods for making the payments would be several (lump sum at the beginning or endof the service period or in installments); and the size of the bonuses could be increased by usingwaiver authority. The section analysis which accompanied S. 2651 (107th Congress)stated that the changes would enable agencies to use the bonuses "in more strategic ways thatenhance their desired effect" and "help federal agencies be more competitive in recruiting andretaining" the workforces they require. (30) By including a more specific service requirement for receipt of recruitment and relocation bonuses and by adding such a service requirement for receipt of retention bonuses, agencies wouldmore directly tie an employee's service to the bonus payments. The amendments do not addressagency funding of the bonuses, as Colleen M. Kelley of the National Treasury Employees Union(NTEU) commented during her testimony before the Senate subcommittee hearing. "As thisCommittee knows, federal agencies have a wealth of flexibilities available to them," she said, but: Unfortunately, in December of 1999, [OPM] reported that overall, only 0.14% of all Executive Branch employees received recruitment, retention orrelocation incentives in Fiscal Year 1998. Recruitment bonuses were given 0.3% of the time. Relocation bonuses were given to 1.0% of employees and 0.09% of employees received retentionallowances. Less than 1/4 of 1% of the federal workforce received any form of recruitment, retentionor relocation incentive in Fiscal Year 1998. When agencies were asked why they did not use theincentives available to them, more often than not, they cited budgetary constraints. Agencies simplyare not being given the resources necessary to fund the very programs and incentives that mightactually help put them on the road to solving their human capital crises .... Expanding the availabilityof these incentives makes little sense if agencies are not provided with the resources to accomplishthe goal. And with agencies slated to receive a 1% reduction in their discretionary spending accountsfor 2003, it is difficult to see how increasing and expanding recruitment and retention allowanceswill in any way translate into more of these flexibilities actually being offered to either prospectiveor current federal employees. (31) Ms. Kelley, in testifying before the April 8, 2003 joint subcommittee hearing, emphasized the critical importance of the committee ensuring "that appropriate funding will be forthcoming beforegiving false hope to agencies that additional bonus options are available to them." (32) She reiteratedthis view at the House subcommittee hearing. (33) Expressing his views before the Senate subcommittee on March 18, 2002, Bobby L. Harnage, Sr., national president of the American Federation of Government Employees (AFGE), reiteratedthose of Ms. Kelley and commented: "Implicitly, the assumption appears to be that bonus paymentsto select individuals would be paid from existing salary accounts. That is, agencies would only beable to use the broadened authority in the draft proposal to provide bonuses if they paid for themthrough the elimination of jobs or the denial of other salary adjustments for those not selected fora bonus." He stated the opinion that limiting the bonuses to General Schedule employees ignores the"equally acute" human capital crisis affecting blue collar workers under the Federal Wage System. Finally, Mr. Harnage observed that "Bonuses of any size are not a replacement for competitivesalaries and benefits." (34) Mr. Harnage expressedsimilar viewpoints at the April 8, 2003 jointsubcommittee hearing and questioned the lack of "a separate, supplemental funding mechanism foreither the payment of bonuses, or the expansion of critical pay authority" in S. 129 and H.R. 1601 . (35) The Federal Managers Association (FMA) representative, John Priolo, recommended a separate line item in the budget for recruitment at the March 18, 2002 Senate subcommittee hearing. (36) MaxStier, representing the Partnership for Public Service at the April 8, 2003 joint subcommittee hearing,urged Congress to commit the resources necessary to meet the challenges of managing the federalworkforce and to "[f]ollow the lead of private sector companies who have increasingly come torealize that success in workforce management feeds success in every other area of organizationalactivity." (37) At the same hearing, ComptrollerGeneral David Walker recommended that "Congressshould consider capping the number or percentage of employees in an agency who would be eligiblefor" recruitment bonuses and retention allowances. (38) Carl DeMaio of The Performance Institute testified before the House subcommittee hearing that, "[a]t the very least, in exchange for bonuses, a system for measuring individual performanceshould be integrated into the provisions for granting those bonuses, thereby requiring results-basedgoals and milestones." He also recommended that a written service agreement be required forbonuses paid in biweekly installments. (39) At thesame hearing, John Gage of AFGE stated that theproposed legislation does not provide funding for the bonuses and questioned whether such bonuseswould improve recruitment and retention. According to him, "Bonus payments do not count as basicpay for purposes of retirement or other salary adjustments" and "[t]hey are a poor substitute for ...competitive salaries and regular salary increases." (40) Mr. Gage also expressed views similar to thosestated by Colleen Kelley of NTEU at the Senate subcommittee hearing discussed above. In histestimony before the House subcommittee, Ronald Sanders, Associate Director for Strategic HumanResources Policy at OPM, stated that, "[e]xcept for its extension of [recruitment and retention]authorities to political appointees, [OPM] would prefer [ H.R. 1601 ], which simplyreplaces existing flexibilities with the new ones, without adding any new reporting requirements." (41) Section 301(b) of S. 129 , as ordered to be reported to the House, would repeal the current law provision at 5 U.S.C. �5305 note that authorizes relocation payments for LEOs. S. 129 , as introduced, included the same provision at Section 201(b), but it was droppedduring markup by the Senate Committee on Governmental Affairs and is not included in theSenate-passed bill. Currently, an LEO whose basic pay rate is less than $60,000 may receive arelocation payment of up to $15,000. For other federal employees, the amount of a recruitment orrelocation bonus cannot exceed 25% of the annual basic pay rate of the position to which theemployee is being appointed or relocated. The analysis which accompanied the introduction of S. 1612 (107th Congress) stated that repeal "would simplify administration of the bonus authority and make treatment of allemployees more consistent and equitable." LEOs "could still be paid a bonus of $15,000 ... byextending the service period to cover more than one year." (42) Section 102 of S. 129 , as passed by the Senate and as ordered to be reported to the House, would amend the critical pay provisions of 5 U.S.C. �5377. Under current law, (43) the Officeof Management and Budget (OMB), in consultation with OPM, may, upon the request of an agencyhead, grant authority to fix the rate of basic pay for one or more critical positions in such agency atnot less than the rate that would otherwise be payable for the position, but not greater than the ratepayable for Level I of the Executive Schedule ($175,700, as of January 2004), except upon thePresident's written approval. Each of these positions must require an extremely high level ofexpertise in a scientific, technical, professional, or administrative field and be critical to an agency'ssuccessful accomplishment of an important mission. The authority may be granted or exercised onlyto the extent necessary to recruit or retain an exceptionally well qualified individual for the position. S. 129 would amend current law to provide that this authority could be granted by OPMin consultation with OMB. Current law specifies that the authority for critical pay terminates whenever OMB determines that one or more of the requirements for critical pay are no longer met. S. 129 wouldamend this provision to authorize OPM to make the determination. Under current law, OMB may authorize the exercise of this authority for up to 800 positions government-wide at any time. Of this number, no more than 30 of the positions at any time couldbe positions whose pay rate would otherwise be determined according to the Executive Schedule(EX). (Positions on the EX schedule include cabinet secretaries, deputy secretaries, administrators,board chairmen, assistant secretaries, and under secretaries.) S. 129 would amend thisprovision to provide that OPM would authorize the exercise of this authority and be held to the samelimitations on the number of positions. The roles of OMB and OPM would be exchanged in other policy areas. For example, OPM would consult with OMB before prescribing regulations or making any decision to grant or terminateany authority for critical pay. OPM would be required to report to the House Committee onGovernment Reform and the Senate Committee on Governmental Affairs annually and in writingon the operation of the pay authority for critical positions. Annual reports to Congress on use of the authority are required under current law. S. 129 does not include this provision. Discussion of the Provisions. S. 129 would shift oversight and reporting authority for critical pay positions from OMB to OPM. Thesection analysis that accompanied S. 2651 (107th Congress) stated that the provision'sobjective "is to encourage [the] increased application of this underutilized authority as a means ofattracting talented individuals to critical positions in the federal government for short periods oftime." (44) OPM staff do not anticipate a need fora significant increase in staff resources were theagency to assume responsibility for administering the critical pay provisions. (45) The critical pay provisions in current law were enacted to recognize the disparity between government and private sector salary structures, particularly at the senior level, and to streamline theprocess for appointing individuals to designated critical positions. This authority does not addresspay and salary issues of members of the Executive Schedule, Senior Executive Service, andsenior-level positions. Colleen M. Kelley of NTEU stated at the Senate subcommittee hearing thatshe does not "think it is possible to solve the human capital crisis without addressing" federal pay. (46) Expressing similar viewpoints at the April 8, 2003, joint subcommittee hearing, Ms. Kelley statedthat "[p]roperly compensating the federal workforce would make further critical pay authorityunnecessary." (47) Carl DeMaio of The PerformanceInstitute recommended pay based on the market"that focuses more on non-profit pay comparisons rather than private-sector ones" at the Housesubcommittee hearing. (48) During the same hearing,John Gage of AFGE expressed concern that theproposed legislation does not provide funding for the expansion of critical pay authority and testifiedin support of adequate and competitive salaries for all employees rather than "for a lucky few." (49) During the period 1991 through 2000, OMB received 55 requests for critical pay, and 37 of these were approved. Twenty-nine authorizations were later cancelled because the positionsremained vacant for an extended period of time. (50) As of December 2003, OPM's Central PersonnelData File showed that five employees were being paid under the critical pay authority at 5 U.S.C.�5377. Among the positions approved for critical pay are these: the Director of the NationalInstitutes of Health; the Director of the Richland, WA, Operations Office of the Department ofEnergy, Office of Environmental Management; the Distinguished Chief Scientist for InformationTechnology at the Ames Research Center, National Aeronautics and Space Administration; theCommissioner for Education Research, the Commissioner for Education Evaluation and RegionalAssistance, and the Commissioner for Education Statistics at the Department of Education; theCommissioner of the Food and Drug Administration; and the Executive Director and ManagingDirectors of the National Transportation Safety Board. (51) Neither the section analysis thataccompanied S. 2651 (107th Congress) nor the Senate subcommittee hearing testimonyprovided information on how widely the authority might be used or for which types of positions. If enacted, Section 105(1) of S. 129 , as passed by the Senate, would amend 3 U.S.C. �107(b) to give the President authority to employ senior executives in the White HouseOffice of Administration, and would require that any permanent Senior Executive Service (SES)positions established be career reserved positions. The provision was added to S. 129 during markup by the Senate Committee on Governmental Affairs at the request of OPM. The SESincludes two types of appointees, career and noncareer. Only career appointees may fill careerreserved positions. Employment of individuals as senior executives would be carried out in accordance with 5 U.S.C. �3132 and related provisions. Other provisions in Title 5 applicable to the SES includeChapter 31, Subchapter II (authority for employment); Chapter 33, Subchapter VIII (appointment,reassignment, transfer, and development in the SES); Chapter 35, Subchapter V (removal,reinstatment, and guaranteed placement in the SES); Chapter 43, Subchapter II (performanceappraisal in the SES); Chapter 45, Subchapter I (awards for superior accomplishments); Chapter 53,Subchapter VIII (pay for the SES); and Chapter 75 (adverse actions). For the Office ofAdministration to hire individuals as senior executives, OPM would have to allocate SES positionsto the White House Office of Administration. (52) The hiring process for career appointees, which isa merit-based selection process, involves a recruitment program and requires candidates todemonstrate they have the requisite executive qualifications. (53) Current law at 3 U.S.C. �114 establishes a limitation on basic pay for an employee of the Vice President appointed under 3 U.S.C. �106, the White House Office, the Executive Residence at theWhite House, the Domestic Policy Staff, or the Office of Administration. That limitation is set ata rate no less than 120% of GS-15, step 1 ($104,927, as of January 2004), and not greater than levelIV of the Executive Schedule ($136,900, as of January 2004). Section 105(2) of S. 129 , as passed by the Senate, would amend current law to provide that the limitation on basic pay would be GS-15, step 10 ($113,674, as of January 2004) andthat the limitation would not apply to senior executives. These provisions are not included in S. 129 , as ordered to be reported to the House. Several provisions related to agency training are included in Title II of S. 129 , aspassed by the Senate and as ordered to be reported to the House. Training is a discretionary accountin agency budgets and is usually one of the first items reduced when funding is needed to pay forfixed or mandatory expenditures such as pay and benefit increases or other programs. A May 2000Senate hearing on training in the federal government found that "most agencies spread their trainingdollars throughout their budget" in an effort "to make it difficult for OMB or the appropriationssubcommittees to identify training money and reprogram it." The hearing also found that "[s]everalof the agencies are unable to provide information on their training budgets from previous yearsbecause their record-keeping is poor or nonexistent." (54) The changes proposed in S. 129 are designed to help agencies better plan their training activities. Section 201(a) of S. 129 , as passed by the Senate and as ordered to be reported to the House, would amend current law at 5 U.S.C. �4103 by adding language on agency trainingplans. (55) Currently, agency heads are required toestablish, operate, maintain and evaluate a plan, orplans, for training employees to assist in achieving the agency's mission and performance goals byimproving employee and organizational performance. S. 129 would require agency headsto evaluate each training program or plan with respect to accomplishing specific performance plansand strategic goals in performing the agency mission and to modify such program or plan toaccomplish those plans and goals. The House version of the provision specifies that the evaluationwould be on a regular basis. Discussion of the Provision. This requirement would tie training activities to the accomplishment of agency missions. Proponents believe it willhelp to ensure that the federal government's training monies are used to optimal advantage.According to Comptroller General David Walker, Agreeing on expected results and associated performance measures at the outset for training and development efforts can also help ensure thatcredible evaluation results will be available to provide feedback on performance. A systematicevaluation of training and development efforts can help show how such efforts contribute toindividual and organizational performance and suggest opportunities for furtherimprovement. (56) Section 201(b) of S. 129 , as passed by the Senate and as ordered to be reported to the House, would add new provisions to Chapter 41 of Title 5 relating to agency training. (57) (TheSenate version would add two new sections and the House version would add one new section.)There are no similar provisions in current law. Under the Senate-passed version of S. 129,each agency would be required to appoint or designate a training officer who would be responsiblefor developing, coordinating, and administering training for the agency. Both the Senate and Houseversions of the legislation would provide that, in consultation with OPM, each agency head wouldestablish a comprehensive management succession program to train employees to develop agencymanagers, and a program to train managers on actions, options, and strategies a manager could usein relating to employees with unacceptable performances, mentoring employees and improvingperformance and productivity, and (in the House version only) conducting employee performanceappraisals. Discussion of the Provisions. Establishing the position of training officer is intended to help ensure efficient and effective use of agency trainingmonies. According to the section analysis that accompanied S. 2651 (107th Congress),the training officer "could be the same person" as the Chief Human Capital Officer. (58) More than adecade ago, Congress required OPM to report annually on training expenditures in the executivebranch, but this requirement was dropped as downsizing at OPM resulted in a reallocation of staffand resources. Congress has not received this information since the mid 1980s. NTEU's ColleenM. Kelley stated during the Senate subcommittee hearing, "While the legislation draws long overdueattention to the need to properly train employees, again, it does nothing to address the resourceproblems that have prevented agencies from adequately training their employees in the past." (59) Atthe House subcommittee hearing, she advocated for Congress to ensure that training is funded. (60) John Priolo, representing the Federal Managers Association, recommended to the Senatesubcommittee that "a separate line item on training [be included] in agency budgets to allowCongress to better identify the allocation of training funds each year." (61) The managerial training program requirement would respond to agency comments, most recently presented at a Senate Committee on Governmental Affairs, Subcommittee on Oversight ofGovernment Management, Restructuring, and the District of Columbia hearing in May 2000, that"their employee training budgets were inadequate and that they could use additional trainingfunds." (62) Ronald Sanders of OPM testified beforethe House subcommittee that appointment oftraining officers in federal agencies is unnecessary as training and development are among theprincipal responsibilities of the agency Chief Human Capital Officers. (63) Accrual of Leave for Newly Hired Federal Employees with Qualified Experience. Under current law at 5 U.S.C. �6303, employees with lessthan three years of federal service accrue annual leave at four hours per biweekly pay period. Six andeight hours of annual leave are accrued every two weeks by employees with three but less than 15years of service and with 15 or more years of service, respectively. Individuals newly hired in thefederal government begin at the four-hour rate. Section 202(a) of S. 129 , as passed by the Senate and as ordered to be reported to the House, would amend 5 U.S.C. �6303 by adding new text that would allow an agency head tocount prior service, not with the federal government, for purposes of annual leave accrual. TheSenate version of the provision would authorize an agency head to deem "a period of qualifiednon-federal career experience" as "a period of service performed as an employee" for the purposeof annual leave accrual. (64) Credit would beallowed for service that was performed in a position withduties directly related to the duties of the position that the individual holds in the agency and thatmeets other such conditions as OPM regulations would prescribe. The authority would becomeeffective 120 days after the act's enactment and would apply only to an individual hired on or afterthe effective date. Under the House version of the provision, OPM would prescribe regulations governing the granting of credit for annual leave accrual of a newly hired employee not later than 180 days afterenactment of the amendment. Credit would be granted for the employee's prior service, nototherwise creditable for such purposes, if the service were performed in a position the duties ofwhich directly related to the position the employee had been appointed to and met such otherrequirements as OPM might prescribe. Further, the agency head would have to decide thatapplication of the provision was necessary to achieve an important agency mission or performancegoal. The service would be creditable as of the effective date of the employee's appointment andwould continue to be so creditable unless the employee failed to complete a full year of continuousservice with the agency. An employee who held a position in the Civil Service within 90 days beforethe appointment's effective date would not be eligible to have his or her nongovernmental servicecredited for the purposes of annual leave accrual. The proposed change would allow newly hired employees to accrue more than four hours of annual leave immediately upon beginning their employment with the federal government. Forexample, an individual hired by the federal government who has 12 years of "qualified non-federalservice," as determined by the agency head, might be credited with 12 years of federal service andthus earn six hours of annual leave per pay period. Increasing the number of hours of leave newlyhired employees may accrue is viewed by some as an effective recruiting tool, particularly formid-level employees. In her testimony before the House subcommittee hearing, Colleen M. Kelleyof NTEU stated that, "if annual leave limits are in fact a barrier to hiring, the entire leave systemshould be reviewed." (65) Annual Leave Enhancements for Senior Level Employees. Currently, a federal employee must have at least 15 years of serviceto accrue eight hours of annual leave per biweekly pay period. In amending 5 U.S.C. �6303, Section202(b)of S. 129 , as passed by the Senate and as ordered to be reported to the House,would allow certain categories of senior level employees to accrue a full day of annual leave for eachpay period regardless of how many years of service they have. (66) Employees in positions classifiedabove GS-15 or in scientific or professional positions established under 5 U.S.C. �3104, membersof the Senior Executive Service, and employees in an equivalent category for which the minimumrate of basic pay is greater than the rate for GS-15, step 10 (the House version states this asemployees in an equivalent category as determined by OPM), would be eligible to accrue eight hoursof annual leave every two weeks. This provision would take effect 120 days after the act'senactment date, and would require OPM to prescribe implementing regulations not later than 120days after the act's enactment. Under the House version, the amendments would not apply to anemployee appointed to a position before the effective date of the regulations implementing theprovision. Targeting senior level employees for this benefit is viewed by some as an effective tool for recruitment and retention. To the extent that most senior executives continue to be drawn fromgovernment ranks, and that these individuals may have already reached, or are about to reach, 15years of service by the time they enter the ranks of the SES, this provision's effect might be limited. To the extent that it attracts more outside managers to the federal ranks, it might have a positiveeffect on recruitment. Under current law at 5 U.S.C. �5542(b)(2), the time that an employee spends in a travel status away from his or her official duty station is not considered to be hours of employment unless specificrequirements are met. The requirements are that (1) the time spent is within the days and hours ofthe employee's regularly scheduled administrative workweek, including regularly scheduledovertime hours; or (2) the travel involves the performance of work while traveling, is incident totravel that involves the performance of work while traveling, is carried out under arduous conditions,or results from an event that could not be scheduled or controlled administratively (including travelto an event and return from an event to the official-duty station). Section 203 of S. 129 , as passed by the Senate and as ordered to be reported to the House, would amend current law by adding a new Section 5550b to Chapter 55, Subchapter V ofTitle 5 United States Code . The section would provide that, notwithstanding current law, anemployee could be granted compensatory time off from his or her scheduled tour of duty for timespent in officially authorized travel status, away from his or her official duty station, that is nototherwise compensable. An employee who has any hours treated as hours of work or employmentfor purposes of compensatory time would not be entitled to payment for any such hours that areunused as compensatory time. OPM would prescribe regulations to implement the provision notlater than 30 days after enactment of the section. If the provision were enacted, federal employees who traveled outside of the normal business hours to meetings, training, and other official activities would no longer need to use their ownpersonal time for such travel. This provision was added to S. 129 during markup bythe Senate Committee on Governmental Affairs at the request of Senator Akaka. During the Housesubcommittee hearing, Colleen M. Kelley of NTEU expressed strong support for compensatory timeoff for travel as an effective recruitment and retention tool. (67) At the same hearing, Ronald Sandersof OPM stated that the personnel agency does not support the provision, because "there is nocompelling business case"; the benefit is "not typically found in the private sector"; and "such abenefit has a significant cost ... in terms of lost productivity." (68) Civil Service Retirement System Computation for Part-Time Service. Employees covered by the Civil Service Retirement System (CSRS) whowork part-time can experience disproportionately large cuts in their retirement annuities as the resultof a regulation adopted by OPM in response to the Comprehensive Omnibus Budget ReconciliationAct of 1986 ( P.L. 99-272 ). Current law (5 U.S.C. �8339(p)) requires retirement annuities for afederal worker whose career includes part-time employment to be based on the rate of pay that wouldbe paid for full-time service, with the employee's service time prorated for the actual number ofhours worked. In its regulation, however, OPM adopted an interpretation of this statute that alsoapplies a lower rate of pay than would be applied if part-time employees had worked full-time fortheir entire careers. Some Members of Congress who sponsored the relevant sections of P.L. 99-272 have stated that the OPM regulation unfairly penalizes part-time work by making larger reductionsin these workers' retirement annuities than were intended by Congress. (70) Section 103 of S. 129 , as passed by the Senate, and Section 211 of S. 129, as ordered to be reported to the House, would amend current law to clarify that CSRSretirement annuities based in whole or in part on part-time service should be prorated for the periodof service that was performed on a part-time basis. (71) Retirement Service Credit for Cadet or Midshipman Service. Under current law at 5 U.S.C. �8331(13) and 5 U.S.C. �8401(31), afederal employee who served in the armed forces can count his or her military service toward acivilian retirement annuity, provided that the employee makes a deposit to the Civil ServiceRetirement and Disability Fund equal to the amount that would have been withheld from his or hermilitary pay (plus applicable interest) if military service had been covered under the civilianretirement system. Section 104 of S. 129 , as passed by the Senate, and Section 212 of S. 129, as ordered to be reported to the House, would amend current law to include serviceas a cadet at the U.S. Military Academy, the U.S. Air Force Academy, or the U.S. Coast GuardAcademy, or as a midshipman at the U.S. Naval Academy in the definition of "military service" thatcan be creditable under the Civil Service Retirement System or the Federal Employees' RetirementSystem. The provision was added to S. 129 during markup by the Senate Committee on Governmental Affairs at the request of OPM. Section 301 of S. 129 , as ordered to be reported to the House, would amend various sections of Chapter 53 of Title 5 on administering special pay rates. S. 129 , asintroduced, included the same provisions at Section 204, but they were dropped during markup bythe Senate Committee on Governmental Affairs and are not included in the Senate-passed bill. Theprovisions would become effective on the first day of the first applicable pay period beginning onor after the 180th day after the act's enactment. Conversion rules would apply as follows. Subjectto any regulations OPM could prescribe, an employee under the General Schedule, a prevailing rateschedule, or a special occupational pay system who, on the day before the effective date of Section301 was receiving a retained rate under 5 U.S.C. �5363, or was receiving under similar authority arate of basic pay greater than the maximum rate of basic pay payable for the grade of the employee'sposition, would have that rate converted as of the effective date of Section 301, and the employeewould be considered to be receiving a retained rate under 5 U.S.C. �5363 (as amended by Section301). The newly applicable retained rate would equal the formerly applicable retained rate asadjusted to include any applicable locality-based comparability payment. Discussion of the Provisions. The section analysis which accompanied S. 2651 (107th Congress) explained that "The changeswould correct a variety of pay administration anomalies associated with special rates and payretention that resulted from the introduction of locality pay under the GS [General Schedule] paysystem," and that "No current employee would lose pay because of these changes." Further, thesection analysis stated that "The proposed changes would go a long way toward reinvigorating thespecial rates program as a useful recruitment and retention tool and would thereby help to relievepressure for authority to set pay outside the GS system." (72) Identical proposed changes also wereincluded as Section 124(a) and (c) of S. 1612 (107th Congress). Under current law at 5 U.S.C. �5304(g)(2)(A), Executive Schedule level III ($145,600, as of January 2004) is the maximum total pay allowable for senior-level, Senior Executive Service (SES),Federal Bureau of Investigation and Drug Enforcement Administration SES, and administrative lawjudge (ALJ) positions. Section 302 of S. 129 , as ordered to be reported to the House,would amend current law to exclude ALJ positions from coverage under the provision. Congressional interest in legislative reforms to improve the management of the federalgovernment's workforce continues in the 108th Congress. The National Commission on the PublicService, in its report to Congress submitted on January 7, 2003, recommended the development ofmore flexible personnel management systems by operating agencies and continued efforts to simplifyand accelerate federal recruitment processes. The Department of Homeland Security and theDepartment of Defense, respectively, are currently working with the Office of PersonnelManagement to craft new human resources management systems for their employees, and personnelmanagement flexibilities likely will be a focus of the discussions surrounding these efforts, as wellas of congressional oversight of the new systems. A representative of the Federal ManagersAssociation, Karen Heiser, testifying before the April 8, 2003, joint subcommittee hearing said thatthose in government service must continually ask such questions as "Do employees receive thetraining they need? Are they receiving the proper incentives to do a good job? In short, is thegovernment investing in its people?" in contemplating "a world-class and resilient Civil Service." (73)

As in the previous Congress, management of the federal workforce continues to be an issue ofinterest to the Senate and the House of Representatives in the 108th Congress. S. 129 ,the Federal Workforce Flexibility Act of 2003, passed the Senate with an amendment by unanimousconsent on April 8, 2004. In the House, the Subcommittee on Civil Service and AgencyOrganization forwarded S. 129 to the House Committee on Government Reform on May18, 2004, after amending it by voice vote. On June 24, 2004, the House committee ordered the billto be reported to the House of Representatives, after amending it, by voice vote. The bill wasintroduced by Senator George Voinovich on January 9, 2003. A similar bill, H.R. 1601 ,the Federal Workforce Flexibility Act of 2003, was introduced in the House by Representative JoAnn Davis on April 3, 2003. S. 129 , as passed by the Senate and as ordered to be reported to the House, would amend current law provisions on critical pay, civil service retirement system computation forpart-time service, agency training, and annual leave. The bill also would amend current lawprovisions on recruitment and relocation bonuses and retention allowances (which would be renamedbonuses). As ordered to be reported to the House, S. 129 would amend the current 5U.S.C. ��5753 and 5754 language on such bonuses and allowances. As passed by the Senate, itwould add new sections 5754a and 5754b on recruitment, relocation, and retention bonuses to Title5 United States Code . Therefore, if S. 129 as passed by the Senate were enacted, agencieswould be able to use the current law provisions on recruitment and relocation bonuses and retentionallowances at 5 U.S.C. ��5753 and 5754 and the enhanced authority for recruitment, relocation, andretention bonuses proposed at 5 U.S.C. ��5754a and 5754b. S. 129 , as ordered to be reported to the House, would amend current law provisions on pay administration. These amendments were included in S. 129 as introduced, butthey were dropped during Senate committee markup and are not included in the Senate-passedversion of the bill. Provisions that would amend current law on retirement service credit for cadetor midshipman service and compensatory time off for travel were added to S. 129 duringSenate committee markup and are included in the legislation as passed by the Senate and as orderedto be reported to the House. Added during Senate Committee markup as well were provisions onSenior Executive Service authority for the White House Office of Administration that are in theSenate-passed bill, but are not in the legislation as ordered to be reported to the House. Otherprovisions that would have amended current law provisions relating to contributions to the ThriftSavings Plan, annuity commencement dates, and retirement for air traffic controllers were includedin S. 129 as forwarded by the House Civil Service and Agency Organization Subcommitteeto the House Government Reform Committee, but were removed during the full committee markup. This report, which will be updated as needed, discusses each of the provisions in S. 129 , as passed by the Senate and as ordered to be reported to the House.

The procedure for appointing a Justice to the Supreme Court of the United States is provided for by the Constitution in only a few words. The "Appointments Clause" (Article II, Section 2, clause 2) states that the President "shall nominate, and by and with the Advice and Consent of the Senate, shall appoint ... Judges of the supreme Court." The process of appointing Justices has undergone changes over two centuries, but its most basic feature—the sharing of power between the President and Senate—has remained unchanged. To receive an appointment to the Court, a candidate must first be nominated by the President and then confirmed by the Senate. This report provides information and analyses related to the debate and consideration of Supreme Court nominations by the full Senate once nominations are reported by the Judiciary Committee. Once the full Senate begins debate on a Supreme Court nomination, many Senators typically will take part in the debate. Some, in their remarks, underscore the importance of the Senate's "advice and consent" role, and the consequent responsibility to carefully determine the qualifications of a nominee before voting to confirm. Typically, each Senator who takes the floor states his or her reasons for voting in favor of or against a nominee's confirmation. The criteria used to evaluate a Supreme Court nominee are an individual matter for each Senator. In their floor remarks, some Senators may cite a nominee's professional qualifications or character as the key criterion, others may stress the importance of the nominee's judicial philosophy or views on constitutional issues, while still others may indicate that they are influenced in varying degrees by all of these criteria. Just as most Presidents want their Supreme Court nominees to have unquestionably outstanding legal qualifications, most Senators also look for a high degree of merit in nominees to the Court. Consequently, floor remarks by Senators often focus, in part, on the professional qualifications of a nominee—both in recognition of the demanding nature of the work that awaits an appointee to the Court, but also because of the public's expectations that a Supreme Court nominee be highly qualified. With such expectations of excellence, floor remarks by Senators often highlight the various ways in which nominees have distinguished themselves in the law (as lower court judges, legal scholars, or attorneys in private practice), or in other types of professional positions (such as elective office). Given the importance of a nominee's professional qualifications in the selection and confirmation process, Senators have on occasion questioned—either directly or indirectly in their floor remarks—whether a nominee has the requisite professional qualifications or experience to be appointed to the Court. In recent decades, Senate debate on virtually every Supreme Court nomination has focused to some extent on the nominee's judicial philosophy, ideology, constitutional values, or known positions on specific legal controversies. Many highly controversial decisions of the Court in recent decades have been closely decided, by 5-4 votes, appearing to underscore a long-standing philosophical or ideological divide in the Court between its more so-called liberal and so-called conservative members. A new appointee to the Court, Senators recognize, could have a potentially decisive impact on the Court's currently perceived ideological "balance" and on whether past rulings of the Court will be upheld, modified, or overturned in the future. Announcements by the Court of 5-4 decisions, a journalist covering the Court in 2001 wrote, had "become routine, a familiar reminder of how much the next appointment to the court will matter." Senators sometimes will indicate in their floor statements whether they believe the views of a particular nominee, although not in complete accord with their own views, nonetheless, fall within a broad range of acceptable legal thinking. Senators' concerns with a nominee's judicial philosophy or ideology may become heightened, and their positions more polarized relative to other Senators', if a nominee's philosophical orientation is seen as controversial, or if the President is perceived to have made the nomination with the specific intention of changing the Court's ideological balance. During the George W. Bush presidency, a Senate Judiciary subcommittee examined the question of what role ideology should play in the selection and confirmation of federal judges. In his opening remarks, the chair of the subcommittee, Senator Charles E. Schumer (D-NY), stated that it was clear that "the ideology of particular nominees often plays a significant role in the confirmation process." The current era, he said, "certainly justifies Senate opposition to judicial nominees whose views fall outside the mainstream and who have been selected in an attempt to further tilt the courts in an ideological direction." By contrast, Senator Orrin G. Hatch (R-UT), in testimony before the subcommittee, declared that there "are myriad reasons why political ideology has not been—and is not—an appropriate measure of judicial qualifications. Fundamentally," he continued, "the Senate's responsibility to provide advice and consent does not include an ideological litmus test because a nominee's personal opinions are largely irrelevant so long as the nominee can set those opinions aside and follow the law fairly and impartially as a judge." More recently, Senators of both parties have based, at least in part, their opposition to particular Supreme Court nominations on the belief that a nominee's ideological disposition or views on specific issues fall outside the mainstream of legal thought or public opinion. Other factors also may figure importantly into a Senator's confirmation decisions. One, it has been suggested, is peer influence in the Senate (especially, perhaps, when the nomination is viewed as controversial). Particularly influential, for instance, might be Senate colleagues who are championing a nominee or spearheading the opposition, or who played prominent roles in the Judiciary Committee hearings stage. Another consideration for Senators will be the views of their constituents, especially if many voters back home are thought to feel strongly about a nomination. Other influences may be the views of a Senator's advisers, family, and friends, as well as the position taken on the nomination by advocacy groups that the Senator ordinarily trusts or looks to for perspective. Just as Presidents are assumed to do when considering prospective nominees for the Supreme Court, Senators may evaluate the suitability of a Supreme Court nominee according to whether certain groups, constituencies, or individuals with certain characteristics are adequately represented on the Court. Among the representational criteria commonly considered have been the nominee's party affiliation, geographic origin, ethnicity, religion, and gender. When considering Supreme Court nominations, Senators may also take Senate institutional factors into account. For instance, the role, if any, that Senators from the home state of a nominee played in the nominee's selection, as well as their support for or opposition to the nominee, may be of interest to other Senators. At the same time, Senators may be interested in the extent to which the President, prior to selecting the nominee, sought advice from other quarters in the Senate—for instance, from Senate party leaders and from the chair, ranking minority Member, and other Senators on the Judiciary Committee. A President's prior consultation with a wide range of Senators concerning a nominee may be a positive factor for other Members of the Senate, by virtue of conveying presidential respect for the role of Senate advice, as well as Senate consent, in the judicial appointments process. Sometimes, Senators may find themselves debating whether the Senate, in its "advice and consent" role, should defer to the President and give a nominee the "benefit of the doubt." This issue received particular attention during Senate consideration of the Supreme Court nomination of Clarence Thomas in 1991. In that debate, some Thomas supporters argued that the Senate, as a rule, should defer to the President's judgment concerning a nominee except when unfavorable information is presented overcoming the presumption in the nominee's favor. Opponents, by contrast, rejected the notion that there was a presumption in favor of a Supreme Court nominee at the start of the confirmation process or that the President, in his selection of a nominee, is owed any special deference. After the Judiciary Committee has reported a nomination, it is placed on the Executive Calendar and assigned a calendar number by the executive clerk of the Senate. As with other nominations listed in the Executive Calendar , information about a Supreme Court nomination includes the name and office of the nominee; the name of the previous holder of the office; whether the committee reported the nomination favorably, unfavorably, or without recommendation; and, if there is a printed report, the report number. Business on the Executive Calendar , which consists of treaties and nominations, is considered in executive session. Unless voted otherwise by the Senate, executive sessions are open to the public. Floor debate on a Supreme Court nomination, in contemporary practice, invariably has been conducted in public session, open to the public and press and, since 1986, to live nationwide television coverage. The Senate's executive business is composed of nominations and treaties. The Senate considers such business in executive session. Since the Senate typically begins its day in legislative session on any day it sits, the decision to proceed to executive session and consider a specific nomination is made while the Senate is in legislative session. Consideration of a nomination is scheduled by the majority leader, who typically consults with the minority leader and all interested Senators. In previous Congresses, the typical practice in calling up a Supreme Court nomination was for the majority leader to consult with the minority leader and interested Senators and to ask for unanimous consent that the Senate proceed to executive session and consider the nomination. The leader asked for unanimous consent to proceed to executive session to consider the nomination immediately, or at some specified time in the future. A unanimous consent request also could include a limit on the time that will be allowed for debate and specify the date and time on which the Senate will vote on a nomination. Typically, the amount of time agreed upon for debate is divided evenly between the majority and minority parties, who usually have as their respective floor managers the chair and ranking minority Member of the Judiciary Committee. If agreed to, a time limit on debate, with a date and time set for final Senate vote on the nomination, precludes unlimited debate or delay in considering a nomination and the possibility of a filibuster. Conversely, if the Senate agrees by unanimous consent to consider a nomination, but does not provide for a time limit on debate or specify when, or under what circumstances, a Senate vote will take place, extended debate is possible, although not necessarily inevitable. When unanimous consent to call up a nomination has not been secured, the majority leader may make a motion that the Senate proceed to consider the nomination. As already explained, such a motion is made while the Senate is in legislative session. The motion is not debatable. Since 1980, the Senate has explicitly established the precedent that a nondebatable motion may be made to go into executive session to take up a specified nomination . One congressional scholar observed that the precedent limits a potential filibuster to the nomination itself. Senate rules place no limits on how long floor consideration of a nomination may last. With time limits lacking, Senators opposing a Supreme Court nominee may seek, if they are so inclined, to use extended debate or delaying actions to postpone or prevent a final vote from occurring. The use of dilatory actions for such a purpose is known as a filibuster. By the same token, however, supporters of a Court nomination have available to them a procedure for placing time limits on consideration of a matter—the motion to invoke cloture. When the Senate agrees to a cloture motion, further consideration of the matter being debated is limited to 30 hours. The majority required for cloture on nominations, including Supreme Court nominations, is a majority of Senators voting, a quorum being present. By invoking cloture, the Senate ensures that a nomination may ultimately come to a vote and be decided by a voting majority. The Senate reinterpreted its cloture rule to allow a majority of Senators voting to invoke cloture on a Supreme Court nomination on April 6, 2017. Shortly thereafter the Senate was able to invoke cloture on the nomination of Neil M. Gorsuch to be a Supreme Court Justice by a vote of 55-45. Prior to the 2017 precedent, a supermajority was required to invoke cloture on a Supreme Court nomination. Motions to bring debate on Supreme Court nominations to a close under the previous procedures were made on four prior occasions. The first use occurred in 1968, when Senate supporters of Justice Abe Fortas tried unsuccessfully to end debate on the motion to proceed to his nomination to be Chief Justice. After the motion was debated at length, the Senate failed to invoke cloture by a 45-43 vote, prompting President Lyndon Johnson to withdraw the nomination. The 45 votes in favor of cloture fell far short of the supermajority required—then two-thirds of Senators present and voting, a quorum being present. A cloture motion to end debate on a Court nomination occurred again in 1971, when the Senate considered the nomination of William H. Rehnquist to be an Associate Justice. Although the cloture motion failed by a 52-42 vote, Rehnquist was confirmed later the same day. In 1986, a cloture motion was filed on a third Supreme Court nomination, this time of sitting Associate Justice Rehnquist to be Chief Justice. Supporters of the nomination mustered more than the three-fifths majority needed to end debate (with the Senate voting for cloture 68-31), and Justice Rehnquist subsequently was confirmed as Chief Justice. A cloture motion was presented to end consideration of a Supreme Court nomination a fourth time, during Senate consideration of the nomination of Samuel A. Alito Jr. in January 2006. The motion was presented on January 26, after two days of Senate floor debate on the nomination. On January 30, the Senate voted to invoke cloture by a 72-25 vote, and the next day it confirmed the Alito nomination by a final vote of 58-42. As one news analysis at the time observed, Senators "are traditionally hesitant to filibuster" Supreme Court nominations. Indicative of this, the article noted, was the fact that some of the "most divisive Supreme Court nominees in recent decades, including Associate Justice Clarence Thomas, have moved through the Senate without opponents resorting to that procedural weapon." In 1991, five days of debate on the Thomas nomination concluded with a 52-48 confirmation vote. The 48 opposition votes would have been more than enough to defeat a cloture motion if one had been filed. In three earlier episodes, Senate opponents of Supreme Court nominations appear to have refrained from use of the filibuster, even though their numbers would have been sufficient to defeat a cloture motion. In 1969, 1970, and 1987 respectively, lengthy debate occurred on the unsuccessful nominations of Clement F. Haynsworth, G. Harrold Carswell, and Robert H. Bork. In none of these episodes, however, was a cloture motion filed, and in each case debate ended with a Senate vote rejecting the nomination. Historically, there has been variation in the length of time from a President nominating a person for a vacancy on the Supreme Court to a final Senate vote on that person's nomination. For nominees since 1975 who have received a final floor vote, Figure 1 shows the number of calendar days that elapsed from the date on which the nomination was formally submitted to the Senate to the date on which the Senate voted whether to approve the nomination. Of the 15 nominees listed in the figure, Robert Bork waited the greatest number of days (108) from nomination to a final Senate vote—followed by Clarence Thomas (99), while John Paul Stevens waited the fewest number of days (19)—followed by Sandra Day O'Connor (33). Overall, the average number of days from nomination to final Senate vote is 69.6 days (or approximately 2.3 months), while the median is 69.0 days. Of the eight Justices currently serving on the Court, the average number of days from nomination to final Senate vote is 72.0 days (or approximately 2.4 months), while the median is 69.5 days. Among the current Justices, Ruth Bader Ginsburg waited the fewest number of days from nomination to confirmation (42), while Clarence Thomas waited the greatest number of days (99). There has also been variation in the length of time nominees to the Court have waited for a final vote after being reported by the Judiciary Committee. Figure 2 shows, for nominees since 1975 who received a final floor vote, the number of calendar days that elapsed from the date on which the nomination was reported by the Judiciary Committee to the date on which the Senate voted whether to approve the nomination. Of the 15 nominees listed in the figure, William Rehnquist and Antonin Scalia waited the greatest number of days (34) from committee report to a final Senate vote, while Neil Gorsuch waited the fewest number of days (4). The nominations of Rehnquist (to be Chief Justice) and Scalia (to be Associate Justice) were reported by the committee the day before the start of the August recess in 1986, which likely lengthened the amount of time from committee report to final vote for both nominations. Overall, the average number of days from committee report to final Senate vote is approximately 12 days, while the median is 7 days. Of the eight Justices currently serving on the Court, the average number of days from committee report to final Senate vote is 9.5 days, while the median is 8.0 days. Among the current Justices, Neil Gorsuch waited the fewest number of days from committee report to confirmation (4), while Clarence Thomas waited the greatest number of days (18). When floor debate on a nomination comes to a close, the presiding officer puts the question of confirmation to a vote. In doing so, the presiding officer typically states, "The question is, Will the Senate advise and consent to the nomination of [nominee's name] of [state of residence] to be an Associate Justice [or Chief Justice] on the Supreme Court?" A roll-call vote to confirm requires a simple majority of Senators present and voting, a quorum being present. Since 1967, every Senate vote on whether to confirm a Supreme Court nomination has been by roll call. Prior to 1967, by contrast, fewer than half of all of Senate votes on whether to confirm nominees to the Court were by roll call, with the rest by voice vote. For roll-call votes on Supreme Court nominations, the formal procedure by which Senators cast their votes on the floor has varied over the years. In recent decades prior to 1991, it was the usual practice for Senators, during the calling of the roll, to be free to come and go, and not have to be present in the Senate chamber for the entire calling of the roll. However, for several recent Supreme Court nominations to receive final Senate votes on confirmation the majority leader or the presiding officer, immediately prior to the calling of the roll, has asked all of the Senate's Members to remain seated at their desks during the entire vote—with each Senator rising and responding when his or her name is called. Voting from the desk during roll calls is in keeping with a standing order of the Senate, which rarely, however, is actually enforced; nevertheless, the rule has been applied by Senate leaders, in recent years, to roll-call votes on Supreme Court nominations, to mark the special significance for the Senate of deciding whether to confirm an appointment to the nation's highest court. Historically, vote margins on Supreme Court nominations have varied considerably. Most votes have been overwhelmingly in favor of confirmation. Some recorded votes, however, either confirming or rejecting a nomination, have been close. For nominations receiving a final floor vote since 1975, Figure 3 shows whether the nomination was approved by the Senate (identified in columns with blue dots) or not approved. For nominations approved, the level of support among Senators voting on the nomination is indicated as follows: (1) unanimous support (i.e., no nay votes cast on the nomination); (2) some opposition (fewer than 10 nay votes cast on the nomination); (3) some opposition (more than 10 nay votes cast on the nomination, but at least half of the Senators not belonging to the President's party still voted aye on the nomination); and (4) party opposition (a majority of Senators not belonging to the President's party cast nay votes on the nomination). The number of dots at the top of each column indicates the number of nominees in each category. Of the 15 nominations receiving a final floor vote, 14 were confirmed. Of the 14 nominations approved by the Senate, 6 were approved despite receiving nay votes from a majority of Senators not belonging to the President's party. These six include the four most recent nominations to the Court, those of Neil Gorsuch (2017), Elena Kagan (2010), Sonia Sotomayor (2009), and Samuel Alito (2006). Additionally, a majority of Senators not belonging to the President party's voted against the Clarence Thomas nomination (1991), as well as the nomination of William Rehnquist to be Chief Justice (1986). In only one of the six cases identified above did the President's party not also hold a majority of seats in the Senate. Specifically, in 1991, President George H. W. Bush (a Republican) nominated Thomas—who was opposed by a majority of Democratic Senators (and whose party was also the majority party in the Senate). In each of the other five cases, the majority of Senators opposed to the nomination belonged to the minority party in the Senate (i.e., Democrats were the minority party in 1986, 2006, and 2017, while Republicans were the minority party in 2009 and 2010). Of the 15 nominations presented in Figure 3 , 7 were approved by the Senate either unanimously or with fewer than 10 nay votes—but the last nomination to fall into either one of these categories was that of Stephen Breyer (nominated by President Clinton in 1994). Figure 4 provides some historical context for the number of nay votes received by the five most recent nominations to the Court (Gorsuch, Kagan, Sotomayor, Alito, and Roberts). Specifically, the figure identifies, of the 34 nominations since 1945 that received a final floor vote, the 10 nominations that received the greatest number of nay votes. Of the 10 nominations listed in the figure, 7 were confirmed by the Senate and 3 were rejected (the Bork, Haynsworth, and Carswell nominations). Of the seven nominations that were approved, five were for individuals currently serving on the Court—including the four most recent nominees (Gorsuch, Kagan, Sotomayor, and Alito). The relatively high number of nay votes received by recent nominations approved by the Senate for the Supreme Court is atypical historically (see further discussion below). The relatively high number of nay votes received by recent nominations reflects greater opposition than in the past by Senators not belonging to a President's party to nominations to the Court. The level of opposition to Supreme Court nominations approved by the Senate, as measured by the percentage of Senators voting against a nomination, has been relatively greater in recent years than in the past. Since 1789 there have been 50 nominations that received an up-or-down roll call vote on the Senate floor that also resulted in the nomination being approved by the Senate Of these 50 nominations, Figure 5 identifies the 10 for which the greatest percentage of Senators voted to oppose it. Of the 10 individuals listed in the figure, 4 are currently serving on the Court. The nominations of Justices Thomas, Gorsuch, Alito, and Kagan were opposed by 48.0%, 45.5%, 42.0%, and 37.0% of Senators, respectively. Additionally, the nominations of two other current Justices, Sonia Sotomayor and John Roberts Jr., rank among the 20 nominations (of 50) that received the most opposition (at 31.3% and 22.0%, respectively). For the 50 nominations, the median percentage of Senators voting "nay" on a nomination was 16.6% (with 6 of the nominations that were approved by roll call not receiving any nay votes). After a Senate vote to confirm a Supreme Court nomination, a Senator who voted on the prevailing side may, under Senate Rule XXXI, move to reconsider the vote. Under the rule, only one such motion to reconsider is in order on each nomination, and the tabling of the motion prevents any subsequent attempt to reconsider. The Senate typically deals with a motion to reconsider a Supreme Court confirmation in one of two ways. Immediately following the vote to confirm, a Senator may move to reconsider the vote, and the motion is promptly laid upon the table by unanimous consent. Alternatively, well before the vote to confirm, in a unanimous consent agreement, the Senate may provide that, in the event of confirmation, the motion to reconsider be tabled. The Senate, it should be noted, has never adopted a motion to reconsider a Supreme Court confirmation vote. Sometimes, after a Supreme Court nomination has been reported, the Senate may delay considering or voting on the nomination, in order to have the Senate Judiciary Committee address new issues concerning the nominee or more fully examine issues that it addressed earlier. Opponents of a nomination may also seek such delay, through recommittal of the nomination to the committee, to defeat the nomination indirectly, by burying it in committee. Although the Senate has never adopted a motion to reconsider a Supreme Court nomination after a confirmation vote, there have been at least eight pre-confirmation vote attempts to recommit Supreme Court nominations to the Judiciary Committee. Only two of those were successful. In the first of these two instances, in 1873-1874, the nomination, after being recommitted, stalled in committee until it was withdrawn by the President. In the second instance, in 1925, the Judiciary Committee re-reported the nomination, which the Senate then confirmed. On December 15, 1873, on the second day of its consideration of the nomination of Attorney General George H. Williams to be Chief Justice, the Senate ordered the nomination to be recommitted to the Judiciary Committee. The nomination had been favorably reported by the committee only four days earlier. During that four-day interval, however, various allegations were made against Williams, including charges that while Attorney General he had used his office to influence decisions profiting private companies in which he held interests. In ordering the nomination to be recommitted, the Senate authorized the Judiciary Committee "to send for persons and papers" —in evident reference to the new allegations made against the nominee. Although the Judiciary Committee held hearings after the recommittal, it did not re-report the nomination back to the Senate. Amid press reports of significant opposition to the nomination both in the Judiciary Committee and the Senate as a whole, the nomination, at Williams's request, was withdrawn by President Ulysses S. Grant on January 8, 1874. On January 26, 1925, the Senate recommitted the Supreme Court nomination of Attorney General Harlan F. Stone to the Judiciary Committee. Earlier, on January 21, the Judiciary Committee had favorably reported the nomination to the Senate. However, one historian wrote, "Stone's unanimous Judiciary Committee approval ran into trouble when it reached the Senate floor." A principal point of concern to some Senators was the decision made by Stone as Attorney General in December 1924 to expand a federal criminal investigation of Senator Burton K. Wheeler (D-MT)—an investigation initiated by Stone's predecessor as Attorney General, Harry Daugherty. Stone's most prominent critic on this point, Montana's other Democratic Senator, Thomas J. Walsh, demanded that the nomination be returned to the Judiciary Committee. By unanimous consent the Senate agreed, ordering the nomination to be "rereferred to the Committee on the Judiciary with a request that it be reported back to the Senate as soon as practicable." Two days after the recommittal, on January 28, the Judiciary Committee held hearings, with the nominee, at the committee's invitation, taking the then-unprecedented step of appearing before the committee. Under lengthy cross examination by Senator Walsh and several other Senators, the nominee defended his role in the Wheeler investigation. On February 2, 1925, the Judiciary Committee again reported the Stone nomination favorably to the Senate, "by voice vote, without dissent," and on February 5, 1925, the Senate confirmed Stone by a 71-6 vote. In 1991, during debate on Supreme Court nominee Clarence Thomas, the Senate—without recommitting the nomination to the Judiciary Committee—delayed its scheduled vote on the nomination specifically to allow the committee time for additional hearings on the nominee. On October 8, 1991, after four days of debate, the Senate, by unanimous consent, rescheduled its vote on the Thomas nomination, from October 8 to October 15. The purpose of this delay was to allow the Judiciary Committee to hold hearings on sexual harassment allegations made against the nominee by law professor Anita Hill, which had come to public light only after the Judiciary Committee had ordered the Thomas nomination to be reported, without recommendation, on September 27. Following three days of hearings, on October 11, 12, and 13, 1991, at which the Judiciary Committee heard testimony from Judge Thomas, Professor Hill, and other witnesses, the Senate, pursuant to its unanimous consent agreement, voted on the Thomas nomination as scheduled, on October 15, 1991, confirming the nominee by a 52-48 vote. Under the Constitution, the Senate alone votes on whether to confirm presidential nominations, the House of Representatives having no formal involvement in the confirmation process. If the Senate votes to confirm the nomination, the Secretary of the Senate then attests to a resolution of confirmation and transmits it to the White House. In turn, the President signs a document, called a commission, officially appointing the individual to the Court. Next, the signed commission "is returned to the Justice Department for engraving the date of appointment (determined by the actual day the president signs the commission) and for the signature of the attorney general and the placing of the Justice Department seal." The department then arranges for expedited delivery of the commission document to the new appointee. Once the President has signed the commission, the incoming Justice may be sworn into office. In fact, however, the new Justice actually takes two oaths of office—a judicial oath, as required by the Judiciary Act of 1789, and a constitutional oath, which, as required by Article VI of the Constitution, is administered to Members of Congress and all executive and judicial officers. Until recently, the most common practice of new appointees had been to take their judicial oath in private, usually within the Court, and, as desired by the Presidents who nominated them, to take their constitutional oaths in nationally televised ceremonies at the White House. In 2009, however, in a departure from that practice, Supreme Court nominee Sonia Sotomayor, after Senate confirmation, took both her constitutional and judicial oaths of office at the Supreme Court—with the constitutional oath administered in a private ceremony, and the judicial oath broadcast on television ("marking the first live coverage of such a ceremony in the institution's history"). This break from the practice of administering one of the oaths at the White House was attributed, in one report, to President Obama "heeding concerns expressed by some justices—most recently John Paul Stevens—that a White House ceremony sends the inappropriate message that justices are beholden to their appointing president." Following Sonia Sotomayor's example, President Obama's second Supreme Court nominee, Elena Kagan, took both her constitutional and judicial oaths of office at the Supreme Court as well. More recently, in contrast, Neil Gorsuch took the judicial oath of office at a public ceremony at the White House and the constitutional oath of office in a private ceremony in the Justices' conference room at the Supreme Court building. Subsequently, the Court itself, in its courtroom, also affords public recognition to the new Justice's appointment, in a formal ceremony called an "investiture," at which the Justice is sworn in yet again. This invitation-only event, for which reserved press seating is made available, is attended by the Court's other Justices, by family, friends, and former associates of the new Justice, and by outside dignitaries who may include the President and the Attorney General. The investiture typically occurs before the new Justice publicly takes his or her courtroom seat alongside the other members of the Court.

The procedure for appointing a Justice to the Supreme Court is provided for in the U.S. Constitution in only a few words. The "Appointments Clause" in the Constitution (Article II, Section 2, clause 2) states that the President "shall nominate, and by and with the Advice and Consent of the Senate, shall appoint ... Judges of the supreme Court." While the process of appointing Justices has undergone some changes over two centuries, its most essential feature—the sharing of power between the President and the Senate—has remained unchanged: to receive lifetime appointment to the Court, one must first be formally selected ("nominated") by the President and then approved ("confirmed") by the Senate. For the President, the appointment of a Supreme Court Justice can be a notable measure by which history will judge his Presidency. For the Senate, a decision to confirm is a solemn matter as well, for it is the Senate alone, through its "Advice and Consent" function, without any formal involvement of the House of Representatives, which acts as a safeguard on the President's judgment. This report provides information and analysis related to the final stage of the confirmation process for a nomination to the Supreme Court—the consideration of the nomination by the full Senate, including floor debate and the vote on whether to approve the nomination. Traditionally, the Senate has tended to be less deferential to the President in his choice of Supreme Court Justices than in his appointment of persons to high executive branch positions. The more exacting standard usually applied to Supreme Court nominations reflects the special importance of the Court, coequal to and independent of the presidency and Congress. Senators are also mindful that Justices—unlike persons elected to legislative office or confirmed to executive branch positions—receive the opportunity to serve a lifetime appointment during good behavior. The appointment of a Supreme Court Justice might or might not proceed smoothly. From the appointment of the first Justices in 1789 through its consideration of nominee Neil Gorsuch in 2017, the Senate has confirmed 118 Supreme Court nominations out of 162 received. Of the 44 nominations that were not confirmed, 12 were rejected outright in roll-call votes by the Senate, while nearly all of the rest, in the face of substantial committee or Senate opposition to the nominee or the President, were withdrawn by the President, or were postponed, tabled, or never voted on by the Senate. Six of the unconfirmed nominations, however, involved individuals who subsequently were renominated and confirmed. Additional CRS reports provide information and analysis related to other stages of the confirmation process for nominations to the Supreme Court. For a report related to the selection of a nominee by the President, see CRS Report R44235, Supreme Court Appointment Process: President's Selection of a Nominee, by [author name scrubbed]. For a report related to consideration of nominations by the Senate Judiciary Committee, see CRS Report R44236, Supreme Court Appointment Process: Consideration by the Senate Judiciary Committee, by [author name scrubbed].

State revenues declined during the recent economic recession (December 2007 through June 2009) and have not fully recovered. This decline in revenue continues to place considerable strain on state budgets. As a result, nearly all states made spending cuts—both to public programs and for public employees. At the same time, the recession increased the number of individuals meeting Medicaid's income eligibility standards. This resulted in higher program enrollment and therefore higher state spending on Medicaid benefits. Given declining state tax revenue, in conjunction with requirements in all states but Vermont for balanced operating budgets, states are faced with tough decisions about where to direct the limited funds. This state fiscal condition is a reason the American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5 as extended) included a temporary increase to the Federal Medical Assistance Percentage (FMAP) rates to help states maintain their Medicaid programs and free up funds that states would have otherwise used for Medicaid to address other state budgetary needs. As a condition of the receipt of the federal Medicaid matching funds made available under the ARRA FMAP provision, states were required to maintain their Medicaid programs with the same eligibility standards, methodologies, or procedures for Medicaid through June 30, 2011 (i.e., the end of the ARRA temporary FMAP adjustment period). This provision is referred to as the Maintenance of Effort (MOE) requirement. With the enactment of the Patient Protection and Affordable Care Act as modified by the Health Care and Education Reconciliation Act of 2010 (ACA, P.L. 111-148 as modified by P.L. 111-152 ), the ARRA MOE provisions were extended and expanded. ACA's MOE provisions were designed to ensure that individuals eligible for Medicaid or the State Children's Health Insurance Program (CHIP) did not lose coverage in the period between the date of enactment of ACA (March 23, 2010) and the implementation of the state health insurance exchanges (expected in 2014). Generally, beginning in 2014, Medicaid-eligible adults who were no longer protected by MOE would presumably have access to subsidized coverage through state exchanges. Under the ACA MOE, with certain exceptions, states are required to maintain their Medicaid and CHIP programs until 2014 with the same eligibility standards, methodologies, or procedures in place as of March 23, 2010. For Medicaid and CHIP-eligible children up to age 19, the MOE requirement extends through September 30, 2019. Failure to comply with these requirements would result in the loss all federal Medicaid matching funds. Because states are prohibited from curbing the cost of Medicaid through restricting eligibility standards due to the MOE requirements included in ARRA and ACA, over the past few years, states have focused cost containment strategies on reducing provider rates, making changes to their benefit packages, or implementing limitations on the use of benefits. However, with the June 30, 2011, phase-out of the enhanced federal Medicaid funding under ARRA, states have been seeking congressional relief from the MOE requirements. States want greater flexibility to restrain their Medicaid expenditures through eligibility restrictions. This report summarizes the MOE requirements enacted under ARRA and ACA and what these requirements have meant for states in terms of their actions to restrict Medicaid and/or State Children's Health Insurance Program (CHIP) eligibility. It also summarizes recent legislative activity to repeal the MOE requirements. Medicaid is a means-tested individual entitlement program that finances the delivery of primary and acute medical services as well as long-term care to more than 68 million people (FY2010) who meet both income and categorical eligibility criteria. While Medicaid is considered a mandatory program in federal budget terms, states choose whether to participate, and all 50 states, the District of Columbia, and the territories do. The federal and state governments share the cost of Medicaid. States are reimbursed by the federal government for a portion (the "federal share") of a state's Medicaid program costs. In FY2010, Medicaid spending totaled approximately $406 billion, with a federal share of $274 billion and a state share of $132 billion. As a condition of receipt of any federal financial participation (FFP), states must meet their state share requirements, have a plan for medical assistance approved by the Secretary of Health and Human Services (HHS), and comply with Medicaid program rules. CHIP was established by the Balanced Budget Act of 1997 ( P.L. 105-33 ) and was recently reauthorized by the Children's Health Insurance Program Reauthorization Act of 2009 (CHIPRA, P.L. 111-3 ). CHIP provides health coverage to uninsured, low-income children in families with annual income above Medicaid eligibility thresholds. When certain conditions are met, CHIP coverage is also available to pregnant women and parents. In FY2010, there were approximately 7.7 million children and 347,143 adults (ever enrolled) in CHIP, and the estimated annual cost to the federal and state governments was roughly $11.4 billion in FY2010, with a federal share of $8.0 billion and a state share of $3.4 billion. As with Medicaid, CHIP is funded jointly by the federal government and the states, and is administered by the states. Also like Medicaid, CHIP is considered a mandatory spending program in terms of the federal budget. However, rather than being considered an individual entitlement, CHIP operates as a capped entitlement to states. States with approved CHIP plans that comply with program rules and that meet their state share requirements are entitled to a portion of a national annual appropriation. All 50 states, the District of Columbia, and the territories choose to participate in the CHIP program. During the most recent recession, Congress provided additional economic stimulus funding to states, including a temporary increase to the Federal Medical Assistance Percentage (FMAP) rate that defines the federal government's share of a state's expenditures for most Medicaid services. The temporary FMAP increase enacted under ARRA was later extended by P.L. 111-226 . The temporary FMAP increase runs for 11 quarters, from the first quarter of FY2009 through the third quarter of FY2011 (i.e., October 2008 through June 2011), subject to certain requirements, including a Maintenance of Effort (MOE) requirement. The ARRA MOE provision generally requires states with Medicaid programs in effect on July 1, 2008, to maintain their programs with the same eligibility standards, methodologies, or procedures for Medicaid through June 30, 2011 (i.e., the end of the ARRA temporary FMAP adjustment period). Failure to comply with the MOE requirements means a state would lose its increase in its federal Medicaid matching funds made available under the ARRA FMAP provision. Section 5001(f)(1)(B) and (C) permits states that have restricted their "eligibility standards, procedures, or methodologies" to reinstate them in any quarter to begin receiving the temporary FMAP increase. In addition, those states that reinstated their "eligibility standards, procedures, or methodologies" prior to July 1, 2009, received the increase for the first three quarters of FY2009. States were required by HHS to attest that they met the eligibility requirements. HHS indicated that four states (Mississippi, North Carolina, South Carolina, and Virginia) were ineligible when funding estimates were first released on February 23, 2009, but those states have since been cleared to receive the FMAP increase. A more recent study found that the ARRA requirements resulted in 14 states reversing and 5 states abandoning planned restrictions to eligibility. Under the Children's Health Insurance Program Reauthorization Act (CHIPRA) of 2009, a number of states were required to move their childless adult populations out of CHIP by December 31, 2009, and could apply to have them enrolled under a Medicaid waiver. However, ARRA FMAPs were not originally available for these childless adults because they had not been eligible for Medicaid on July 1, 2008 (as stated above). Under P.L. 111-226 , states can now receive ARRA FMAPs for non-pregnant childless adults in Medicaid who would have been eligible for CHIP based on standards in effect on December 31, 2009. It appears that Idaho, Michigan, and New Mexico will benefit from this provision. The Patient Protection and Affordable Care Act (ACA, P.L. 111-148 ), as amended by the Health Care and Education Reconciliation Act of 2010 ( P.L. 111-152 ), made significant changes to Medicaid and extended federal financing for CHIP through FY2015. The most noteworthy change begins in 2014, or sooner at state option, when states are required to expand Medicaid eligibility to individuals under age 65 with income up to 133% of the federal poverty level (FPL) (effectively 138% FPL with the Modified Adjusted Gross Income or MAGI 5% FPL income disregard). At the same time, with certain exceptions, ACA requires states to maintain current Medicaid and CHIP eligibility levels. Under ACA, the ARRA MOE provisions were extended and expanded. ACA's MOE provisions were designed to ensure that Medicaid and CHIP-eligible individuals did not lose coverage in the period between the date of enactment of ACA (March 23, 2010) and the implementation of the state health insurance exchanges (expected in 2014). The ACA Medicaid MOE provision generally requires that states with Medicaid programs in effect on March 23, 2010, maintain their programs with the same eligibility standards, methodologies, or procedures until the health insurance exchanges are operational. Additionally, the Medicaid MOE for Medicaid-eligible children up to age 19 continues until September 30, 2019. Failure to comply with the ACA MOE requirements would result in a loss of all federal Medicaid matching funds for that state. This differs from the ARRA MOE requirement, under which states that do not comply would only lose access to the additional federal funds made available through the increase in the FMAP rate. Section 2001(b)(3) provides for an exemption to this MOE requirement for states that have, or are projected to have, a budget deficit, but only with respect to individuals who are non-pregnant, non-disabled adults who are eligible for medical assistance under a state plan or waiver of a state plan, and whose income exceeds 133% FPL (or 138% FPL with the MAGI income counting disregard). This MOE provision does not prohibit states from cutting Medicaid in other ways, such as by reducing provider reimbursement rates or by eliminating optional benefits. States are not prohibited from expanding Medicaid coverage during the MOE period. Arizona had planned to "scale back eligibility" for parents and childless adults under its Medicaid Section 1115 waiver, but the state did not take these actions. Initially, Arizona concluded that the changes would violate the MOE requirements in ACA. However, later, in a February 15, 2011, letter to the governor of Arizona, the Secretary of HHS ruled that the MOE provision in ACA does not require Arizona to renew its Section 1115 waiver demonstration as is, beyond its expiration date of September 30, 2011. According to Secretary Sebelius's letter, any reduction in eligibility associated with the expiration of Arizona's demonstration "for individuals whose eligibility derives from the demonstration" would not constitute a violation of ACA's MOE requirements. In March 2011, Governor Brownback, of Kansas, sent a letter to the Secretary of HHS requesting approval to block grant the state's Medicaid program, and seeking "a complete waiver of the Maintenance of Effort (MOE) requirements." On March 30, 2011, the Secretary of HHS responded to the governor by saying, "I look forward to learning more details about your proposals." To date, a formal waiver proposal submission detailing Governor Brownback's proposal is not publicly available. With regard to states' actions using the "Section 2001(b)(3) exemption," no state has sought a state plan amendment to invoke the exemption under the Medicaid state plan authority. However, two states (i.e., Maine and Hawaii) have certified to CMS that the state is experiencing a budget shortfall under its Section 1115 waiver programs. Such certification represents the first in a two-step process for the state to begin scaling back its eligibility requirements. The second step of the process involves the state seeking CMS approval to make a change in the state's upper income eligibility. According to CMS, Maine has CMS approval to scale back its eligibility requirements but has not formally applied for the eligibility change. By contrast, Hawaii is in the process of seeking CMS approval to scale back its childless adult coverage from 200% FPL to 133% FPL. This CHIP-specific MOE provision generally requires states to maintain income "eligibility standards, methodologies and procedures" in effect as of March 23, 2010, through September 30, 2019, as a condition of receiving federal matching payments under Medicaid. Specifically, with the exception of waiting lists for enrolling children in CHIP or enrolling CHIP-eligible children in exchange plans when federal CHIP funding is no longer available, states cannot implement eligibility standards, methodologies, or procedures that are more restrictive than those in place on the date of enactment of ACA. However, states can expand their current income eligibility levels—that is, states can enact less restrictive standards, methodologies, or procedures. Prior to ACA, Arizona planned to "eliminate the KidsCare [CHIP] program effective June 15, 2010." However, the state did not take these actions. Arizona does, however, have HHS approval to freeze its CHIP program enrollment because Arizona's CHIP enrollment freeze was in place prior to the enactment of ACA (i.e., effective January 1, 2010). In a letter dated May 17, 2010, from Victoria Wachino, the Director of the Family and Children's Health Programs Group at the Centers for Medicare and Medicaid Services (CMS), to Ms. Monica Coury, the Assistant Director of the Office of Intergovernmental Relations for the state's Arizona Health Care Cost Containment System (AHCCCS), CMS stated: Prior to the enactment of the Affordable Care Act, Arizona had an approved State Plan to freeze enrollment and had stopped enrolling new children in CHIP pursuant to its eligibility freeze. Since the enrollment freeze was an eligibility procedure in place as of the March 23, 2010, MOE date, we do not believe that the continuation of the enrollment freeze would be a change in Arizona's eligibility procedures that would trigger an MOE violation. To obtain fiscal reprieve, some states have pondered either dropping out of Medicaid entirely or scaling back on eligibility. Recently, states have been seeking congressional relief from the MOE requirements, to provide them with greater flexibility to restrain Medicaid expenditures through eligibility restrictions. On May 3, 2011, the House of Representatives introduced H.R. 1683 , the State Flexibility Act, which would repeal the MOE requirements for Medicaid and CHIP included in ARRA and ACA. CBO and the staff of the Joint Committee on Taxation (JCT) estimated that enacting H.R. 1683 would reduce the federal deficit by approximately $2.1 billion over the 2012-2021 period. Their estimate includes the net impact on direct spending and revenues from changes in enrollment in Medicaid, CHIP, health insurance purchased through exchanges, and employer-based health insurance. Of this amount, CBO estimates that federal Medicaid spending would decline by roughly $1.5 billion over the five-year period (2012-2016), with no additional savings or costs occurring in the next five years of the budget window. For CHIP, CBO estimates that federal spending would decline by an estimated total of $8.8 billion over 10 years. The Medicaid and CHIP savings would be largely offset by increased enrollment in employer-sponsored plans and additional exchange subsidies. With regard to enrollment, CBO estimates that H.R. 1683 would reduce Medicaid and CHIP enrollment by about 400,000 individuals in 2013, of which approximately 300,000 would become uninsured and 100,000 would enroll in employer-based coverage. In 2014, individuals would be eligible for Medicaid based on the new income requirements established in ACA, eliminating the impact of repealing MOE requirements on Medicaid enrollment. In 2016, CBO estimates that CHIP enrollment would decline by about 1.7 million individuals, while employer-based insurance would increase by 700,000. Relative to current law projections, approximately 300,000 individuals would become uninsured in 2016.

State revenues declined during the recent economic recession (December 2007 through June 2009) and have not fully recovered. At the same time, the recession increased the number of individuals meeting Medicaid's income eligibility standards. States are faced with tough decisions about where to direct their increasingly limited funds. This state fiscal condition is a reason the American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5; and subsequently extended in P.L. 111-226) included a temporary increase to Federal Medical Assistance Percentage (FMAP) rates. As a condition of the receipt of the federal Medicaid matching funds made available under ARRA, states were required to maintain their Medicaid programs with the same eligibility standards, methodologies, or procedures for Medicaid through June 30, 2011. This provision is referred to as the ARRA Maintenance of Effort (MOE) requirement. The ARRA MOE provisions were extended and expanded in the Patient Protection and Affordable Care Act as modified by the Health Care and Education Reconciliation Act of 2010 (ACA, P.L. 111-148 as modified by P.L. 111-152). ACA's MOE provisions were designed to ensure that individuals eligible for Medicaid or the State Children's Health Insurance Program (CHIP) did not lose coverage in the period between the date of enactment of ACA (March 23, 2010) and the implementation of the state health insurance exchanges (expected in 2014). Because states are prohibited from curbing the cost of Medicaid through restricting eligibility standards due to the MOE requirements included in ARRA and ACA, states have focused cost containment strategies on reducing provider rates, making changes to their benefit packages, or implementing limitations on the use of benefits. However, states want greater flexibility to restrain their Medicaid expenditures through eligibility restrictions. This report summarizes the MOE requirements enacted under ARRA and ACA and what these requirements have meant for states in terms of their actions to restrict Medicaid and/or CHIP eligibility. It also summarizes recent legislative activity to repeal the MOE requirements.

Horses and burros are thought to have been first brought to the Americas by Spanish explorers around 1500. Those that escaped became the first wild horse herds in North America, with feral populations spreading throughout the Southwest in the 16 th and 17 th centuries. Native Americans incorporated horses and burros into their culture, and wild and domesticated populations spread throughout the West. Wild populations increased when animals escaped from, or were released from, ranching and mining activities in the 19 th and 20 th centuries. At the turn of the 20 th century, an estimated 2 million wild horses may have lived on the range. By the 1950s their population was thought to be fewer than 20,000. Public concern developed over falling populations and instances of inhumane treatment by profiteers who captured and sold the animals for slaughter. A protection movement culminated in the Wild Horse Annie Act of 1959 (18 U.S.C. §47) and later in the Wild Free-Roaming Horses and Burros Act of 1971 (hereinafter "the 1971 Act") (16 U.S.C. §§1331 et seq.). The 1971 Act seeks to preserve wild horses and burros on federal lands as "living symbols of the historic and pioneer spirit of the West." The law covers wild horses and burros on lands of the Bureau of Land Management (BLM) in the Department of the Interior and the Forest Service (FS) in the Department of Agriculture, and assigns management responsibility to these agencies. The animals are to be managed "to achieve and maintain a thriving natural ecological balance on the public lands," according to the 1971 Act. The law imposes criminal penalties for removing, converting to private use, killing, harassing, selling, or processing into commercial products wild horses and burros (with some exceptions) under federal jurisdiction unless given federal authority. A nine-member Wild Horse and Burro Advisory Board of private citizens advises the Secretaries. Under the 1971 Act, the agencies conduct inventories of horse and burro populations on federal land to determine appropriate management levels (AMLs). They are authorized to remove animals exceeding the range's carrying capacity to restore a natural ecological balance and to protect the range from deterioration associated with an overpopulation of wild horses and burros. First, the agencies are to destroy old, sick, or lame animals by the most humane means available. Second, they are to remove healthy animals for private adoption. BLM takes the lead in gathering animals and holding adoptions for both agencies. Third, if adoption demand is insufficient, the remaining healthy animals are to be destroyed; however, the agencies have not used this authority since 1982. The 108 th Congress enacted changes to the 1971 Act regarding wild horse and burro management on federal lands ( P.L. 108-447 , §142) to provide an additional tool for reducing wild horse and burro populations. One change directed the agencies to sell, "without limitation," excess animals (or their remains) that are deemed too old (more than 10 years old) or otherwise unable to be adopted (offered unsuccessfully at least three times). Proceeds are to be used for the BLM wild horse and burro adoption program. A second change removed a ban on the sale of wild horses and burros and their remains for processing into commercial products. A third change removed criminal penalties for processing into commercial products the remains of a wild horse or burro, if it is sold under the new authority. These changes have been supported as providing a cost-effective way of helping the agencies achieve AML, to improve the health of the animals, protect range resources, and restore a natural ecological balance on federal lands. However, the changes have been opposed as potentially leading to the slaughter of healthy animals. Legislation in the 110 th and 111 th Congresses had sought to repeal the sale authority and overturn the other 108 th Congress changes. Such legislation has not been introduced in the 112 th Congress as of December 2, 2011, although measures pertaining to horse slaughter and consumption more generally have been introduced. BLM has set the upper limit for AML for all wild horse and burro herds at 26,576. Of the total, the AML for horses is 23,672 and the AML for burros is 2,904. The number of animals on BLM lands significantly exceeds this figure; there were an estimated 38,497 wild horses and burros (145% of AML) on BLM land as of February 28, 2011. Horses greatly outnumber burros on federal land. The total of 38,497 includes 33,014 horses (86%) and 5,483 burros (14%). Horses on the range exceeded the horse AML by 9,342 (39%), while burros on the range exceeded the burro AML by 2,579 (89%). About half of all the animals are in Nevada. Another 4,700 wild horses and burros were on 32 active territories (FS management areas) as of September 30, 2010. Thousands of additional animals—41,874 as of September 2011—are in agency holding facilities. (See the section of this report entitled " Holding in Facilities .") Paring the number of wild horses and burros to the national AML has eluded BLM. There were an estimated 28,500 wild horses and burros as of April 1, 2007. This was the lowest level since the early 1970s and was the closest to AML since that time. The possibility of achieving AML subsequently diminished, in part due to a reduced emphasis on removing animals from federal lands. The number of wild horses and burros on the range subsequently increased by 9,997 animals (35%) as of February 28, 2011. Wild horses and burros are managed in 179 herd management areas (HMAs) in 10 western states, as shown in Figure 1 . BLM had reached AML in 72% of the HMAs that existed in 2006, but there was a decline to 45% of HMAs in 2011. Likely reasons that have been cited include underestimates of populations on the range, the high population growth rate of horses and burros, a virtual absence of natural predators, inadequate funding, insufficient interest in adoptions and sales, little emphasis on fertility control, and poor program management. Currently, animals that are removed from the range are offered for adoption or sale or sent to holding facilities. BLM projected it would achieve AML in fewer HMAs during FY2012, based on the Administration's request for funding for wild horse and burro management. Specifically, the agency expected to be at AML in 39% of HMAs in 2012. Federal management of wild horses and burros has generated controversy and lawsuits for years. Key issues for Congress have included the adequacy of authorities for managing wild horses and burros and achieving AML on federal lands; the effectiveness of agency management of wild horses and burros and of options for achieving AML; and the sufficiency of funding for managing wild horses and burros and achieving AML. Currently, the number of animals on BLM lands significantly exceeds the agency's estimate of the appropriate management level, causing concerns about the health of both animals and rangelands and about increased conflicts with other land uses. Adoptions and sales of animals have not kept pace with the numbers removed from the range, leading to high numbers of animals held in agency facilities. In recent years, the cost of caring for animals in facilities has been about half to three-quarters of the annual BLM appropriation for wild horses and burros, prompting uncertainty about the sustainability of these long-term costs. Some existing authorities for reducing wild horse and burro populations on the range are not being used, fostering debate over whether they should be or whether additional authorities for managing wild horses and burros are needed. Specifically, among the most contentious issues are whether BLM should destroy healthy animals under the authority provided in the 1971 Act, and sell animals "without limitation" as provided in the 108 th Congress changes. Thus far the agency has focused on sales with procedures to protect against slaughter. Other controversial issues include the priority given wild horses and burros in land use decisions; whether, and to what extent, to remove animals from the range; the disposal of healthy animals through the adoption and sales programs; the extent of holding animals in facilities, particularly long-term (pasture) facilities; the use of fertility control to slow the rate of production; and the costs of management and whether funding is appropriate. Concerns about management of wild horses and burros, particularly by BLM, have become pronounced in the past few years. While varying concerns have been expressed, with differing proposals to address them, there has been considerable agreement that management of wild horses and burros could be improved. A number of governmental agencies or entities appear to share this view. For instance, Secretary of the Interior Ken Salazar called the "current path" of BLM's wild horse and burro program "not sustainable for the animals, the environment, or the taxpayer." A BLM statement noted, "It is clear that the Bureau cannot continue its current removal and holding practices; neither can the BLM allow horses to multiply unchecked on the range without causing an environmental disaster." The Government Accountability Office (GAO) observed that the wild horse and burro "program is at a critical crossroads," where cost-effective alternatives to holding animals are needed because that cost is "overwhelming the program." The Senate Appropriations Committee similarly noted that the costs of gathering horses and burros to control populations on federal lands "have risen beyond sustainable levels." The House Natural Resources Committee expressed that "underfunding and charges of mismanagement have plagued the BLM since passage of the 1971 Act, and have undermined the BLM Wild Horse and Burro Program and the intent of the law." Nongovernmental organizations also have expressed varying concerns about management of wild horses and burros. For instance, the president of the Public Lands Council stated that while wild horses and burros "are an integral part of the Western landscape ... at their current population levels, they are damaging our rangelands and making it difficult for ranchers to graze cattle in the West." A representative for the Western Association of Fish and Wildlife Agencies observed that BLM has underestimated wild horse and burro populations, and that "wild horse and burro impacts on the West's wildlife habitats continue to be of significant concern to the state and federal land and resource agencies." The Humane Society of the United States has asserted that wild horses and burros "deserve first to be given every chance to live out their lives wild and free" and that BLM "has failed time and again to protect these creatures." They contend that BLM has favored livestock over wild horses and burros and has neglected to use fertility control as a humane management tool. A representative for The Animal Welfare Institute stated that while the organization has "significant concerns about all aspects of the BLM's wild horse and burro management program, overlying everything is a fundamental lack of transparency and accountability within the program." These concerns have fostered evaluation of alternatives, development of proposals, and implementation of actions for improving the care and management of wild horses and burros. Most of the focus has been on BLM, since the number of wild horses and burros under BLM care is far greater than that under FS jurisdiction. For instance, an October 2008 report by GAO recommended that BLM use different methods to estimate populations, issue a policy to achieve consistency in setting AMLs, provide information to the public on treatment of animals, and develop alternatives to caring for animals in facilities. Also, in November 2008, the Wild Horse and Burro Advisory Board made recommendations to BLM on how to reduce wild horse and burro herd sizes, population growth, and costs of management, among other issues. Selling animals without limitation or euthanizing excess animals were presented "as a last resort." BLM has been developing options internally. From late 2008 through late 2009, the BLM focused on whether to implement three specific options that have been contentious. One was whether to destroy healthy animals, under the authority in the 1971 Act. The agency expressed a need to consider all management options due to the inability to date to reach AML and the improbability of doing so under current management practices and funding levels. The euthanization of healthy animals has been opposed by horse advocates as inhumane, and as unnecessary given other management options. The second option was whether to sell animals "without limitation," as provided in the 108 th Congress changes in law. Thus far the agency has focused on sales to buyers intending to provide long-term care. This option has been opposed on the grounds that these animals could end up being sold for slaughter. The third option was to cease the removal of animals from the range, in part because adoptions have not kept pace with removals and because of the costs of placing removed animals in long-term holding facilities. However, the agency expressed that this option would result in insufficient nutrition for increasingly larger horse and burro herds, and would lead to further damage of soil, vegetation, riparian areas, and wildlife habitat. Ceasing removals would likely be opposed by ranchers who depend on federal lands for forage. Proposals by the Secretary of the Interior, released on October 7, 2009, had a different approach. The Secretary proposed the creation of a set of wild horse preserves, primarily on the grasslands of the Midwest and East, for non-reproducing horses. Fertility control and other actions would seek to reduce population growth rates. Neither the slaughter of healthy animals nor the sale of animals "without limitation" would be used to control or reduce the number of wild horses and burros, according to the Administration. These proposals met with mixed reaction. Differences of opinion centered on the expanded use of fertility control, relocation of animals from the West, and lack of sales without limitation, among other issues. Others expressed that the proposals could be too costly. Currently, BLM is finalizing a new strategy for managing wild horses and burros, in part to advance Secretary Salazar's proposals to reduce wild horse and burro populations and to respond to congressional direction to publish a new long-term plan. Under the proposed strategy, BLM would take a variety of actions intended to reduce gathers, strengthen the care of animals, increase fertility control treatments, use the best science and research in program management, establish sanctuaries for the long-term care of animals, increase adoptions, encourage volunteerism, and improve program transparency. BLM has begun initiatives in furtherance of the strategy. For instance, the agency has asked the National Academy of Sciences (NAS) to study the science being used in managing wild horses and burros and to make recommendations on how to use the best available science. BLM also is pursuing partnerships with other landowners for the establishment of ecosanctuaries, to be located solely on BLM land or on a combination of BLM and non-BLM land. In addition, the treatment of wild horses and burros was examined in two recent reports: a December 2010 report of the Department of the Interior, Office of Inspector General, and an August 2011 report of the American Association of Equine Practitioners. While determining that overall care was humane, the reports contained various recommendations for BLM. For example, the report of the American Association of Equine Practitioners included recommendations as to the structure, capacity, and biosecurity standards for short-term holding facilities. No broad legislation to amend the 1971 Act has been introduced in the 112 th Congress as of December 2, 2011. In the 111 th Congress, House and Senate companion bills ( H.R. 1018 and S. 1579 ) would have made significant changes to the 1971 Act. Provisions of the bills would have prohibited the slaughter of healthy wild horses and burros, removed agency authority to sell animals, limited the removal of animals from the range, created wild horse and burro sanctuaries, and expanded the areas available for herds, among other changes. Subsequent sections of this report discuss current issues of controversy. The final sections of the report provide additional information on recent proposals and initiatives for managing wild horses and burros, including on aspects of their implementation. One controversy has been the priority given wild horses and burros versus domestic livestock in decisions on forage and land allotments. Critics assert that AMLs are set low to favor livestock. The Secretaries may designate specific ranges exclusively for wild horse and burros; in practice, most areas also have livestock. Currently, livestock may graze on approximately 157 million acres of BLM land and 85 million acres of FS land, while wild horses and burros roam on 26.9 million BLM acres and 2.0 million FS acres. Together with intermingled state, tribal, and private lands, wild horses and burros roam on 31.6 million acres in the West. This is a reduction of 22.2 million acres from the level that existed following enactment of the 1971 Act (53.8 million acres). Of the 22.2 million acres, 15.5 million was in BLM ownership; these lands were closed to wild horses and burros by BLM due to new laws, court decisions, or land use planning decisions. The remaining 6.7 million acres were in private or other ownership, which the owners closed to wild horses and burros. Under the 1971 Act, wild horses and burros may not be relocated "to areas of the public lands where they do not presently exist." Thus, the animals could roam on a maximum of 53.8 million acres. In 2010, forage consumed on BLM lands was approximately 432,342 animal unit months (AUMs) for wild horses and burros and 8.2 million AUMs for livestock. In 2009, forage consumed on FS lands was approximately 56,200 AUMs for wild horses and burros and 5.0 million AUMs for livestock. A long-standing controversy is whether to remove wild horses and burros from the range. Some animal rights and conservation groups believe they should roam freely. Others stand by an older (1990) GAO conclusion that removals have not demonstrably improved range conditions, in part because livestock consume more forage and cause more degradation to riparian areas. By contrast, a 2010 report by the DOI Office of Inspector General concluded that wild horse and burro gathers are "necessary and justified" because BLM lands cannot sustain the growing number of animals. Some wildlife, conservation, and livestock interests agree that reduction of horse herds protects range resources and balances wild horse and burro levels with wildlife and domestic livestock. Many livestock groups contend that wild horses and burros are more environmentally destructive than domestic stock because they graze year-round without limit, whereas the time, place, and quantity of cattle grazing is controlled. Where drought, fire, and other emergencies reduce forage, domestic livestock usually are removed first to protect forage for wild horses and burros, according to BLM. The debate on the extent of damage by wild horses and burros versus livestock continues because of value differences and lack of definitive data on range degradation. Determining AMLs and removing animals to achieve AMLs have been part of the controversy. AMLs are set through BLM's land use planning process. Under BLM guidance, they are established as a population range, wherein the lower limit is set to allow growth to the upper limit between gathers. BLM determines AMLs based on population censuses and range monitoring in tandem with removal efforts. Objectives include establishing or maintaining an ecological balance on the land and providing for land health. The determinations involve maintaining multiple use in the area. According to BLM, the agency takes into account natural resources, such as wildlife and vegetation, and land uses, such as grazing and recreation. Other considerations include the biological and social needs of the herds and the genetic diversity needed to maintain healthy wild horse and burro populations. BLM guidance establishes that a minimum of 50 breeding animals (with a total herd size of about 150-200 animals) is generally required to maintain genetic diversity. AMLs generally are reviewed every four to five years as part of horse gathers and removals, but may be revised as circumstances and conditions change. There were 347 herd areas at the time of enactment of the 1971 Act. Herd areas are defined as areas of the public lands identified as habitat used by wild horses and burros at the time of the 1971 Act. BLM currently manages wild horses and burros in 179 herd management areas. Herd management areas are areas designated for the management of wild horses and burros within herd areas. This is a 48% reduction in areas managed for wild horses and burros. This reduction is attributed to the combining of some herds, and the removal of others because they roamed on private lands or areas transferred to the National Park Service, according to BLM. In other cases, the areas were not suitable to retain because of a lack of critical habitat components (i.e., forage, water, cover, or space), a resource conflict with endangered species, or a conflict with military reservations. Concerns with removal to AML have included the lack of an overall environmental analysis of removal efforts throughout the West, removal of animals in some herds to a level lower than AML, and removal of entire herds. Other removal issues have included the effect on the genetic viability of herds, increased reproduction of remaining horses, and accuracy of supporting data. Still other concerns have focused on whether wild horses and burros have consistently received humane care when being removed from the range and at holding facilities following their removal. As shown in Table 1 , more horses and burros were removed from the range in recent years than could be adopted. Specifically, over the 10-year period from FY2001 through FY2010, a total of 95,904 animals were removed, while 54,097 were adopted (56%). However, the number of burros adopted during the 10-year period from FY2001 through FY2010 exceeded the number of burros removed, while only about half (52%) of the removed horses were adopted. Burros have a higher adoption rate because they have strong popular appeal, there are fewer of them than horses, they are less expensive to care for than horses, and they are good guard animals. Most recently, in FY2010, 10,255 animals were removed and 3,074 were adopted. BLM anticipated removing approximately 10,000 horses and burros, with 3,500 being adopted, in FY2011. The agency further projected reducing the number of animals removed for at least FY2012 and FY2013 from 10,000 to 7,600, pending a review of the National Academy of Sciences that will examine the number of animals that could remain on the range. BLM further projected an increase in adoptions for FY2012 and FY2013 to 4,200, by offering more trained animals. One reason for the overall higher removal rates over the past decade was additional and more aggressive efforts to reach AML. Another contributing factor was the reduction of available forage, due to fire, drought, and other weather conditions. Further, BLM has asserted that the 2007 closing of all three commercial processing plants within the United States put an additional 90,000 domestic horses annually in the adoption market. The competition for adoption between these domestic horses and the wild horses and burros removed from the range may have increased the difficulty of adopting the wild animals. Further, BLM claims that high fuel and feed costs have weakened interest in adoption. Critics contend that removals have been high because a disproportionate share of funding is used for removal versus adoption. The primary disposal method for healthy animals has been through adoption. From FY1972 to FY2009, 296,629 horses and burros were removed, of which 227,383 were adopted. Others died of natural causes, were sent to holding facilities, or were sold. Adoptions have been declining over the past several years due to factors including increased costs of care. The base fee to adopt a wild horse or burro is a minimum of $125. In most cases, competitive bidding is used and the fee is the highest bid over the base. New owners can receive title after a one-year wait, with certification of proper care during that time. An individual may receive title to no more than four animals per year. BLM has established other conditions for the transportation, feeding, and care of wild horses and burros. The BLM Director may reduce or waive the minimum fee or provide other adoption incentives. For instance, currently in the New Mexico region an adopter pays the standard $125 fee, but is eligible for a $500 payment from BLM after receiving title to the animal. The current adoption process stems in part from past concerns that some adopted animals were slaughtered. From 1984 to 1988, approximately 20,000 horses were placed with large-scale adopters, without fee. Hundreds of them died of starvation or dehydration during the one-year probationary period and thousands were slaughtered soon after title passed, according to the 1990 GAO report. Public protest led BLM to resume charging an adoption fee. Further changes followed reports in 1997 that wild horses were sold to slaughterhouses and charges, denied by BLM, of related misconduct by some employees. Changes required adopters to certify that they have "no intent" to sell their animals for slaughter; established a monitoring program with slaughterhouses and federal inspectors to return untitled animals intended for slaughter and retain records on titled, slaughtered animals; prohibited individuals from using power of attorney from others to adopt animals; and increased compliance inspections of untitled adopted animals. Also, the Wild Horse and Burro Advisory Board was reestablished to assist and advise the Secretaries on wild horse and burro policy and to conduct oversight of the wild horse and burro program. A lingering debate exists, despite court reviews and the changes in law in 2004, over whether wild horses and burros are protected from slaughter once adopted. The BLM asserts that it has no authority over a titled animal because the 1971 Act states that wild horses and burros "or their remains shall lose their status as wild free-roaming horses and burros and shall no longer be considered as falling within the purview of this chapter—upon passage of title"(16 U.S.C. §1333(d)(1)). The agency seeks to protect horses and burros through efforts to place them with qualified adopters and subsequent monitoring for one year. By contrast, animal advocacy groups contend that the legislative history and intent of the 1971 Act show that titled animals were to be protected indefinitely from slaughter. They further note that adopters are to certify that they have "no intent" to sell their wild horse or burro "for slaughter or bucking stock, or for processing into commercial products." Controversy over this attestation has centered on how long it should last and the extent to which it can be enforced in court. As a result of removals in recent years, large numbers of excess animals for which there is no demand for adoption are being held in facilities (see below). In this context, the 108 th Congress provided a tool, in addition to adoption, to reduce wild horse and burro populations. Congress directed BLM to sell excess animals that were older or deemed unadoptable. Under law, these animals are to be sold "without limitation." For instance, the law does not set a minimum purchase price, maximum number of animals an individual may purchase, or standards for the type or length of care to be provided. Support for the sales authority has been strong among livestock groups and others. Animal activists and other groups have questioned its desirability, primarily due to concerns that sold animals may end up being sent to slaughter. According to the BLM, approximately 16,120 animals were available for sale (as of September 2011). Since the inception of the program in March 2005, 5,088 have been sold—far fewer than the agency had anticipated. BLM negotiates sales of excess animals, for instance with ranchers, tribes, and humane organizations, with the price determined on a case-by-case basis. The average price per animal sold during FY2011 was about $10. On April 25, 2005, BLM temporarily suspended the sale of wild horses and burros because some of the animals it sold ended up being sent to slaughter. The agency did not sell animals directly for slaughter, and was requiring purchasers to give written affirmation of an intent to provide humane care. Nevertheless, 41 sold animals were resold or traded and then sent to slaughterhouses. Another 52 animals were sold to slaughterhouses, but Ford Motor Co. committed to purchasing them to prevent their slaughter. On May 19, 2005, the agency resumed sales after revising its bill of sale and pre-sale negotiation procedures to protect against slaughter. Purchasers now also must agree not to sell or transfer ownership to those intending to resell, trade, or give away animals for processing into commercial products. Sales contracts also incorporate criminal penalties for anyone who knowingly or willfully falsifies or conceals information. Some horse advocates question whether the penalties would withstand legal challenge because the 2004 law provides for the sale of animals "without limitation." Also, according to BLM, purchased animals are classified as private property free of federal protection. The 1971 Act provides authority to BLM to destroy excess healthy animals. BLM had used its authority to euthanize about 2,000 healthy animals before 1982, when the agency suspended euthanization due to negative public reaction. The agency has focused subsequently on providing long-term care for healthy, unadoptable animals at contracted holding facilities (pastures). Further, BLM was specifically prohibited, by the annual Interior appropriations acts for FY1988-FY2004, from using its authority to destroy healthy animals. This prohibition was omitted from the FY2005 appropriations act ( P.L. 108-447 ), which instead made changes to wild horse and burro management to reduce excess populations. One change directed the agencies to sell excess wild horses and burros, while another removed a ban on the sale of animals for processing into commercial products, as outlined in the " Background " section above. The FY2010 Interior appropriations law ( P.L. 111-88 ) reestablished a prohibition on using funds in the bill for the slaughter of healthy, unadopted wild horses and burros under BLM management. It also prohibited funds in the bill from being used for the sale of wild horses and burros that resulted in their slaughter for processing into commercial products. This prohibition was continued in FY2011. Further, BLM is not considering euthanization or sale without limitation under the agency's 2011 proposed strategy for managing wild horses and burros. Euthanization of healthy wild horses and burros has long been controversial. At times, BLM, GAO, and others have asserted that all management options need to be considered because of significant funding shortfalls and because the 1971 Act provides for the humane destruction of excess animals. Some animal advocacy and other groups have opposed euthanization as inhumane. Instead, some have advocated expansion of existing programs or practices, such as fertility control, or new options, for instance tax benefits for landowners who would allow wild horses and burros to roam on their property. Large numbers of animals have been sent to holding facilities, and BLM continues to be responsible for these animals. Many of these animals being held may become long-term costs to the government. In total, there were 41,874 animals in short- and long-term holding as of September 2011. Nearly all of the animals were horses—41,245—and there were 629 burros. Initially, animals are placed in short-term holding (corral) facilities. Of the 41,874 animals in holding, 11,862 (28%) were in 23 short-term facilities. Younger animals tend to be in short-term holding, with 9,759 (82%) of the horses and burros between 0 and 4 years old. Animals in short-term facilities will either be readied for adoption or sale or sent to long-term holding. Typically, it takes BLM two to three months to prepare these animals for adoption/sale or for long-term holding. However, in 2008 and 2009, the average time an animal spent in short-term holding was six months, primarily due to a lack of sufficient long-term holding facilities. BLM has been seeking to reduce the time animals spend in short-term facilities due to their higher cost, by contracting for additional long-term facilities. Many more of the animals in holding are in long-term holding (pasture) facilities. Of the 41,874 animals in holding as of September 2011, there were 30,012 animals in 21 long-term facilities. All of these animals were horses. Nearly all animals in long-term holding were 5 or more years old, with about half being 11 years old or older. Pasture facilities are located on private ranch lands and are privately operated under contract with the U.S. government. All current long-term facilities are in Iowa, Kansas, Oklahoma, and South Dakota. Groups of horses are maintained in large pastures. The number of acres needed to maintain a wild horse varies among the facilities based on the vegetation; currently the average is seven acres per horse. Any adoptable animals in long-term facilities are to be put up for adoption when demand allows, which for some animals may be years. The unadoptable ones, such as older animals, are to be sold or live out their lives in long-term facilities. Extensive use of holding facilities has prompted a number of issues, including whether to remove more horses than can be adopted, whether the cost of holding is too high (see below), and whether animals in long-term facilities receive appropriate care. Over the past several years, BLM has continued to acquire capacity in new long-term holding facilities to accommodate the increasing numbers of animals removed from the range. For instance, on July 5, 2011, BLM issued a solicitation for one or more pasture facilities accommodating 800 to 5,000 animals. Wild horses and burros are thought to reproduce at a rate of about 20% yearly. To slow reproduction, research is developing fertility controls for wild horses. Advocates of fertility control assert that it improves the genetic viability and health of the horses, as well as foal survival, by delaying pregnancy in younger mares. Some view fertility control as less stressful and disruptive to horses than removals, and worth more emphasis. Opponents contend that the long-term effect of fertility control on the behavior and size of herds is uncertain. Some favor natural controls such as disease and starvation. In selected areas, BLM has tested one- and two-year contraception vaccines on mares. The primary agent being tested—Porcine Zona Pellucida (PZP)—is not commercially available, but is being tested under an investigational drug exemption issued by the Food and Drug Administration and held by The Humane Society of the United States. The formulation that has appeared to be most effective is a one-year vaccine. However, it is not feasible to administer, because it is not possible to gather herds yearly or to get close enough to wild horses on the range to use darting. Instead, BLM has been using a two-year contraceptive, and since 2004 the agency has administered it to 3,866 mares during gathers in dozens of the 179 HMAs. The animals were then returned to the range. The treatment has several limitations. One limitation is the difficulty of capturing enough mares in a herd for the treatment to be effective. To effectively reduce population, 60% to 90% of breeding-age mares in a herd must be treated, according to BLM. A second limitation of the vaccine is that it must be administered three to four months before breeding (i.e., November-February) for maximum effectiveness. A third limitation is that if enough mares were captured and treated so as to reduce the herd population to AML, it would be difficult to capture the remaining scattered horses to continue treatments, especially in very large herds. The extent of the effectiveness of the two-year vaccine in the areas being tested will be assessed when the herds are next gathered. This usually occurs every three to five years. Overall, there has not been a significant reduction in the rate of population growth in herds where the contraceptive was applied, according to BLM, in part due to the relatively small number of mares receiving the treatment in each herd and the duration of the contraceptive. However, preliminary analysis of the data from one herd indicates a foaling rate of 28%-38% for treated mares and 69%-83% for non-treated mares. BLM considers this to be a significant reduction in population growth. BLM has determined from studies and modeling that PZP alone would not reduce wild horse populations to AML, but would control the rate of population increase once AML is achieved in a herd. For this reason, beginning in FY2011 the agency adopted a new approach, called "catch, treat, and release," to administer PZP to mares in HMAs that are at or near AML. Gathers in these HMAs are being done for the primary purpose of administering the contraceptive rather than for removing excess animals to achieve AML. BLM's goal is to treat 70%-80% of a herd's mares during catch, treat, and release gathers and then return the animals to the range. The agencies continue to seek a more effective, longer-lasting fertility drug. BLM, in cooperation with the Humane Society of the United States, has contracted with the U.S. Geological Survey to research and develop PZP. The focus is on assessing the effectiveness of vaccines over several years and developing a vaccine that would last at least three years and could be approved as safe for general use. Other research efforts focus on improving the current vaccines and the methods of administering them, such as through remote delivery. Other methods of population control are being considered currently by BLM or are being researched by government agencies and other organizations for possible future consideration. Beginning in 2011, BLM has been placing greater emphasis on assessing two population control techniques other than PZP. One technique is sex ratio management. While herds typically produce roughly equal numbers of males and females, under the proposal the sex ratio of a herd would be adjusted in favor of males to reduce the number of pregnancies on the range. BLM suggests considering an adult herd makeup of 60%-70% males, either by releasing a greater number of stallions to the range following a gather or by releasing geldings back to the range following castration. This option is thought to be most applicable to large herds─those with 150 or more horses─where AML has been reached, in order to maintain AML. Changes in herd dynamics may result from a change in sex ratios, and an increase in the proportion of stallions may have more of an effect on social structure than releasing geldings to the range, according to BLM. A second technique for managing population increase is to establish non-reproducing herds (or minimally reproducing) herds in some areas. Among the criteria that might be used to select a herd as non-reproducing are having no special or unique characteristics, having limited public water, and being in poor condition ecologically. Under this option, captured horses would be sterilized before being released back to the range. Gelding (castration) of stallions has been determined to be a safe, effective, and humane means of sterilization, so BLM is focusing on returning geldings to the range. By contrast, sterilizing mares through spaying is considered risky, and requires major abdominal surgery and good post-operative care, so it is not currently regarded as safe, effective, and humane for wild horses. Research continues to develop and test new fertility control treatments. In one study, the BLM and USGS are evaluating whether two types of SpayVac, an investigational vaccine, can reduce foaling in mares. The goal is to see if SpayVac will have a longer effect than other PZP vaccines currently being used by BLM. Begun in 2011, this five-year study is being conducted at one BLM short-term holding facility using animals that already were in holding. If effective in this controlled setting, the vaccine would be considered for use on wild horses on the range. Other options for fertility control might be considered in the future, according to BLM. One question is whether vasectomies for stallions could be done safely and whether such fertility control focused on males would reduce population growth. A second future option could be use of intrauterine devices. Barriers to using this method include a lack of success in pilot studies and the difficulty of timing the application of the devices to when the mares are not pregnant. A third possible option might be use of an experimental vaccine called GonaCon. However, thus far it appears that GonaCon does not provide longer-term fertility control than the PZP vaccine currently in use. Whether funding is appropriate to care for wild horses and burros, reach AML, and reduce long-term budgetary needs has been unclear. Appropriations for BLM for managing wild horses and burros doubled from FY2000 ($20.4 million) to FY2009 ($40.6 million). The biggest increase during that period occurred from FY2000 to FY2001, when BLM received a 69% increase (to $34.5 million) with a goal of achieving AML over several years and, by FY2010, reducing budgetary needs below the FY2001 level. These goals have not been achieved. Instead, the FY2010 Interior appropriations law included $64.0 million for wild horse and burro management, a $23.4 million increase (58%) over FY2009. The conferees on the FY2010 Interior appropriations bill also required BLM to follow the Senate's directions on wild horses and burros. Noting that the costs of gathering and holding wild horses and burros "have risen beyond sustainable levels," the Senate Appropriations Committee had directed BLM to develop and publish a new, long-term plan for management of wild horses and burros that included private proposals. (See " BLM Strategy Proposal ," below.) For FY2011, the appropriation for BLM wild horse and burro management was higher still—$75.8 million. The Obama Administration had sought an increase in part to implement Secretary Salazar's proposals for wild horse and burro management, including increased fertility control treatments. The Administration also requested an additional $42.0 million to acquire lands for a wild horse preserve, as proposed by the Secretary. (See " Secretary Salazar's Proposals ," below.) However, the FY2011 appropriations law did not include these acquisition funds. Concerns over increasing costs have prompted questions about managing wild horses and burros. One question is whether the average cost of adoption can be reduced. In 2010, the cost was estimated at $2,210 per animal adopted, more than double the 2007 estimate of $994 per animal adopted. The average cost increased because in 2010 BLM spent more on promoting and advertising adoptions than in 2007, but the number of animals adopted in 2010 was lower than in 2007. Another question is whether animals can be moved more quickly through the adoption and sales systems or into long-term facilities, as the cost of short-term facilities is relatively high—$5.30 per animal per day in 2010. This cost has increased from $3.00 per animal per day in 2001, in part due to increased fuel costs. By comparison, the average cost paid to contractors to care for animals in long-term facilities was $1.27 per animal per day in 2009, nearly the same as the cost in 2001—$1.22. In recent years, a significant portion of the appropriation for wild horses and burros has been used for the costs of holding animals in facilities. BLM estimated that the cost of holding animals in all facilities in FY2009 was about $29 million, or 71% of the appropriation of $40.6 million. The estimated cost of holding was higher for FY2010, approximately $37 million, although the percentage of the total appropriation (58%) used for holding was lower because of the larger FY2010 appropriation for wild horses and burros ($64.0 million). The agency estimated even higher holding costs for FY2011—$43.2 million—which would constitute 57% of the $75.8 million appropriated for wild horse and burro management. One BLM estimate had been that, to support its removal and holding practices, the agency's appropriation would need to rise to $94.6 million in FY2014. Of this amount, the cost of holding animals in facilities was estimated at $65 million (69%). These relatively high costs of holding have fostered debate and proposals about expanding or developing other options, such as fertility control and privately managed sanctuaries. Other questions involve whether additional funds could supplement appropriations. For instance, one question is whether long-term facilities could become financially self-sufficient through fundraising and donations, as some had expected when the first facilities were created. A related issue is whether the current base adoption fee of $125 could be increased to generate more money for the program. For FY2011, BLM estimated collecting $0.5 million in adoption fees. Contrarily, some support reducing the base adoption fee to promote adoptions. Collections from sales of wild horses and burros have been significantly lower than expected when the sales program was created. This is in large part because the number of animals sold and the purchase price per animal have been relatively low. For instance, with an average sale price of $10 in FY2011, collections from sales of wild horses and burros were estimated at $8,956. Still other ideas have included allowing proceeds of land disposals to be used for wild horse and burro management, and selling horse sponsorships. In 2008, GAO conducted a year-long review of BLM's wild horse and burro program. Specifically, the agency examined BLM's progress in setting and meeting AML; management of animals through adoption, sales, and holding facilities; controls to ensure humane treatment of animals; and long-term management challenges. GAO reached several conclusions about the program and recommended that the Secretary of the Interior direct BLM to take related actions. GAO tracked specific agency actions on its recommendations, and reports that BLM has implemented all of its wild horse and burro recommendations. Among other findings in the 2008 report, GAO found that while BLM had made significant progress in setting and meeting AML, the agency had not provided specific guidance to field offices to achieve consistency in establishing AMLs. GAO recommended that BLM issue a wild horse and burro handbook that contains a policy for determining AML to ensure that AMLs are set consistently across herds. In June 2010, BLM issued a handbook that outlines the authorities, objectives, policies, and procedures for managing wild horses and burros. The handbook includes information on establishing AMLs, gathering horses and burros, designation of HMAs through the land use planning process, management of habitat, using fertility controls, and other issues. Further, GAO concluded in 2008 that the direct-count method many BLM field offices used to conduct population counts, which reports the number of animals actually seen on the ground, resulted in undercounting the animals. Such undercounts in turn lead to the removal of fewer animals than needed and costlier gathers of animals in the future. GAO recommended that BLM use statistically based methods to improve the accuracy of estimations of animal populations, such as those being developed by researchers. BLM has begun using two methods to achieve greater accuracy in determining herd size. The simultaneous double-count method, which is most effective in open terrain and short vegetation, uses two observers to simultaneous observe herds and record data. The results are compared using statistical modeling to estimate the number of animals not observed. Under the photographic mark-resight method, which is most effective in steep terrain and tall vegetation, two or more separate aerial counts are performed. During each count the animals are photographed, then the photos are compared to determine which animals were identified and which were not seen during each count. An estimate of the total number missed is based on the number that were missed during each count. GAO also concluded that BLM had implemented many controls to foster humane treatment of wild horses and burros, including for animals gathered, held in facilities, adopted, and sold. The controls involved establishing standard operating procedures, conducting inspections and monitoring, collecting data, and implementing protections against slaughter of sold animals. However, BLM did not regularly provide information to the public on treatment of animals, and doing so would improve transparency, according to GAO. BLM subsequently established protocols for reporting information on wild horse and burro gathers, including the number of animal deaths, and currently publishes this information on its website. According to GAO, the development of alternatives to caring for animals in facilities is necessary for the long-term sustainability of the wild horse and burro program, due to the cost of caring for animals in facilities. GAO cited Secretary Salazar's 2009 proposals and the BLM 's ongoing strategy initiative (both discussed below) as implementation of this recommendation. Further, GAO observed that some current alternatives for managing wild horses and burros are not being exercised. BLM is not euthanizing healthy excess animals, or selling them without limitations, as provided for in the 1971 Act. GAO recommended that BLM discuss with Congress and other interests BLM's concerns with implementing these provisions, as well as how to comply with the 1971 Act or amend it to facilitate compliance. GAO cited congressional testimony and correspondence with Members during the 111 th Congress and discussions with the Wild Horse and Burro Advisory Board as addressing this recommendation. At its November 17, 2008, meeting, the Wild Horse and Burro Advisory Board made 19 recommendations to BLM regarding management of wild horses and burros. The recommendations related to enhancing the adoption and sale of animals, euthanizing animals, slowing population growth, securing sufficient funding, and providing care through livestock permits, among other matters. BLM has been evaluating these recommendations, and Secretary Salazar's October 2009 proposals and BLM's 2011 proposed strategy and other actions incorporate some of them. In the area of adoptions, the Advisory Board's recommendations included that BLM explore the feasibility of semi-privatizing the adoption program. Another was that the BLM support an expansion of the work of the Mustang Heritage Foundation, a non-profit organization that facilitates the adoption of wild horses and burros. Several recommendations pertained to increasing the sale of animals. One was for BLM to offer animals for sale if they are 10 years old or younger, if they have not been adopted after three attempts, as provided for in law. Other proposals to sell eligible animals were that BLM market them overseas and explore opportunities to sell them abroad for agricultural (nonfood) use. Still another was that BLM offer organizations with existing adoption/sale networks the option of adopting or purchasing groups of animals for virtual adoptions or sale to approved homes. Except for this last recommendation, these recommendations to boost sales included the specific proviso that the animals be sold with "the intent clause," which was designed to protect against slaughter. The intent clause is currently used for animals sold by the BLM under the sale authority enacted in the 108 th Congress. The language, which is included on the bill of sale, states that the "Purchaser agrees not to knowingly sell or transfer ownership of any listed wild horse(s) and/or burro(s) to any person or organization with an intention to resell, trade, or give away the animal(s) for processing into commercial products." BLM began using this language in 2005 after some of the animals it had sold were later sent to slaughter. However, the board recommended that "as a last resort," animals that are eligible for sale, but that are not sold or adopted after 30 days, be offered for sale without limitation and without "the intent clause," or be humanely euthanized under current law. "Without limitation" would imply making the animals available for sale without restrictions and without provisions designed to foster humane care. For instance, the bill of sale currently also includes language that the "Purchaser agrees to provide humane care to the listed wild horse(s) and/or burro(s)." Removing the intent clause would allow for sale without a buyer's commitment not to resell for slaughter. The inclusion of euthanization and sale without limitations and without the intent clause, even as a last resort, was controversial. The Administration is not using these options, as noted above. Issues associated with selling and euthanizing healthy animals are discussed in above sections of this report. Also with regard to euthanasia, the Advisory Board recommended that a veterinarian be present at all emergency gathers of wild horses and burros. Animals should be humanely euthanized if they show signs of disease, stress, or other conditions that would make them susceptible to life- threatening illness if moved into holding facilities. To slow population growth, the Advisory Board developed several recommendations. Among them were that BLM explore additional fertility control methods that might be permanent for stallions or mares; consider establishing non-reproductive herds; make changes to the ratio of females to males in herds to favor males; and consider and utilize unproven field techniques on a conditional basis. The board recommended that BLM not use spaying and vasectomies unless proven safe, practical, and effective. Recommendations to secure sufficient funding included that BLM seek additional, dedicated funding for at least two herd management areas in Nevada per year. The money would be used in herds that were at or near AML in order to reduce population growth. To offset the costs of long-term holding, the Advisory Board proposed that BLM explore assistance agreements with wild horse advocacy groups, for instance, with the Save The Mustang Fund to raise money specifically for long-term care. Two other proposals pertained to livestock permits/permittees. They involved having BLM provide information to groups and individuals who may be interested in acquiring grazing permits to provide long-term, private care for adopted or purchased animals, or in contracting with existing permittees to provide long-term care. On October 7, 2009, Secretary Salazar issued Proposals to Create a Sustainable National Wild Horse and Burro Program . The proposals were aimed at reducing wild horse and burro populations, both on and off the range; developing new options for animals removed from the range; and reducing the costs of wild horse and burro management. Central to the initiative is applying new approaches to align population growth with adoptions, to minimize the number of animals that need to be removed from the range and cared for in long-term holding. According to DOI, the Secretary's proposals would enable BLM to achieve AML by 2013 and eliminate the need for any additional holding by 2014. The Secretary called for the establishment of a set of wild horse preserves throughout the United States, particularly on the grasslands of the Midwest and East. A preserve would be similar to a long-term holding facility in that it would provide lifetime care in pastures for animals that are not adopted or sold. However, a preserve would differ from a long-term holding facility because it would be open to the public for viewing, tourism, and education. Areas in the Midwest and East were promoted as potentially more suitable than areas in the West, where in some cases there is a scarcity of water and forage and threats to the animals from drought and fire. The wild horses in these preserves would be non-producing. Land for the preserves would be acquired by BLM or "partners," and the preserves would be managed either by BLM or through cooperative agreements between BLM and other entities. Specifically, BLM was interested in acquiring private land to establish two preserves, with a total capacity of about 7,200 horses. In furtherance of this effort, BLM's FY2011 budget request included $42.0 million to acquire land to establish one new preserve. However, the FY2011 appropriation to BLM did not include funds for this acquisition. Further, BLM is not currently pursuing this option, due to opposition to federal purchase of lands to establish the preserves. Under the Secretary's proposal, BLM also hoped that its partners would acquire and privately own five other preserves, with a total capacity of about 17,800 horses, that would be managed cooperatively with the agency. BLM currently is pursuing public-private partnerships through the establishment of ecosanctuaries. (See the section of this report entitled " Ecosanctuaries .") Several proposals were aimed at reducing population growth. They included enhanced use of the fertility control drug PZP and efforts to develop longer-acting treatments. The Administration's budget request for FY2011 proposed an increase for costs of fertility treatments, from $1.0 million in FY2010 to $4.2 million in FY2011. Under the proposal, 1,990 mares were to be treated in FY2011, compared with 463 in FY2010 and 582 in FY2009. The focus of fertility control thus far has been on mares in herds that exceed AML. Of the 1,990 mares, 750 were to receive the drug during regular gathers of these overpopulated herds. However, in FY2011 the BLM also would begin a new program of gathering herds already at AML, or near AML, to apply the treatment to mares and then return them to the range. Of the 1,990 mares to be treated, 1,240 were to be in herds at or near AML. The Secretary also proposed reducing population growth by managing the sex ratios of herds; introducing non-reproducing herds (geldings) in selected HMAs (which would require congressional authorization, according to BLM); and expanding the number of adoptions. The Administration indicated that it had "no intention" of using authorities in the 1971 Act (as amended) to reduce the number of wild horses and burros through euthanasia or sale without limitation. The Secretary also proposed "showcasing" herds that "deserve recognition" through secretarial or congressional designations. The designations would be intended to "highlight the special qualities" of the herds and foster tourism. The types of designations were not specified, nor whether they would confer or be facilitated by different management. Designations under the proposal have not been made as of December 2, 2011. To accelerate reforms in wild horse and burro management, BLM is finalizing a new strategy for managing wild horses and burros. The emphasis of the proposed strategy, issued on February 28, 2011, is on advancing Secretary Salazar's proposals to reduce wild horse and burro populations, pursue new options for animals removed from the range, and reduce program costs. The strategy is intended to respond to congressional direction to BLM to develop and publish a new long-term plan and policy for management of wild horses and burros that included private proposals. BLM expects to issue the strategy in final form after considering public comment on the proposal. Under the proposed strategy BLM would seek to take a number of actions, including the following: Reduce the number of wild horses and burros gathered during at least each of the next two years (FY2012 and FY2013) from approximately 10,000 to 7,600, pending the findings of a National Academy of Sciences study on how BLM should proceed based on the best available science and research. Strengthen the humane treatment of animals in both gathers and care in holding facilities, such as through development and implementation of a comprehensive animal welfare program. Increase fertility control over the current estimated level of 1,015 animals in FY2011 to 2,000 animals in each of FY2012 and FY2013, and, over the longer term, use fertility control as the primary means of maintaining AML on the range. Also, consider other population control measures such as adjustment of herd sex ratios to favor males and introduction of non-reproducing animals. Use the best science and research in managing wild horses and burros. Also, continue existing research and conduct new research, such as on fertility control methods. Pursue partnerships with private landowners and other entities for the establishment of sanctuaries for the long-term care of wild horses and burros removed from the range. Partnership sanctuaries would be pursued as an alternative to federal acquisition of preserves, which had been proposed as part of Secretary Salazar's initiatives. Increase adoptions, from approximately 3,000 to at least 4,000 annually, for instance by training more wild horses and burros. Encourage volunteering with wild horses and burros and partnerships to increase ecotourism involving wild horse and burro herds. Improve transparency and openness of the wild horse and burro program, for instance through opportunities for public viewing at gathers and holding facilities and release of information on wild horse and burro management. Implementation of the strategy is contingent upon an appropriations level of approximately $76 million for wild horse and burro management for each of FY2011-FY2014, according to BLM. The agency intended to prioritize funding for enhancing fertility control, increasing adoptions, and conducting the study by the National Academy of Sciences. In early 2011, BLM asked NAS to review the science that BLM is using in managing wild horses and burros and to make recommendations on how to use the best available science. The study is expected to examine the science used in various areas, such as population estimation, gather decisions, herd growth, and fertility control. The NAS will review their earlier reports on wild horses and burros as well as current science and research, and identify areas needing further research. It is anticipated that the study will be completed in early 2013. Following the study, BLM is expected to assess whether there is a need for a comprehensive environmental impact statement (EIS) to analyze impacts of wild horse and burro options, or if changes in law are needed to alter management of wild horses and burros. BLM has begun to pursue partnerships with other landowners for the establishment of wild horse ecosanctuaries for the long-term care of wild horses and burros determined to be excess and removed from the range. Ecosanctuaries are to provide opportunities for public viewing with a potential for ecotourism. They are to consist exclusively of non-reproducing herds in an effort to limit population growth. The age range of animals in ecosanctuaries will vary. Horses with the most potential for adoption typically would be cared for at ecosanctuaries that contain an outlet for adoption. Ecosanctuaries could be located solely on non-BLM land, such as private, tribal, state, or other lands, or on a combination of non-BLM and BLM lands. A landowner could propose that a third-party organization manage the horses. Ecosanctuaries located on combined BLM and non-BLM lands are required to be located within established herd areas, while ecosanctuaries established on non-BLM land could be located anywhere. In general, the goal is for the ecosanctuaries to be less costly to the federal government than long-term holding facilities. The amount BLM will pay sanctuary operators per horse is likely to vary among sanctuaries, depending on the services BLM provides and the services the other land owners provide (e.g., forage). Proposals that include a visitor center or visitor facilities are to identify the expected costs of such facilities and the financial contributions of each party. In spring 2011, BLM solicited proposals for the establishment of ecosanctuaries. The agency currently is evaluating proposals received as to their cost and technical merit, and will evaluate under the National Environmental Policy Act those determined to have merit. That analysis is expected to take at least 6 months for private land proposals and at least 18 months for public-private land proposals. BLM anticipates the establishment of the first ecosanctuary on private lands in 2012, as this land is not subject to the same laws, regulations, and policies affecting BLM lands. The agency anticipates the establishment of the first ecosanctuary on public-private lands in 2013. One proposal for the establishment of an ecosanctuary had been evaluated before the 2011 initiative to solicit proposals. Specifically, in November 2008, a private animal activist first expressed interest in purchasing thousands of excess horses from BLM. The idea was to prevent the animals from being slaughtered, and was developed in reaction to BLM's consideration at that time of whether to euthanize animals or sell them without limitations. According to the proponent, the horses would be cared for in a sanctuary in order to protect the wild horse as a living icon of the American West. The sanctuary would be open to the public with the hope that it would be a popular tourist destination like some national parks. Under one version of the proposal, once the Secretary of the Interior agreed to the establishment of an ecosanctuary, the proponent would deed a privately owned ranch to Saving America's Mustangs (or another Nevada nonprofit corporation) to be operated in perpetuity as a sanctuary for wild horses. The sanctuary would be populated initially with up to 10,000 horses currently in BLM holding facilities, with additional excess horses gathered from the range to be added in the future. The horses in the sanctuary would be managed as a non-reproductive herd. The BLM would pay Save America's Mustangs a per head per year fee of the lesser of $500 or the long-term holding cost. The sanctuary also would be available for short-term holding of horses. The proposal included a horse receiving, training, and clinical facility as well as a range of public amenities, such as overnight accommodations, a learning center, trails, and campgrounds. Proponents of the proposal contended that it had several advantages over current wild horse management, including that it would be much less costly. For instance, cost savings would be derived from removing animals from short-term holding, which has an estimated annual cost of $1,935 per horse, and keeping animals in the West, rather than paying for their transport to the central states for long-term care. Further, the proposal would remove animals from corral facilities and allow them to roam on their natural rangelands. Supporters predicted increased stability of management through care in a permanent sanctuary, rather than uncertainty stemming from the continuing need to seek and renew contracts for care in long-term facilities. Showcasing wild horses in a sanctuary open to the public would have the benefit of promoting American heritage as well, advocates contended. BLM and others raised concerns about the feasibility of the proposal. One was that the proponents did not provide a detailed enough proposal to allow for a comprehensive feasibility analysis. A second was that BLM did not have authority under law to implement the proposal, (e.g., to reimburse a private party for grazing titled horses on deeded land). A third concern was that the proposed payment would not provide a financial advantage to the government for animals currently in long-term holding, and that BLM could not commit to such lifetime payments because appropriations are provided annually. Other concerns were that the proposed ranch area did not contain sufficient water and forage to support 10,000 animals. A December 2010 report of the DOI Office of Inspector General (OIG) evaluated whether wild horse and burro gathers are "necessary and justified" and whether wild horses and burros are being mistreated. As mentioned above, the report concluded that the gathers are necessary and justified to control herd populations at a level the range can support as well as to maintain a balance of uses of the range. Over the years, at times there have been concerns expressed about the treatment of animals, including stress and risk to horses at gathers and the quality of care of animals in holding. The OIG also expressed that they did not find evidence that BLM or its contactors inhumanely treated wild horses and burros during gathers or at holding facilities. The OIG recommended that BLM continue implementing program improvements and Secretary Salazar's initiatives, particularly: research and testing of improved population control methods so as to balance population increases with adoption rates, minimizing the need for holding; efforts to reduce the need for holding facilities; and coordinating and confirming science and research with the National Academy of Sciences and using the best science and research in program management. At the request of BLM, a task force of the American Association of Equine Practitioners evaluated BLM's treatment of wild horses and burros at gathers and in short- and long-term holding facilities. BLM sought the independent study in an effort to improve the health and welfare of wild horses and burros, in part in light of ongoing concerns over the treatment of animals. The task force was made up of 10 veterinarians from private practice, universities, and industry involved with equine medicine and surgery throughout the country. Their August 2011 report described the condition of animals during gathers, transport, medical procedures, and holding as observed during site visits. The panel concluded that the "care, handling and management practices utilized by the agency are appropriate for this population of horses and generally support the safety, health, and welfare of the animals." The task force documented many practices of quality care for wild horses and burros. The panel also made recommendations for improvement. They included: using the best available science for determining a healthy and sustainable number of animals for each HMA; prioritizing research on and use of fertility controls to reduce wild horse populations; adopting conservative helicopter flying patterns during gathers to ensure a safe distance between helicopters and horses or the ground; changing the configuration of capture pens for gathered animals to enhance safety (for instance, to discourage horses from climbing out); providing areas of solid footing in all short-term holding facilities so horses can lie down; ensuring a uniform protocol for anesthesia for all surgical procedures on horses; adjusting numbers of animals at short-term holding facilities as needed to avoid overcrowding, and adopting biosecurity standards for short-term facilities to reduce outbreaks of infectious disease; and continuing agency efforts to establish a centralized database to track wild horses and burros that includes trends and outcomes of programs such as adoption and training at prisons. Congress has considered the extent to which funding for wild horse and burro management is appropriate for a number of sometimes conflicting goals: caring for wild horses and burros, reaching AML on the range, and reducing long-term budgetary needs, as discussed above. Congress also has provided guidance and direction to the agencies on managing wild horses and burros, and considered whether alternative authorities would be desirable. Currently (as of December 2, 2011), legislation to amend the 1971 Act has not been introduced in the 112 th Congress. Legislation in the 111 th Congress had sought to make many changes to wild horse and burro management. Specifically, H.R. 1018 had passed the House and was referred to a Senate Committee, while S. 1579 was introduced in the Senate and referred to committee. The bills sought to prohibit the slaughter of wild horses and burros, unless the animal is terminally ill or fatally injured, and to remove agency authority to sell excess wild horses and burros. They would have limited the removal of wild horses and burros from the range to certain circumstances: (1) the immediate health or safety of the animals is threatened; (2) the health and well-being of native plants or wildlife is threatened; or (3) the Secretary "has exhausted all practicable options" of maintaining the animals on the range, has determined that there is an "adoption demand" for the animals, and can "ensure humane treatment and care" through specified requirements. Other provisions were intended to expand the area available for wild horses and burros. To the extent practicable, the acreage was not to be less than the acreage where the animals roamed in 1971—53.8 million acres; currently, wild horses and burros roam on 31.6 million acres. The prohibition on relocating wild horses and burros to public lands where they did not exist in 1971 would have been stricken. The bills sought to facilitate the establishment of wild horse and burro sanctuaries or exclusive use areas, and to identify new rangelands for wild horses and burros, including on private lands. They would have required an assessment of the effects of creating new ranges, sanctuaries, or exclusive use areas for wild horses and burros, including on range health, water quality, and threatened and endangered species. Still other provisions aimed to improve the methods for estimating animals on the range and determining AMLs. The Secretary was to employ the best scientific methods for estimating populations, develop a policy and standards for setting AMLs, and distribute standards so that the methodology for estimating populations and determining AMLs is consistent. To reduce populations on the range, the Secretary was to research, develop, and implement fertility control. The Secretary also was to maintain an inventory of wild horses and burros and update it every two years. To promote wild horse and burro adoptions, the Secretary was to take several actions. They included implementation of creative and more aggressive marketing strategies, exploration of agreements with local and state organizations that use horses, provision of resources for screening and training potential adopters, and development of a program of economic incentives for adopters. Adopters would have been required to sign an attestation affirming that neither the adopted animals nor their remains would be sold or transferred for consideration for processing into commercial products. Wild horses and burros could not be held in short-term holding facilities for more than six months while awaiting disposition. Further, the bills would have required annual reports to the House and Senate authorizing committees with information on animal populations, AMLs, acres of land for wild horses and burros, sanctuaries (or exclusive use areas), and fertility control, among other topics. The Secretary also was to track the number of animals injured or killed during gathering and holding, and determine what information on treatment of animals held and adopted could be provided to the public.

The Wild Free-Roaming Horses and Burros Act of 1971 (the 1971 Act) protects wild horses and burros on federal lands, and places them under the jurisdiction of the Bureau of Land Management (BLM) and the Forest Service (FS). Under the 1971 Act, the agencies are to inventory horse and burro populations on federal land to determine appropriate management levels (AMLs). They are authorized to remove animals exceeding the range's carrying capacity. First, the agencies are to destroy "old, sick, or lame animals" by the most humane means available. Second, they are to remove healthy animals for private adoption. Third, if adoption demand is insufficient, the remaining healthy animals are to be destroyed. However, the agencies have not used this authority since 1982, and the FY2011 Interior appropriations law prohibited funds from being used to slaughter healthy animals. In addition, under a 108th Congress change, the agencies are to sell, "without limitation," excess animals (or their remains) that essentially are too old or otherwise unadoptable. BLM has not achieved reduction to the national AML, which is 26,576 for all herds. There were an estimated 38,497 wild horses and burros on BLM lands as of February 28, 2011. Another 41,874 animals were in BLM holding facilities as of September 2011. More than half of BLM's $75.8 million FY2011 appropriation for wild horses and burros was used to care for animals in holding facilities. A much smaller number of horses and burros are on FS lands—4,700. Management of wild horses and burros has long been controversial, with most attention centering on BLM. Among the most contentious issues are whether BLM should destroy healthy animals under the authority provided in the 1971 Act, and sell animals "without limitation" as provided in the 108th Congress change. Other controversial issues include the priority given wild horses and burros in land use decisions; whether, and to what extent, to remove animals from the range; the disposal of healthy animals through the adoption and sales programs; the extent of holding animals in facilities, particularly long-term (pasture) facilities; the use of fertility control to slow the rate of reproduction; and the costs of management and whether funding is appropriate. Several sets of options are being considered or implemented for reaching AML, limiting the number of animals in holding, reducing program costs, and generally improving the care and management of wild horses and burros, primarily by BLM. An October 2008 report by the Government Accountability Office recommended that BLM use different methods to estimate populations, issue a policy to achieve consistency in setting AMLs, provide information to the public on treatment of animals, and develop alternatives to caring for animals in facilities. In November 2008, the Wild Horse and Burro Advisory Board made recommendations to BLM on how to reduce wild horse and burro herd sizes, population growth, and costs of management, among other issues. On October 7, 2009, the Secretary of the Interior, calling the BLM wild horse and burro program "unsustainable," announced proposals to establish wild horse preserves for the care of non-producing herds, and to reduce population growth rates through such methods as expanded use of fertility control. In February 2011, BLM released a draft strategy to advance the Secretary's proposals, pursue new options for animals removed from the range, and reduce program costs. In spring 2011, BLM began to solicit proposals to establish wild horse and burro sanctuaries, either on BLM or combined public-private land, for the long-term care of non-reproducing herds. Further, the National Academy of Sciences is developing recommendations for BLM on using the best science in caring for wild horses and burros. Two recent reports (Department of the Interior and American Association of Equine Practitioners) found overall quality care for wild horses and burros, while providing recommendations. No broad legislation to amend the 1971 Act has been introduced in the 112th Congress.

Congress plays a major role in formulating and implementing U.S. trade policy through its Constitutional role in regulating foreign commerce. This role includes providing authority to the President to conclude trade agreements to eliminate and reduce tariff and non-tariff barriers to U.S. trade with other countries. For Members of Congress, trade can be a difficult issue, because decisions that liberalize trade flows have mixed effects on U.S. domestic and foreign interests, both economic and political. Historically, Congress has supported policies to open international markets to U.S. goods, services, and agriculture. It also has weighed carefully the economic impact of trade agreements to asses their benefits and costs. Congress also has enacted targeted adjustment assistance programs to provide training and other assistance to help workers and firms that may be dislocated by greater market opening adjust to new economic opportunities. Anticipating congressional consideration of a free trade agreement between the United States and South Korea (KORUS FTA), a number of groups offered estimates to quantify potential effects of the FTA on U.S. employment. This report discusses the models used to estimate the employment effects of the agreement and their various assumptions, necessary in order for the model to generate results. Invariably, these assumptions determine to some extent the results that are generated and, therefore, limit their representation of the real world economy. The models also are highly sensitive to assumptions used to establish the parameters of the models and are hampered by a lack of data in some areas. In general, the various economic models provide differing estimates of the magnitude of changes in U.S. employment that could arise from a trade agreement with South Korea, reflecting different assumptions and conditions. Both advocates and opponents of the KORUS FTA cite results of these studies to support their position. Each of these models has strengths and weaknesses and varies in the degree to which it reflects economic reality. These models are discussed at greater length in the analyses that follow. In addition, the potential job effects need to be viewed in terms of their relative share of U.S. employment. Estimates from the studies range from as many as 280,000 jobs potentially gained to 159,000 jobs potentially lost over the ten-year implementation period of the KORUS-FTA. Middle-range estimates include one often cited by the Obama Administration, which suggests that the KORUS FTA would support 70,000 export jobs. At the other end of the spectrum, other estimates suggested that the United States could lose 345,017 jobs over ten years if the United States did not approve and implement the KORUS-FTA but the European Union (EU) and Canada implemented their FTAs with South Korea. None of these estimates, which represent gains or losses in employment over a ten-year period, account for more than 1.4% of total goods-producing employment, or 0.26% of total employment in the U.S. economy in 2009. None of these studies, however, draws a direct link between any expected changes in trade from a change in tariffs and subsequent changes in employment. These estimates reflect different methodologies and assumptions, and a partial accounting of the total economic effects of such agreements. For instance, the agreement includes provisions on trade in goods, services, and investment. Due to the complexities involved and a lack of data, nearly all estimates focus only on changes in goods-producing employment. As a result, they do not serve well as an indicator of the overall impact of the agreement on the economy. The estimates selected for analysis are the following. U.S. International Trade Commission (USITC): U.S-Korea Free Trade Agreement Potential Economy-wide and Selected Sectoral Effects The University of Michigan: Economic Effects of a Korea-U.S. Free Trade Agreement U.S.-Korea Business Council: Failure to Implement the U.S.-Korea Free Tr ade Agreement: The Cost for American Workers and Companies Economic Policy Institute (EPI): Trade Policy and Job Loss: U.S. Trade Deals with Colombia and Korea Will be Costl y In addition, two other estimates, derived by the USITC and released by the Obama Administration and the Majority Staff of the Senate Finance Committee Trade Subcommittee, are reported. Congress has demonstrated an ongoing interest in concluding trade agreements to eliminate and reduce barriers to U.S. trade in goods, services, and agriculture, and it has assumed a direct role in assessing the impact of trade agreements on the U.S. economy. This report provides background and context for the analyses of the various estimates. It summarizes congressional interest in the issue and then examines the specific estimates—their findings, assumptions, methodologies, and the limitations of those methodologies. Finally, it explains the broader macroeconomic and microeconomic context in which the composition of employment within the economy is affected by a new trade agreement. Although discussions of trade agreements often focus on potential employment gains or losses, most economists argue that such employment estimates represent a partial accounting of the total economic effects of trade agreements and, therefore, do not perform well as an indicator of the overall impact of the agreement on the economy. As this report attempts to explain, estimating such employment effects is imprecise and highly sensitive to the assumptions that are used. In addition, while trade agreements generally are comprehensive in nature and cover goods, services, and investment, most employment estimates focus narrowly on the goods sector and do not adequately represent the total impact of the agreements. It is difficult to estimate precisely the employment effects associated with liberalizing trade in services and reducing or eliminating barriers to investment flows. Trade in services, in particular, is characterized by a broad array of formal and informal barriers that challenge efforts to translate the barriers into tariff-equivalent values. Negotiations to reduce barriers to trade in services, however, potentially could have a very large and positive effect on the U.S. economy, since the United States is highly competitive in a number of services sectors and U.S. direct investment abroad often spurs exports. Finally, estimates of employment arising from FTAs, by themselves, do not account for a broad range of benefits for the economy as a whole. For example, FTAs may provide individual consumers and firms with broader economic benefits and yield broad productivity and efficiency gains for the economy over the long run that may enhance employment. While most economic trade models attempt to model consumer and corporate behavior associated with changes in income, the results of the models depend on a number of factors, including the way changes in prices are passed along to consumers. Most estimates generally assume that the changes in tariffs and, therefore, changes in the prices of goods, will be adopted at the time the agreement is signed and then the annual changes in traded goods are aggregated over ten years. In fact, in the KORUS-FTA, some tariffs will drop to zero immediately, while others will be implemented in tariff reduction stages over ten years, with the impact on prices accruing over time. In the models, expected changes in the trade in services generally are treated as exogenous factors and must be specified outside the model itself. A key assumption used in generating a number of the estimates of the impact of the KORUS-FTA is the level of employment in the U.S. economy during the ten-year period required to phase in the agreement. None of these estimates, however, generate precise estimates of the exact number of jobs to be gained or lost, but generate estimates that reflect the relative magnitude of changes in employment that could be expected over ten years, provided that all other things remain constant. One approach assumes that the U.S. economy operates at a level of full employment over the next decade and holds the level of employment in the economy stable while wage rates are allowed to adjust. A second approach, and one that has been used extensively to derive many of the estimates evaluated in this report, assumes that the economy is marked by a rate of unemployment that reflects current economic conditions, or an economy that is operating at less than full employment. This assumption, more than any other, seems to be the most important factor generating estimates of employment effects under the KORUS-FTA. While the U.S. economy currently is operating at less than full employment, it seems reasonable to assume that over the next ten years the economy will return to its long-term trend that is closer to full employment as the economy recovers from the most severe economic recession in the post-World War II period. Trade models of the type used in the analysis of free trade agreements are part of a class of economic models referred to as computable general equilibrium models (CGE) that incorporate data on trade and a range of domestic economic variables on nearly 100 countries. As a result of this large number of countries, and the vast amounts of data that are a part of the model, the models can provide important insights into the mechanisms by which changes in tariffs or other parameters can affect a range of countries. For practical reasons, however, the data in the models must be limited, so the models necessarily must sacrifice some level of precision in their estimating abilities. Since such trade models originally were developed with the intent of analyzing the economic effects of multi-country trade agreements such as the Uruguay Round, this lack of precision was not considered to be an important drawback. However, this lack of precision may be an issue when the models are used to estimate the effects of bilateral trade agreements where the overall amount of trade and, therefore, the impact of the agreement, is expected to be less than that of a comprehensive multilateral agreement. In addition, such models do not account for changes in exchange rates, since such effects were considered to be neutral in a large multi-country trade agreement. Movements in exchange rates, however, could have an important impact on trade patterns that involve countries that are parties to a bilateral trade agreement. With floating exchange rates, movements in those rates can have an important effect on the prices of internationally-traded goods. Figure 1 shows the movement of the internationally trade value of the won relative to the dollar and the Euro and movements in the dollar-Euro relationship, indexed to January 2005. In this presentation, a rise in the index indicates a depreciation in the value of the won relative to the dollar and the euro and the depreciation of the dollar relative to the euro between January 2006 and January 2011. Between January 2008 and January 2009, the won depreciated about 44% against the dollar and 30% against the euro largely due to a flight to the dollar during the financial crisis, a sharp drop in capital inflows to South Korea, and the largest annual drop in South Korean exports on record. After recovering somewhat between January 2009 and mid-2010, the won experienced another bout of depreciation relative to the dollar and the euro as international markets became more cautious as a result of financial problems in Greece, Ireland and other European countries and concerns over political developments in neighboring North Korea. By February 2011, the won remained 19% and 10% below its value in January 2008 relative to the dollar and the euro, respectively. Such changes in the value of the won relative to the dollar and the euro would have a significant impact on the prices of goods to and from South Korea and possibly eclipse the relatively small changes in tariff rates included under the respective FTAs. Since the KORUS FTA was signed in 2007, a number of estimates of the potential effects of the KORUS FTA have been released that attempt to estimate the effect of the trade agreement on U.S. employment. The estimates range from 280,000 jobs gained to a loss of 159,000 jobs if the United States does adopt the agreement. Two of the estimates are based on standard economic modeling, two others were developed by the USITC, and two represent estimates derived from unique approaches. Table 1 summarizes all six estimates. These estimates will be discussed in greater detail below. The two standard model estimates were undertaken by the USITC and the University of Michigan. Neither of these efforts estimated the total number of U.S. jobs created or lost by the KORUS FTA. but focused instead on potential economy-wide trade effects and sectoral shares of those effects. In contrast, two other approaches by the U.S.-Korea Business Council and the Economic Policy Institute, attempted to estimate employment effects of the KORUS FTA indirectly. In a dynamic economy such as the United States, jobs are constantly being created and replaced as some economic activities expand, while others contract, reflecting broad macroeconomic developments. In this process, various industries and sectors evolve over time at different speeds, reflecting differences in technological advancement, productivity, and efficiency. Those sectors that are the most successful in developing or incorporating new technological advancements generate greater economic rewards and are capable of attracting greater amounts of capital and labor. In contrast, those sectors or individual firms that lag behind are less capable of attracting capital and labor and confront ever-increasing competitive challenges. Indeed, depending on the overall state of the economy, some sectors may need to relinquish some capital and labor in order for others sectors to grow to avoid economic stagnation. Also, advances in communications and technology have facilitated a global transformation of economic production into sophisticated supply chains that span national borders and defy traditional concepts of trade that potentially could involve a greater share of the labor force in trade-related activities. How firms respond to these challenges likely will determine their long-term viability in the market place. At the plant level, job openings may come from new business openings or from expansions at existing facilities, including those that are used to support increased exports. Job losses may come from voluntary departures, involuntary discharges, or from business closures for any reason, including bankruptcy, personal choice, inability to compete in the domestic market, import competition, or production shifts. The Bureau of Labor Statistics, Business Employment Dynamics (BED) Report tracks gross jobs gained and lost in the economy as a whole and in specific sectors and reveals the dynamics underlying gross changes in employment. As Appendix A shows, 15% of total U.S. employment in 2010 was in the goods-producing industries, while the services-producing industries accounted for 68% of the employed population. The remaining 17% of employment was in the government sector, with employment at the State and Local government level accounting for 15% and the federal government sector accounting for 2% Table 2 shows the gross number of jobs gained and lost for the economy as a whole for the goods- and services-producing sectors, and for the number of jobs related to exports, during the period 2006-2009. This process of job turn-over typically affects 18-20% of the jobs in the total economy each year (when percentages of gross jobs gained and gross jobs lost are combined). This process is stronger in the goods-producing sector of the economy, where a number equivalent to 24%-27% of the jobs are typically gained or lost each year, compared with the services sector, where the comparable share is 17%-18%. Such job turn-over is amplified by economic expansions or recessions, as was the case in 2008-2009, when the economy experienced the most severe recession in the post-World War II period. The data in Table 2 also indicate that 1. Jobs supported by exports represent a small share of the total number of jobs in the economy and are equivalent to about one-third of the total number of jobs gained or lost in the economy as a whole during a year. Jobs supported by exports were equivalent to a small share of the annual turn-over in jobs, ranging from 6% to 8% of the annual turnover of jobs in the economy between 2006 and 2009. 2. Within the goods-producing sector, however, such export-related jobs were equivalent to 29% to 35% of total jobs, and within the services sector they averaged about 2%. Similar to overall job gains and losses for the total economy, jobs supporting exports are sensitive to the business cycle. 3. Business cycle effects were particularly apparent between 2008 and 2009, when the global economic recession and financial crisis sharply reduced global trade. As a result, jobs in the economy supported by trade fell by about 1.8 million jobs, or from 8% of total employment to 6% of total employment, or by about one-fourth of its share of total employment. Some would argue that the data on jobs gained and lost throughout the whole economy do not adequately reflect the concern of workers about job losses. According to data published by the Bureau of Labor Statistics, during the last two years of the most recent economic expansion (2005-2007), 3.6 million workers were displaced from jobs they had held for at least three years. Of those workers, by the end of January, 2008, only 67% had been re-employed in full-time jobs and only 22% were in jobs where their salaries matched their previous income level. In the current highly globalized economy, international trade has come to represent a complex set of transactions. Nations not only trade goods and services, but they also trade a broad range of financial products. In addition, liberalized capital flows and floating exchange rates have greatly expanded the amount of capital that flows between countries. Basically, trade represents an exchange of goods or services between two or more willing parties. Such trade allows nations to use their resources more efficiently in order to maximize the total amount of goods and services that are available to their citizens, a common definition of a nation's standard of living. As a result of this maximization process, nations trade because it serves their national interests. In the same way that individuals gain by specializing in activities that use their strongest skills and then trade with others, nations specialize in the production of certain goods and then trade with other nations for the goods they do not produce. Essentially, nations export in order to import goods and services they do not produce, or cannot produce efficiently. Both the benefits and the costs of trade have become well-publicized. These benefits are categorized as one-time, or static, benefits, which include gains for consumers and gains for producers, and dynamic benefits that accrue over time and can positively affect the long-term rate of growth of a country. While it is not always possible to measure these effects precisely, most economists believe that the net effect of international trade on the national economy as a whole is positive, that is, that the total gains exceed the total costs. By reducing foreign barriers to U.S. exports and services and by removing U.S. barriers to foreign goods and services, trade liberalization helps to strengthen those industries that are the most competitive and productive and to reinforce shifts in labor and capital from less productive endeavors to more productive economic activities. An important issue in estimating employment effects from increased trade and trade agreements is the difference between the microeconomic viewpoint and the macroeconomic viewpoint. In a dynamic economy such as the U.S. economy, the composition of jobs is constantly changing as some sectors grow and other sectors decline. This constant churning would continue even in the complete absence of international trade. International trade adds to the myriad of factors that determine the composition of output and jobs within the economy. From the microeconomic perspective, or the viewpoint of the individual firm, competitive pressures from international trade, as well as a broad range of other factors, determine the viability of individual plants or firms. Given these competitive pressures, firms face a number of choices. How such firms choose to respond to the competitive pressures likely determines the overall viability of the firm in the marketplace. As a result of these actions, some firms expand, while others contract. In contrast, the macroeconomic viewpoint focuses on the net overall direct and indirect economic effects of trade. Direct effects include changes in the composition of employment and production for the economy as a whole. Indirect effects can include secondary and tertiary effects in industrial sectors that may be more difficult to estimate. It is assumed that trade agreements affect production and consumption as a result of the impact of the agreements on the prices of goods. Presumably, trade agreements lower the tariffs on imported goods, which result in lower prices on imported goods and shift domestic production in ways that make the economy more efficient. Consumers benefit directly from the lower prices of imported goods to the extent that they shift their consumption in favor of the lower-priced imported goods. They also benefit from an increase in their real incomes as a result of the lower prices of imported goods. Consumers may benefit further from lower domestic prices to the extent that domestic producers lower their prices in response to the competition from imports. Throughout this process, however, the total number of jobs in the U.S. economy is not affected, that is, trade agreements do not affect the total number of jobs in a large open economy such as the U.S. economy, but can affect the composition of employment. This result becomes more binding as the economy approaches full employment. Since the KORUS-FTA is expected to be implemented over a 10-year period, it seems reasonable to assume that the U.S. economy will revert to its long-term trend toward full employment, rather than remain at the current level with underutilized resources that reflect the 2008-2009 recession. The total number of jobs in the U.S. economy is determined by such macroeconomic factors as productivity growth, the growth rate of the population, and the pace of technological innovation. Changes in any of these "structural" factors, together with short-term fluctuations in the business cycle and shifts in the relative value of the dollar against other currencies, may overwhelm effects of any industry-wide job "gains" or "losses" from trade and trade agreements. As the U.S. economy shifts the composition of production from labor-intensive, import-competing products to capital-intensive, export-oriented products, more labor than capital is released. Because those displaced from labor intensive jobs may not have the skills to immediately become employed in more capital intensive jobs, labor dislocations in the economy may result. Economists have long recognized, however, that the long-term production gains associated with greater specialization in the economy create a wide range of adjustment costs as labor and capital are shifted from less efficient industries and activities into more efficient industries and activities. These adjustment costs are difficult to measure, but they are potentially large over the short run and can entail significant dislocations for some segments of the labor force, for some companies, and for some communities. In negotiating trade agreements, governments are most mindful of the adjustment costs involved and, at times, are constrained in their ability to fashion such agreements because of opposition by groups within the economy that would bear heavy costs from trade liberalization. These costs are especially acute for labor groups within the economy that lack advanced education and training skills that provide them with the means necessary to be redeployed in other sectors of the economy. Quantifying the relationship between international trade and the composition of employment in the economy is problematical and complex. For the United States, international trade is not the primary force creating employment in the economy. While trade agreements with specific countries may well benefit certain sectors of the economy, their effect is dubious as an employment program for the economy as a whole. In addition, changes in exchange rates and in the business cycle can affect the overall state of the economy in ways that can outweigh the effects of trade agreements, given the already highly open state of the U.S. economy. In addition, significant gaps in data, particularly relative to the services sector, hinder the ability to model the effects of trade agreements that lower barriers to trade in services. These gaps are important, because the services sector accounts for 69% of output and 68% of full- and part-time employment in the U.S. economy and increased trade in services offer potentially large gains for the U.S. economy. In addition, concerns over the impact of a trade agreement on employment often focus on a comparison of labor compensation rates between countries. For instance, some groups in the United States are concerned that U.S. employment could be negatively affected because labor compensation rates, in general, are lower in South Korea. Measures of competitiveness, however, reflect not only the rate of labor compensation, but the rate of compensation relative to the level of productivity. Rates of labor compensation in the United States could be many multiples of that in South Korea, but as long as U.S. workers remain more productive than workers elsewhere, U.S. goods would continue to be competitive in the global marketplace. In general, most estimates of employment effects do not incorporate measures of productivity in their analysis. Various approaches typically have been used to estimate the employment effects of trade agreements, including the KORUS FTA. In most cases, these approaches share some common features. Similar to other free trade agreements, the KORUS FTA is a comprehensive agreement that includes provisions to: (1) lower tariffs and non-tariff barriers on trade in goods and agriculture; (2) reduce barriers to trade in services; and (3) encourage increased flows of investment. Formal and informal barriers to trade in services, however, are extremely difficult to quantify in monetary terms, and it is equally difficult to estimate the impact of an agreement on potential flows of investment. As a result, most approaches derive their estimate of changes in employment almost exclusively from estimated changes in the value of exports and imports of goods under the agreement. Even these estimates, however, are imprecise and sensitive to the assumptions that are used. Appendix B explains some of the most common assumptions used in economic models. The USITC used a standard approach and analysis by addressing the issue of how U.S. exports to and imports from South Korea would be affected by the FTA with South Korea that lowered tariffs on a set of traded goods. This approach attempted to measure the long-term trade (but not employment) effects of a one-time full implementation of the KORUS FTA after the full implementation period of 10 years on U.S. exports and imports. The ITC used an economic model known as the Global Trade Atlas Project (GTAP), located at Purdue University to estimate changes in trade (exports and imports) from changes in tariff rates and tariff rate quotas. The results are expressed as proportional effects (percentage increases or decreases in trade) for various sectors, relative to the projected 2008 economy. According to this estimate, if the KORUS FTA were to go into effect, U.S. merchandise exports to South Korea likely would increase by an estimated $9.7 billion to $10.9 billion over the first decade after enactment, while merchandise imports from South Korea likely would increase by an estimated $6.4 billion to $6.9 billion over the first decade. This would result in an estimated net increase in U.S. exports of $3.3 billion to $4.0 billion during the first decade after enactment. In a slightly different approach, economists at the University of Michigan used a similar world trade model to estimate the effect of a negotiated reduction in tariff rates on export and import prices and then estimated changes in the volumes of goods exported and imported arising from those change in prices, as indicated in Table 3 . They estimated, using 2006 data, that U.S. bilateral exports to Korea would increase by $9.2 billion and that U.S. imports from Korea would increase by $6.9 billion during the first ten years after implementation of the agreement. The total number of jobs gained or lost in the economy is assumed to be zero, because the model begins with the assumption of full employment. Given this constraint of no changes in the overall number of jobs gained or lost, the estimates represent expected changes in the composition of employment among sectors in the economy. As a result, the estimates should not be viewed as projections of the exact number of jobs gained or lost by sector, but as estimates of the magnitude of the changes that could occur. Given this caveat, the estimates indicate that 85% of the projected job gains would be in the agricultural sector, and 90% of projected job losses would be in six industrial sectors: government services, trade and transportation services, manufactured textiles and apparel, transportation equipment, metal products, and machinery equipment. Standard economic theory provides some insight into which sectors may be expected to gain, and which sectors may be expected to lose employment as a result of increased trade. Accordingly, those sectors that represent areas of greatest comparative advantage based on the economy's endowment of the factors of production (land, labor, capital, technology, and entrepreneurial ability), are the ones most likely to gain employment. Compared with other countries, the United States has a comparative advantage in capital-intensive products, many services, and agricultural products that characterize U.S. exports. This is in contrast to most developing countries, that have a comparative advantage in more labor-intensive products that characterize U.S. imports. Two additional estimates of the employment effects of the KORUS FTA are based on the data developed by the ITC on the number of U.S. jobs supported by exports. In one estimate, the White House apparently used the ITC data to estimate that an additional 70,000 U.S. workers would be supported by new exports under the KORUS FTA. This estimate appears to be based on data developed by the ITC regarding the amount of additional exports that would be created by lowering tariff rates, combined with the data on the number of U.S. jobs supported by exports. As indicated below, the ITA has stated that the data developed on the average number of jobs in the economy that are supported by exports should "not be used to estimate the net change in employment that might be supported by increases or decreases in total exports, in the exports of selected products, or in the exports to selected countries or regions." Some could argue, however, that the White House estimate honored this caution by stating only that the proposed KORUS FTA "would support" (not create) 70,000 U.S. jobs. Another estimate developed at the request of the Majority Staff of the Senate Trade Subcommittee by the ITC using the GTAP model indicated that the KORUS FTA has the potential to create about 280,000 American jobs. The Subcommittee asked the USITC staff to "examine the agreement based on current data and economic conditions." The Trade Subcommittee staff modeled two scenarios with differing assumptions. In the first scenario, the staff assumed that labor and capital in the economy were held fixed, representing an economy close to full employment and full capacity utilization. Since the scenario assumes that labor is fixed, there would be no net change in employment, but labor and capital from other industries would need to be reallocated from other sectors as a result of the KORUS-FTA. This scenario estimates slightly lower percentage increases in output and employment as a result of the FTA, since it assumes that the economy is fully employed. In the second scenario, it is assumed that wages and capital rentals are held constant, but that there is underutilized labor and capital, similar to an economy that is operating at less than full employment and that it has excess capacity. The results of this scenario indicated that, "in an economy with substantial unemployment and underused capital, the agreement has the potential to expand employment by 0.16%, or approximately 280,000 American jobs." In this scenario, labor and capital would be drawn from sectors with unemployed labor and capital and from other sectors. In both scenarios, U.S. exports to South Korea would increase by 4.4% and imports from South Korea would increase by 1.3%. The differences between the two scenarios offer a clear example of the importance of the assumptions that are used to generate estimates of the KORUS-FTA from the economic models. In this case, the importance of the assumption that the U.S. economy will operate at less than full employment during the ten-year period of full implementation drives the estimate of employment gains. It seems reasonable to assume, however, that during the next ten years the U.S. economy will return to its long-term trend of operating closer to full employment than to remain at the current levels of underutilization as the economy recovers from the most severe recession in the post-World War II period. The U.S.-Korea Business Council estimated the employment effects of the KORUS-FTA using a slightly different approach. This approach does not attempt to model the impact of the KORUS-FTA on the U.S. economy, but addresses a different, but related issue: What would be the impact on U.S. trade with South Korea if the proposed FTAs between South Korea and the Europe Union and Canada were implemented, but the South Korea-U.S. FTA were not implemented? This question was rendered moot when Congress passed the KORUS FTA. Nevertheless, according to the Council, they also used the GTAP model to derive their result. The Council's approach involved a number of steps and assumptions. Most importantly, the Council's approach assumed that there were underutilized capital and labor in the economy. This assumption is consistent with an assumption that the U.S. economy operates at less than full employment during the duration of the ten-year phase-in period. The Council also assumed that the Canadian and EU FTAs with South Korea would result in a 5% reduction in barriers to trade in services and that there would be a reduction in trade facilitation costs. The Council's first scenario modeled the impact on U.S. output and trade if the three FTAs involving Canada, the EU, and the United States with South Korea were fully implemented. Next, the second scenario modeled the impact on U.S. output and trade if the Canadian and EU FTAs with South Korea were fully implemented, but the U.S.-South Korea FTA were not implemented. Next, the council derived the difference in the impact on U.S. output and trade by subtracting the data from the first scenario from the second scenario. As a result of this process, the Council estimated that the United States would experience a potential loss of 345,000 goods and services export jobs if the KORUS FTA is not implemented, but the EU and Canadian FTAs with South Korea are implemented. The estimate assumes that exports to South Korea primarily from Canada and the EU would be substituted for a certain share of U.S. exports of goods and services, in an amount equal to $35.1 billion. This scenario has a number of strengths and weaknesses, although the final estimate appears to be within the same general level of reliability as the other estimates that are analyzed in this report. The attempt to model the impact of not implementing the KORUS-FTA is a departure from the other approaches and highlights the fact that a large number of FTAs are being negotiated by a broad range of countries with potentially far-reaching impact on the patterns of international trade. Since the approach used by the Council does not estimate directly the negative impact on U.S. output and employment of not implementing the KORUS-FTA, this approach can introduce potential distortions into the estimates. For instance, trade agreements involve both trade diversion, or shifting trade among competing countries, and trade creation, or new trade possibilities as a result of changes in trading relationships. Although the model does not capture the possible trade-creating effects of the FTAs, which would offset some of the trade diversion effects, the trade-creating effects likely would be small relative to the trade diversion effects. This estimate is the only one of the current estimates that imposes an assumption of the net impact of a change in the trade in services. The Economic Policy Institute estimated that the KORUS FTA would result in a loss of 159,000 U.S. goods-producing jobs stemming from a projected increase in the trade deficit with South Korea. This estimate was derived using an unconventional approach. The EPI did not derive its estimate directly from estimated changes in trade or the potential employment effects from a free trade agreement between South Korea and the United States. Instead, the EPI derived its estimate by averaging the changes that occurred in U.S. trade with Mexico between two different periods: the two seven-year periods immediately before and after the North American Free Trade Agreement (NAFTA) went into effect in 1993; and the two seven-year periods immediately before and after China joined the World Trade Organization in 2001. It then used the average rate of growth in exports and imports between these periods to estimate percentage changes in U.S. trade with South Korea under the proposed KORUS FTA. This estimate suggested that the KORUS FTA would result in a net increase in imports (a trade deficit) rather than net increase in exports. Next, the EPI study used an estimate of jobs associated with trade to estimate the number of jobs that would be lost in the United States as a result of a projected increase in the U.S. trade deficit with Mexico. The EPI approach made a number of assumptions, including 1. T rade proxies . This approach uses a non-trade-weighted average of U.S. trade with Mexico and China as a proxy for estimated U.S. trade with South Korea with no clear explanation of why these two cases match the Korea case. Data on U.S. trade with South Korea are readily available, so it is not clear why these data are not used to estimate potential changes. Also, U.S. trade with South Korea is about one-fourth that of U.S. trade with Mexico, and the United States and South Korea do not share a common border as is the case between the United States and Mexico. 2. Exchange rates . There are numerous differences between the movement in exchange rates among the three countries considered in this analysis: China, Mexico, and South Korea. For Mexico, the second seven-year period following adoption of NAFTA coincided with the devaluation of the peso. This boosted U.S. imports from Mexico and likely contributed to a decline in U.S. exports there. Unlike the peso, China's currency is linked primarily to the value of the U.S. dollar. The South Korean won is determined mainly by market forces. 3. Trade and jobs . The EPI estimate also uses some form of an estimate of jobs related to trade similar to that developed by the ITA on exports supporting U.S. jobs to estimate the number of U.S. jobs that would be lost as a result of a projected increase in the U.S. trade deficit with South Korea. As previously indicated, the ITA has warned that this approach to estimating jobs gained or lost from trade is not reliable. In a joint project, the Department of Commerce (DOC), Bureau of Economic Analysis (BEA), and the Bureau of Labor Statistics (BLS), estimated the average number of jobs supported by exports in the U.S. economy based on the dollar value of output relative to the average number of jobs required to produce that output for each industry. As a result of this joint effort, the Commerce Department determined in its 2010 update that on average $166,000 in goods exports, $216,000 in services exports, or a weighted average of $180,000, supported one job in each respective sector. At times, some estimates of the employment effects of FTAs have been derived from this DOC report on employment in the economy supported by exports. In some cases, the data have been used in reverse to argue that if a certain number of jobs were supported by a billion dollars of exports, then that same number could be used to argue that a certain number of jobs would be "lost" by a billion dollars of imports, so that any net increase in imports associated with a trade agreement would necessarily result in a loss of employment for the economy. The composition of U.S. imports, however, is fundamentally different from U.S. exports. While some imports and exports represent clearly substitutable items, other imports represent inputs to further processing, or are items that are not available in the economy. The ITA has issued various statements indicating that using the data in this manner is not appropriate. As the ITA has indicated, the employment estimate is not a multiplier and should not be used to estimate jobs that are associated with exports or imports in a multiplier fashion. In addition, the ITA estimates relate to the average number of jobs supported by exports across a broad section of the economy and should not be used in conjunction with trade agreements where the approach should more appropriately focus on estimating the change in the composition of employment that are associated with a change in trade as a result of a trade agreement. The International Trade Administration (ITA) argues, however, that the job estimates should not be used with projected changes in trade to estimate potential employment effects from trade agreements. It says: Averages derived from IO [input-output] analysis should not be used as proxies for change. They should not be used to estimate the net change in employment that might be supported by increases or decreases in total exports, in the exports of selected products, or in the exports to selected countries or regions. (Emphasis added.) The averages are not proxies because the number of jobs supported by exports usually does not change at the same rate as export value. The rate is not the same because other factors, such as prices, resource utilization, business practices, and productivity, do not usually change at the same rate. In addition, the material and service inputs and the labor and capital inputs differ significantly across types of exports. For example the labor requirements for an exported aircraft are significantly different from those of an exported agricultural product or an educational service. Ideally, estimates of trade changes from tariff reductions would be multiplied by figures which reflect actual changes in employment (based on the mix of goods traded) that would occur at the margin as a result of changes in the volume of goods traded. According to the ITA, though, such data do not exist. The only data that are available reflect the estimated average number of jobs supported across the U.S. economy by a given level of exports. According to the ITA, " As a result, multiplying trade estimates from the computable general equilibrium (CGE) models by employment averages would tend to overestimate the actual number of jobs potentially lost to trade changes." (Emphasis added.) The ITA also indicated that In addition, estimates of the average number of jobs associated with exports cannot be adjusted for fluctuations in manufacturing capacity over the course of the business cycle. As explained by the USITC, the more slack there is in the U.S. economy, the more potential there would be for job creation: During periods of slack business activity, increased output, such as exports, would tend to increase employment, to lower unemployment, and to increase labor force participation. Conversely, during periods of high business activity, when industry operates at or near full capacity and employment, increased output, including output for exports, tends to raise employment less—if at all—and instead mainly shifts employment to industries that pay higher wages. The 112 th Congress passed legislation implementing the KORUS FTA. Part of the debate surrounding the agreement focused on the potential impact the agreement could have on U.S. employment, particularly employment in certain sectors of the economy. Given the current high rate of unemployment, it is not uncommon for communities or workers to raise concerns over the impact of a new FTA. Indeed, for some communities that already are affected by high rates of unemployment or have experienced plant closings due to foreign competition, the KORUS FTA could pose additional challenges. An analysis of the available estimates of the potential effects of the KORUS FTA on U.S. employment, however, raises a number of questions concerning the usefulness of the estimates. Economic modeling naturally incorporates various assumptions and entails differing methodologies that can have a profound effect on the estimates that are generated, even when the estimates are derived from the same economic model. Standard models incorporate standard assumptions and approaches that generally are well explained. The mark of a good economic model often is one that uses assumptions and methodologies that seem reasonable and are not geared toward generating any particular result. In contrast, some models use non-standard assumptions and approaches that may be difficult to justify and seem to have been chosen in order to generate pre-determined results. Given the current state of economic modeling and data availability, the most accurate models likely can provide only rough estimates of the magnitude of the potential changes in employment in certain sectors, but cannot offer estimates of the precise size of the shifts in employment. As this reports indicates, the most important assumption involved in generating estimates of the impact of the KORUS-FTA on employment appears to be the expected level of labor utilization in the U.S. economy over the ten-year phase-in period expected to be required to fully implement the KORUS-FTA. The existence of unutilized labor and capital make it possible for the models to generate long-term estimates of output and employment gains for the fully-implemented KORUS-FTA and losses, in case the agreement had not been adopted. It seems reasonable to assume, however, that the U.S. economy will return to its long-term trend approaching full employment during the ten years following the adoption of the KORUS-FTA. Another major qualification for the estimates may be that they do not account for changes in exchange rates, which can have a wide-ranging effect on the prices of internationally traded goods and may overwhelm changes in prices of goods that arise from changes in tariff rates. Estimates of employment effects of new FTAs often tend to be highly subjective and can be misleading, because they represent a partial accounting of the total economic effects of new FTAs. In most cases, FTAs are comprehensive agreements that include provisions for goods, services, and investment. With few exceptions, estimates of employment effects of the KORUS FTA focus narrowly on employment effects in the goods sectors and neglect the potential effects in the services and investment areas. In addition, the estimates neglect a broad range of benefits for the economy as a whole that potentially can provide consumers with large economic benefits and that can yield broad productivity and efficiency gains for the economy and may enhance employment. As a result, estimates of the employment effects of new FTAs may serve poorly as an indicator of the total impact of a new FTA on the economy as a whole. As policymakers considered the KORUS FTA and consider other FTAs, they likely will continue to weigh the results of a range of estimates of the employment effects of the FTAs to gauge the impact of the agreements. In this process, policymakers likely would be aided by estimates that clearly state the assumptions that are used and that inform policymakers about the broad implications of such agreements for the economy as a whole. In addition, policymakers likely would benefit from more reliable data on the potential magnitude of such agreements on specific sectors that would allow policymakers to craft programs that could assist those most directly affected by the agreements. As a result, policymakers may benefit from a number of initiatives to improve information and data on the impact of international trade on the economy. These might include increased information and data on services in the economy, including the shifting of in-house services from the manufacturing sector to the services sector and the formal and informal barriers to U.S. services posed by major trading partners; better data on worker dislocations including the reasons for those closings; better understanding of the development of global supply chains and the role they are playing in the U.S. economy. Appendix A. Employment Population and Shares of the Economy, by Major Industry and Sector, 2010 Appendix B. Standard Assumptions of Economic Models In order to assess the validity of the various estimates of the employment effects of the KORUS FTA, it is first necessary to understand how the economic models work and the assumptions that are made. The standard approach to estimating the effects on U.S. employment associated with trade agreements follows a number of steps, although most of these steps are not included in the discussion of the estimates. In general, these steps include the following: 1. Estimating the impact a change in the tariff rate would have on a change in the prices of goods. For instance, if tariff rates are lowered by 10%, would goods prices also fall by 10%? Are the changes in tariff rates accomplished at once, or are they reduced slowly, according to a set schedule? If tariff rates are adjusted over time according to a set schedule how does that affect the rate at which goods prices adjust? 2. Estimating the impact a change in goods prices would have on a change in sales of those goods. This estimate attempts to quantify the responsiveness of consumers to changes in prices. In markets with a number of close substitutes, the consumer response could be strong with consumers buying less of a particular product as its price rose relative to those of similar products. For goods with few substitutes, consumers would be less responsive to changes in prices. 3. Estimating the impact a change in sales would have on a change in output or a change in employment. A change in employment associated with a change in sales would depend, at the very least, on the level of plant utilization, the level of productivity, and the availability of labor. In attempting to estimate these intermediary steps, most models incorporate a number of assumptions to reduce the high level of variability that is intrinsic in such estimates. Often these additional assumptions are not well explained. In general, these basic assumptions are: 1. Changes in Tariff Rates Will Translate Directly into Price Changes. Most models assume that any change in the tariff rate will be passed along completely to the change in the prices of traded goods. In most cases, however, tariff rates are not adjusted completely at the time of implementation, but are adjusted over a set schedule that can encompass a decade or longer. Also, there is no guarantee that the prices of traded goods would adjust at exactly the same rate as tariff rates are adjusted. They may be passed along at a differential rate or simply absorbed by the exporter. 2. Exchange Rates Will Remain As They Are. In most cases, the estimates do not make any assumptions concerning potential changes in the exchange rate of the dollar as a result of a trade agreement. In addition, the exchange value of currencies of competitors could affect the expected change in exports or imports associated with a trade agreement. 3. Consumer Purchases Will Follow Tariff Reductions. Most of the estimates on changes in employment are based on the assumption that reductions in the prices of goods associated with a drop in the rate of tariffs would result in a complete substitution of goods toward the FTA countries and away from other foreign suppliers. In general, there may be some goods within the total basket of traded goods that consumers consider easily substitutable (such as steel and fasteners), but consumer choices often are predicated on more than relative prices (such as brand names and quality) and, therefore, the rate of substitution overall may be quite low. To the extent that consumers do not shift their purchases based on changes in prices, the change in employment would be blunted. In addition, standard economic theory argues that trade agreements generally entail both trade diversion, or the substitution of lower-priced goods among the parties to the agreement for the now higher-priced goods from other suppliers, and trade creation. Trade agreements can create trade by increasing efficiency in production and by increasing the real incomes of consumers that, in turn, leads to a greater level of consumption of both domestic and imported goods. To the extent that a trade agreement creates additional trade, it could have a positive effect on employment. 4. Employment or Wages Will Not Change. Another assumption that often is made is whether employment or wages should be held constant. Such an assumption often is necessary in order to generate results from the economic models. By holding employment constant, the model is attempting to estimate the change in the composition of employment that would be associated with a trade agreement. This assumption would allow wages to change, although most models do not attempt to estimate changes in wages. As a result, these models generally attempt to highlight the magnitude of the impact of an agreement on various sectors in the economy, rather than attempting to generate precise estimates of the actual number of jobs that may be gained or lost by individual sectors. In contrast to these assumptions, models that hold wages constant allow employment to change in an effort to estimate changes in the number of jobs in various economic sectors. Since changes in wages often lead to changes in employment, this assumption is questionable. In either case, the estimates usually attempt to aggregate the total cumulative effects over a number of years, often a decade, in order to derive an estimate of the overall change in employment. While such an assumption is a necessary condition for generating results, the assumptions compromise the validity of the results, since the composition of employment in the economy over a decade can change quite noticeably, even in the complete absence of international trade, due to business cycle effects and the constant churning that occurs. Currently none of the estimates of the employment effects of trade agreements incorporate either business cycle or other transformational effects into the estimates. Key Steps in Converting Changes in Tariffs to Changes in Employment In general, there are a number of steps involved in converting changes in tariffs into changes in employment. In most cases, these steps are not explicitly explained. The chart below summarizes these three steps.

The Obama Administration finalized negotiations with South Korea in early December 2010 on a bilateral free trade agreement. Congress passed the implementing legislation for the U.S.-South Korea free trade agreement on October 21, 2011 (P.L. 112-42). Congress not only plays a direct role in approving legislation that implements the provisions of free trade agreements, but also authorizes and appropriates funding for programs that are meant to provide special assistance to firms and workers that are dislocated as a result of lower barriers to trade. Since the agreement with South Korea covers a wide range of trade and investment issues, it could have substantial economic implications for both the United States and South Korea. South Korea is the seventh-largest trading partner of the United States, and the United States is South Korea's third-largest trading partner. Similar to other trade agreements, the U.S.-South Korea Free Trade Agreement (KORUS FTA) attracted both supporters and detractors, primarily over the impact the agreement could have on employment in the economy. Supporters argued that the agreement could create as many as 280,000 jobs in the economy. Others, however, argued that the agreement could lead to an overall loss of up to 159,000 jobs in various sectors of the economy. Still others contended that the United States could stand to lose exports, employment, and extended economic opportunities if it failed to sign a trade agreement, while the European Union and other nations were lining up to finalize similar agreements with South Korea. Estimating the economic impact of trade agreements, however, is a daunting task, due to a lack of data and important theoretical and practical matters associated with generating results from economic models. In addition, such estimates provide an incomplete accounting of the total economic effects of trade agreements. This report assesses the results of a number of models used to generate estimates of the effect of the KORUS FTA on employment. These studies were chosen specifically because they estimate (or can be used to estimate) data on employment effects of the trade agreement. All economic models incorporate various assumptions that are necessary in order for the model to generate results. Invariably, these approaches determine, to some extent, the results that are generated and, therefore, limit their representation of the real world economy. Currently, the various models produce widely disparate estimates of the number of jobs affected by the trade agreement, reflecting the various assumptions that are used in the models and differences in the approaches. From the perspective of a large open economy such as the U.S. economy, international trade is not a major determinate of total employment in the economy, real wages in the economy, or the overall level of production. This is especially true for bilateral trade agreements with individual countries where the impact on the economy as a whole is expected to be small. Nevertheless, some sectors of the economy are likely to be affected more than others. Congress has demonstrated an ongoing interest in assessing the economic impact of trade agreements and, at times, has provided assistance to those workers and firms that are disproportionately affected.

The term "cloning" is used by scientists to describe many different processes that involve making copies of biological material, such as a gene, a cell, a plant or an animal. The cloning of genes, for example, has led to new treatments developed by the biotechnology industry for diseases such as diabetes and hemophilia. In the context of this report, a human embryo produced via cloning involves the process called somatic cell nuclear transfer (SCNT). In SCNT, the nucleus of an egg is removed and replaced by the nucleus from a mature body cell, such as a skin cell. In cloning, the embryo is created without sexual reproduction: there is no joining of egg and sperm. Concern over the possibility of producing a human clone increased with the announcement on February 24, 1997, that scientists in Scotland had used SCNT in 1996 to produce the first cloned adult mammal, Dolly, the sheep. Ian Wilmut's group at the Roslin Institute in Edinburgh removed the nucleus from a sheep egg and replaced it with the nucleus of a mammary gland cell from an adult sheep. The resulting embryo was then transferred to the uterus of a surrogate sheep. A total of 277 such embryos were transferred, but only one lamb was born. Analyses of Dolly's genetic material confirmed that she was derived from the sheep mammary cell. Dolly was euthanized on February 14, 2003, after developing a lung infection. Although some claim that her somewhat early death at six years was related to being a clone, scientists at the Roslin Institute believe her ailment may be due to the fact that she was raised indoors (for security reasons) rather than as a pastured sheep, which can live to 11 or 12 years of age. Although scientists have been successful in using SCNT to produce other animals (such as a cat, goat, cow, horse, mule, pig, mouse, and rabbit), the efficiency of the procedure is still very low and frequently results in abnormal development. Proponents maintain that one day cloning may be very useful for a number of agriculture applications, including the improvement of livestock. Currently, cloned mice are used for basic research on human health applications. Charges of ethical and scientific misconduct have clouded the reputation of scientists involved in deriving stem cells from cloned human embryos. In February 2004 scientists at the Seoul National University (SNU) in South Korea announced the first isolation of stem cells from a cloned human embryo. In May 2005 this same group announced they had achieved major advances in the efficiency of creating human cloned embryos using SCNT and in isolating human stem cells from the cloned embryos. These eleven new stem cell lines were derived using cells from patients with either spinal cord injury, diabetes, or an immune deficiency and offered the hope of one day providing treatments with patient-matched cells. The team attributed the improved success rate in part to the use of freshly harvested eggs from younger fertile women instead of leftover eggs from older women who received fertility treatments. However, serious concerns about the achievements of the SNU group began in November 2005 when a co-author of the 2005 paper, Gerald Schatten of the University of Pittsburgh, accused Woo Suk Hwang, the lead researcher of the SNU group, of ethical misconduct. In violation of some ethical standards and contrary to statements made in the 2005 paper, junior scientists in the SNU lab secretly donated their own eggs for the experiments and they along with other women received payment for their role. The accusation halted plans for a collaboration between the SNU scientists and US and UK labs that had been announced only one month earlier and resulted in Hwang resigning from all public positions on November 24, 2005. On December 12, 2005, Schatten asked that his name be removed from the 2005 paper when he learned that the work may have been fabricated. In early December, scientists in South Korea began questioning the validity of photographs and other scientific evidence presented in the 2005 paper and called for an independent analysis of the data. The University of Pittsburgh and SNU began separate investigations into the charges. On December 15, 2005, another co-author of the 2005 paper, Sung Il Roh, stated to the Korean media that the research had been fabricated and that the 2005 paper should be retracted. Hwang agreed to the retraction on December 16, but continued to defend the scientific results. A preliminary report released on December 23, 2005, by SNU stated that nine of the eleven stem cell lines described in the 2005 paper were deliberately fabricated and the remaining two stem cell lines were still under investigation. On December 29, 2005, Seoul National University stated that the remaining stem cell lines were not patient-matched and were not derived through cloning. On January 10, 2006, SNU stated that results of the 2004 paper, which reported the first derivation of stem cells from a cloned human embryo, were also a deliberate fabrication. Scientists in the United Kingdom, at the University of Newcastle and the University of Edinburgh, and scientists in the United States, at Harvard University, Advanced Cell Technology and the University of California in San Francisco, are working on deriving patient-matched stem cells from cloned human embryos. In the United Kingdom, scientists performing human cloning and embryonic stem cell research are regulated by the Human Fertilization and Embryology Authority (HFEA). A team of scientists headed by Alison Murdoch at the University of Newcastle received permission from HFEA to start therapeutic cloning experiments in August 2004. In May 2005, the team announced that it had created a cloned human embryo but has not yet reported success in isolating stem cells from a cloned human embryo. A research team headed by Ian Wilmut at the University of Edinburgh also is seeking permission from HFEA to begin working on SCNT experiments using human embryos. Scientists at the Harvard Stem Cell Institute intend to produce cloned human embryos for research studies on juvenile diabetes, Parkinson's disease, and several other diseases. In November 2003, the research group, headed by Douglas Melton and Kevin Eggan, submitted their proposal to a Harvard committee composed of ethicists, scientists and public policy experts. Preliminary permission to proceed with the research was granted in January 2005, provided that a number of specific restrictions were followed and approval was received from a second committee charged with safeguarding the use of human subjects in research. The restrictions include limitations on the developmental age of the cloned embryos used in experiments, a prohibition on reproductive cloning, and a limitation on paying only for the medical expenses of women who donate eggs. In June 2006, after more than 2½ years, the Harvard group announced that they had received final approval in the review process that looked at ethical, legal and intellectual property issues and involved eight different boards and committees at five separate institutions. In May 2006, scientists at the University of California in San Francisco (UCSF) and Advanced Cell Technology (ACT) in Worcester, MA, independently announced that they would resume their efforts to produce cloned human embryos for research purposes. Both UCSF and ACT (see below) had been working separately on such experiments prior to the February 2004 South Koreans' announcement of cloning success, but subsequently suspended their work; in the case of ACT due to lack of funding and in the case of UCSF due to lack of success. On December 27, 2002, a representative of Clonaid announced the birth of the first cloned human, a seven-pound baby girl nicknamed Eve. The baby was born on December 26, 2002, at an undisclosed location outside the United States. Although the company offered no proof of its claim, Dr. Brigette Boisselier, Managing Director of Clonaid, stated that genetic tests would show that the baby is the clone of the 31-year-old American woman who is the birth mother. To date the test results have not been released; the company claims that the parents fear the test results could lead to legal actions and loss of custody of the child. The Clonaid website indicates that "13 cloned babies are now alive," and that "each month, between 10 and 15 implantations will be performed" in the Clonaid laboratory. Clonaid was founded in 1997 by the leader of the Raelians, an international sect of 55,000 people in 84 countries, which claims that life on Earth was created via genetic engineering by a human extraterrestrial race. The Food and Drug Administration (FDA) is investigating the company's actions; the agency would consider any human cloning activity to be illegal if performed in the United States. In April 2001 FDA investigated a Clonaid laboratory in Nitro, WV; the laboratory closed shortly thereafter. On November 25, 2001, Advanced Cell Technology (ACT) of Massachusetts announced that it had created the world's first human embryos produced via cloning. ACT used two techniques, SCNT and parthenogenesis, to produce human embryos. ACT researchers obtained eggs from seven women, ages 24 to 32, who were paid $3,000 to $5,000. In the SCNT approach, scientists removed the nucleus from 19 eggs and replaced it with a nucleus from another adult cell. The nucleus of a skin cell was used for 11 eggs, and for the remaining eight eggs, cumulus cells were used. Eggs that received a skin cell nucleus did not divide; seven of the eggs with the cumulus cell nucleus began to divide but division stopped at the four-to-six-cell stage. In parthenogenesis, an egg cell is treated with chemicals causing it to divide without being fertilized by a sperm. ACT exposed 22 human eggs to the chemicals. After five days, six eggs had matured into a larger mass of cells before division stopped. None of the embryos developed by ACT divided sufficiently to produce stem cells. ACT suspended its work in 2004. The goal of ACT's work was to produce human embryonic stem cells and develop new therapies for diseases such as diabetes and Parkinson's disease. Scientists believe that stem cells transplanted into a patient could treat disease or injury by replacing damaged tissue. If the cell nucleus used in SCNT is from the patient, the stem cells would be genetically identical to the patient, recognized by the patient's immune system, and would avoid any tissue rejection problems that could occur in other stem cell therapeutic approaches. Because of this, many scientists believe the SCNT technique may provide the best hope of eventually treating patients using stem cells for tissue transplantation. Within a year of the Dolly announcement, concerns over human cloning were heightened when Dr. Richard Seed, a Chicago scientist, announced on January 7, 1998, his intention to clone a human being. In response, bills were introduced in the 105 th Congress that would have banned human cloning indefinitely or imposed a moratorium. The legislation was opposed by a number of medical organizations, the biotechnology industry and many scientists and was not enacted. Others who have expressed an interest in reproductive cloning include Dr. Panos Zavos, of the University of Kentucky, and Dr. Severino Antinori, director of a fertility clinic in Rome. At one time, Dr. Zavos and Dr. Antinori were working together to help infertile couples have children via cloning. In April 2002, there were unconfirmed reports in the media that Dr. Antinori had implanted cloned human embryos in women. Dr. Antinori claimed there were three such pregnancies of six- to nine-weeks' duration, two in Russia and one in an Islamic state. His claim was disputed by his former partner Dr. Zavos. In January 2004 Dr. Zavos announced that he had implanted a cloned embryo into a woman's uterus; two weeks later he stated that the pregnancy had failed. At the present time, no U.S. laws or regulations would prohibit all cloning research. However, federal funding of any type of research involving human embryos, starting with in vitro fertilization (IVF) then later cloning and the creation of stem cell lines from embryos, had been blocked by various policy decisions dating back 25 years. Following the birth of the first IVF baby, Louise Brown, in July 1978, the federal Ethics Advisory Board (EAB) was tasked with considering the scientific, ethical, legal, and social issues surrounding human IVF. The EAB released its report on May 4, 1979, which found that IVF research was acceptable from an ethical standpoint and could be supported with federal funds. The EAB's recommendations were never adopted by HHS, the EAB was dissolved in 1980, and no other EAB was ever chartered. Because federal regulations that govern human subject research (45 C.F.R. Part 46) stipulated that, at the time, federally supported research involving human IVF must be reviewed by an EAB, a so-called "de facto moratorium" on human IVF research resulted. Other types of embryo research ensuing from the development and use of IVF, such as cloning and stem cells, were therefore also blocked. The de facto moratorium was lifted with the enactment of the National Institutes of Health (NIH) Revitalization Act of 1993 ( P.L. 103-43 , Section 121(c)) which nullified the regulatory provision (45 C.F.R. § 46.204(d)) requiring EAB review of IVF proposals. In response, the NIH established the Human Embryo Research Panel to assess the moral and ethical issues raised by this research and to develop recommendations for NIH review and conduct of human embryo research. The NIH Panel released a report providing guidelines and recommendations on human embryo research in September 1994. The panel identified areas of human embryo research it considered to be unacceptable, or to warrant additional review. It determined that certain types of cloning without transfer to the uterus warranted additional review before the Panel could recommend whether the research should be federally funded. However, the Panel concluded that federal funding for such cloning techniques followed by transfer to the uterus should be unacceptable into the foreseeable future. The NIH Panel recommended that some areas of human embryo research should be considered for federal funding, including SCNT, stem cells and, under certain limited conditions, embryos created solely for the purpose of research . The Panel's report was unanimously accepted by the NIH Advisory Committee to the Director (ACD) on December 2, 1994. After the ACD meeting on December 2, 1994, President Clinton directed NIH not to allocate resources to support the " creation of human embryos for research purposes ." The President's directive did not apply to research involving so-called "spare" embryos, those that sometimes remain from clinical IVF procedures performed to assist infertile couples to become parents. Nor did it apply to human parthenotes, eggs that begin development through artificial activation, not through fertilization. Following the Clinton December 2, 1994 directive to NIH, the agency proceeded with plans to develop guidelines to support research using spare embryos. NIH plans to develop guidelines on embryo research were halted on January 26, 1996, with the enactment of P.L. 104-99 , which contained a rider that affected FY1996 funding for NIH. The rider prohibited HHS from using appropriated funds for the creation of human embryos for research purposes or for research in which human embryos are destroyed. This same rider, often referred to as the Dickey Amendment, has been attached to the Labor, HHS and Education Appropriations Acts for FY1997 through FY2006. For FY2006, the provision is found in Section 509 of the Labor, HHS and Education and Related Agencies Appropriations Act, 2006 ( P.L. 109-149 ). It states that: (a) None of the funds made available in this Act may be used for— (1) the creation of a human embryo or embryos for research purposes; or (2) research in which a human embryo or embryos are destroyed, discarded, or knowingly subjected to risk of injury or death greater than that allowed for research on fetuses in utero under 45 CFR 46.204(b) and Section 498(b) of the Public Health Service Act (42 U.S.C. 289g(b)). (b) For purposes of this section, the term "human embryo or embryos" includes any organism, not protected as a human subject under 45 CFR 46 [the Human Subject Protection regulations] as of the date of enactment of this Act, that is derived by fertilization, parthenogenesis, cloning, or any other means from one or more human gametes [sperm or egg] or human diploid cells [cells that have two sets of chromosomes, such as somatic cells]. One month after the Dolly announcement, on March 4, 1997, President Clinton sent a memorandum to the heads of all executive departments and agencies making it "absolutely clear that no federal funds will be used for human cloning." This action extended the congressional ban beyond HHS to all federally supported research. Clinton also urged the private sector to adopt a voluntary ban on the cloning of human beings. The NIH Guidelines on Stem Cell Research , published by the Clinton Administration in August 2000, would not have funded research in which: human stem cells are used for reproductive cloning of a human; human stem cells are derived using SCNT; or, human stem cells that were derived using SCNT are utilized in a research project. On August 9, 2001, President Bush announced that for the first time federal funds would be used to support research on human embryonic stem cells, but funding would be limited to "existing stem cell lines." In the speech, President Bush stated that he strongly opposes human cloning. Although not mentioned specifically in the August 9 speech, a fact sheet on the White House website states that federal funds will not be used for "the cloning of human embryos for any purpose." In his speech, President Bush announced his intention to name a President's council, chaired by Dr. Leon Kass of the University of Chicago, "to consider all of the medical and ethical ramifications of biomedical innovation." The President's Council on Bioethics, was established for a period of up to two years by Executive Order 13237 on November 28, 2001. The White House announced the other 17 members of the council on January 16, 2002. The first topic addressed by the Council was human cloning. Although all Council members voted in opposition to reproductive cloning, they could not come to an agreement on articulating the precise nature of their objection, whether solely safety concerns or which of the various moral objections were most important. In an informal vote on the issue of therapeutic cloning, about half of the 18 members of the Council voiced their support for the therapeutic use of human cloning. Dr. Kass proposed that the Council's final report reflect both the arguments supporting cloning for the purpose of medical treatment and those against. At the June 20, 2002, meeting, nine Council members voted to support cloning for medical research purposes, without a moratorium, provided a regulatory mechanism was established. Because one member of the Council had not attended the meetings and was not voting, the vote seemed to be nine to eight in favor of research cloning. However, the draft report sent to Council members on June 28, 2002, indicated that two of the group of nine members had changed their votes in favor of a moratorium. Both made it clear that they have no ethical problem with cloning for biomedical research, but felt that a moratorium would provide time for additional discussion. The changed vote took many Council members by surprise, and some on the Council believe that the moratorium option, as opposed to a ban, was thrown in at the last minute and did not receive adequate discussion. In addition, some on the Council believe that the widely reported final vote of 10 to 7 in favor of a moratorium does not accurately reflect the fact "that the majority of the council has no problem with the ethics of biomedical cloning." The final report, Human Cloning and Human Dignity: An Ethical Inquiry , was released on July 11, 2002. In March 2001, the FDA sent letters to the research community stating that the creation of a human being using cloning is subject to FDA regulation under the Public Health Service Act and the Food, Drug and Cosmetic Act. FDA stated that such research could only occur when an investigational new drug application (IND) is in effect. Some legal scholars believe that there is no legal basis for the regulation of cloning by FDA. They find little evidence to support FDA's position that cloned human embryos are "drugs." However, the biotechnology industry and the American Society for Reproductive Medicine believe FDA has the authority to regulate cloning and legislation is unnecessary because FDA regulation is preferred to any new action by Congress. On January 18, 2002, the National Academies released its report, entitled Scientific and Medical Aspects of Human Reproductive Cloning . The panel recommended that the U.S. ban human reproductive cloning. The panel was concerned for the safety of both the woman and the fetus and judged the procedure to be too dangerous for use in humans at the present time. The ban should be legally enforceable, rather than voluntary, and carry substantial penalties. The ban should be reconsidered in five years, but only if compelling new data on safety and efficacy are presented and a national dialogue on the social and ethical issues suggests that a review is warranted. However, the panel concluded that research using SCNT to produce stem cells should be permitted because of the considerable potential for developing new therapies and advancing biomedical knowledge. This position is in agreement with a previous National Academies' report entitled Stem Cells and the Future of Regenerative Medicine, which was released on September 11, 2001. Because of the current lack of federal regulation, the National Academies established in July 2004 the Committee on Guidelines for Human Embryonic Stem Cell Research to develop voluntary guidelines for deriving, handling and using human embryonic stem cells. The stated position of the National Academies is that there should be a global ban on human reproductive cloning and therefore the guidelines will focus only on therapeutic and research uses of human embryonic stem cells and somatic cell nuclear transfer. The Committee released its "Guidelines for Human Embryonic Stem Cell Research" on April 26, 2005. The guidelines recommend that institutions conducting human embryonic stem cell research should establish oversight committees, including experts in the relevant areas of science, ethics and law, as well as members of the public, to review all proposed experiments. The guidelines recommend that a national panel should be established to oversee the issue in general on a continuing basis. However, the guidelines state that certain types of research should not be permitted at the present time: (1) culture of any intact embryo, regardless of derivation method, for more than 14 days; (2) the insertion of any embryonic stem cells into a human embryo or the insertion of human embryonic stem cells into a nonhuman primate embryo. In addition, animals in which human embryonic stem cells have been introduced, at any stage of development, should not be allowed to breed. The document also provides guidance on informed consent of donors and states that there should be no financial incentives in the solicitation or donation of embryos, sperm, eggs, or somatic cells for research purposes. The U.S. Supreme Court has recognized in past cases certain personal rights as being fundamental and protected from government interference. Some legal scholars believe a ban on human cloning may be struck down by the Supreme Court because it would infringe upon the right to make reproductive decisions which is "protected under the constitutional right to privacy and the constitutional right to liberty." Other scholars do not believe that noncoital, asexual reproduction, such as cloning, would be considered a fundamental right by the Supreme Court. A ban on human cloning research may raise other constitutional issues: scientists' right to personal liberty and free speech. In the opinion of some legal scholars, any government limits on the use of cloning in scientific inquiry or human reproduction would have to be "narrowly tailored to further a compelling state interest." As of April 18, 2006, 15 states have passed laws pertaining to human cloning. Arkansas, California, Connecticut, Indiana, Iowa, Maryland, Massachusetts, Michigan, New Jersey, North Dakota, Rhode Island, South Dakota, and Virginia have all enacted measures to prohibit reproductive cloning. Arizona and Missouri have passed laws that address the use of public funds for cloning. In addition, Louisiana has enacted legislation prohibiting reproductive cloning but the law expired in July 2003. Six of the states also prohibit cloning for research or therapeutic purposes (Arkansas, Indiana, Iowa, Michigan, North Dakota, South Dakota). The Virginia law may also prohibit therapeutic cloning, "but it may be unclear because the law does not define the term 'human being' which is used in the definition of human cloning." The California and New Jersey laws specifically permit cloning for research purposes. The Rhode Island law is silent on therapeutic cloning and cloning for research purposes, and has a sunset date of July 7, 2010. The 109 th Congress addressed the issue of cloning and embryo research in the Labor, HHS and Education Appropriations Act of 2006 ( P.L. 109-149 ) by again including the Dickey Amendment, which has banned, since FY1996, almost all publically funded human embryo research. In addition, the Science, Justice and Commerce Appropriations Act, 2006 ( P.L. 109-108 ) bars the Patent and Trademark Office from spending money "to issue patents on claims directed to or encompassing a human organism." This restriction, which was first included in the Consolidated Appropriations Act, 2004 ( P.L. 108-199 ), and in the Consolidated Appropriations Act, 2005 ( P.L. 108-447 ), could potentially deter human embryo research and stem cell research because researchers might not be able to claim ownership of their work. H.R. 810 (Castle), the Stem Cell Research Enhancement Act, passed the House on May 24, 2005, on a vote of 238-194. It would amend the Public Health Service Act and direct the Secretary of HHS to conduct and support research that utilizes human embryonic stem cells regardless of the date on which the stem cells were derived from a human embryo. Stem cell lines derived after enactment must meet ethical guidelines established by the NIH. Only embryos that were originally created for fertility treatment purposes and in excess of clinical need are eligible for stem cell derivation. Only embryos that the individuals seeking fertility treatments have determined will not be implanted in a woman and will be discarded are eligible for stem cell derivation. Written consent is required for embryo donation. The Secretary in consultation with the Director of NIH shall promulgate guidelines 60 days after enactment. No federal funds shall be used to conduct research on unapproved stem cell lines. The Secretary shall annually report to Congress about stem cell research. A companion bill, S. 471 (Specter), was introduced on February 28, 2005. On June 29, 2006, Senate Majority Leader Bill Frist announced an agreement on scheduling a vote in the Senate on stem cell research legislation, more than a year after the House passed H.R. 810 . Under the agreement, amendments were not allowed on a package of three bills; each needed 60 votes to pass: H.R. 810 , S. 2754 (Santorum) the Alternative Pluripotent Stem Cell Therapies Enhancement Act, and S. 3504 (Santorum) the Fetus Farming Prohibition Act. S. 3504 does not address the issue of stem cell research but rather the use of tissue from a later stage embryo or fetus. The second bill in the agreement, S. 2754 , was introduced on May 5, 2006. It would amend the Public Health Service Act adding a new Section 409J "Alternative Human Pluripotent Stem Cell Research." The bill would require the Secretary of HHS to develop techniques for the isolation, derivation, production, or testing of stem cells that are capable of producing all or almost all of the cell types of the developing body and may result in improved understanding of treatments for diseases and other adverse health conditions, but are not derived from a human embryo. Within 90 days of enactment, the Secretary would be required to: (1) provide guidance concerning the next steps required for additional research; (2) prioritize research with the greatest potential for near-term clinical benefit; and (3) take into account techniques outlined by the President's Council on Bioethics and any other appropriate techniques and research. The Secretary would be required to prepare and submit to the appropriate committees of Congress an annual report describing the activities and research conducted. The bill authorizes such sums as may be necessary for FY2007 through FY2009. A companion bill, H.R. 5526 (Bartlett), was introduced on June 6, 2006. The third bill, S. 3504 , was introduced on June 13, 2006. It would amend the Public Health Service Act to prohibit the solicitation or acceptance of human fetal tissue obtained from a human pregnancy that was deliberately initiated to provide such tissue, or tissue obtained from a human embryo (or fetus) that was implanted in the uterus of a nonhuman animal. The bill was referred to the Senate Health, Education, Labor and Pensions Committee. A companion bill, H.R. 5719 (Weldon), was introduced on June 29, 2006, and referred to the House Energy and Commerce Committee. On July 18, 2006, the Senate passed H.R. 810 (63 to 37), S. 2754 (100-0) and S. 3504 (100-0). On the same day, the House passed S. 3504 (100-0) but failed to pass S. 2754 with the required 2/3 vote (273-154). On July 19, 2006, President Bush signed S. 3504 and vetoed H.R. 810 , the first veto of his six years in office. An attempt in the House on July 19 to override the veto of H.R. 810 did not receive the required 2/3 vote (235-193). H.R. 1357 (Dave Weldon), the Human Cloning Prohibition Act of 2005, was introduced on March 17, 2005. H.R. 1357 amends Title 18 of the United States Code and would ban the process of human cloning as well as the importation of any product derived from an embryo created via cloning. Under this measure, cloning could not be used for reproductive purposes or for research on therapeutic purposes, which would have implications for stem cell research. H.R. 1357 includes a criminal penalty of imprisonment of not more than 10 years and a civil penalty of not less than $1 million. H.R. 1357 is essentially identical to the measure which passed the House in the 107 th Congress ( H.R. 2505 ) and the 108 th Congress ( H.R. 534 ). H.R. 1357 was referred to the House Committee on the Judiciary. A companion bill, S. 658 (Brownback), was introduced on March 17, 2005. It is similar to H.R. 1357 , except that (1) it does not contain the ban on importation of products derived from therapeutic cloning; and (2) it amends Title 4 of the Public Health Service Act (42 U.S.C. §§ 289 et seq.) instead of Title 18 of the United States Code. S. 658 includes a criminal penalty of imprisonment of not more than 10 years and a civil penalty of not less than $1 million. It requires GAO to conduct a study to assess the need (if any) for any changes of the prohibition on cloning in light of new developments in medical technology, the need for SCNT to produce medical advances, current public attitudes and prevailing ethical views on the use of SCNT and potential legal implications of research in SCNT. The study is to be completed within four years of enactment. S. 658 has been referred to the Senate Health, Education, Labor, and Pensions Committee. S. 876 (Hatch), the Human Cloning Ban and Stem Cell Research Protection Act of 2005, was introduced on April 21, 2005. A similar bill, H.R. 1822 (Bono), the Human Cloning Ban and Stem Cell Research Protection Act of 2005, was introduced on April 26, 2005. S. 876 amends Title 18 of the United States Code and H.R. 1822 amends the Food, Drug and Cosmetic Act (21 U.S.C. §§ 301 et seq.). Both bills would ban human reproductive cloning but allow cloning for medical research purposes, including stem cell research. S. 876 and H.R. 1822 include a criminal penalty of imprisonment of not more than 10 years; S. 876 has a civil penalty of not less than $1 million, H.R. 1822 has a civil penalty not to exceed $10 million. S. 876 requires the Comptroller General to prepare a series of four reports within one year of enactment. The first report describes the actions taken by the Attorney General to enforce the prohibition on human reproductive cloning, the personnel and resources used to enforce the prohibition, and a list of any violations of the prohibition. A second report describes similar state laws that prohibit human cloning and actions taken by the states' attorney general to enforce the provisions of any similar state law along with a list of violations. A third report describes the coordination of enforcement actions among the federal, state and local governments. A fourth report describes laws adopted by foreign countries related to human cloning. H.R. 1822 requires a similar set of three reports to be prepared by the Secretary of Health and Human Services. S. 876 and H.R. 1822 would amend the Public Health Service Act by requiring that human SCNT be conducted in accordance with the ethical requirements (such as informed consent, examination by an Institutional Review Board, and protections for safety and privacy) contained in subpart A of 45 C.F.R. Part 46, or Parts 50 and 56 of 21 C.F.R. S. 876 and H.R. 1822 have a prohibition on conducting SCNT on fertilized human eggs (oocytes), and both state that "unfertilized blastocysts" shall not be maintained after more than 14 days from its first cell division, aside from storage at temperatures less that zero degrees centigrade. S. 876 and H.R. 1822 stipulate that a human egg may not be used in SCNT research unless the egg is donated voluntarily with the informed consent of the woman donating the egg. Both bills also specify that human eggs or unfertilized blastocysts may not be acquired, received or otherwise transferred for valuable consideration if the transfer affects interstate commerce. In addition, SCNT may not be conducted in a laboratory in which human eggs are subject to assisted reproductive technology treatments or procedures, such as in vitro fertilization for the treatment of infertility. Violation of these provisions in S. 876 and H.R. 1822 regarding ethical requirements would result in a civil penalty of not more than $250,000. S. 876 has been referred to the Senate Judiciary Committee. H.R. 1822 has been referred to the House Energy and Commerce Committee. Supporters of a ban on human cloning, such as that contained in H.R. 1357 , argue that a partial ban on human cloning, like the one contained in S. 876 , would be impossible to enforce. Critics of the ban on human cloning argue that SCNT creates a "clump of cells" rather than an embryo, and that the ban would curtail medical research and prevent Americans from receiving life-saving treatments created overseas. The possibility of using cloning technology not just for therapeutic purposes but also for reproducing human beings raises profound moral and ethical questions. As previously mentioned, the Bush Administration and the National Academies have made their positions clear. In July 2002, the President's Council on Bioethics issued its report, Human Cloning and Human Dignity , which contained two opinions and sets of recommendations: one of the 10-7 majority, and one of the minority. The majority and minority both opposed reproductive cloning. It was on the topic of therapeutic cloning, which the majority opposed and the minority favored, that the Council was split. A predecessor to the President's Council, the National Bioethics Advisory Commission (NBAC), recommended, in Cloning Human Beings , the continuation of a moratorium on federal funding for reproductive purposes with a call for voluntary compliance from the private sector. It further recommended the enactment of legislation with a three- to five-year sunset clause banning cloning for reproductive purposes. However, it made clear that all measures taken should "be carefully written so as not to interfere with other important areas of scientific research." Various other organizations, individuals, and councils have issued opinions and reports on cloning as well. Some, such as The United States Conference of Catholic Bishops (USCCB) oppose human cloning for any purpose: "The cloning procedure is so dehumanizing that some scientists want to treat the resulting human beings as subhuman, creating them solely so they can destroy them for their cells and tissues." Others, such as a group of forty Nobel Laureates, former First Lady Nancy Reagan, and former President Gerald Ford, would allow regulated cloning for therapeutic purposes, but disallow it for reproductive ones. Still others, such as such as Dr. Severino Antinori, and Clonaid, favor cloning for reproductive purposes, and even claim to have created human clones via SCNT. The human cloning debate centers around number of different ethical and pragmatic issues. Exploration of these issues reveals variation in ethical and moral as well as factual beliefs. The following discussion breaks down the arguments surrounding human cloning according to these issues, demonstrating both the complexity of the issues and the points of resonance among the groups. As Clonaid advertised and the President's Council acknowledged, supporters of reproductive cloning favor it because it might "allow infertile couples to have genetically-related children," enable families to avoid genetic disease in their genetically-related children, facilitate the replication of specific persons (such as lost loved ones), or to create ideal transplant donors. Likewise, the NBAC recognized that some of the principles that underlie these purposes are a "presumption in favor of individual liberty," that "human reproduction [is] particularly personal and should remain free of constraint, ... [and] as a society, we ought not limit the freedom of scientific inquiry." However, for a number of other reasons, the idea of cloning for reproductive purposes is presently rejected by most groups and organizations, including the President's Council and NBAC. Of the groups and individuals listed in the Ethical and Social Issues section, only Clonaid and Dr. Antinori favor reproductive cloning at this time. Despite the apparent uniformity of views rejecting reproductive cloning, there is a great deal of variation in the lines of reasoning underlying such objections. According to the USCCB, Donum Vitae instructs that "attempts or hypotheses for obtaining a human being without any connection with sexuality through 'twin fission,' cloning or parthenogenesis are to be considered contrary to the moral law, since they are in opposition to the dignity both of human procreation and of the conjugal union." This objection to reproductive cloning, that procreation should be limited to conjugal unions, is not supported by most groups. If accepted, it would lead to a rejection of other forms of assisted reproduction, such as in vitro fertilization (IVF). Of the groups and individuals listed above, only UCCSB cites the need for a conjugal union as a persuasive argument against reproductive cloning. The most agreed upon objection to human reproductive cloning is one of safety. The President's Council on Bioethics concluded that, "[g]iven the high rates of morbidity and mortality in the cloning of other mammals, we believe that cloning-to-produce-children would be extremely unsafe, and that attempts to produce a cloned child would be highly unethical." The National Bioethics Advisory Commission reached a consensus in its objection to reproductive cloning "because current scientific information indicate[d] that this technique [was] not safe in humans...." The National Academies agrees with this line of reasoning, given that animal experimentation has demonstrated that "only a small percentage of attempts are successful," "many of the clones die during gestation," and "newborn clones are often abnormal, or die." While these objections about safety are widely held, they may be temporary in nature. As research advances, it may become less risky, and thus some may find it less objectionable to attempt reproductive human cloning. Unlike concerns about safety, other types of objections, while not so widely held, may be more lasting because they are not likely to be alleviated by scientific progress. These tend to be philosophical in nature. These concerns, listed in the following paragraphs, have been acknowledged by the President's Council, NBAC, UCSSB, and the National Academies. According to the President's Council, "[d]ifferent Council members give varying moral weight to [the following] different concerns." Only the UCSSB found the concerns persuasive in total. Some objections to reproductive cloning are based upon fears that cloned children will have difficulty with their identities "because each will be genetically virtually identical to a human being who has already lived and because the expectations for their lives may be shadowed by constant comparisons to the life of the 'original."' These concerns are dismissed by others, who point out that this argument rests largely on "the crudest genetic determinism." They cite both the effect that environment plays on individual development, and the lack of difficulty with identity experienced by naturally occurring identical twins. Other philosophical objections have to do with a fear that cloned children "might come to be considered more like products of a designed manufacturing process than 'gifts' whom their parents are prepared to accept as they are. Such an attitude toward children could also contribute to increased commercialization and industrialization of human procreation." This, in turn, may fuel a new eugenics in which parents select not only whether to have a child, but which child to have. Others point out that these types of concerns were raised about most forms of assisted reproduction (such as in vitro fertilization and preimplantation genetic diagnosis), which have not led to objectification. In addition, if being born is a considered to be a benefit to the one born, "to the extent that the technology is used to benefit the child ... no objectification of the child takes place." A complicated lineage has also been introduced as an objection to reproductive cloning: "By confounding and transgressing the natural boundaries between generations, cloning could strain the social ties between them. Fathers could become "twin brothers" to their "sons"; mothers could give birth to their genetic twins; and grandparents would also be the "genetic parents" of their grandchildren. Genetic relation to only one parent might produce special difficulties for family life." Others point out that children "born through assisted reproductive technologies may also have complicated relationships to genetic, gestational, and rearing parents ... [yet] there is no evidence that confusion over family roles has harmed children born through assisted reproductive technologies, although the subject has not been carefully studied." Concerns have been voiced about the effects of cloning on society: "Cloning-to-produce-children would affect not only the direct participants but also the entire society that allows or supports this activity. Even if practiced on a small scale, it could affect the way society looks at children and set a precedent for future nontherapeutic interventions into the human genetic endowment or novel forms of control by one generation over the next." This objection is rejected by others, who argue that "people can, and do, adapt in socially redeeming ways to new technologies ... [A] child born through somatic cell nuclear transfer could be loved and accepted like any other child...." Cloning for therapeutic purposes is more broadly supported than reproductive cloning, and the issues involved are somewhat different. The safety concerns of reproductive cloning do not apply in therapeutic cloning, placing much of the scientific community, such as the National Academies, in favor of it. In addition, the NBAC, a minority of the President's Council, the group of Nobel Laureates, Nancy Reagan, and Gerald Ford also generally support cloning for therapeutic purposes. Opponents include a majority of the President's Council, and the USCCB. The central debate over therapeutic cloning rests on the relative weight ascribed to potential research benefits, and that ascribed to cloned embryos themselves. All sides generally agree that research involving cloning may generate biomedical advancements that relieve human suffering. As described the President's Council, the research "may offer uniquely useful ways of investigating and possibly treating many chronic debilitating diseases and disabilities, providing relief to millions." Yet a majority of Council members were dissuaded from the research, arguing that "[i]f we permit this research to proceed, we will effectively be endorsing the complete transformation of nascent human life into nothing more than a resource tool." Similar arguments are made by the USCCB. The Council's minority offered an opposing viewpoint: "We believe there are sound moral reasons for not regarding the embryo, in its earliest stages as the moral equivalent of a human person" but rather as having a "developing and intermediate moral worth that commands our special respect." The minority based its opinion on the fact that, at the blastocyst stage (the one useful for stem cell research, for example), the cells are still undifferentiated and could still be split and develop into two separate twinned embryos, "suggesting that the earliest stage embryo is not yet an individual." Furthermore, they note that the possibility for the development of a human child from a cloned embryo would require its transference to a uterus, as is currently the case with IVF. IVF often results in the creation of embryos that remain unimplanted, and is permitted in the United States. For all of the above reasons, the Council minority, NBAC, Nancy Reagan, Gerald Ford, and the Nobel Laureates support therapeutic cloning. In July 2004, Dr. Paul McHugh, a member of the President's Council who objects to the destruction of human embryos and who had voted with the Council majority for a moratorium on cloning-for-biomedical research, argued in a medical journal article that SCNT "resembles a tissue culture," and that the products of SCNT should be available for research once regulations are in place to ensure that SCNT is conducted ethically. At the December 2004 Council meeting, Dr. William Hurlbut, another Council member who objects to the destruction of human embryos and voted for the moratorium, made a proposal to explore the possibility of using SCNT in combination with techniques to ensure that the group of cells created cannot give rise to human life but can generate embryonic stem cells. Dr. Hurlbut explained, "using the technique of nuclear transfer, it may be possible to produce embryonic stem cells within a limited cellular system that is biologically and morally akin to a complex tissue culture and thereby bypass moral concerns about the creation and disruption of human embryos." Some have criticized Dr. Hurlbut's proposal to create something that is not an embryo, yet generates embryonic stem cells, as one focused on a "semantic issue, not a scientific one." Others have lauded Dr. Hurlbut's proposal as a potential scientific solution to a moral problem. Included among them is Dr. Leon Kass, the Chair of the Council and a well-known opponent of embryo destruction, who said the proposal raises the possibility that, "the partisans of scientific progress and the defenders of nascent human life can go forward in partnership without anyone having to violate things they hold dear." A second set of considerations underlying the debate have to do with a moral aversion to the prospect of creating life in order to destroy it. As a majority of the President's Council pointed out, cloning for therapeutic purposes requires "the creation of human life expressly and exclusively for the purpose of its use in research, research that necessarily involves its destruction, ... transform[ing] nascent human life into nothing more than a resource tool." The USCCB agrees with this characterization. The Council minority countered that the "embryos would not be 'created for destruction,' but for use in the service of life and medicine." Further, the "practice of sacrificing the life of the unborn in order to save the live of the pregnant woman—while not a moral parallel to the case of using cloned embryos for biomedical research—shows that there is some moral precedent for subordinating nascent human life to more developed human life." The NBAC, Nancy Reagan, Gerald Ford, and the Nobel Laureates agree with this characterization. The effect of therapeutic cloning upon society has been debated by opponents and proponents alike. The President's Council majority fear negative effects, such as the subjugation of weak members of society, or genetic manipulation of developing life: "As much as we wish to alleviate suffering now and to leave our children in a world where suffering can be more effectively relieved, we also want to leave them in a world ... that honors moral limits, that respects all life whether strong or weak, and that refuses to secure the good of some human beings by sacrificing the lives of others." Approving therapeutic cloning would harm society by "crossing the boundary from sexual to asexual reproduction, thus approving in principle the genetic manipulation and control of nascent human life." USCCB also shares this point of view. Counter arguments have been made by those who note that "[h]istorically, scientific inquiry has been protected and even encouraged because of the great societal benefit the public recognizes in maintaining the sanctity of knowledge and the value of intellectual freedom." In addition, they note that cloning is replication, rather than transformation: "In an important sense, cloning is not the most radical thing on the horizon. Much more significant ... would be the ability to actually alter or manipulate the genome of offspring, ... which could then lead to a child being born with characteristics other than it would have had...." The Council minority, NBAC, Nancy Reagan, Gerald Ford, and the Nobel Laureates share this perspective. Some, such as the majority of the President's Council and USCCB, believe that policies allowing therapeutic cloning would create a slippery slope, "opening the door to other moral hazards, such as cloning-to-produce-children or research on later-stage embryos and fetuses." Others, such as the Council minority, NBAC, Nancy Reagan, Gerald Ford, and the Nobel Laureates, believe that it is possible to circumscribe acceptable practices with good policy. "Both the federal government and the states already regulate the researchers' methods in order to protect the rights of research subjects and community safety." Government might regulate "the secure handling of embryos, licensing and prior review of research projects, the protection of egg donors, and the provision of equal access to benefits." The topic of egg procurement came to the public's attention in November 2005 with allegations that some human eggs used in South Korean scientist Dr. Hwang's laboratory had been obtained under coercive conditions. The alleged situation in Dr. Hwang's laboratory raises the issue of coercion both because subordinate women in the laboratory allegedly donated eggs, and because some women were allegedly paid for their eggs. A 2002 study conducted by a University of Pennsylvania student raised the issue of insufficient information, finding that a number programs seeking donor eggs for reproductive purposes were not up front about the risks involved in egg retrieval. The wide consensus regarding the need for informed consent necessarily implies similar consensus on the need for an information-rich, coercion-free method of obtaining eggs; however, there is some disagreement on the specifics of whether payment for eggs necessarily constitutes coercion. The prospect of paying women for their eggs, which has been debated in the context of seeking donor eggs both for reproductive purposes (for example, to enable women who do not produce their own eggs to become pregnant), and for research purposes, is not unheard of in the United States. According to a 2000 study by the American Society of Reproductive Medicine (ASRM), some IVF programs reportedly offered as much as $5,000 for one egg retrieval cycle, though $2,500 appeared to be a more common amount. Offers of much higher amounts ($50,000-$100,000) have been reported elsewhere. Dr. Huang's laboratory reportedly made payments of $1,400 to each woman who donated eggs. Payments are not illegal in the Unites States, nor were they illegal in South Korea at the time Dr. Huang's laboratory allegedly made them. The questions are, is payment for egg donation ever acceptable, and if so, what amount is appropriate? Several arguments have been put forth in favor of payment for egg donation, many focused on donation for reproductive purposes. First, some have argued that payment creates incentives to increase the number of egg donors, thus facilitating research and benefitting infertile couples. Second, some reason that payment for eggs gives women parity with sperm donors, who may be compensated for donating gametes at a lower rate, given that they require a much less involved procedure. Third, some allege that fairness dictates that women who donate eggs ought to be able to benefit from their action. Fourth, some claim that pressures created by financial incentives may be no greater than those experienced by women asked to make altruistic egg donations for relatives or friends, and may thus not rise to the level of coercion. These are the types of arguments that led ASRM to recommend in 2000 that sums of up to $5,000 may be appropriate for typical egg donation, while sums of up to $10,000 may possibly be justified if there are particular difficulties a woman must endure to make her donation. Several arguments have also been put forth against payment for egg donation. First, some voiced fears that payment might lead to the exploitation of women, particularly poor women, and the commodification of reproductive tissues. Second, some have argued that payment for eggs for research purposes might undermine public confidence in endeavors such as human ESR. Arguments such as these have prompted both the NAS and the PCBE to recommend that women not be paid for donating their eggs for research purposes. It also led the PCBE to note that in theory, there is the possibility that eggs could be procured from ovaries harvested from cadavers, which might at least alleviate concerns related to coercion. It is worth noting that a woman may choose to undergo egg retrieval for her own reproductive purposes, which would effectively take the process of egg procurement out of the research arena and avoid the question of payment entirely. (For example, this could be an option for a woman seeking IVF because her fallopian tubes are blocked). One final set of arguments center around the types of actions that the government may take with respect to therapeutic and/or reproductive cloning. These include permitting, regulating, funding, discouraging, and temporarily or permanently banning the practices. As a starting point, NBAC offers: "In the United States, governmental policies that prohibit or regulate human actions require justification because of a general presumption against governmental interference in individual activities." As may be expected, the opinions regarding appropriate courses of action are largely linked to points of view about the appropriateness of the various endeavors. The most permissive approach available, permitting cloning with no restrictions, is not supported by any of the individuals or organizations referenced herein. By contrast, the next most permissive approach, regulating cloning, is supported by the Council minority, NBAC, Nancy Reagan, Gerald Ford, and the Nobel Laureates as appropriate for therapeutic cloning, so as to enable it to continue in accordance with socially accepted scientific research practices. As summarized by the Council minority, "We believe that this research could provide relief to millions of Americans, and that the government should therefore support is, within sensible limits imposed by regulation." A voluntary prohibition, the third most permissive approach, was recommended by NBAC as the appropriate immediate response to reproductive cloning by the private sector. NBAC called for "an immediate request to all firms, clinicians, investigators, and professional societies in the private and non-federally funded sectors to comply voluntarily with the intent of the federal moratorium." As a longer term approach, NBAC recommended the fourth most permissive approach, a temporary ban on reproductive cloning. "Federal legislation [should] be enacted to prohibit anyone from attempting, whether in a research or clinical setting, to create a child through somatic cell nuclear transfer. It is critical, however, that such legislation include a sunset clause to ensure that Congress will review the issue after a specified time period (three to five years) in order to decide whether the prohibition continues to be needed." Readers may be interested to note that, if enacted in 1997 when NBAC's report was published, a five-year ban on reproductive cloning would have expired in 2002. The National Academies also recommended a ban on reproductive cloning, and did not call it temporary but did add that it should be reconsidered every five years. On the topic of therapeutic rather than reproductive cloning, a majority of the Council recommended a temporary moratorium as the proper approach, because it would "reaffirm the principle that science can progress while upholding the community's moral norms, and would therefore reaffirm the community's moral support for science and biomedical technology." The most restrictive approach to cloning, a permanent ban, was proposed by the Council minority and majority, and Nancy Reagan as appropriate for reproductive cloning. "By permanently banning cloning-to-produce children, this policy gives force to the strong ethical verdict against [it], unanimous in the Council ... and widely supported by the American people." This approach is also favored by the USCCB not only for reproductive cloning, but also for therapeutic cloning. One related issue, that of the use of federal funding for therapeutic cloning, has also been discussed. No proposals have been made by any of the groups or individuals listed above for the use of federal funding for reproductive cloning. Opponents of funding therapeutic cloning, such as the Council majority, have expressed concern that use of federal funding for therapeutic cloning would put "the federal government in the novel and unsavory position of mandating the destruction of nascent human life." Proponents of federal funding for therapeutic cloning, such as the Council minority, NBAC, Nancy Reagan, Gerald Ford, and the Nobel Laureates, cite as support the advancements that might be powered by the infusion of federal dollars into the research, as well as the ethical protections that would attach with the money.

In December 2005, an investigation by Seoul National University, South Korea, found that scientist Hwang Woo Suk had fabricated results on deriving patient-matched stem cells from cloned embryos—a major setback for the field. In May 2005 Hwang had announced a significant advance in creating human embryos using cloning methods and in isolating human stem cells from cloned embryos. These developments have contributed to the debate in the 109 th Congress on the moral and ethical implications of human cloning. Scientists in other labs, including Harvard University and the University of California at San Francisco, intend to produce cloned human embryos in order to derive stem cells for medical research on diabetes, Parkinson's disease, and other diseases. President Bush announced in August 2001 that for the first time federal funds would be used to support research on human embryonic stem cells, but funding would be limited to "existing stem cell lines." Federal funds can not be used for the cloning of human embryos for any purpose, including stem cell research. In July 2002 the President's Council on Bioethics released its report on human cloning which unanimously recommended a ban on reproductive cloning and, by a vote of 10 to 7, a four-year moratorium on cloning for medical research purposes. The ethical issues surrounding reproductive cloning (commodification, safety, identity ), and therapeutic cloning (embryos' moral status, relief of suffering), impact various proposals for regulation, restrictions, bans, and uses of federal funding. In January 2002, the National Academies released Scientific and Medical Aspects of Human Reproductive Cloning . It recommended that the U.S. ban human reproductive cloning aimed at creating a child. It suggested the ban be enforceable and carry substantial penalties. The panel noted that the ban should be reconsidered within five years. However, the panel concluded that cloning to produce stem cells should be permitted because of the potential for developing new therapies and advancing biomedical knowledge. On May 24, 2005, the House passed H.R. 810 (Castle), which would allow federal support of research that uses human embryonic stem cells regardless of the date on which the stem cells were derived from a human embryo, thus negating the Bush stem cell policy limitation on "existing stem cell lines." In July of 2006, the Senate passed H.R. 810 and President Bush vetoed it, the first veto of his presidency. An attempt in the House to override the veto was unsuccessful. Action on the Weldon bill (which passed the House in the 108 th Congress and stalled in the Senate) is also possible; it was reintroduced in the 109 th Congress as H.R. 1357 and S. 658 (Brownback). The bill bans the process of cloning as well as the importation of any product derived from an embryo created via cloning. It bans not only reproductive applications, but also research on therapeutic uses, which has implications for stem cell research. Advocates of the legislative ban say that allowing any form of human cloning research to proceed raises serious ethical issues and will inevitably lead to the birth of a baby that is a human clone. Critics of the ban argue that the measure would curtail medical research and prevent Americans from receiving life-saving treatments created overseas. This report will be updated as needed.

The Transportation, Housing and Urban Development, and Related Agencies (THUD) appropriations subcommittees are charged with drafting bills to provide annual appropriations for the Department of Transportation (DOT), Department of Housing and Urban Development (HUD), and related agencies. Typically, these bills are reported out by the appropriations committees and passed by the House and Senate, which then produce a conference agreement. Title I of the annual THUD appropriations bill funds the Department of Transportation. The mission of DOT is to serve the United States by ensuring a fast, safe, efficient, accessible, and convenient transportation system that meets vital national interests and enhances the quality of life of the American people today and into the future. DOT is primarily a grant-making and regulatory organization; its programs are organized roughly by mode, providing grants to state and local government agencies to support the construction of transportation infrastructure for highways, transit, and intercity passenger rail, while providing regulatory oversight to promote safety for the freight rail, commercial trucking, and maritime industries. The exception is aviation; the Federal Aviation Administration (FAA) not only administers grants for airport development and regulates the safety of aviation operations, but also operates the air traffic control system of the United States, and it thus accounts for the majority of the employees of DOT. Title II of the annual THUD appropriations bill funds the Department of Housing and Urban Development. HUD's mission is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD's programs are primarily designed to address housing problems faced by households with very low incomes or other special housing needs. These include several programs of rental assistance for persons who are poor, elderly, and/or have disabilities. Three rental assistance programs—Public Housing, Section 8 Vouchers, and Section 8 project-based rental assistance—account for the majority of the department's nonemergency funding. Two flexible block grant programs—HOME and Community Development Block Grants (CDBG)—help communities finance a variety of housing and community development activities designed to serve low-income families. Other, more specialized grant programs help communities meet the needs of homeless persons, including those with AIDS. HUD's Federal Housing Administration (FHA) insures mortgages made by lenders to home buyers with low downpayments and to developers of multifamily rental buildings containing relatively affordable units. Title III of the THUD appropriations bill funds a collection of related agencies. The related agencies under the jurisdiction of the subcommittee are a mix of transportation-related agencies and housing and community development-related agencies. They include the Access Board, the Federal Maritime Commission, the National Transportation Safety Board, the Amtrak Office of Inspector General (IG), the Neighborhood Reinvestment Corporation (often referred to as NeighborWorks), the United States Interagency Council on Homelessness, and the costs associated with the government conservatorship of the housing-related government-sponsored enterprises, Fannie Mae and Freddie Mac. Table 1 provides a timeline of legislative action on the FY2013 THUD appropriations bill, and Table 2 lists the total funding provided for each of the titles in the bill for FY2012 and the amount requested for that title for FY2013. As is discussed in the next section, much of the funding for this bill is in the form of contract authority, a type of mandatory budget authority. Thus, the discretionary funding provided in the bill (often referred to as the bill's 302(b) allocation) is only around half of the total funding provided by this bill. The President's FY2013 budget requested $73.4 billion in new budget resources for DOT. The requested funding was $3.5 billion (5%) more than the amount provided for FY2012 (not counting $1.7 billion in FY2012 emergency funding). Both the House-passed bill and Senate Committee on Appropriations' bills recommended roughly the same level of funding as in FY2012 (not counting the emergency funding). The House-passed FY2013 THUD bill ( H.R. 5972 ) included no funding for the Transportation Investments Generating Economic Recovery (TIGER) grant program or for the high speed and intercity passenger rail development program, two priorities of the Administration. The Senate THUD bill ( S. 2322 ) proposed to fund the TIGER program and provide a minimal level of funding for high speed rail development ($100 million, compared to the $1.0 billion request). The Administration request proposed a restructuring of DOT surface transportation programs reflecting a reauthorization proposal (a similar proposal was included in last year's request). The appropriations committees did not support the requested restructuring; in July 2012, Congress passed surface transportation reauthorization legislation that did restructure DOT's surface transportation program but differed from the Administration proposal. The President's FY2013 budget requested nearly $34 billion in net new budget authority for HUD in FY2013. This is about $4 billion less than was provided in FY2012. However, in terms of new appropriations for HUD's programs and activities, the President's budget actually requested an increase of more than $512 million compared to FY2012. The difference—a decrease in net budget authority versus an increase in new appropriations—is attributable to an estimated increase in the amount of excess receipts available from the FHA insurance fund, which are used to offset the cost of the HUD budget. S. 2322 included about $35 billion in net new budget authority for HUD. That is about $1 billion more than the President's request and over $2 billion less than was provided in FY2012. H.R. 5972 included $33.6 billion for HUD, which is less than the Senate proposed but more than the President requested. The Administration threatened to veto the House bill. In part this threat came because of the House's overall discretionary funding level for FY2013, which was below the ceiling allowed for FY2013 under the terms of the the Budget Control Act of 2011. Another stated reason for the threat is opposition to certain program funding levels in the bill, such as zeroing out the DOT TIGER and high speed rail programs and the HUD Choice Neighborhoods and Sustainable Communities programs, as well as cuts to HUD homeless assistance grants and other programs. FY2013 appropriations were not enacted before the start of the fiscal year, so Congress enacted a continuing resolution ( H.J.Res. 117 ) providing funding for federal agencies at roughly the FY2012 level for the first six months of FY2013. The 112 th Congress adjourned without enacting final FY2013 appropriations. On January 29, 2013, President Obama signed the Disaster Relief Appropriations Act, 2013, into law ( P.L. 113-2 ). The act provided $50.7 billion in supplemental funding and legislative provisions to address both the immediate losses from Hurricane Sandy, as well as to support mitigation for future disasters. The act contained $13.07 billion for DOT, including funding for repairs to public transportation ($10.9 billion) and roads ($2.0 billion). The act contained $16 billion in funding for HUD, all of which was provided to the Community Development Block Grant (CDBG) program. The law established a number of terms and conditions for the funding that vary from the rules covering the regular CDBG program. In addition, P.L. 113-2 included language to allow HUD to make funding adjustments in the Section 8 Housing Choice Voucher for local public housing authorities affected by the storm. FY2013 discretionary appropriations were considered in the context of the Budget Control Act of 2011 (BCA, P.L. 112-25 ). The BCA established discretionary spending limits for FY2012-FY2021. It allowed for the adjustment of the discretionary limits for several different purposes, including for appropriations designated as being for disaster relief and appropriations designated as emergency requirements. The BCA also tasked a Joint Select Committee on Deficit Reduction to develop a federal deficit reduction plan for Congress and the President to enact by January 15, 2012. The failure of Congress and the President to enact deficit reduction legislation by that date triggered an automatic spending reduction process established by the BCA, consisting of a combination of sequestration and lower discretionary spending caps that were scheduled to begin on January 2, 2013. However, prior to that date, Congress enacted the American Taxpayer Relief Act of 2012 (ATRA, P.L. 112-240 ), which made several substantive changes to the BCA, including a delay of the scheduled BCA sequester until March 1, 2013, and a reduction of the total amount scheduled to be sequestered. The sequestration process for FY2013 required automatic, largely across-the-board spending cuts at the program, project, or activity level to achieve equal budget reductions from both defense and nondefense funding. The level of cuts was to be determined by the Office of Management and Budget (OMB), under terms specified by the Balanced Budget and Emergency Deficit Control Act of 1985, as amended by the BCA and ATRA. On March 1, 2013, President Obama ordered the BCA-mandated sequestration. OMB calculated that it required a 7.8% reduction in non-exempt defense discretionary funding, a 5.0% reduction in non-exempt nondefense discretionary funding, a 5.1% reduction for most non-exempt nondefense mandatory funding, and a 7.9% reduction for non-exempt defense mandatory funding. The majority of DOT's budget was exempted from sequestration per Section 255 of P.L. 99-177 as amended, so the overall reduction in DOT funding was closer to 2%, though because of the exclusions the impact was uneven, with affected accounts being reduced by 5%. Nearly all of HUD's budget is non-exempt discretionary funding, and thus was subject to a 5% reduction in funding for FY2013. These percentages were then applied to the funding levels in place at the time in order to calculate dollar amount reductions for each non-exempt account. According to a report accompanying the order, funding for DOT's programs and activities for FY2013 was reduced by about $1.6 billion; funding for HUD's programs and activities for FY2013 was reduced by about $3 billion as a result of the sequester. Congress passed H.R. 933 , as amended, which included continuing appropriations for THUD and several other federal agencies, on March 21, 2013; it was signed into law on March 26, 2013, as P.L. 113-6 . Division F of P.L. 113-6 , the Further Continuing Appropriations Act, 2013, provides funding for THUD in Titles I and VIII. Funding is provided generally at the level and under the conditions provided in FY2012, as modified by anomalies, the application of the sequester, and a 0.2% across-the-board rescission in section 3004 of the act. Anomalies include the following: For DOT, adjusting the funding levels of certain accounts changing certain statutory references to reflect provisions of P.L. 112-141 , the surface transportation authorization act enacted after passage of FY2012 THUD appropriations. Funding increases for some HUD programs. These include the Homeless Assistance Grants, Section 8 tenant-based rental assistance, the Public Housing Operating Fund, and Indian Housing Loan Guarantees. Between 2003 and 2008, the House and Senate Committees on Appropriations reorganized their subcommittee structures three times. Prior to FY2005, DOT and HUD were funded in separate appropriations bills under the jurisdiction of separate subcommittees. From the time those departments were placed under the jurisdiction of the same subcommittee through FY2008, the list of other agencies also under the jurisdiction of the Transportation, Department of Housing and Urban Development, and Related Agencies subcommittees changed as well. These changes make year-to-year comparisons of Transportation and Housing and Urban Development appropriations bills complex, as their appropriations appear in different bills in combination with various other agencies. Other factors, such as supplemental appropriations for response to disasters (such as the damage caused by the Gulf Coast hurricanes in the fall of 2005) and changes in the makeup of the Department of Transportation (portions of which were transferred to the Department of Homeland Security in 2004), also complicate comparisons of year-to-year funding. Table 3 shows funding trends for DOT and HUD over the period FY2007-FY2012, omitting emergency funding and other supplemental funding, and the amounts requested for FY2013. The purpose of Table 3 is to indicate trends in the funding for these agencies, which is why emergency supplemental appropriations are not included in the figures. Table 4 presents an account-by-account summary of FY2013 appropriations for DOT, compared to FY2012. On July 6, 2012, new surface transportation authorization legislation was signed into law. P.L. 112-141 , Moving Ahead for Progress in the 21 st Century (MAP-21), was enacted after the House had passed, and the Senate Appropriations Committee had reported out, their FY2013 THUD bills. MAP-21 authorizes funding levels similar to those the affected DOT administrations (FHWA, FMCSA, NHTSA, and FTA) received in FY2012, but it made changes to the program structure of several of those DOT agencies. DOT funding has typically increased from year to year. The FY2011 appropriation broke that trend, and in both FY2011 and FY2012 Congress provided lower levels of funding for DOT than in FY2010. The Obama Administration's FY2013 budget request reflected a reauthorization proposal for DOT surface transportation programs. This included a proposed restructuring of some surface transportation programs with overall funding roughly at the level provided in FY2012, plus a $50 billion supplemental appropriation requested for FY2012 to provide an immediate boost to transportation infrastructure improvement and job creation. This up-front additional funding was described as an alternative to the typical surface transportation reauthorization funding plan, in which funding levels gradually increase over an authorization period of several years. This proposal would have front-loaded a large increase in funding in the first year of the Administration's proposed six-year surface transportation reauthorization plan. The Administration had made a similar proposal in its FY2012 budget request—restructuring the DOT surface transportation program structure, and requesting an additional $50 billion in up-front funding—which Congress did not support. Thus, while the FY2012 enacted funding and the appropriation amounts recommended in H.R. 5972 and S. 2322 for FY2013 were comparable, comparing these figures to the amounts requested in the FY2013 budget for DOT's surface transportation programs is complex. Overall, the FY2013 request totaled $73.4 billion in new budget resources for DOT. The requested funding was $3.5 billion (5%) more than the amount provided for FY2012 (not counting $1.7 billion in emergency funding provided in FY2012). Both the House-passed bill and Senate Committee on Appropriations' bill would have provided roughly the same level of funding as in FY2012 (not counting the emergency funding). The final enacted amount, $70.6 billion, is slightly less (about $100 million) than the FY2012 enacted amount Virtually all federal highway funding, and most transit funding, comes from the highway trust fund, whose revenues come largely from the federal motor fuels excise tax ("gas tax"). For several years, expenditures from the fund have exceeded revenues; for example, in FY2010, revenues were approximately $35 billion, while authorized expenditures were approximately $50 billion. Congress transferred a total of $34.5 billion from the general fund of the Treasury to the highway trust fund during the period FY2008-FY2010 to keep the trust fund solvent. In January 2012 the Congressional Budget Office projected that the trust fund would become insolvent around the end of FY2013, given current revenue and expenditure levels. The MAP-21 legislation enacted in 2012 authorized additional transfers from the general fund to the Highway Trust Fund to keep the fund solvent through FY2014. One reason for the shortfall in funding in the highway trust fund is that the federal gas tax has not been raised since 1993, while improved fuel efficiency and inflation have reduced the amount of fuel consumed and the value of the tax revenues. The tax is a fixed amount assessed per gallon of fuel sold, not a percentage of the cost of the fuel sold. That means that whether a gallon of gas costs $1 or $4, the highway trust fund receives the same amount from each gallon sold (18.3 cents for each gallon of gasoline, 24.3 cents for each gallon of diesel). Meanwhile, the capacity of the federal gas tax to support transportation infrastructure has been diminished by inflation (which has reduced the purchasing power of the revenue raised by the tax) and increasing automobile fuel efficiency (since more efficient vehicles are able to travel farther on a gallon of fuel, increasing efficiency reduces the amount of tax generated by each mile of vehicle travel). The Congressional Budget Office has forecast that gasoline consumption will be relatively flat during the period 2013 to 2022, as continued increases in the fuel efficiency of the U.S. passenger fleet will offset increases in the number of miles people will drive. It forecasts highway trust fund revenues of $41 billion in FY2022, well short of even the current annual level of authorized expenditures from the fund. A host of reports produced by the Department of Transportation, congressionally created commissions, and nongovernmental groups generally assert that the nation is not spending enough to maintain its existing transportation infrastructure, let alone to make desired improvements. These reports call for considerably higher levels of spending on transportation infrastructure, by both the federal government and the states. A dilemma faced by Congress is how to provide the additional funding needed to maintain the current level of transportation infrastructure spending, let alone to support significant increases in that funding. While raising the federal gas tax is seen as the simplest and most efficient way to provide significantly increased funding for transportation infrastructure in the near future, there appears to be little support in Congress or in the Administration for raising the gas tax during the current period of economic difficulty. Even if there were support for higher gas taxes, increases in vehicle fuel efficiency resulting from previously enacted legislation and greater use of electric vehicles are likely to constrain motor fuel consumption, leaving in question the longer-term viability of motor fuel taxes as the principal source of surface transportation funding. As it did last year, the President's FY2013 budget proposed to change the name of the highway trust fund to the transportation trust fund and to increase authorized expenditures from the fund to a total of $476 billion over the next six years. This money would have gone to increasing the funding levels of existing surface transportation programs, and the Federal Railroad Administration and the Federal Transit Administration's New Starts transit construction program would have been added to the programs financed by the fund. This proposal reflected, in part, a recommendation of the National Commission on Fiscal Responsibility and Reform to expand the highway trust fund to cover rail infrastructure—but the commission also recommended increasing the gas tax by 15 cents per gallon by 2015, and thereafter limiting expenditures from the fund to match its revenues. The budget request did not propose an increase in the gas tax; it proposed to offset the additional spending with savings assumed from reducing overseas military operations. This proposal was not supported by Congress. The Transportation Investments Generating Economic Recovery (TIGER) grant program originated in the American Recovery and Reinvestment Act ( P.L. 111-5 ), where it was referred to as national infrastructure investment. It is a discretionary grant program intended to address two criticisms of the current structure of federal transportation funding: that virtually all of the funding is distributed to state and local governments who select projects based on their priorities, making it difficult to fund projects that have national or regional impacts but whose costs fall largely on one or two states; and that the federal funding is divided according to mode of transportation, making it difficult for major projects in different modes to compete for the limited amount of discretionary funding. The program provides grants to projects of regional or national significance in various modes on a competitive basis, with recipients selected by the federal DOT. Congress has continued to support the TIGER program through the annual DOT appropriations acts. There have been four rounds of TIGER grants (from ARRA funding, and from FY2010-FY2012 annual appropriations). The Administration requested $500 million for FY2013, the same amount provided in FY2012. The House-passed bill did not provide any funding for the program, noting that the Administration has not defined the selection criteria by which recipients are selected. The Senate Committee on Appropriations recommended $500 million. This program was not included in the MAP-21 authorization act. The FY2013 enacted bill funded TIGER at the FY2012 level, $500 million; after sequestration reductions and rescission, the program received $474 million. The EAS program seeks to preserve air service to small communities whose level of ridership makes air service unprofitable by subsidizing the cost of that service. The costs of the program have more than doubled since FY2008, in part because route reductions by airlines have resulted in an average of six new communities being added to the program each year. Supporters of the EAS program contend that preserving airline service to small communities was a commitment Congress made when it deregulated airline service in 1978, anticipating that airlines would reduce or eliminate service to many communities that were too small to make such service economically viable. Supporters contend that subsidizing air service to smaller communities promotes economic development in rural areas. Critics of the program note that the subsidy cost per passenger is relatively high, that many of the communities in the program have very few residents flying out of their airports, and that some of the airports receiving EAS subsidies are little more than an hour's drive from major airports. The Administration requested $114 million for the EAS program. This appeared to be a cut from the FY2012 enacted figure of $143 million, but in fact the Administration's request represented an increase over the FY2012 figure. This is because the EAS program is funded from two sources: in addition to the annual discretionary appropriation for the program, there is a mandatory annual authorization of $50 million financed by overflight fees collected from commercial airlines by the Federal Aviation Administration (this funding does not appear in the appropriation budget tables). Thus, the total funding provided for the EAS program in FY2012 was $193 million (the $143 million appropriation added to the $50 million mandatory funding). The Administration's FY2013 request proposed to increase the mandatory funding from $50 million to $100 million; added to the $114 million discretionary funding requested, that would have provided a total of $214 million for the EAS program. This would have been an 11% ($21 million) increase over FY2012. Both the House-passed bill and the Senate Committee on Appropriations' bill supported the Administration request. The bills also supported the request to eliminate the 15-passenger aircraft requirement. The EAS program has required airlines to use, at a minimum, 15-passenger aircraft to service EAS communities, even though many of these communities typically have fewer than 15 passengers per flight. Eliminating the minimum 15-passenger aircraft requirement is seen as a way to reduce EAS program costs. The same request was made last year, and was included in the FY2012 appropriations act. The current Federal Aviation Administration authorization act ( P.L. 112-95 , enacted February 14, 2012) included reforms intended to limit EAS program costs, some of which were included in the FY2012 appropriations act. These include limiting funding to those communities which received subsidies in FY2011, and limiting coverage to airports that average at least 10 passengers per day (unless they are more than 175 miles from the nearest hub airport). The legislation also repealed the local participation program, a pilot program established in 2003 under which communities assumed a portion of the cost of their EAS subsidy. The final FY2013 enacted bill provided $143 million for the program, the same amount as in FY2012; after sequestration reductions and rescission, the program received $136 million. The budget proposed a total of $2.5 billion for high speed and intercity passenger rail funding under two new accounts which realign existing programs: $1.5 billion for System Preservation (which would primarily fund maintenance and improvement of existing intercity passenger rail service, i.e., Amtrak) and $1 billion for Network Development (which would fund new intercity passenger rail projects). The budget described high speed rail development as the signature initiative of the Administration's proposal for surface transportation reauthorization. It is seen as a way of creating new jobs; providing a new transportation option for intercity travel; and increasing the capacity, competitiveness, and environmental sustainability of the transportation system. The Senate Appropriations Committee recommended $100 million for the program. The House-passed bill did not include any funding for new high speed rail projects. To date, Congress has provided $10.1 billion for DOT's high speed and intercity passenger rail grant program, beginning with $8 billion in the American Recovery and Reinvestment Act of 2009. However, all of that funding was provided by the 111 th Congress. The 112 th Congress provided no funding for the high speed and intercity passenger rail grant program for FY2011, and rescinded $400 million of the unobligated portion of the $10.5 billion already appropriated; it also provided no funding for the program for FY2012. The final FY2013 enacted funding bill did not provide any funding for the program. The $10.1 billion provided in the 111 th Congress went to the High Speed and Intercity Passenger Rail Grant Program. In common usage, references to "high speed rail" are generally taken to mean systems such as those of Japan, France, Spain, and China, where trains travel on dedicated networks at speeds greater than 150 miles per hour. Perhaps because it is convenient to abbreviate references to this program by dropping the middle phrase "and intercity passenger rail," it is often taken to be a program intended only to fund high speed lines similar to those in other countries. But much of the funding in this program has gone to develop intercity passenger rail service with top speeds of 90 or 110 miles per hour. In its public comments the Administration has emphasized the high speed rail portion of the program. However, there is only one state, California, that is actively pursuing development of a high speed rail line similar to those the Administration has pointed to in Europe and Asia, one that would provide dedicated tracks for passenger trains traveling at speeds greater than 150 mph. California has received $3.6 billion in federal funding for this project, but the total cost of constructing the line is estimated at more than $70 billion, and the financing prospects are uncertain. The Administration budget proposed to place Amtrak funding into a new Federal Railroad Administration account—System Preservation—for which $1.546 billion was requested. This account would fund publicly owned passenger rail asset development and maintenance, primarily Amtrak. Amtrak received $1.418 billion in capital, operating, and debt service grants in FY2012. Amtrak also submits a grant request to Congress, separate from the Administration's budget request. Amtrak requested $2.167 billion for FY2013. Amtrak's authorized funding level for FY2013 is $2.256 billion. The Senate Committee on Appropriations recommended $1.450 billion for Amtrak grants; that is $32 million (2%) more than Amtrak received in FY2012. The House-passed bill recommended $1.802 billion. Table 5 shows the amount of funding appropriated for Amtrak grants in FY2012, requested by the Administration for FY2013, recommended by the House and Senate Committees on Appropriations, and final enacted. The major difference between the House and Senate funding was a proposal in the House bill to create a new program within the Amtrak Capital and Debt Service Grants account—Bridge and Tunnel grants—to fund "high priority, state-of-good-repair, intercity infrastructure projects owned by Amtrak or States." The House bill included $500 million for this new program. The federal share for projects funded under this program would be up to 80%. This proposal was not included in the enacted bill. The majority of FTA's $10 billion funding is funneled to transit agencies through several formula programs. The largest discretionary grant program is the Capital Investment Grants programs (commonly referred to as the New Starts program). This program funds new fixed-guideway transit lines and extensions to existing lines. There are two primary components to the program, based on project cost. New Starts include capital projects with total costs over $250 million which are seeking more than $75 million in federal funding. Small Starts include capital projects with total costs under $250 million which are seeking less than $75 million in federal funding. Congress appropriated $1.955 billion for the Capital Investment Grants program in FY2012. For FY2013, the Administration requested $2.2 billion for the program. The Senate bill would have provided $2.0 billion, a 2% increase over FY2012 but $200 million less than requested. This would have covered the majority of the costs for existing and pending full funding grant agreements. The House bill would have provided $1.817 billion, $138 million (7%) below the FY2012 level. The final FY2013 enacted bill provided $1.955 billion; after sequestration reductions and rescission, the program received $1.855 billion. New Starts projects must go through a multi-stage process, during which they are repeatedly evaluated by FTA. Projects must receive positive ratings to proceed to the next step. The final step is signing of a full-funding grant agreement (FFGA) with FTA. The FFGA details how much funding the project will receive from FTA and the steps of project development. One purpose of the FFGA is to encourage accurate estimates of project costs; cost overruns are the responsibility of the grantee. The federal share for New Starts projects, by statute, can be up to 80%. Since FY2002, DOT appropriations acts have included a provision directing FTA not to sign any full funding grant agreements that provide a federal share of more than 60%. This provision is in the FY2013 House bill, but not the Senate bill. Critics of this provision note that the federal share for highway projects is typically 80% and in some cases is higher. They contend that, by providing a lower share of federal funding (and thus requiring a higher share of local funding), this provision tilts the playing field toward highway projects when communities are considering how to address transportation problems. Advocates of this provision note that the demand for New Starts funding greatly exceeds the amount that is available, so requiring a higher local match allows FTA to support more projects with the available funding. They also assert that requiring a higher local match likely encourages communities to scrutinize the costs and benefits of major proposed transit projects more closely. Table 6 presents an account-by-account summary of FY2013 appropriations for HUD compared to FY2012. FHA's single-family mortgage insurance program is intended to be self-financing. The fees that FHA collects from borrowers are deposited in its insurance fund, the Mutual Mortgage Insurance Fund (MMIF), and have historically been sufficient to cover the expected losses from the loans insured. However, if the MMIF ever does not have enough money to cover expected losses on defaulted loans, it can draw on permanent and indefinite budget authority with the U.S. Treasury to cover any shortfalls without congressional action. The FY2013 President's budget showed that, for the first time, HUD anticipated that the MMIF would need to draw on this permanent and indefinite budget authority for $688 million during FY2012. The budget estimated that this money would be needed to make a required transfer of funds from the MMIF's secondary reserve account to its primary reserve account, in order to account for an increase in the estimated future losses expected to occur over the life of the loans insured by FHA. The anticipated need for these funds did not mean that FHA was currently out of money; at the time, FHA had about $33 billion in reserves that it could use to pay claims, and those funds would have had to be exhausted before any additional funds from Treasury would have been spent. Rather, the budget included these funds because it was estimated that the funds that FHA had on hand would not be enough to cover all of its expected future losses on insured loans. Any funds drawn from Treasury would have been held in reserve to pay for these expected future losses. After the FY2013 President's budget was released, HUD stated that it no longer expected to need this funding from Treasury in FY2012. Rather, it expected that it would receive enough money from recent increases in the fees it charges for mortgage insurance and legal settlements to cover any increases in expected losses. Therefore, FHA did not have to draw on its permanent and indefinite budget authority with Treasury in FY2012. However, FHA did ultimately use its permanent and indefinite budget authority to draw $1.7 billion from Treasury at the end of FY2013 in order to make its required transfer of funds between reserve accounts in that year. The project-based rental assistance (PBRA) account provides funding to administer and renew existing project-based Section 8 rental assistance contracts between HUD and private multifamily property owners. The President's budget requested about $600 million less for this account than was provided in FY2012. The President's budget documents acknowledged that the funding level requested would not be sufficient to fund the full 12-month renewal of all of the existing contracts. Instead, the department planned to "short-fund" the contracts, meaning fund them for partial terms (less than 12 months). The budget also requested policy changes, and indicated that the department was pursuing other administrative policy changes that would result in program savings. S. 2322 proposed about $1.2 billion more for the PBRA account than was requested by the President, stating that the committee rejected the President's proposal to short-fund Section 8 project-based rental assistance contracts and instead would provide sufficient funding to renew all contracts for 12 months. The House bill, H.R. 5972 , adopted the President's request for the Section 8 project-based rental assistance account. Ultimately the PBRA account was funded at the FY2012 level ($9.340 billion), less amounts for the 0.2% across-the-board rescission (reducing funding to $9.322 billion ), and sequestration (about another $470 million ). That amount was not sufficient to "fully fund" PBRA contracts, thus requiring HUD to short-fund contracts in FY2013. The Community Development Fund (CDF) funds several community development-related activities, including the Community Development Block Grant (CDBG) program, the federal government's largest and most widely available source of financial assistance supporting state and local government-directed neighborhood revitalization, housing rehabilitation, and economic development activities. For FY2013, the Administration requested $3.1 billion for CDF, which was less than the $3.3 billion appropriated in FY2012. S. 2322 , the Senate Appropriations Committee-passed bill, recommended $3.2 billion for CDF, approximately $100 million more than the President's request. H.R. 5972 , the House-passed bill, proposed $3.4 billion for CDF, almost $300 million more than the President's request and $200 million more than proposed in S. 2322 . The FY2013 Consolidated and Further Continuing Appropriations Act ( P.L. 113-6 ) funded CDF at $3.3 billion; after the 0.2% across-the-board rescission and sequestration, the amount available for CDF was approximately $3.1 billion. Table 7 presents appropriations levels for the various related agencies funded within the Transportation, HUD, and Related Agencies appropriations bill. The Neighborhood Reinvestment Corporation, commonly known as NeighborWorks America, is a government-chartered non-profit corporation that supports a variety of community revitalization activities such as generating investment in communities and providing training and technical assistance related to affordable housing. In addition to its regular annual appropriation, since 2008 NeighborWorks has also received additional funding to distribute to housing counseling organizations to use solely for foreclosure prevention counseling. This program is known as the National Foreclosure Mitigation Counseling Program (NFMCP). In FY2012, NeighborWorks received a total of $215.3 million: a regular annual appropriation of $135 million, of which $5 million was to be used for a multifamily rental housing program, and an additional $80 million for the NFMCP. The President's FY2013 budget request included $213 million for NeighborWorks, a decrease of just over $2 million from FY2012. This included a regular annual appropriation of $127 million, a decrease of more than $8 million from the FY2012 enacted level, and $86 million for the NFMCP. The Senate committee-passed bill proposed funding NeighborWorks at the same level as FY2012: $135 million for its regular activities and $80 million for the NFMCP. The House-passed bill proposed increasing funding for NeighborWorks to $225 million. Of that amount, $80 million was designated for the NFMCP. The FY2013 Consolidated and Further Continuing Appropriations Act ( P.L. 113-6 ) funded NeighborWorks at the FY2012 level, including funding for the NFMCP, of $215.3 million. The application of the across-the-board rescission in P.L. 113-6 reduced funding to $214.9 million, and sequestration reduced funding to $204.1 million. Composition of the THUD Funding Bill Budget Concepts Relevant for THUD The numbers cited in discussions of the THUD appropriations bills can be confusing. Different totals may be published by the committees in their tables and press releases, reported in the press or by advocates, and even presented in this report, all of which may be correct. This is possible because the THUD appropriations bill includes different types of funding mechanisms and savings mechanisms, which can result in different figures being reported for the same programs, depending on how the numbers are being presented. The following section of this report explains the different types of funding often included in the THUD appropriations bill. Most of the programs and activities in the THUD bill are funded through regular annual appropriations , also referred to as discretionary appropriations. This is the amount of new funding allocated each year by the appropriations committees. Appropriations are drawn from the resources of the general fund of the Treasury. For some accounts, the appropriations committees provide advance appropriations , or regular appropriations that are not available until the next fiscal year. In some years, Congress will also provide emergency appropriations , usually in response to disasters. These funds are sometimes provided outside of the regular appropriations acts—often in emergency supplemental spending bills—and are generally provided in addition to regular annual appropriations. Although emergency appropriations typically come from the general fund, they may not be included in the discretionary appropriation total reported for an agency. In addition to appropriations, much of the Department of Transportation's budget is derived from contract authority . Contract authority is a form of budget authority based on federal trust fund resources, in contrast to "regular" (or discretionary) budget authority, which is based on the resources of the general fund of the Treasury. Contract authority for DOT is generally derived from the Highway Trust Fund and the Airport and Airways Trust Fund. Congressional appropriators are generally subject to limits on the amount of new non-emergency discretionary funding they can provide in a year. One way to stay within these limits is to appropriate no more than the allocated amount of discretionary funding in the regular annual appropriation act. Another way is to find ways to offset a higher level of discretionary funding. A portion of the cost of providing regular annual appropriations for the THUD bill is generally offset in two ways. The first is through rescissions , or cancellations of unobligated or recaptured balances from previous years' funding. The second is through offsetting receipts and collections , generally derived from fees collected by federal agencies. When the Appropriations Committee subcommittees are given their "302(b) allocations"—that is, when the total amount that the Appropriations Committee has to spend for a fiscal year is divided among the subcommittees—that figure includes only net discretionary budget authority (non-emergency appropriations, less any offsets and rescissions); contract authority from trust funds is not included. This can lead to confusion, as the annual discretionary budget authority allocations for THUD are typically around half of the total funding provided in the bill, with the remainder made up of contract authority, or offset in some way. The Budget Control Act of 2011 (BCA), which was enacted into law ( P.L. 112-25 ) on August 2, 2011, following negotiations over raising the ceiling on the national debt, established overall limits, or caps, on the amount of total federal discretionary appropriations that can be provided for each of FY2012 through FY2021. Within these annual spending limits, decisions about the actual amount of appropriations for individual programs or agencies will continue to be made through the regular appropriations process. Under the law, these limits are to be enforced through a sequestration process involving the cancellation of budgetary resources (i.e., spending cuts). This means that if the limits are breached, spending for each non-exempt program will be cut by a uniform percentage. Allocation Across Agencies Once the THUD subcommittees receive their 302(b) allocations, they must decide how to allocate the funds across the different agencies within their jurisdiction. As shown in Figure A-1 , when it comes to net discretionary budget authority (appropriations, less any offsets), the vast majority of funding allocated by the appropriations committee generally goes to HUD (about two-thirds in FY2012). However, as shown in Figure A-2 , when taking into account contract authority—which, as noted earlier, is not allocated by the appropriations committees—the total resources available to DOT are greater than the resources available to HUD. Impact of Offsets Besides the level of the 302(b) allocation, one of the most important factors in determining how much in new appropriations the THUD subcommittee will provide in each year is the amount of savings available from rescissions and offsets. Each dollar available to the subcommittee in rescissions and offsets serves to reduce the "cost" of providing another dollar in appropriations. As shown in Table A-1 , in FY2012, without rescissions and offsets, it would have "cost" the THUD Subcommittee an additional $6 billion to provide the same amount of appropriations. In any given year, the amount of these "budget savings" can be higher or lower, meaning that the "cost" of providing the same level of appropriations may be higher or lower.

The Transportation, Housing and Urban Development, and Related Agencies (THUD) appropriations subcommittee is charged with providing annual appropriations for the Department of Transportation (DOT), Department of Housing and Urban Development (HUD), and related agencies. The HUD budget generally accounts for the largest share of discretionary appropriations provided by the subcommittee. However, when mandatory funding is taken into account, DOT's budget is larger than HUD's budget, because it includes funding from transportation trust funds. Mandatory funding typically accounts for a little less than half of the bill total. In the deliberations on FY2013 THUD funding during the second session of the 112th Congress, the House passed a THUD bill (H.R. 5972) and the Senate Committee on Appropriations reported out a THUD bill (S. 2322), but this bill was not passed by the Senate. Thus Congress did not enact a separate THUD funding bill prior to the beginning of FY2013. THUD appropriations for FY2013 were provided through a pair of continuing resolutions (CRs): P.L. 112-175 provided funding from the beginning of FY2013 through March 27, 2013, and P.L. 113-6 provided funding through the end of FY2013. These CRs provided funding at roughly the FY2012 level. These CRs included several exceptions (anomalies) for individual DOT and HUD accounts. P.L. 113-6 also included an across-the board rescission of 0.2%. FY2013 THUD funding was further reduced by the imposition of a sequester, per the terms of the Budget Control Act. The sequester reduced DOT funding by around $1.6 billion, and HUD funding by around $3 billion. In terms of final FY2013 THUD funding, Congress enacted $71.3 billion for DOT in FY2013; after the sequester reduction, DOT received around $70.6 billion. Congress enacted $33.4 billion for HUD in FY2013, pre-sequester. Accounting for sequestration, HUD was provided with about $31.4 billion in FY2013.

Everyone eats. As a result, everyone is affected to some degree by food price changes. This makes understanding food price changes and their effects on consumers an important matter for Congress. This report provides information on the current status and outlook for U.S. food prices, measuring their changes and how such changes relate to U.S. consumers. The first section of the report, " Consumer Demand ," briefly reviews the major economic concepts underlying consumer food behavior. The second section, " The Consumer Price Index (CPI) ," describes how U.S. food price inflation rates have evolved since 1915, when federal price data collection for inflation-measuring purposes began. The third section, " Consumer Income and Expenditures ," provides information on recent history and projections for U.S. food expenditure shares relative to total household budget, with comparisons across income quintiles, as well as internationally. The fourth section, " Recent Food Price Inflation ," examines retail food price inflation, including a review and discussion of the level of food price inflation registered by the consumer price index for all-food, at-home-food, and away-from-home-food purchases as well as for major food groups. Finally, a fifth section, entitled " Effect of Retail Price Changes ," briefly discusses the impact that rapid food price inflation can have on government food programs and the more vulnerable consumer groups. Each section may be read independently of the others. Thus, those readers that are concerned primarily with the current status of U.S. retail food price inflation may proceed directly to the sections entitled " Historic Price Inflation Patterns ," " Recent Food Price Inflation ," or " Effect of Retail Price Changes ." Consumer demand is influenced by economic factors—own-price, the price of close substitutes, the price of complementary items, and household income—as well as by several non-economic factors including tastes and preferences, family size, age of family members, geographic location, shopping behavior, and lifestyle choices. Economists attempt to study and measure the nature of consumer behavior in response to changes in prices, incomes, and household characteristics, with an eye for understanding the potential social welfare outcomes that may result from price and income changes across different socioeconomic groups. Policymakers, in turn, often attempt to use that information to design and implement policies that mitigate the more deleterious effects of price and income changes on consumers. In general, consumers will use less of any good if its price increases relative to other goods (referred to as the pure "substitution effect" by economists). However, a consumer's price responsiveness is a matter of degree and is subject to the potential influence of disposable income as well as other non-price factors such as those listed in the preceding paragraph. Under most circumstances, the availability of many close substitutes is likely to make consumers more sensitive or responsive to price changes, because they have the opportunity to switch to similar alternatives. In contrast, a lack of substitutes may give the consumer little choice but to continue to purchase the available good, even as its price rises, especially if it is deemed a necessity. Strong ethnic or cultural tastes and preferences may endear a person to a particular food type such that he or she will continue to purchase that food as its price rises even in the presence of abundant substitutes (for example, ethnic groups that are accustomed to eating rice at every meal may be reluctant to switch to bread or potatoes even if the price of rice rises relative to those other foods). Rapid or unexpected changes in retail food prices will impact some consumers more than others depending on income levels and the importance of the affected food items in consumers' budgets. In general, if an item represents a very small portion of the consumer's budget (for example, consider salt), then a consumer is less likely to respond to a price change. For the average American consumer, basic food staples such as bread, potatoes, pasta, and rice tend to take smaller shares of the food budget (relative to meat, dairy products, fruits and vegetables, and more processed food products), and, as a result, consumers are less responsive to a change in their price. In contrast, high-valued food items such as expensive cuts of meat or seafood probably represent more costly (and infrequently purchased) delicacies for most households. As a result, most households will tend to be far more responsive to changes in the prices of such high-valued products than for basic staples. Often a price change for an item within a specific food group may result in consumers switching to lower-quality items within that food category—the classic example being a switch from steak to hamburger when meat prices rise. In contrast, a widespread price rise across all food groups may engender substantial reshuffling of consumer food budget allocations as households try to meet their nutritional goals with their limited budgets. Of course, the absolute size of a consumer's disposable income is also important in determining actual purchasing power. For households with smaller incomes, the food budget itself is likely a larger portion of total household expenditures, and such households are likely to be more responsive to price changes across all food categories than are higher-income households. In summary, lower-income consumers who spend a significant share of their household budget on food are likely to be impacted more severely by rising food prices (and are likely to be more responsive to price changes) than high-income consumers with lower food budget shares. A household's absolute level of disposable income (and, to a lesser degree, wealth) directly affects its ability to respond to price changes. As a result, as household incomes grow, consumers often opt for more expensive or higher-quality selections of foods than are presently in their food budget, or may experiment by trying new or unfamiliar foods. For example, as incomes increase in less-developed countries, it is common to see per-capita expenditures on meat and dairy products increase. In contrast, when incomes decline, consumers tend to pull back from more expensive options. If the income decline is severe and is perceived as permanent or long-lasting, consumers may make substantial changes to their food budget choices. In the aggregate, household consumption behavior in response to perceived income changes (if persistent and widespread) may affect a country's agricultural production or trade patterns, or it may impact the health and nutritional status of certain segments of the population. As a result, it is important for policymakers to monitor household wealth and income levels and distribution for unexpected shifts that may have important economic or health consequences. Economists call the relationship between changes in consumer income and the quantity of an item purchased an Engel curve . This relationship is used by economists to classify goods. For a normal good , consumers buy more of it as incomes increase, but at a decreasing rate such that its average budget share declines at higher income levels. For a luxury good , consumers buy more of it as their incomes increase and at an increasing rate such that its budget share increases at higher income levels. For an inferior good , consumers buy less of it as their incomes increase. Non-economic factors such as cultural or ethnic preferences may determine both the share of a particular food product in the household's budget (e.g., rice represents a larger share of per-capita expenditure in most Asian households than in most European households at similar income levels) as well as a household's responsiveness to a change in the price of a particular product. Dietary needs also change with age and gender. For example, young children and adolescents generally need both more calories and a higher portion of protein-based calories to meet nutritional demands of rapid physical growth and high activity levels. Populations or households with a large share of individuals from this demographic stratum are more likely to consume larger per-capita portions of meat and dairy products than an older, more mature and sedentary population would. As a result, population demographics such as household composition, size, and age structure often play an important role in consumer price sensitivity and income responsiveness. Shopping behavior—for example, impulse purchases, quick-stop shopping at convenience stores to and from work, or weekend shopping at big-box discount stores—can influence the food choices as well as the average per-item prices paid by a household. Also, a household's geographic location—for example, inner city, suburbs, or rural areas—may restrict both a consumer's selection of goods and the price range paid for them. Finally, in increasingly affluent societies, lifestyle choices—for example, frequency of dining out, meal choices, etc.—when complemented with sufficient purchasing power, can also play an influential role in household food purchases. For households with low disposable income levels where food expenditures are a large share of the budget, rising food prices result in greater responsiveness and may force more difficult budgetary tradeoffs than in higher-income households with smaller food-budget shares. Of course the opposite effect is true during periods of falling prices. However, each household's price and income effects also are influenced by its particular set of non-economic characteristics. The CPI is perhaps the most widely reported measure of U.S. price inflation. The CPI is used both as an economic indicator of retail price inflation and as a means of adjusting current-period values for inflation. The "All-Items" CPI is the index most often referred to (i.e., the headline CPI) for representing consumer price inflation. It is generally divided into eight major spending categories, including a "Food and Beverage" category comprising 15.3% of the overall index. The CPI category of "Food and Beverages" is composed of two major subcategories: "All-Food" (which has a relative weight of 14.3% in the all-items CPI) and "Alcoholic Beverages" (1.0%). The All-Food CPI is the principal indicator of consumer food price changes ( Figure 1 ). The All-Food CPI can be subdivided into the "Food-at-Home" (59.1%) and "Food-Away-from-Home" (40.9%) categories. The Food-at-Home CPI reflects changes in the prices of foods consumed at home. As such it is the principal indicator of changes in retail food prices in the United States and includes prices of foods purchased at grocery stores, food marts, and big-box discounters (e.g., Walmart, COSTCO, etc.). The Food-Away-from-Home CPI reflects changes in the prices of foods purchased and consumed outside of the home, such as restaurants and other eating and drinking establishments. However, it also includes price changes for ready-to-eat foods purchased at hotels and motels, recreational places and sporting events, vending machines, and school and work cafeterias. Over time, the All-Food and All-Items CPIs have moved together, although the All-Food CPI has been consistently more variable than the All-Items CPI ( Table 1 and Figure 2 ). Prior to 1960, both of these indexes exhibited higher average inflation rates and more volatility than in recent years. During the 1914-1920 period—which encompassed the international market turmoil associated with World War I—both price indexes recorded double-digit average annual inflation. Food inflation hit its all-time high of 28.7% in 1917 ( Figure 2 ). All-Items price inflation peaked a year later at 18%. Just four years later, starting in 1921, retail prices entered a prolonged deflationary period, with a plunge of -24.2% for All-Food and -10.5% for All-Items, that essentially lasted until 1941 when the wartime shortages of World War II finally renewed retail price inflation. The variability of the overall CPI and its individual components is important because uncertainty about price changes makes planning more difficult—whether the meal planning of a household, the investment planning of a business, or the policy intervention planning of a federal agency. During the 1941-1960 period, price inflation remained extremely volatile, alternating between spikes of inflation and steep disinflationary (i.e., deflationary) drops. It was not until 1960 that retail prices stabilized with tolerably mild inflation. However, this proved short-lived as the 1970s saw a return to sharp price spikes generated by an energy crisis and rapid, unexpected shifts in global crop supply and demand. By the early 1980s, retail price inflation had returned to modest levels below 5%. Since 1983 retail prices, as measured by the All-Items and the All-Food CPIs, have been relatively low and relatively stable, except for temporary surges in 1989-1990 and again in 2007-2008. Many economists and policymakers believe that the food and energy components of the CPI are volatile and subject to shocks not easily dealt with through government monetary policy. In response, BLS also reports another price index, referred to as the "core" index because it removes the food and energy price components from the All-Items CPI. The so-called core CPI is thought to be a useful measure of underlying trend inflation in the short run. The food component of the CPI, although more volatile than the overall CPI, is substantially less volatile than the energy component ( Figure 3 and Table 1 ). Since 1960, the energy price index has been a more volatile component of the All-Items CPI than the food price index by a substantial margin. For example, the energy price inflation standard deviation (SD) of 9.1% was more than double the All-Food SD of 4.1% during the 1960-1983 period, and over six times larger since 1983 (7.9% versus 1.2%). Since 1983 both the All-Food and the All-Items CPIs have been lower (in terms of average values) and substantially more stable (in terms of SDs) than during the preceding seven decades. In contrast, the energy price index has remained nearly as volatile since 1983 (although at a lower mean level) as it was during the preceding two decades. This is an important point because the energy price index has seen its weighted share of the CPI gradually increase over time and, although energy's current weight share of 9.7% is slightly more than half that of the food weight share of 15.3%, energy price inflation is far more insidious than food inflation to the extent that energy costs figure in the retail price of practically every other component of the CPI. A household allocates its available income across a range of expenditure, savings, and investment choices. As mentioned earlier, food expenditures as a share of a household's total budget are an indicator of sensitivity (or vulnerability) to unexpected food price changes. At the national level, food budget share (via Engel's law) can be used as a general indicator of welfare among nations. U.S. consumers have seen their "well-being" improve substantially over the past 80 years ( Figure 4 ) as measured by both food budget share and real disposable personal income (DPI) per capita. However, these national averages ignore any potential income distribution issues. In 2013 total U.S. DPI was $12,505 billion, or $39,518 per capita—in inflation-adjusted 1982-1984 dollars this equaled nearly $17,000 per capita DPI. On average, 9.8% of disposable personal income was spent on food in 2013. The U.S. food share of real DPI has fallen from a high of 25.2% in 1933 to under 10% since 2000, while the average DPI per capita (in 1982-1984 dollars) has risen from $2,838 in 1933 to nearly $17,000 by 2013. Based on 2013 Consumer Expenditure Survey (CES) data ( Table 2 ), average food outlays of $6,602 per household accounted for 13.0% of average total consumer expenditures of $51,100 per household. The difference between the two food-budget-share estimates (9.8% based on DPI versus 13.0% based on CES total expenditures) is due to how disposable income and food expenditures are calculated for each of these indicators. The share of household All Food and Food-at-Home expenditures ( Table 2 ) varied across income quintiles, in accordance with Engel's law—that is, each succeeding higher income quintile increased its absolute dollar expenditures on food, but at a decreasing rate such that the Food-at-Home budget share declines across higher quintiles. For example, the lowest 20% of U.S. households spent $2,514 on Food-at-Home , or 11.4% of their average total expenditures of $22,393 in 2013, whereas the highest 20% of households spent $6,058 on Food-at-Home , or a 6.2% share of their average total expenditures of $99,237. However, the budget shares for Food-Away- f rom-Home do not fully comply with Engel's law—they decline across income quintiles until the third income quintile, then decline until the fifth quintile. This pattern suggests that other factors (possibly lifestyle and/or work-related) are influencing Food-Away- f rom-Home spending choices. In summary, BLS data show that lower-income U.S. households tend to spend a larger share of their food budget on Food-at-Home consumption and are thus more vulnerable to unexpected retail food price increases (this is discussed further in the next section). U.S. households have shown a strong propensity over time to increase their share of annual food consumption outside of the home ( Figure 5 ). With the exception of a brief period following the end of World War II, the portion of the national food budget spent on food consumption away from the home has steadily increased from 12.7% in 1930 to an estimated 43.2% in 2013. This phenomenon is associated with: increasing per-capita disposable income, increasing female participation in the labor force, more two-earner households, increased advertising and promotion by large food-service chains, increasing time constraints on household members (e.g., longer commutes, increased work hours and less leisure time, etc.), the smaller size of U.S. households, and the increased availability of relatively low-cost, fast-food establishments. The tendency for increased Away-from-Home food consumption has important implications for consumer responsiveness to price and income changes, as well as for household nutrition. This is because prices of Food-at-Home purchases are significantly more volatile than are prices of food-away-from-home purchases ( Table 1 and Figure 6 ). ERS research suggests that Away-from-Home expenditures are typically higher for single-person households and households containing multiple adults without living-at-home children. By implication, households with living-at-home children typically rely more on Food-at-Home consumption (as a share of their budget) and are thus more vulnerable to the normally higher price variability associated with retail food prices. A comparison of food budget shares (based on Food-at-Home expenditures) from over 70 countries ( Table 3 ) suggests that, on average, the United States has achieved a higher level of social welfare (based on this particular indicator) than any of the other countries in the database. The food budget share is only one indicator of national welfare and ignores any unfavorable distribution of the food expenditure share (should any exist). Even the lowest 20% of U.S. households, on average, spent less than 12% of their budgets on at-home food consumption in 2013 and, thus, appear relatively well-off in food terms based on this particular international standard ( Table 2 ). Readers should note that this cursory assessment is aggregate in nature and does not exclude the possibility that there are food-deficient individuals within the lowest 20% quintile of the U.S. population. According to ERS, in 2012, an estimated 14.5% of U.S. households were food-insecure at least some time during the course of the year—meaning that the food intake of one or more household members was reduced and their eating patterns were disrupted at times during the year because the household lacked money and other resources for food. This section provides a discussion of recently observed food price inflation, first based on an annual aggregate perspective, then from a monthly disaggregate perspective that examines price inflation for both Food-at-Home versus Food-Away-from-Home and major food groups. As a general rule, the All-Item and All-Food CPIs tend to move together. Following a relatively tumultuous period of price inflation in the late 1980s, both price indexes entered an extended period of relative stability. From 1991 through 2006, the All-Food CPI measured average annual inflation of 2.5%, compared with 2.7% annual average All-Items price inflation ( Figure 7 ). Several economic factors emerged in late 2005 that began to gradually push market prices higher for both raw agricultural commodities and energy costs. These factors included the rapid development of the U.S. biofuels sector, as well as rising consumer incomes, not just in the United States but globally, which sparked demand for meat and dairy products, food and feed grains, as well as energy and transportation resources, and a wide assortment of raw materials ranging from minerals and metals to coal and petroleum. Driven largely by these demand forces, both general inflation and food price inflation began to accelerate in 2007 and reached a peak in 2008 when the All-Items CPI reached 3.8%, highest since 1991, and the All-Food CPI peaked at 5.5%, highest since 1990 ( Figure 7 and Figure 8 ). For a given level of income, higher prices mean lower effective purchasing power, since the same household budget will now acquire a smaller volume of products. The negative aspects of the sharp rise in retail food prices that occurred in 2007 and 2008 were magnified by a global financial crisis that emerged in 2008 and led to declines in both real (i.e., inflation-adjusted) gross domestic product (GDP) and real household disposable personal income (DPI)—after 15 consecutive years of positive growth both aggregate income indicators fell modestly in 2008, real GDP by 0.3%, and real DPI per capita by 0.2% ( Figure 9 ). The situation of sharply rising prices through the first half of 2008 came to a sudden halt when the financial crisis hit U.S. and global commodity and financial markets in mid-2008 leading to a severe economic recession in 2009. Annual average real GDP declined by 2.8% in 2009, the sharpest decline since 1946 ( Figure 9 ). Real DPI per capita also plunged downward in 2009, falling by 1%, sharply reducing average consumer purchasing power. The economic downturn also manifested itself in a decline in household wealth due to sharply lower real estate values, tighter business and consumer credit, stagnant wage rates, and rising unemployment numbers ( Figure 10 ). Unemployment is generally a lagging indicator in that it moves slowly and with a substantial delay relative to an economic downturn. This is primarily because employers need several months to determine the permanency of an economic downturn before idling productive resources including laying off workers. As a result, the U.S. unemployment rate associated with the economic recession of 2008 and 2009 did not peak until 2010, when it reached 9.6%. From 1995 to its upturn in 2009, the unemployment rate had averaged 5.1%. Monthly retail food price inflation responds with lags of up to several months to farm-level price changes in their underlying raw commodity markets. This is because, in part, the prices for raw commodities must work their way through the marketing chain to the retail level. Also, food processors and retailers are traditionally slow to pass on price decreases that they experience at the wholesale level for several reasons, including substantial inherent operating risk associated with volatile markets. Prices for most farm-level agricultural commodities peaked in early 2008, then began a steady decline through 2010 reflecting abundant supplies, as well as the economic crises and diminished consumer purchase power. However, most retail prices were slow to reflect farm-level commodity price declines, and it was only in late 2008 that retail prices began to significantly retreat for most foods. As a result, annual retail food price inflation peaked at 5.5% in 2008 before falling to 1.8% in 2009 and 0.8% in 2010 ( Figure 8 ). Monthly price data ( Figure 11 and Figure 12 ) more clearly show the strong inflationary and deflationary cycles that have dominated food price movements since 2008. After spiking up sharply during 2008, sharply lower raw commodity and energy costs combined with weak domestic and global economies to reduce inflationary pressures by mid-2009 for both the All-Items and All-Food price indexes. The change in month-to-month retail food prices declined precipitously through 2009 even though farm prices had stabilized by early 2009. The downward monthly price inflation trend reversed itself in mid-2009; however, average annual food price inflation continued to fall, hitting 0.8% in 2010. However, the All-Items CPI was subject to much stronger deflationary pressures than the All-Food CPI, particularly from weakening energy markets. As a result, the disparity between the two indexes widened in 2009 as the All-Items CPI fell at an annual rate of -0.4% ( Figure 7 ). By late 2009 global economies resumed growing, albeit slowly, followed in 2010 by more robust growth in the U.S. economy ( Figure 9 ), thus reversing the deflationary price pattern. Because of the lags in the price-signal response process (referred to as price transmission by economists) described earlier, the price deflationary trend persisted into 2010 and provided some budgetary relief for households with employed members. However, surging unemployment numbers (also lagging well behind the general economy) meant that many households were unable to take advantage of food price declines. By late 2010, prices for most food groups had resumed their upward surge into 2011 ( Figure 11 ) before sharply slowing their growth due to another bout of general economic weakness and persistently high unemployment. The unemployment rate peaked at 9.6% in 2010 but declined slowly to 8.9% in 2011 and 8.1% in 2012—still historically high levels. The U.S. and global economies remained sluggish through 2012 and into 2013, dampened by high unemployment, continued financial turmoil in Europe, and a slowing economy in China. This economic turn-around was reflected in declining monthly price inflation data into 2013 ( Figure 11 ). In early 2014, the U.S. economy again rebounded slightly ( Figure 9 ) and with it came a mild rebound in commodity price inflation. However, other major international economies remained weak, with little or no growth. U.S. agricultural exports peaked at record value in 2014, but by the end of the year, international market prospects dimmed. Food price rises slowed considerably and turned negative in early 2015. According to USDA, U.S. food price inflation is projected in the 2% to 3% range in 2015 ( Table 4 and Figure 8 ). Retail food prices have clearly been responding to the on-again, off-again demand driven by the cyclical nature of U.S. and global economic activity. Monthly All-Food price inflation data (adjusted for seasonality) are presented in Figure 12 , but for a longer time period and accompanied by their 11-month moving average (MA). The 11-month MA series reveals three recent pronounced inflationary-deflationary trends for retail food prices that have occurred since 2005: 1. a strong upward inflationary trend that began at the end of 2005 and persisted through June 2008—in line with the demand-driven price rises in global markets for agricultural commodities as well as for energy, transportation, and raw materials; followed by a severe deflationary price pattern from late 2008 until mid-2009, driven by the U.S. and global financial crisis of 2008 and its aftermath; 2. another upward trend starting in late 2010 as U.S. and global economic conditions slowly improved, followed by a decline in inflationary pressure in mid-2011 into 2013—again due largely to sluggish economic growth, stagnant wages, and persistently high unemployment, which combined to weaken consumer purchasing power; and finally 3. food price inflation returning in 2014 due to a strengthening U.S. economy and strong employment gains; followed once again by an apparent economic downturn heading into 2015. As shown earlier ( Figure 6 ), At-Home food prices are substantially more volatile than Away-from-Home food prices (see also Table 1 ). This volatility is apparent, even when using a shorter time period ( Figure 13 ). When displayed in terms of monthly price changes, the pattern exhibited by At-Home food price inflation ( Figure 13 ) appears very similar to the pattern for All-Food price inflation ( Figure 11 ), although the At-Home food price movements are more extreme. In contrast, monthly Away-from-Home price inflation is much more stable. Note that both At-Home and Away-from-Home monthly price inflation show a distinct downturn beginning in July 2008 and running into early 2009, followed by a steady recovery into 2011. However, the monthly Away-from-Home price inflation does not show the same declining trend that started in mid-2011 for At-Home monthly price inflation, nor the follow-on downturn in early 2015. The demand-side influences of income growth (and decline) and the global financial crisis that emerged in late 2008 have already been discussed. On the supply side, food price inflation is the result of dynamic forces that occur both at the farm, where the raw agricultural ingredients for retail food items are produced, and along the marketing chain, as the farm output is transformed and moved to the retail customer. An array of costs are layered on top of the price of the raw agricultural commodity, including handling, transportation, storage, and processing, as well as the insurance, financing, and advertising costs necessary to move the product to the retail customer. The relative importance of these marketing costs varies widely for different retail food products depending on the degree of processing and transformation (i.e., cleaning, packaging, shipping, advertising, etc.). As a result, economic forces such as higher energy costs or increased labor rates do not impact all food categories equally. More highly processed food products, where the farm-level commodity value contributes a small share to the final price, are less influenced by farm-level price changes than are those food products that have very little marketing and processing as part of the final retail product—for example, eggs, fresh meat, and certain fruits and vegetables. Food price inflation is not felt evenly across all food groups, but varies widely in terms of both the timing and the relative magnitude. However, the patterns displayed for At-Home food prices in Figure 13 are for the most part replicated across the individual food groups of Table 4 . In 2008, at-home food prices inflation of 6.4% was the highest since 1990. In 2009 and 2010, most food groups experienced very modest price inflation (0.5% and 0.3%, respectively); several categories experienced price deflation. Food price inflation turned upward sharply across most food categories in 2011. Food price inflation returned to its long-run trend of about 2.5% in 2012 with the notable exception of beef and poultry products, and fats and oils, which were up sharply. High feed costs and lack of pasture during 2012 (due to a severe drought across the Plains States and Cornbelt) contributed to substantial declines in livestock and poultry populations and cut into cattle feedlot and chicken grow-out profit margins, thus sparking concerns—but not shortages—at the retail level. Tight animal product supplies in 2011 and 2012 supported most animal product prices at above average price inflation levels during those years. As feed supplies rebounded in 2013, the hog, poultry, and dairy sectors began to expand (the beef sector is constrained by biology from rapid expansion). In 2014, prices moderated for most food categories except for dairy and livestock products, most notably beef prices, which surged at a 12.1% rate. Most commodity prices (with the exception of beef) are expected remain in the 2% to 3% range in 2015. Annual averages can cloud over substantial inter-year price movements. As a result, it is worthwhile to glance over the monthly price indexes by major food group to get a better sense of the general pattern of retail food price movements across the various food groups. A "common theme" across the various food product prices in the following charts is a sharp deflationary move associated with the fiscal crises of 2008 and subsequent recession, followed by a slow but sustained upward price trend since 2010, with a flattening of the upward price movement since 2012 (meat being the exception with its continued upward trend into 2015). Also, evidence (as presented in the following charts) suggests that highly processed foods more consistently adhere to steady, stable upward price trends dependent on general economic conditions. In contrast, prices for less-processed retail food products—such as eggs, milk, and fresh fruits and vegetables—respond far more quickly to changes in both farm commodity prices and economic conditions. Monthly price indexes ( Figure 14 ) for the four principal food groups—cereals and bakery products; meats (including beef, pork, poultry, and seafood); dairy products (including milk, cheese, ice cream, and other); and fruits and vegetables (including fresh as well as processed)—reveal variations of the "common theme" of price movement. The meat price index has shown the strongest increase since 2008, rising 32% by 2015. The cereals and bakery product price index has shown the least volatility. The dairy price index rose declined sharply from mid-2008 through 2009, before moving steadily upward from mid-2009 until 2015. The fruit and vegetable price index has shown considerable volatility. A general upward pattern has been punctuated by significant deflationary movements during 2007, 2009, 2010, late 2011, and again heading into 2015. Animal product prices ( Figure 15 and Figure 16 ) show a similar pattern of decline between 2008 and 2010, before rising into 2015. Steady U.S. economic growth coupled with relatively tight animal product supplies sustained retail prices for most animal products through 2014. Beef and pork prices have shown considerable strength since early 2010 although pork prices temporarily tailed off during 2012-2013. Low cattle populations are expected to support beef prices through 2015. However, the rapid expansion of the hog sector in 2013 and 2014 has pushed supply past current demand, thus triggering lower prices heading into 2015. Poultry prices have been more stable and have ticked upward since late 2010, helped in part by high beef prices and consumer switching of meat choices. Perhaps the most dramatic and volatile of the individual animal product price indexes has been eggs ( Figure 15 ), which underwent a severe deflationary period from mid-2008 through 2009 before growing steadily into 2015. Stronger egg production coupled with the global economic crisis dampened prices starting in the latter half of 2008. General economic growth has pulled egg prices upward steadily since mid-2009, just surpassing their mid-2008 peak in June 2013. The individual components of the dairy group ( Figure 16 ) followed distinctly different patterns. Cheese and fresh milk prices exhibited deflation from mid-2008 until late 2009 due to initially tight supplies and expensive feed costs, followed by increased supplies and a sharp drop in demand. A resumption of U.S. and global economic growth (albeit slow) has helped sustain price increases in late 2009. The dairy sector experienced a slow down with the stalling economy in 2012 and 2013 before surging upward in 2014 as the general economy surged. The overall dairy index mimics closely the cheese index since cheese is the principal use category and accounts for much of dairy price formation. Prices for highly processed ice cream showed a far more stable pattern and have generally reflected overall economic conditions. Similar to ice cream, the price index for processed fruits and vegetables ( Figure 17 ) has tended to follow general economic conditions. In contrast, the price indexes for both fresh fruit and fresh vegetables have exhibited greater volatility, incorporating aspects of both the general economy as well as supply and demand conditions for the raw commodities. The ongoing drought in California is likely to have a major impact on the state's agricultural production. Long-term moisture deficits across most of the state remain at near-record levels. Because California is the major U.S. producer of fruit, vegetables, tree nuts, and dairy, the drought has potential implications for U.S. supplies and prices of affected products. USDA currently projects combined U.S. fruit and vegetable prices to rise by 2% to 3% in 2015, with fresh fruits projected up 2.5% to 3.5%. The price indexes for highly processed snacks, sugar and sweets, and fats and oils ( Figure 18 ) are similar to other processed food products or products with inelastic demand—they tend to follow general economic conditions. Again, the prepared-food group (which includes frozen and freeze-dried prepared foods) and the carbonated beverages indexes tend to follow the swings in consumer demand as reflected by the general economy ( Figure 19 ). Carbonated beverages have shown greater price inflation since 2010 compared with prepared foods which are more dependent on the U.S. market. Coffee prices are strongly linked to international supply and demand conditions and have exhibited greater volatility as a result. As stated earlier in this report, lower-income consumers who spend a significant share of their household budget on food are likely to be impacted more severely by rising food prices, to be more responsive to price changes, and to be forced to make more difficult budgetary tradeoffs than high-income consumers with lower food budget shares. The United States has several domestic programs that are designed to help consumers meet their household food and nutrition needs during periods of economic downturn when household purchasing power is diminished. In addition, the United States has a history of providing significant international food aid during periods of famine or food shortages throughout the world. Both domestic and international U.S. food assistance programs are directly influenced by food price inflation. Many wages and salaries, as well as federal programs (including several domestic food assistance programs), are linked to price inflation through escalation clauses in order to retain their purchasing power. For households where income does not keep up with price inflation, declines in purchasing power are both real and immediate. However, even for households with escalation clauses that adjust incomes or benefits for price inflation, there is a time lag between the time the price inflation is measured and the time when the wage or program benefit is adjusted upward to compensate. As a result, for households with incomes or federal benefits linked to price inflation escalators, higher prices can cause a short-term decline in real purchasing power. This is most meaningful when prices are accelerating. When prices are falling, as during a deflationary period, consumers with fixed incomes realize gains in real income (provided that they are not subject to wage cuts or layoffs). The U.S. Department of Agriculture (USDA) administers several domestic food and nutrition programs that provide a nutritional safety net for millions of low-income households, as well as schoolchildren and nutritionally vulnerable groups such as pregnant and/or lactating mothers. The past decade has seen a tremendous expansion in use of USDA's food and nutrition assistance programs—since FY2000, expenditures for food and nutrition assistance have more than tripled ( Figure 20 ). Federal expenditures totaled $109.2 billion in FY2013 and marked the 13 th consecutive year in which food and nutrition assistance expenditures exceeded the previous historical record. Total outlays declined slightly to $103.6 billion in FY2014. USDA's expenditures for food and nutrition assistance programs can be grouped into five main categories: (1) the Supplemental Nutrition Assistance Program (SNAP); (2) school food programs (including the National School Lunch Program and the School Breakfast Program); (3) the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC); (4) the Child and Adult Care Food Program; and (5) food distribution programs including Nutrition Services Incentive Program (NSIP), Food Distribution on Indian Reservations (FDPIR), Commodity Supplemental Food Program (CSFP), and the Emergency Food Assistance Program (TEFAP). SNAP is the largest of these programs and accounted for 73% of federal food and nutrition assistance spending in FY2014. SNAP provides monthly benefits for eligible participants to purchase food items at authorized food stores. A substantial portion of spending on food and nutrition assistance programs is in the form of entitlements (i.e., mandatory spending) whereby eligibility and participation rates govern outlays. For mandatory programs, food price inflation leads to more spending on domestic assistance efforts. Increasing prices encourage those who are eligible, but not participating, to enroll. They also translate directly (albeit with a time lag) into higher benefit payments and per-meal subsidies for "entitlement" programs in which benefits are indexed to food-price inflation. However, many of these programs also include discretionary components where outlays are determined through the annual appropriations process. Increasing prices place pressure on appropriators to provide more funding to support caseloads for "discretionary" programs like the WIC program. The 2008-2009 global economic crisis—with its higher unemployment, income loss, and lower effective household purchasing power—following on the heels of higher retail prices, brought on higher participation rates and greater costs for domestic food aid programs. Although the U.S. economy resumed growth during 2010, unemployment ranks have been slow to follow. This is reflected in high SNAP participation levels, which hit an all-time high of 47.8 million (or 15.2% of the U.S. population) in December 2012. SNAP monthly benefit costs have grown from $2.4 billion in May 2006 to a peak of $6.5 billion in November 2012, with average per-person monthly benefit spending rising from $93 to $135.73. Other domestic food assistance programs have seen similar increases in participation (and costs). The SNAP, with over $74.1 billion in outlays in FY2014, is the largest of the federally supported domestic food assistance programs. SNAP benefits normally are indexed annually (each October) for changes in the cost of USDA's least costly food plan, the "Thrifty Food Plan" (TFP). However, the increases are lagged by three months in reflecting rising food costs—they were (by law) based on prices from the immediately previous June. Thus, there is a three-month gap between the calculation of the price inflation index in June and its use to adjust SNAP benefits in October. In recognition of the lag in the inflation index for SNAP benefits, increased food needs, and reduced income, the 2009 American Recovery and Reinvestment Act (ARRA; P.L. 111-5 ) provided additional support for domestic food assistance programs: an estimated $11.5 billion for FY2009-FY2010 and $20.8 billion through FY2019. SNAP was the primary recipient of this new money, most of which is being used to pay for added benefits, loosened eligibility standards, and administrative costs. However, these increased SNAP benefits were reduced as part of P.L. 111-226 (a law providing funding for education jobs and Medicaid) and were further reduced by child nutrition reauthorization legislation (the Healthy, Hunger-Free Kids Act of 2010; P.L. 111-296 ). As a result of these cuts, in November 2013 SNAP benefits will revert to what basic SNAP law directs (i.e., as calculated using annual food-price inflation). Federally supported child nutrition programs (e.g., the National School Lunch Program, the School Breakfast Program, the Special Milk Program, Child and Adult Care Food Program, and the Summer Food Service Program) and initiatives reach over 30 million children annually. In FY2014, federal spending on these programs totaled nearly $20 billion, the second-largest federal commitment to domestic food assistance. The basic goals of federal child nutrition programs are to improve children's nutrition, increase lower-income children's access to nutritious meals and snacks, and help support the agricultural economy. Federal payments for meals and snacks served to children are indexed every July to food-price changes reflected in the Food-Away-from-Home component of the CPI over the 12-month period ending each May. Commodity support also is indexed annually based on the Bureau of Labor Statistics' Producer Price Index for five major food components (cereal and bakery products, meats, poultry and fish, dairy products, processed fruits and vegetables, and fats and oils). Unlike the SNAP and child nutrition programs, which receive mandatory funding, the WIC program is funded from discretionary sources. Spending depends on annual appropriations, based largely on estimates of participation and the cost of the food packages that are purchased with WIC vouchers. In FY2014, $6.2 billion was spent on WIC, including $4.3 billion in food costs and $1.9 billion in nutrition service and administrative costs. The average monthly food cost per participant was $43.65. The value of benefits is not indexed to inflation, per se. Rather, WIC vouchers are redeemable at whatever the participating retailer charges for the items covered by the vouchers, which differ according to the type of recipient (e.g., pregnant mother, infant, and child). As a result, the cost of WIC vouchers reflect food price changes without the time lag built into other inflation-indexed nutrition programs. Just as important, WIC vouchers are highly specific as to the food items they cover and have a relatively heavy emphasis on certain types of food—for example, dairy items and infant formula are major components. In recent years, the cost of WIC food vouchers has varied a great deal, largely because of changes in dairy-related food prices. The average per-participant monthly cost of vouchers has ranged from $33.06 in FY2000 to $46.69 in FY2011. However, the annual percentage increase has actually declined in some years (FY2005 and FY2006) and increased substantially in other years. Given this significant volatility, it is difficult to produce specific estimates of the effect of food price inflation on WIC program costs. Although WIC spending is discretionary, Congress has historically shown a willingness to appropriate whatever amounts are necessary to meet costs imposed by increased participation or food costs. USDA operates several additional food assistance programs targeting low-income or vulnerable populations. The Emergency Food Assistance Program (TEFAP) and meal service programs under the Older Americans Act (e.g., "meals-on-wheels" and meals served to seniors in congregate meal settings) provide key food assistance support for vulnerable groups. The Commodity Supplemental Food Program (CSFP) provides foods purchased by USDA to low-income infants and children up to age six, low-income pregnant and postpartum women, and to low-income senior citizens. The Senior Farmers' Market Nutrition Program (SFMNP) provides coupons to low-income seniors that can be exchanged for fresh, nutritious, unprepared, locally grown fruits, vegetables, and herbs at farmers' markets, roadside stands, and community-supported agriculture programs. Like WIC, these programs are discretionary, and rising need and higher food prices have placed pressure on appropriators to add to federal funding. USDA's international food and nutritional assistance activities are funded by discretionary appropriations—primarily under the Food for Peace Act (P.L. 83-480) as amended by the 2014 farm bill (Agricultural Act of 2014; P.L. 113-79 ). Average annual spending on U.S. international food aid programs has average $2.6 billion since FY2006. Food aid usually takes the form of basic food grains—such as wheat, sorghum, and corn—and vegetable oil, as well as blended and/or processed food products. Because foreign food aid is a budget value and not a food volume, its effective "purchase power" for acquiring U.S. agricultural commodities in domestic wholesale markets for delivery to foreign countries is diminished by food price hikes without additional appropriations. Also, higher energy costs increase the shipping costs to move food purchases and food aid to foreign countries further limiting the budgetary purchase power of food aid dollars. Unlike some domestic nutrition programs, foreign food aid does not have an escalation clause to adjust for changing costs. U.S. food aid also has certain delivery requirements that add to the program's vulnerability to general price inflation. Ocean transport of government-generated shipments is governed by the Cargo Preference Act, P.L. 83-644 (August 26, 1954). This act contains permanent legislation requiring that at least 50% of the volume of U.S. agricultural commodities financed under U.S. food aid programs ship on U.S.-flag vessels. Excess costs are usually incurred because freight rates on U.S.-flag vessels are generally higher than on foreign commercial ships. There is growing interest from the Administration and certain Members of Congress, but also from the international development community, for the United States to switch its food assistance program over to cash rather than kind. Such a switch would avoid the costly effects that domestic food price inflation has on the food aid budget, while sidestepping completely the obligation to ship food aid on more expensive U.S.-flagged vessels.

The heightened price volatility of global commodity markets in 2008, the devastating U.S. drought of 2012, China's growing demand for international commodities, and almost routine media reports of daunting world population growth all raise the specter of food price inflation and generate many questions about farm and food price movements. Understanding food price changes and their effects on consumers is an important matter for Members of Congress and their constituents. This report provides information on the current status and outlook for U.S. food prices, measuring their changes and how such changes relate to U.S. consumers. Despite the hype associated with media coverage of international catastrophes, historical evidence suggests that prices for retail food products are driven more by consumer demand (strongly linked to general economic conditions), than by price changes in raw commodity markets, although this linkage varies with the degree of raw commodity content in the retail product. For a discussion of the relationship between farm and retail prices, and the major factors influencing farm-level and wholesale food prices, see CRS Report R40621, Farm-to-Food Price Dynamics. During the 1991 to 2006 period, U.S. food prices were fairly stable—annual food price inflation, as measured by the Consumer Price Index (CPI) for All Food (excluding alcoholic beverages), averaged a relatively low 2.5%. However, several economic factors emerged in late 2005 that began to gradually push market prices higher for both raw agricultural commodities and energy costs, and ultimately retail food prices. U.S. food price inflation increased at a rate of 4% in 2007 and at 5.5% in 2008—the highest since 1990 and well above the general inflation rate of 3.8%. The situation of sharply rising prices came to a sudden halt in late 2008, when the financial crisis led to a severe global economic recession. Annual food price inflation dropped to 1.8% in 2009 and 0.8% in 2010, driven by the global financial crisis and its aftermath. In 2011, improving U.S. and global economic conditions led to a 3.7% rise in average food prices. However, since 2012, food price inflation has averaged 2.5%—due in part to continued sluggish economic growth and stagnant wages, which combined to weaken consumer purchasing power. The U.S. Department of Agriculture (USDA) projects that annual U.S. food price inflation will be in the 2% to 3% range in 2015 compared with 2.4% in 2014. For households with low disposable income levels where food expenditures are a large share of the budget, rising food prices result in diminished purchasing power and may force difficult budgetary tradeoffs. To help food-deficient households during periods of rising prices, many domestic food assistance programs are linked to price inflation through escalation clauses, in order to retain consumer purchasing power during periods of rising food prices. However, even for programs with escalation clauses, a time lag usually occurs between the time the price inflation is measured and the time when the wage or program benefit is adjusted upward to compensate. The All-Food CPI has two components—Food-at-Home and Food-Away-from-Home. The Food-at-Home CPI is most representative of retail food prices and is significantly more volatile than the Food-Away-from-Home index. However, both indexes, Food-at-Home and Food-Away-from-Home, are projected at 2% to 3% for 2015.

In recent years, some scholars, legislators, and others have proposed to reexamine and potentially reinterpret the U.S. Constitution's Citizenship Clause to change and limit the current rule of conferring U.S. citizenship at birth to any person born in the United States, or "birthright citizenship." The Citizenship Clause is the first clause of the Fourteenth Amendment, and states: "All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside…." The policy debates on the topic of birthright citizenship are far-ranging, driven by concerns regarding unauthorized immigration, global antiterrorism efforts, reports of "birth tourism," and congressional redistricting, among other issues. The legal debates, however, center squarely on the six words in the middle of the Citizenship Clause: "and subject to the jurisdiction thereof." The Citizenship Clause has conventionally been taken to require U.S. citizenship generally to be accorded automatically to any child born within the United States, regardless of the citizenship or status of the child's parents. The "subject to the jurisdiction thereof" language has been interpreted to impose limited exceptions, such as for children of diplomats and foreign ministers (who are accorded immunity from U.S. law). This interpretation flows from the English common law doctrine of jus soli ("right of soil"), under which a person's nationality at birth is determined by the territory within which the person was born. The alternative doctrine of jus sanguinis ("right of blood"), which determines a person's nationality by descent, is now the more common general system outside of North and South America. However, each system's adherents have incorporated some elements of the other, with few purely adopting one or the other. The jus soli interpretation of the Citizenship Clause is recognized in a number of judicial decisions; however, arguably, no case has ever directly held whether the Citizenship Clause extends to children of aliens who are present in the United States unlawfully. The factual scenarios of the key cases interpreting the Citizenship Clause, Elk v. Wilkins (1884) and United States v. Wong Kim Ark (1898), involved Native Americans and children of domiciled resident aliens, respectively. Elk found that members of Indian tribes were not granted U.S. citizenship by the Fourteenth Amendment (a situation which was eventually remedied by statute ), while Wong Kim Ark found that the child of Chinese citizens residing in San Francisco had become a U.S. citizen at the time of his birth and therefore was not subject to the Chinese Exclusion Acts of the time. Some scholarship in the past few decades has argued that the phrase "and subject to the jurisdiction thereof" in the Citizenship Clause was in fact intended by the framers of the Fourteenth Amendment to include only those children born to lawfully present or lawfully resident aliens, and not children of unauthorized or nonimmigrant aliens. These arguments have been embraced by some legislators, who have introduced bills since the early 1990s seeking to change the jus soli rule in various ways. Many of these bills target Section 301 of the Immigration and Nationality Act (INA), which tracks the language of the Citizenship Clause and states: "The following shall be nationals and citizens of the United States at birth: (a) a person born in the United States, and subject to the jurisdiction thereof…." Any statute reinterpreting the Citizenship Clause to exclude children of certain aliens would face judicial review by federal courts. Because of the core constitutional principles involved, it seems probable that any case on such a statute could reach the Supreme Court. The Court could find such a statute constitutional if it interpreted the "subject to the jurisdiction" language of the Citizenship Clause to exclude the children of certain aliens from the scope of the Clause's protection. To uphold a statute limiting birthright citizenship, it would also appear that the Court would have to find either (1) that the discussion in Wong Kim Ark apparently supporting the conventional interpretation of birthright citizenship was mere dicta, not binding precedent, and the case's holding was limited to the facts of that case; or (2) that Wong Kim Ark incorrectly interpreted the Citizenship Clause, at least in some respects, and should be overruled. If a statute could not change the meaning of the Citizenship Clause, then a constitutional amendment, as some have proposed, would have the power to do so. Proponents and opponents of the current birthright citizenship rule have marshalled a variety of arguments and historical records on all of these points. This report first sets the stage for analyzing the modern debates by providing a brief historical review of U.S. citizenship from the time of the founding through the Civil Rights Act of 1866 and the Citizenship Clause of the Fourteenth Amendment of 1868. It then describes the primary Supreme Court decisions analyzing the scope of the Citizenship Clause, as well as subsequent decisions generally reflecting the conventional understanding of birthright citizenship. This report then presents an overview of the main legal arguments for and against reassessing the scope of the Citizenship Clause, building on the history and judicial precedent described in previous sections. In light of the various bills that have been proposed to modify birthright citizenship, this report closes by discussing the primary legal considerations that would determine whether any congressional action to restrict birthright citizenship of U.S.-born children of alien parents without constitutional amendment could be upheld. The original framers of the U.S. Constitution referenced, but did not define, national citizenship. The Constitution required that a person have been a citizen of the United States for seven years to be a Representative and for nine years to be a Senator, and that a person be a natural-born citizen or a citizen at the time of the adoption of the Constitution in order to be eligible to be President. It also gave Congress the power to establish a uniform rule of naturalization, but naturalization refers to the manner in which a non-citizen acquires citizenship, rather than citizenship by birth. Nor did the Naturalization Act of 1790 or subsequent acts until the Civil Rights Act of 1866 define citizenship by birth within the United States. In the absence of any statement in the Constitution or federal statutes that U.S. citizenship was acquired by right of birth in the United States, citizenship at birth generally was construed in the context of the English common law. As noted by the Supreme Court, "[t]he interpretation of the Constitution of the United States is necessarily influenced by the fact that its provisions are framed in the language of the English common law, and are to be read in the light of its history." For example, in an 1824 inheritance case, the Supreme Court proceeded on the assumption that three girls born in the United States were citizens, although their father was an Irish citizen who never naturalized. In 1830, the Supreme Court held that the law of England as to citizenship at birth was the law of the English colonies, and that a person born in New York after the Declaration of Independence on July 4, 1776 was a citizen of the United States, unless he was born in British-occupied territory, left for England as a minor, and did not elect to affirm his U.S. citizenship within a reasonable time after attaining his majority. In another early case more directly on point, Lynch v. Clarke , a New York court held in 1844 that Julia Lynch, born to Irish aliens while they were temporarily sojourning in New York, was a U.S. citizen. In determining the appropriate national law to apply, the Lynch court looked to the traditional English common law doctrine of jus soli , holding that by the "law of the United States, every person born within the dominions and allegiance of the United States, whatever were the situation of his parents, is a natural born citizen." These birthright citizenship principles were not extended to slaves, or generally to Native Americans. Moreover, in the infamous 1857 case of Dred S cott v. Sandford , Supreme Court Chief Justice Roger B. Taney wrote that the Constitution "point[ed] directly and specifically to the negro race as a separate class of persons, and show[ed] clearly that they were not regarded as a portion of the people or citizens of the Government then formed," and held that the Constitution precluded both Congress and states from granting citizenship to descendants of slaves or people of African descent generally. As such, the Dred Scott decision applied a rigid racial limitation on the jus soli doctrine. Following the Civil War, Congress passed the Civil Rights Act of 1866. The first section of that act repealed Dred Scott . It provided "[t]hat all persons born in the United States and not subject to any foreign power, excluding Indians not taxed, are hereby declared to be citizens of the United States…." Prior to passage of the act, Congress debated its effects on citizenship, particularly the language "not subject to any foreign power, excluding Indians not taxed." Senator Lyman Trumbull, a lead sponsor, introduced language similar to the above but omitting the exclusion for "Indians not taxed" on January 30, 1866. Senator Trumbull explained that "[o]ur dealings with the Indians are with them as foreigners, as separate nations," and in response to an inquiry from Senator Edgar Cowen whether the provision would "have the effect of naturalizing the children of Chinese and Gypsies born in this country," responded: "Undoubtedly." Notably, Senator Trumbull and Senator Cowen agreed that "the children of German parents" were citizens under what was then the current law, and disagreed over the effects of race, rather than alien status of the parents. However, in other statements on the citizenship provision, Senator Trumbull discussed the requirements of citizenship to be enshrined by the provision in terms of "owing allegiance" to the United States, or similar conditions seemingly additional to geographic presence. The Civil Rights Act of 1866 was passed over President Andrew Johnson's veto on April 9, 1866, and the Fourteenth Amendment was introduced soon thereafter, in May 1866. As passed in the House and introduced in the Senate, the proposed Fourteenth Amendment lacked a citizenship provision. Senator Benjamin Wade proposed an amendment that would remove the word "citizen" from what would become the "privileges and immunities" clause and replace it with "person," saying that "the word 'citizen' … is a term about which there has been a good deal of uncertainty in our Government." In the discussion that ensued, Senator Wade explained his understanding that the only instance in which "a person may be born here and not be a citizen" was "in the case of children of foreign ministers…." The Citizenship Clause was initially introduced by Senator Jacob Howard to read: "All persons born in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the States wherein they reside." Senator Howard stated: This amendment which I have offered is simply declaratory of what I regard as the law of the land already, that every person born within the limits of the United States, and subject to their jurisdiction, is by virtue of natural law and national law a citizen of the United States. This will not, of course, include persons born in the United States who are foreigners, aliens, who belong to the families of ambassadors or foreign ministers accredited to the Government of the United States, but will include every other class of persons. Once again, Senator Cowen objected and inquired, "Is the child of the Chinese immigrant in California a citizen? … [I]s it proposed that the people of California are to remain quiescent while they are overrun by a flood of immigration…?" Senator John Conness, of California, responded: "The proposition before us … relates simply to the children begotten of Chinese parents in California, and it is proposed to declare that they shall be citizens…. I voted for the proposition to declare that the children of all parentage whatever, born in California, should be regarded and treated as citizens of the United States…." Further debate proceeded largely on the topic of Native American status. In that context, Senator Trumbull stated: "What do we mean by 'subject to the jurisdiction of the United States?' Not owing allegiance to anybody else. That is what it means. Can you sue a Navajoe [sic] Indian in court? Are they in any sense subject to the complete jurisdiction of the United States? By no means. We make treaties with them, and therefore they are not subject to our jurisdiction." Despite the Citizenship Clause's expansion of birthright citizenship to "all persons born … in the United States, and subject to the jurisdiction thereof" regardless of race, naturalization remained racially restricted even after the Fourteenth Amendment was ratified in 1868; the Naturalization Act of 1870 extended the naturalization process to "aliens of African nativity and to persons of African descent," but other aliens who were not "free white persons" remained excluded. The first Supreme Court decision to interpret the new Fourteenth Amendment, known as " T he Slaughter-H ouse Cases " decision, was not focused on the scope and interpretation of the Citizenship Clause. Among other conclusions, this landmark 1873 decision rendered the Privileges and Immunities Clause a "practical nullity" in holding that it referred only to federal rights as designated in the Constitution or as necessarily implied as belonging to citizens of the United States, and did not forbid the states from withholding the privileges and immunities pertaining to state citizenship. In the course of its decision, the majority stated that "[t]he phrase, 'subject to its jurisdiction,' was intended to exclude from its operation children of ministers, consuls, and citizens or subjects of foreign States, born within the United States." However, this statement is generally regarded as dicta, that is, a remark not controlling as precedent on later courts because it was made in reference to an issue not actually before the court. Elk v. Wilkins , decided in 1884, did target the meaning of the Citizenship Clause, although not with respect to children of aliens. John Elk was born a member of a recognized Indian tribe, but had separated from his tribe and "taken up his residence among the white citizens" of Omaha, Nebraska, although the petition in the case did not allege that he had ever been naturalized or taxed. A local registrar refused to register Elk as a qualified voter, on the grounds that Elk "was an Indian, and therefore not a citizen of the United States." The Supreme Court upheld the dismissal of Elk's case against the registrar, holding that the Citizenship Clause of the Fourteenth Amendment did not make members of Indian tribes U.S. citizens at birth, largely because of the tribes' special status as independent political communities. It declared that a member of an Indian tribe was born owing allegiance to that tribe rather than to the United States, and tribes were not fully subject to the jurisdiction of the United States. The Court stated: The evident meaning of these last words ["subject to the jurisdiction thereof"] is, not merely subject in some respect or degree to the jurisdiction of the United States, but completely subject to their political jurisdiction, and owing them direct and immediate allegiance. … Indians born within the territorial limits of the United States, members of, and owing immediate allegiance to, one of the Indian tribes (an alien, though dependent, power), although in a geographical sense born in the United States, are no more "born in the United States and subject to the jurisdiction thereof," within the meaning of the first section of the Fourteenth Amendment, than the children of subjects of any foreign government born within the domain of that government, or the children born within the United States, of ambassadors or other public ministers of foreign nations. To this day, the primary Supreme Court case on the meaning of the Citizenship Clause as to birthright citizenship remains United States v. Wong Kim Ark , decided in 1898. Wong Kim Ark was born in 1873 in San Francisco and resided and worked in California. His parents, who were Chinese citizens and ineligible to naturalize under then-existing law, returned to their home country in 1890. When Wong Kim Ark returned to the United States from a several month visit to China in 1895, he was detained on his steamship when a customs agent (responsible for immigration enforcement at the time) declared that he was not a U.S. citizen and that he therefore was barred from entry by the Chinese Exclusion Acts. The government argued before the Supreme Court that "subject to the jurisdiction" referred to those born within the political, not territorial, jurisdiction of the United States. It pointed to the Slaughter-House Cases , Elk v. Wilkins , international adoption of jus sanguinis rules, some historical documents, and policy grounds to argue for limits on citizenship. Wong Kim Ark's attorneys raised a number of arguments in opposition, including common law jurisprudence, the purpose of the Fourteenth Amendment and its context following the Civil War, and principles of national sovereignty. More than a year after the case was argued, Justice Horace Gray found for Wong Kim Ark in an opinion that: traced the development of the English common law with regard to jus soli , and countered the argument that it had been superseded by jus sanguinis ; read the original Constitution's references to citizenship in light of the common law while reviewing pre-Fourteenth Amendment judicial decisions on citizenship; delved into the legislative history of the Civil Rights Act of 1866 and the Fourteenth Amendment; reviewed interpretations of the Citizenship Clause by lower federal and state courts and the executive branch; analyzed and distinguished the Slaughter-House Cases and Elk v. Wilkins ; and stated: The foregoing considerations and authorities irresistibly lead us to these conclusions: The Fourteenth Amendment affirms the ancient and fundamental rule of citizenship by birth within the territory, in the allegiance and under the protection of the country, including all children here born of resident aliens, with the exceptions or qualifications (as old as the rule itself) of children of foreign sovereigns or their ministers, or born on foreign public ships, or of enemies within and during a hostile occupation of part of our territory, and with the single additional exception of children of members of the Indian tribes owing direct allegiance to their several tribes. The Amendment, in clear words and in manifest intent, includes the children born, within the territory of the United States, of all other persons, of whatever race or color, domiciled within the United States. The Court declared that "[e]very citizen or subject of another country, while domiciled here, is within the allegiance and the protection, and consequently subject to the jurisdiction, of the United States," reading allegiance fairly broadly and indeed "independently of any domiciliation … [or] renouncing any former allegiance…." The enumerated exceptions to birthright citizenship, for children of foreign diplomats, foreign public ships, or hostile occupying enemies, and members of Indian tribes, were also reiterated on several occasions in the opinion. Moreover, the birthright citizenship guaranteed by the Citizenship Clause could not be abridged by the Chinese Exclusion Acts or any other legislation: "The Fourteenth Amendment, while it leaves the power, where it was before, in Congress, to regulate naturalization, has conferred no authority upon Congress to restrict the effect of birth, declared by the Constitution to constitute a sufficient and complete right to citizenship." The Court's ultimate holding, on the specific facts of the case, was phrased more narrowly than the foregoing general pronouncements on jus soli generally: [A] child born in the United States, of parents of Chinese descent, who, at the time of his birth, are subjects of the Emperor of China, but have a permanent domicil and residence in the United States, and are there carrying on business, and are not employed in any diplomatic or official capacity under the Emperor of China, becomes at the time of his birth a citizen of the United States. Chief Justice Fuller and Justice Harlan dissented, objecting to the application of the English common law rule and urging a narrower view of allegiance and jurisdiction. They emphasized a treaty and statute disqualifying Chinese parents and their children from naturalization. After Elk v. Wilkins and United States v. Wong Kim Ark , the meaning of the Citizenship Clause of the Fourteenth Amendment as to U.S. born children of alien parents was generally taken to be fairly settled. U.S. citizenship was and is automatically granted to any person born within the geographic United States, unless the person fell within a specific exception and therefore outside the "subject to the jurisdiction thereof" requirement of the Fourteenth Amendment. The main exceptions are children born as members of recognized Indian tribes (now citizens by statute), and children born to foreign diplomatic officers. The alien status, or even unlawful presence, of a child's parent or parents has not been held to deny U.S. citizenship to a child born in this country. Notably, in World War II, former California attorney general Ulysses S. Webb brought an unsuccessful test case seeking to overturn Wong Kim Ark and remove Japanese Americans from voter rolls on the theory that they were not citizens. The U.S. Court of Appeals for the Ninth Circuit summarily affirmed the district court's dismissal of that case "[o]n the authority of the [F]ourteenth Amendment to the Constitution, § 1, making all persons born in the United States citizens thereof, as interpreted by the Supreme Court of the United States in United States v. Wong Kim Ark … and a long line of decisions"; the Supreme Court did not grant review. The Supreme Court has not directly addressed whether the Citizenship Clause necessarily requires U.S. citizenship to be granted to persons born in the United States to unlawfully present aliens. However, it has made pronouncements arguably relevant to that question while addressing other issues. Perhaps most notably, in 1983, the Supreme Court decided Plyler v. Doe , holding that a Texas statute which withheld state funds for the education of children who were not "legally admitted" into the United States, and which authorized local school districts to deny enrollment to such children, violated the Equal Protection Clause of the Fourteenth Amendment. Texas had argued "that the Equal Protection Clause directs a State to afford its protection to persons within its jurisdiction " and that "persons who have entered the United States illegally are not 'within the jurisdiction' of a State even if they are present within a State's boundaries and subject to its laws. " The Court disagreed, holding that "[t]o permit a State to employ the phrase 'within its jurisdiction' in order to identify subclasses of persons whom it would define as beyond its jurisdiction, thereby relieving itself of the obligation to assure that its laws are designed and applied equally to those persons, would undermine the principal purpose [of] the Equal Protection Clause …." While the threshold inquiry in Plyler centered on the "person within [a state's] jurisdiction" language of the Equal Protection Clause, the Court also analogized that phrase to the use of "jurisdiction" in the Citizenship Clause, in a footnote, stating: Although we have not previously focused on the intended meaning of this phrase ["within its jurisdiction"], we have had occasion to examine the first sentence of the Fourteenth Amendment, which provides that "[all] persons born or naturalized in the United States, and subject to the jurisdiction thereof , are citizens of the United States…." (Emphasis added.) Justice Gray, writing for the Court in United States v. Wong Kim Ark , 169 U.S. 649 (1898), detailed at some length the history of the Citizenship Clause, and the predominantly geographic sense in which the term "jurisdiction" was used. He further noted that it was "impossible to construe the words 'subject to the jurisdiction thereof,' in the opening sentence [of the Fourteenth Amendment], as less comprehensive than the words 'within its jurisdiction,' in the concluding sentence of the same section…." Justice Gray concluded that "[every] citizen or subject of another country, while domiciled here, is within the allegiance and the protection, and consequently subject to the jurisdiction, of the United States." Id. , at 693. As one early commentator noted, given the historical emphasis on geographic territoriality, bounded only, if at all, by principles of sovereignty and allegiance, no plausible distinction with respect to Fourteenth Amendment "jurisdiction" can be drawn between resident aliens whose entry into the United States was lawful, and resident aliens whose entry was unlawful. In the same Equal Protection context, the Court in Plyler also recognized "[p]ersuasive arguments" for withholding benefits "from those whose very presence within the United States is the product of their own unlawful conduct," but was more skeptical of "classifications imposing disabilities on the minor children of such illegal entrants," who could not control their parents' conduct or their own status. In 2004, the Supreme Court was invited to reassess the automatic granting of U.S. citizenship to children born to aliens in the United States by several amici curiae briefs in Hamdi v. Rumsfeld . That case presented legal questions about the rights owed to a U.S. citizen, born in Louisiana to Saudi parents, who had been detained in Afghanistan as an enemy combatant. The briefs by the Eagle Forum Education & Legal Defense Fund and the Claremont Institute Center for Constitutional Jurisprudence argued that Wong Kim Ark had been read too broadly. The amici argued that the Citizenship Clause of the Fourteenth Amendment should instead be read to advance a legal concept of citizenship based on consent, of both the individual and the sovereign, embodied in the Clause's "subject to the jurisdiction thereof" language. The Court declined the invitation and did not discuss the issue of granting American citizenship to children of aliens, although a dissent authored by Justice Antonin Scalia did refer to Hamdi as "a presumed American citizen." Several recent cases have touched on the meaning of "subject to the jurisdiction thereof" in assessing the scope of another phrase in the Citizenship Clause, "born … in the United States." For example, in Tuaua v. United States , decided in June 2015, the U.S. Court of Appeals for the D.C. Circuit held that "born … in the United States" did not extend to those born in the U.S. territory of American Samoa. In doing so, the court analyzed the geographic scope of the jus soli doctrine and applied both Elk v. Wilkins and United States v. Wong Kim Ark . The court viewed the English common law rule as defining the domain of the king broadly, with those born in, for example, the American colonies treated as subjects of the king; however, the court was "unconvinced … that Wong Kim Ark reflects the constitutional codification of the common law rule as applied to outlying territories," since Wong Kim Ark was born in San Francisco and issues regarding geographical scope of the Citizenship Clause were not addressed. Rather, the American Samoan plaintiffs were more analogous to Indian tribe members under Elk v. Wilkins in terms of being "significantly self-governing." American Samoa's situation was, perhaps more importantly, determined to a significant extent by The Insular Cases , a series of decisions beginning in 1901 in which the Supreme Court addressed whether the Constitution, by its own force, applies in any territory that is not a state. Notably, the Circuit Court in Tuaua briefly addressed and dismissed an argument that Congress could change the interpretation of the Citizenship Clause by statute, without constitutional amendment, stating: The United States Government also argues, "even if Plaintiffs were correct that … the Fourteenth Amendment should generally confer birthright citizenship [on persons born in American Samoa,] ... Congress's direct modification of that status by statute trumps that interpretation" … (relying on Rogers v. Bellei, 401 U.S. 815, 828 (1971)). This argument is novel, if curious. Yet it erroneously conflates Congress's broad powers over naturalization with authority to statutorily abrogate the scope of birthright citizenship available under the Constitution itself. Congress's authority for the latter is wanting. See generally Marbury v. Madison, 5 U.S. (1 Cranch) 137, 178 (1803) ("[T]he constitution is superior to any ordinary act of the legislature."). The debate over American birthright citizenship for children of aliens has, of course, significant policy and political philosophy components—and real world consequences—which are generally outside the scope of this report. In focusing on the legal and constitutional aspects of the debate, the remainder of this report begins by briefly introducing the main competing perspectives and their respective approaches to analyzing the history, constitutional text, and case law developments summarized in previous sections. It then notes some legislative proposals to limit birthright citizenship and discusses how, if enacted, they would likely be assessed by the Supreme Court. Those who seek a reinterpretation of the Citizenship Clause would seem to face substantially greater legal and constitutional hurdles than those who would maintain the birthright citizenship status quo. Nevertheless, it is not necessarily clear that the question has been truly settled. There are, broadly speaking, two sides to the current legal debate over whether the Citizenship Clause of the Fourteenth Amendment requires the automatic granting of U.S. citizenship to all persons born in the United States, including those born to unlawfully or temporarily present aliens. It would be futile to attempt a comprehensive review of the many statements cited and arguments made on both sides, but even a summary of selected points illustrates the deep philosophical differences underlying the legal disagreements. The following sections highlight a few of the principal themes, although a full examination of points and counter-points on the issues below—and others—is outside the scope of this report. What is generally considered the majority view, embodied in applicable law and policy, is that the Fourteenth Amendment does require U.S. citizenship to be automatically conferred on "[a]ll persons born … in the United States"; and that the phrase "subject to the jurisdiction thereof" excludes from that general rule only certain common-law-based exceptions to the jus soli doctrine, for those born in the United States to foreign diplomats, hostile occupying forces, or members of recognized Indian tribes. Legally, the "jurisdiction" referred to by the Citizenship Clause is territorial jurisdiction, which is the power of a sovereign to enforce its laws within its territorial limits. This conventional interpretation has been called the "ascriptive" view (at least by some opponents) because it determines citizenship by the objective geographical circumstances of a person's birth. On the other side, some argue that the Fourteenth Amendment does not require U.S. citizenship to be automatically granted to persons born in the United States to aliens, especially those aliens who are present unlawfully or who are domiciled elsewhere. The core of this argument is that the phrase "subject to the jurisdiction thereof" was intended to codify a limitation on the birthright citizenship principle that, in the words of two of its early proponents, "demanded a more or less complete, direct power by government over the individual, and a reciprocal relationship between them at the time of birth, in which the government consented to the individual's presence and status and offered him complete protection." The "jurisdiction" referred to by the Citizenship Clause, in this view, is a more "complete" jurisdiction that entails undivided allegiance. This opposing view has been called the "consensual" approach, as its proponents would "make political membership a product of mutual consent by the polity and the individual." In short, as one of the aforementioned Hamdi v. Rumsfeld amicus brief argued unsuccessfully before the Supreme Court in 2004, "[i]t is not the physical location of birth that defines citizenship, but the express or implied consent to jurisdiction of the sovereign." It is generally acknowledged that opposition to the conventional interpretation is the minority viewpoint. Both sides of the birthright citizenship debate look back to colonial and pre-colonial times for evidence for their respective positions. Some legal writers favoring a narrower reinterpretation of birthright citizenship have emphasized statements in English common law cases referring to "aliens in amity"; they argue that even the common law doctrine of jus soli came to rely upon mutual consent between the citizen and the sovereign, and that the Fourteenth Amendment did not intend to abandon what they interpret as common law notions of consent. Other consensualist legal writers say that to the extent the English common law made persons English subjects purely on the basis of the place of their birth, the American Revolution rejected this element of the English common law and enshrined more consensualist ideals of a social contract. Consensualist legal writers have also emphasized the right of expatriation, or the voluntary ending of citizenship, as a corollary that they argue supports an allegiance based approach to gaining citizenship at birth. Proponents of the conventional interpretation of the Citizenship Clause generally argue that the American Founders understood the English common law doctrine of jus soli to include only limited exceptions for children born to diplomats and hostile occupying forces, and that, as various passages in the Wong Kim Ark decision describe, this understanding of the jus soli doctrine informed the framing of the Fourteenth Amendment. Interpretations of the legislative history of the Citizenship Clause of the Fourteenth Amendment, and of its precursor language in the Civil Rights Act of 1866, are similarly divergent, even as to some of the very same passages in the Congressional Globe . As recognized by the Supreme Court, "the legislative history of the Fourteenth Amendment … like most other legislative history, contains many statements from which conflicting inferences can be drawn…." Those in favor of narrowing birthright citizenship often point to passages in the 1866 congressional debates referring to "complete jurisdiction" or notions of "allegiance," arguing that the framers of the Fourteenth Amendment would not have understood today's unlawfully present aliens or their U.S. born children as meeting these requirements. However, the legislators' statements cited by consensualist writers were made largely, though not entirely, in the context of the exclusion from the Citizenship Clause of members of Indian tribes. As proponents of retaining birthright citizenship point out, other indicia in the legislative history indicate that children of aliens were considered differently than children of Indian tribe members and were broadly intended to be included within the Citizenship Clause's scope. The two sides also differ as to how the Civil Rights Act of 1866's language giving citizenship to all persons born in the United States "not subject to any foreign power" should be evaluated in interpreting the modified language in the Citizenship Clause of the Fourteenth Amendment. Within the consensualist camp, it appears that most argue that Wong Kim Ark could be interpreted narrowly, rather than overturned, in order to support reinterpreting the Citizenship Clause. As noted above, Wong Kim Ark's parents had apparently established as firm a foothold in the United States as was legally available to them; the holding of the case referred to their "permanent domicil and residence in the United States" at the time of his birth, although the rest of the analysis and the discussion in the case ranged much more broadly. Proponents of the birthright citizenship status quo argue that the Elk v. Wilkins and Wong Kim Ark Supreme Court decisions in the 1800s essentially settled the meaning of the Citizenship Clause, in part by enumerating the few exceptions to the jus soli doctrine, which did not include the unlawful or temporary presence in the United States of a person's alien parents at the time of that person's birth. Supporters of the ascriptive and consensual viewpoints also debate, for example, whether other case law supports giving the term "jurisdiction" in the Citizenship Clause its more conventional and straightforward definition based on geographic territoriality, or a narrower and more context-specific definition based on allegiance and consent. Supporters of the prevailing interpretation also argue that a broader interpretation of "jurisdiction" hews more closely to a textualist approach, and avoids having to draw an "elaborate construct" of consent and allegiance from contextual sources. An argument often raised by those who wish to change the current rule of birthright citizenship is that illegal immigration, in the form it exists today, did not exist prior to the adoption of general immigration statutes, which was well after the adoption of the Fourteenth Amendment. Some commentators have argued that "it is simply wrong to assert that there has ever been a conscious deliberate decision, by the framers of the Fourteenth Amendment or its judicial interpreters, to accord birthright citizenship under the [Citizenship] clause to children of illegal aliens." Proponents of a narrower interpretation argue that the United States embraced a more open borders policy prior to the Twentieth Century, and point out that the framers of the Fourteenth Amendment apparently did not discuss unlawfully present aliens per se, as recorded in the Congressional Globe (precursor to today's Congressional Record ). The Wong Kim Ark decision also did not expressly declare that the children of unlawfully present aliens were included within the scope of the Citizenship Clause, because Wong Kim Ark's parents had apparently been lawfully domiciled in San Francisco at the time of his birth. On the other hand, the Chinese Exclusion Acts were a legal fact by the time the Wong Kim Ark case was decided, and any Chinese citizen who entered the United States in violation of these Acts would have been unlawfully present. Violations of the Chinese Exclusion Acts were known by the time of Wong Kim Ark to have occurred, and some late nineteenth century writers believed they had occurred at a large scale. Some modern commenters have also pointed to slaves imported in violation of the slave import ban that took effect in 1808, or to socially isolated and generally unwelcome "Gypsies" allegedly entering the United States, as nineteenth century precursors to today's unlawfully present aliens that would have been known to the framers and judicial interpreters of the Citizenship Clause. The discussion over whether modern illegal immigration is novel also raises broader issues regarding how to apply the Constitution to social conditions that may have been unanticipated by the framers. Lawmakers in Congress, as well as state-level legislators and various interest groups, have offered proposals since at least the early 1990s to restrict automatic U.S. citizenship at birth. Some of these have taken the form of resolutions proposing to amend the Constitution, but it appears that the more often proposed approach is to amend the Immigration and Nationality Act without constitutional amendment. In 1995, a hearing was held on a collection of bills and resolutions to deny automatic citizenship at birth to children born in the United States to parents who are not citizens or permanent residents. A decade later, another hearing was held involving the topic of birthright citizenship. More recently, companion measures entitled the "Birthright Citizenship Act of 2015" were introduced in both the House and the Senate. The bills would amend Section 301 of the Immigration and Nationality Act to provide, applicable prospectively as of the date of enactment, that: Acknowledging the right of birthright citizenship established by section 1 of the 14 th amendment to the Constitution, a person born in the United States shall be considered 'subject to the jurisdiction' of the United States for purposes of subsection (a)(1) if the person is born in the United States of parents, one of whom is— (1) a citizen or national of the United States; (2) an alien lawfully admitted for permanent residence in the United States whose residence is in the United States; or (3) an alien performing active service in the armed forces…. In other words, if both parents were unlawfully present aliens or were present only on nonimmigrant visas or as refugees or asylees at the time of the birth of their child, that child would not be granted U.S. citizenship. At least one parent would have to be a citizen, a non-citizen national (such as an American Samoan), a lawful permanent resident (i.e., green card holder), or actively serving in the U.S. Armed Forces in order for a U.S. born child to obtain citizenship at birth. An amendment with similar contents was offered in March 2015 to the Justice for Victims of Trafficking Act, but the amendment was not added to the bill. The House Judiciary Committee's Subcommittee on Immigration and Border Security held a hearing in April 2015 entitled "Birthright Citizenship: Is It the Right Policy for America?" Attendees and witnesses at the hearing extensively discussed legal and constitutional issues of restricting birthright citizenship by statute, including much of the historical development, legislative history, and case law reviewed in this report. It is generally acknowledged, even by those who would change it, that the current policy of automatically granting U.S. citizenship to essentially every person born in the United States is at least permissible under the Citizenship Clause. This is because the Citizenship Clause sets a minimum guarantee, a floor above which Congress may but is not required to extend U.S. citizenship by birth to additional groups, as it has done for Native Americans and for children of U.S. citizens born abroad under certain circumstances. If, as many argue, the current interpretation is required under the language and context of the Citizenship Clause and relevant judicial precedent, then a statute or other action purporting to reinterpret the Citizenship Clause more narrowly would be held unconstitutional, and a new amendment to the Constitution would be necessary to impose new restrictions on America's birthright citizenship policy. It would likely fall to the judicial branch to determine whether the Citizenship Clause would permit a narrower interpretation by Congress (or by the Executive Branch). This determination could potentially require a court to weigh a number of complex considerations, including: canons of constitutional interpretation, including the degree to which textualist, originalist, traditionalist, prudential, and aspirational or ethical approaches should be applied to the Citizenship Clause; separation of powers, and each branch's relative authority to interpret—and particularly to limit—rights set forth in the Constitution, especially the Fourteenth Amendment; stare decisis, or adherence to judicial precedent, and how to interpret and apply relevant cases; and the specific nature and language of the citizenship-limiting statute or other action under review. Opinions on the most likely outcome of such a determination differ. Judge Richard Posner, of the U.S. Court of Appeals for the Seventh Circuit, stated in a 1996 concurrence that "[a] constitutional amendment may be required to change the rule whereby birth in this country automatically confers U.S. citizenship, but I doubt it. … Congress would not be flouting the Constitution if it amended the Immigration and Nationality Act to put an end to the nonsense." Some commentators have testified before Congress that they believe a statute denying birthright citizenship to children of unlawfully present aliens would likely survive constitutional challenge. Others, however, have concluded that any of a number of legal and constitutional obstacles would more likely prove insurmountable to a narrower reinterpretation of the Citizenship Clause. Since automatic granting of American citizenship to all who are born here, without inquiring into parental origins or status, has been the practice and the law for more than a century, some supporters of the status quo have contended that a reinterpretation of the Citizenship Clause would mark a "seismic shift" in constitutional law. The size of the policy change, in itself, could present an impediment to judicial support for the constitutionality of a citizenship-limiting statute. Opponents of reinterpretation could also urge a court to take into legal consideration what they view as practical, policy, or ethical considerations stemming from issues such as the potential for creation of a stateless subpopulation. It has also been argued that "[t]he justices may also be reluctant to weaken a constitutional amendment explicitly designed to override a previous Supreme Court ruling—especially if that ruling was Dred Scott ." On the other hand, proponents of a narrower reinterpretation could potentially avail themselves of a number of practical and policy counterarguments; for example, some have asserted that a major divergence of modern circumstances from historical assumptions warrants a change from the prevailing interpretation. Congress's authority to reinterpret the Citizenship Clause, to exclude persons born in the United States to unlawfully or temporarily present aliens from its scope, would be significantly constrained if the Wong Kim Ark decision and subsequent case law were to be interpreted as having settled that issue in favor of those persons' inclusion. Factors that the U.S. Supreme Court generally considers when responding to a request to overrule precedent include whether that precedent "has proved 'unworkable' …, the antiquity of the precedent, the reliance interests at stake, and of course whether the decision was well reasoned." Ultimately, the Court "does not overturn its precedents lightly. Stare decisis … is a foundation stone of the rule of law, … [and] 'any departure' from the doctrine 'demands special justification.'" However, if any discussion in Wong Kim Ark arguably extending beyond the citizenship of a person born to lawfully present and domiciled aliens is deemed mere dicta, unnecessary to the case's holding, then the Court would not be bound by it, although it could still weigh the dicta's persuasive value. Other precedent less specific to citizenship issues could pose legal obstacles to a reinterpretation as well. For example, courts would have to grapple with the meaning of "jurisdiction" as it has been interpreted in the context of the Equal Protection Clause, which follows the Citizenship Clause in the Fourteenth Amendment. Finally, any statute reinterpreting the Citizenship Clause would be far more difficult to uphold if it were designed to operate retroactively to remove or revoke any living person's U.S. citizenship. As stated by the Supreme Court in Afroyim v. Rusk , a 1967 case that held unconstitutional a statute that provided that a U.S. citizen would lose his citizenship upon voting in a political election in a foreign state: Citizenship is no light trifle to be jeopardized any moment Congress decides to do so under the name of one of its general or implied grants of power. … The very nature of our free government makes it completely incongruous to have a rule of law under which a group of citizens temporarily in office can deprive another group of citizens of their citizenship. We hold that the Fourteenth Amendment was designed to, and does, protect every citizen of this Nation against a congressional forcible destruction of his citizenship, whatever his creed, color, or race. Our holding does no more than to give to this citizen that which is his own, a constitutional right to remain a citizen in a free country unless he voluntarily relinquishes that citizenship. However, Congress tends to propose applying birthright citizenship restrictions only prospectively, which, as a consequence, would not result in the loss of citizenship by any person already a citizen. Nevertheless, a number of hurdles to such bills likely remain, including but not limited to the weight of the legislative history of the Fourteenth Amendment, the extensive discussion in Wong Kim Ark , the statements in various cases defining "jurisdiction" more often on the basis of territory rather than undivided allegiance, and the embrace of the prevailing birthright citizenship interpretation by more than a century of subsequent law and practice. In light of these factors, it appears likely that a constitutional challenge to a statute denying citizenship to persons born to unlawfully present or nonimmigrant aliens could possibly succeed in barring the statute, absent a constitutional amendment providing that such persons do not acquire citizenship by right of their birth in the United States.

The first clause of the Fourteenth Amendment to the U.S. Constitution, known as the Citizenship Clause, provides that "[a]ll persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside." This generally has been taken to mean that any person born in the United States automatically gains U.S. citizenship, regardless of the citizenship or immigration status of the person's parents, with limited exceptions such as children born to recognized foreign diplomats. The current rule is often called "birthright citizenship." However, driven in part by concerns about unauthorized immigration, some have questioned this understanding of the Citizenship Clause, and in particular the meaning of "subject to the jurisdiction [of the United States]." Proponents of a narrower reinterpretation of that phrase argue that the term "jurisdiction" can have multiple meanings, and that in the Citizenship Clause, "jurisdiction" should be read to mean "complete jurisdiction" based on undivided allegiance and the mutual consent of the sovereign and the subject. This has been termed a "consensual" approach to citizenship. Conversely, proponents of the conventional view interpret the term "jurisdiction" to mean territorial jurisdiction, that is, the authority of a sovereign to enforce its laws within its boundaries. Under the conventional rule, citizenship is ascribed to a person at birth on the basis of the geographic location of that person's birth in the United States. This birthright citizenship rule has sometimes been termed an "ascriptive" approach to citizenship. Proponents of either side of this legal debate argue that a variety of sources and arguments support their respective positions. The two approaches differ in their interpretations of pre-Revolutionary English common law, pre-Civil War understandings of citizenship, the legislative history of the Civil Rights Act of 1866 and the Citizenship Clause of the Fourteenth Amendment, and subsequent case law. Two key Supreme Court cases in particular, Elk v. Wilkins (1884) and United States v. Wong Kim Ark (1898), interpreted the Citizenship Clause. Elk held that a member of a recognized Indian tribe was outside the scope of the Citizenship Clause because he was born owing allegiance to the tribe, rather than the United States, and the tribe was a political community not fully subject to the jurisdiction of the United States. Wong Kim Ark held that a person born in the United States to resident aliens became a U.S. citizen at birth, even when the person's parents were barred from ever naturalizing. However, some argue that Wong Kim Ark's statements limiting the exceptions to birthright citizenship were not necessary to its holding, and that no Supreme Court case has ever squarely held that the Citizenship Clause requires a broad view of jurisdiction that extends birthright citizenship to children of unlawfully or temporarily present aliens. Twentieth and 21st century case law also can be seen to support the conventional interpretation of the Citizenship Clause, but again, not in direct case holdings. Bills have been introduced since the early1990s to deny birthright citizenship to persons born in the United States to aliens other than lawful permanent residents. While a few proposals have suggested constitutional amendments, most seek to change the birthright citizenship rule by statute. It would likely fall to federal courts to determine whether such a statute could be upheld as constitutional. The weight of the legislative history of the Fourteenth Amendment, the analysis and discussion in Wong Kim Ark, the statements in various cases defining "jurisdiction" more often on the basis of territory rather than undivided allegiance, and the embrace of the prevailing birthright citizenship interpretation by more than a century of subsequent law, would probably factor against the constitutionality of a statute limiting birthright citizenship. Nevertheless, the scope of the guarantee of the Citizenship Clause remains a legal question of great interest and importance to many.

On January 27, 2010, the Securities and Exchange Commission (SEC) voted to provide an interpretive guidance, the Commission Guidance Regarding Disclosure Related to Climate Change (the Guidance), which technically does not create new legal obligations, but clarifies how publicly traded corporations should apply existing SEC disclosure rules to certain mandatory financial filings with the SEC regarding the risk that climate change developments may have on their businesses. The Guidance's release was controversial and prompted legislation in the 112 th Congress to repeal it. To date, no bills have been introduced in the 113 th Congress that address the Guidance. This report (1) briefly describes the Guidance; (2) provides opposing views on the Guidance, including past congressional legislation; (3) summarizes a study on potential corporate costs and benefits of implementing the Guidance; and (4) examines the impact of the Guidance from the perspectives of investors, corporations, and finance professionals. At the opening of the SEC commissioners' vote on the Guidance, then-SEC Chairman Mary Schapiro explained that the Guidance provided "interpretive guidance on existing [public company] disclosure requirements as they relate to business or legislative events on the issue of climate change." As such, the Guidance, which went into effect on February 8, 2010, attempts to give greater specificity to various existing disclosure rules that may require a public company to disclose the impact that business, legal, regulatory, or legislative developments related to climate change may have on its business. This information must meet the test of "materiality"—the notion that information should be disclosed if a reasonable investor would want it in order to make an informed investment decision. Specifically, the Guidance states what companies could be required to disclose in relation to climate change under the corporate disclosure requirements that fall under the SEC's Regulation S-K, including Forms 10-K and 20-F filings. In accordance with the Sarbanes-Oxley Act of 2010 ( P.L. 107-204 ), the SEC must look at one filing from each public company at least once every three years. In part, the Guidance attempts to clarify how certain climate change-related matters should be disclosed under the aforementioned SEC corporate disclosures through providing examples of developments that could trigger such disclosures. Key points expressed in the Guidance include the impact of climate change legislation and regulation, impact of international accords on climate change, indirect consequences of regulation or business trends, and physical impacts of climate change. On the day that the SEC voted to adopt the Guidance, then-SEC Chairman Mary Schapiro, who had voted for adoption, observed, [T]he Commission is not making any kind of statement regarding the facts as they relate to the topic of "climate change" or "global warming." And, we are not opining on whether the world's climate is changing; at what pace it might be changing; or due to what causes. Nothing that the Commission does today should be construed as weighing in on those topics…. It is neither surprising nor especially remarkable for us to conclude that of course a company must consider whether potential legislation—whether that legislation concerns climate change or new licensing requirements—is likely to occur. If so, then under our traditional framework the company must then evaluate the impact it would have on the company's liquidity, capital resources, or results of operations, and disclose to shareholders when that potential impact will be material. Similarly, a company must disclose the significant risks that it faces, whether those risks are due to increased competition or severe weather. These principles of materiality form the bedrock of our disclosure framework. Today's guidance will help to ensure that our disclosure rules are consistently applied, regardless of the political sensitivity of the issue at hand, so that investors get reliable information. The vote by the SEC commissioners in favor of the Guidance split 3-2, a vote that reflected two rival perspectives on the merits of the Guidance. Below are examples of views both in support of and in opposition to the Guidance. A Supportive SEC Commissioner. Articulating a view commonly found among many of the Guidance's advocates, Luis A. Aguilar, a Democratic commissioner who voted for it, argued for the Guidance's importance. His stance significantly derived from his view that a clear consensus had been established on the reality of climate change. At the time, his view was also informed by the belief that, given the salience of climate change and the various related legislative and regulatory responses to it, the Guidance would help foster a better understanding of how the SEC's existing disclosure requirements applied to climate change. Climate change, he argued, had become increasingly material to corporate affairs as well as to corporate investors, the disclosures' ultimate beneficiaries: Over two years ago, the Intergovernmental Panel on Climate Change concluded that it is "unequivocal" that the Earth's climate is warming. In October of last year, 13 federal agencies and departments published a coordinated annual report to Congress that reached the same conclusion. It is expected that climate change, if unchecked, will result in severe harm to ecosystems and people around the world. So it is no surprise that regulation of greenhouse gases has the attention of state governments, Capitol Hill, and the Environmental Protection Agency, as well as the attention of investors and companies. Against this backdrop of a changing climate and changing legislative and regulatory landscapes, it is only natural that there are questions about what companies should be disclosing to investors. Today's release is an important step toward answering these questions. By explaining what our existing rules currently require with respect to climate change disclosure, today's release should help companies comply.... Climate change and related governmental action can create risks and opportunities for companies. It is clear that disclosure of this material information will inform and aid investors in their decision making.... This release clarifies that effects resulting from climate change that are keeping management up at night should be disclosed to investors. Additionally, today's interpretive release should facilitate disclosure to investors regarding regulatory restrictions on greenhouse gas emissions that would materially change a company's business and future prospects. A Supportive Group of Institutional Investors. In March 2010, soon after the release of the Guidance, a group called the Investor Network for Climate Risk, a coalition of public pension fund and corporate treasurers, comptrollers, controllers, institutional investors, and asset managers, wrote to then-SEC Chairman Schapiro to lend their support to the guidance. Echoing the views expressed by Commissioner Aguilar, the network stressed that the Guidance would add significant value to corporate disclosures: Climate change already poses significant risks to economies and investments. Many of us have concluded that corporate assessments of the regulatory, physical and litigation risks from climate change are critical in understanding the value of our investments. In response to our efforts to engage companies, more businesses have started to account for the impacts of climate change on their financial performance, while others have pursued opportunities to develop energy-efficient and low-carbon products and services in order to gain market share and improve competitiveness. However, few companies disclose sufficient information about these issues in SEC filings to allow us to make more informed investment decisions. The SEC's new interpretive guidance provides registrants valuable information about how to apply longstanding disclosure requirements to the evolving challenges posed by climate change. Two Supportive Members of Congress D uring the 111 th Congress. In January 2010, during the 111 th Congress, Senator Christopher Dodd, then-chair of the Senate Committee on Banking, Housing, and Urban Affairs, lent his support to the Guidance. Investors have a right to know if their investment may be helped or hurt by severe weather, rising sea levels, or new greenhouse gases regulation or legislation. These new guidelines will help ensure that investors have the guidance they need to make well-informed decisions. At the same time, Senator Jack Reed, then-chair of the Senate Banking Subcommittee on Securities, Insurance, and Investment, expressed similar support: I am pleased the SEC has taken the important step of issuing guidelines regarding climate change disclosure that will increase informational transparency. Climate change is creating new opportunities and risks in the economy. Major environmental risks and liabilities can significantly impact companies' future earnings and, if undisclosed, could impair investors' ability to make sound investment decisions. A Critical SEC Commissioner . At the time, then-SEC Commissioner Katherine Casey cast one of the two dissenting votes against adopting the Guidance. Ms. Casey argued that her opposition largely stemmed from her view that (1) the state of the science and the law underlying the idea of global change lacked certainty; (2) existing SEC disclosure rules were adequate with respect to corporate reporting on environmental change; and (3) while certain interest groups had advocated for such climate change disclosure guidance, the usefulness of the information to most investors from the Guidance was questionable: I believe that the release is premised on the false notion that registrants may not recognize that disclosure related to "climate change" issues may be required. In truth, our disclosure regime related to environmental issues including climate change is highly developed and robust, and registrants are well aware of, and have decades of experience complying with, these disclosure requirements.... There is undoubtedly a constituency that is interested in, and has long pressed the Commission to require, more extensive disclosures on environmental issues in order to drive particular environmental policy objectives. The issuance of this release, however, at a time when the state of the science, law and policy relating to climate change appear to be increasingly in flux, makes little sense.... I do not believe that this release will result in greater availability of material, decision-useful information geared toward the needs of the broad majority of investors. Criticism from an Electrical Utility Industry Trade Group. In the private sector, major criticism of the Guidance came from the Edison Electrical Institute, an electrical utility trade group, which reports that its members are responsible for 60% of the total electricity supplied in the United States. In a July 2010 letter to then-SEC Chairman Schapiro, the group voiced concerns that the SEC Guidance (1) required too much speculation by corporate registrants in areas such as predicting weather patterns, the likelihood of enacting climate-change-related legislation, and potential corporate reputational damage related to climate change; (2) could discourage voluntary disclosures by registrants fearful of liability under securities laws for the contents of such disclosures, which would reduce the total amount of general climate change information provided to investors; and (3) might be interpreted as requiring that corporate management conduct a comprehensive review of climate change-related matters, which could be both unnecessary and excessively burdensome. Critical Responses in Congress . To date, in the 113 th Congress, no legislation involving the climate change guidance has been introduced. However, in both the 111 th and 112 th Congresses, various Members have expressed displeasure with the SEC's Guidance by introducing legislation and through correspondence with the SEC. In the 112 th Congress, Senator John Barrasso and Representative Bill Posey introduced identical bills ( S. 1393 and H.R. 2603 , respectively) that would prohibit the enforcement of the SEC's climate change disclosure guidance. In a joint news release accompanying the introduction of the bills, the Members explained the purpose behind the legislation: In this economy, the SEC's main responsibility should be to protect American investors and maintain fair markets. Instead, it's actually using time and resources on regulating climate change. This is yet another startling example of how the Administration is making it worse for job creators across our country. Our bill blocks the SEC from forcing American employers to conduct burdensome and expensive climate analysis. In March 2010, during the 111 th Congress, Representative Posey was joined by 20 of his House colleagues in writing a letter to Chairman Schapiro to express their opposition to the climate change disclosure guidance. Among the signatories were former Representative Ron Paul and Representative Scott Garrett, currently chair of the Subcommittee on Capital Markets and Government-Sponsored Enterprises of the House Financial Services Committee. Earlier in the 111 th Congress, similar concerns were expressed in a February 2, 2010, letter to Chair Schapiro from Representative Spencer Bachus, then-ranking Member of the House Committee on Financial Services. In his letter, Representative Bachus reportedly observed, With legislative progress on climate change having stalled, this guidance suggests an attempt by the SEC to promote a political agenda through regulation. The guidance reaches beyond the SEC's expertise and will impose potentially significant compliance costs on issuers with little apparent benefit to investors. The Guidance did not address the issue of the added costs or burdens of its implementation. Soon after the Guidance's release, however, a law review article was published that examined the Guidance's potential costs and benefits for corporations. Among other things, the article, An Inconvenient Risk: Climate Change Disclosure and the Burden on Corporations , concluded that (1) in the context of the fairly limited data that exist on climate change risks previously placed in 10-K filings and in existing voluntary disclosure protocols, the Guidance would require expanded disclosure of "all relevant information"; (2) there are legitimate concerns that the added burdens of identifying and measuring climate change-related risk would exacerbate the challenges of determining what disclosures are material; and (3) in the context of potential corporate "maximum liability" for risks related to climate change, the added cost of comprehensively assessing climate change risks as dictated by the Guidance would appear to be justified. The Guidance has been in effect since early February 2010. Several studies examined its impact for the initial year. This section examines three such studies, which reflected, respectively, investor, corporate, and finance perspectives. One impact study after the Guidance's first year was done by Ceres, a nonprofit coalition of institutional investors, environmental organizations, and other public interest groups. Ceres works with companies to address what it calls sustainability challenges, such as global climate change and water scarcity. Ceres was also one of several entities that petitioned the SEC in 2007 to "issue an interpretive release clarifying that material climate-related information must be included in corporate disclosures under existing law." Other entities included the California Public Employees' Retirement System, California state controller, Friends of the Earth, New York City comptroller, New York state attorney general, Rhode Island general treasurer, Vermont state treasurer, North Carolina state treasurer, and Maine state treasurer. The SEC Guidance essentially reflects many of the recommendations from the 2007 petition. Ceres has also been responsible for several reports that examined public company disclosures after the Guidance went into effect. Three such efforts are described below. A 2011 report by Ceres, Disclosing Climate Risks & Opportunities in SEC Filings: A Guide for Corporate Executives, Attorneys & Directors , examined various public company disclosures after the Guidance went into effect, with a focus on the quality of climate change risk disclosures from an investor perspective. The study's central conclusion was that most corporate filers needed more experience at communicating the risks associated with climate change. Overall, it found that large public companies have improved their climate change risk disclosures in recent years, but recommended that more work be done. In assessing the quality of companies' disclosures, Ceres rated such disclosures as either good —detailed disclosure of the financial impacts of existing and proposed regulatory requirements on the company; fair —disclosure of regulatory risk discusses legislation and its possible effects on the company, but makes no attempt at quantifying or assigning a value to the risks, or fails to place such values in a meaningful context; or poor —disclosure of regulatory risks does not mention existing or proposed regulations, or mentions them without analyzing possible effects on the company. The study concluded that good climate change risk disclosures were rare and that the vast majority of climate change risk disclosures were either fair, poor, or involved no such disclosure. Summarizing its findings, Ceres observed, Although public companies' climate reporting has improved somewhat in recent years, it remains true that disclosures very often fail to satisfy investors' legitimate expectations. Ensuring adequate disclosure will require commitment from management, as well as continued attention from regulators - and it will require that investors continue to make their needs heard. Greater attention to risks and opportunities will help companies themselves, and improved disclosure will help investors and the broader public. Released on June 18, 2012, the Ceres report, Clearing the Waters: A Review of Corporate Water Risk Disclosure in SEC Filings , examined corporate disclosure with respect to water risks in an attempt to ascertain how such disclosures have evolved between 2009 and 2011, a year after the Guidance was issued. For example, the report looked at changes in water risk disclosures of 82 companies in the beverage, chemicals, electric power, food, homebuilding, mining, oil and gas, and semiconductors sectors. Among other things, the report found that there had been a large increase in the number of analyzed companies that disclosed their exposure to water risk in 2011 over those that did so in 2009. It reported that a significant focus of the corporate disclosures involved reporting of water-related physical risks. Eighty-seven percent of the companies it analyzed in 2011 reported that they disclosed such risks, up from the 76% that did so in 2009 before the release of the Guidance. Within this, the percentage of companies in the oil and gas and chemicals sectors reporting water-related physical risks grew from 31% in 2009 to 45% in the 2011 disclosures. The report also observed that while overall disclosure improved between 2009 and 2011, there was still a dearth of disclosed data on water use and the financial implications of water-related risks. Arguing for the importance of such disclosures, it observed that it helped "investors understand the exposure of their portfolio companies to current and future water stress, as well as potential regulatory developments." The report recommended that companies boost their use of quantitative data (e.g., water use data, the proportion of operations affected by new regulations, the extent of financial losses from drought, or cost reductions through innovations or advances in efficiencies) as well as qualitative disclosures. It also recommended that companies bolster their use of performance targets, and risk management disclosures to better explain the nature of their responses to water-related risks. Another Ceres publication, Sustainable Extraction? An Analysis of SEC Disclosure by Major Oil & Gas Companies on Climate Risk and Deepwater Drilling Risk , was released in August 2012. The report examined the quality of material climate risk and deepwater drilling risks in the 2010 annual financial filings as disclosed in 2011 among 10 of the world's largest publicly held oil and gas companies, Apache, BP, Chevron, ConocoPhillips, Eni, ExxonMobil, Marathon, Shell, Suncor, and Total. Among other things, in the area of climate risk disclosure, it found that none of the corporate disclosure warranted an excellent rating because no company provided reporting of that quality; while the companies are broadly involved in undertaking extensive capital investments related to climate change and deepwater drilling, which carry material financial risks, they are generally deficient in properly disclosing them in ways that are consistent with SEC rules and investor needs; of a total of 60 climate disclosure ratings (described above) given by Ceres, only 5 were rated good and 34 (more than half) merited a poor rating or were simply not disclosed; while all the companies reported some disclosures on regulatory risks and indirect risks, they exhibited significant range in terms of specificity, comprehensiveness, and the quality of analysis; and 6 of the 10 companies provided no disclosures and 3 provided poor disclosures. With respect to deepwater drilling risk disclosures, the report found that out of 50 deepwater drilling risk disclosure ratings given, 4 merited a good rating, and 29 were rated either poor or involved no disclosure; after the Gulf of Mexico oil drilling disaster, disclosure on drilling and safety generally remained weak, including disclosures related to drilling risk management and spill response strategy; 8 out of 10 of the companies disclosed minimal or no information on safety or environmental statistics; and 8 out of 10 of the companies disclosed minimal or no information regarding their investments in safety-related research and development. Overall, for both climate risk and deepwater drilling disclosures, the report concluded that its "findings are concerning, and demonstrate the need for oil and gas companies to better align their climate risk and deepwater drilling risk disclosure with SEC rules and investor expectations." Another study on the impact of the Guidance was published by Davis Polk & Wardwell, a law firm with a significant corporate securities practice. The study, Environmental Disclosure in SEC Filings, 2011 Update , examined a large number of 2010 corporate disclosure filings after the Guidance's first year. Some of its findings were as follows: Despite concerns of some critics that the Guidance would lead to extraneous and unimportant disclosure that might distract investors from focusing on significant disclosures, the Guidance did not appear to have had as significant an impact on disclosure as various critics had feared. Disclosures appeared to feature more generic weather risk factors. New disclosures emerged on potential changes in demand for products and services and on increases in fuel prices. There was relatively little disclosure of actual or potential reputational harm that may result from climate change. Companies in greenhouse gas intensive industries, especially energy companies, have expanded their disclosure. For example, they have added longer factual updates of legislative, regulatory, and litigation developments. Left unclear, however, was whether the increase in energy company climate change-based disclosure was largely due to the Guidance, earlier electric utility settlements with the office of the New York attorney general, or the historical growth in climate change regulation in general. Davis Polk & Wardwell took a granular approach in its study of post-guidance filings by focusing on the nature of individual filings. By contrast, an article in an American Bar Association (ABA) newsletter looked at (1) changes in the number of climate change-related disclosures during the Guidance's first year; and (2) the views of corporations and finance professionals on those disclosures. Among other things, Davis Polk found that prior to the Guidance in 2009, of the 75,000 Form 10-Ks filed with the SEC, about 800, or 1.8%, included some reference to climate change or greenhouse gas. Immediately after the Guidance in the first quarter of 2010, the article in the ABA newsletter observed a significant increase in the percentage of such filings to 2.8%. However, by the third quarter of the year, it found that the percentage of climate change or greenhouse gas referenced in 10-K filings had fallen below the 2009 level to 1.6%. In addition, in its survey of how various corporations and finance professionals thought about the disclosures, the article also reported the following: Many companies saw little upside and even less downside in climate change disclosures. Many companies saw no meaningful business opportunities coming from climate change disclosures, but felt that they carried a potential for creating risks. Often disclosing uncertain climate change-related information was frequently seen as a speculative process that was driven by guidelines that lacked any recognized standards or had not resulted in any standardized practices. Investor relations professionals reportedly observed a general lack of interest in climate change from the financial community or other constituencies. Financial analysts had generally shown a small amount of interest in climate change-related issues. About half of the asset managers surveyed indicated that they did not analyze climate risks because no investor clients requested that they do so. Many companies appeared to believe that there were few, if any, penalties from the SEC for nondisclosure of climate change matters, a perception that was reinforced by observations that also characterized the SEC's level of enforcement in this area as negligible.

Publicly traded companies are required to transparently disclose material business risks to investors through regular filings with the Securities and Exchange Commission (SEC). On January 27, 2010, the SEC voted to publish Commission Guidance Regarding Disclosure Related to Climate Change (the Guidance), which clarifies how publicly traded corporations should apply existing SEC disclosure rules to certain mandatory financial filings with the SEC regarding the risk that climate change developments may have on their businesses. The Guidance has been controversial and prompted legislation in the 112th Congress to repeal it. Proponents of the Guidance, including several union and public pension funds, argued that it was necessary because a consensus has been established on the reality of climate change and that, given the salience of climate change and the various related legislative and regulatory responses to it, the Guidance would help foster a better understanding of how the SEC's existing disclosure requirements applied to it. Some that oppose the Guidance, including several business interests, have argued that the current state of the science and the law underlying the idea of global climate change remains uncertain; existing SEC disclosure rules are adequate with respect to corporate reporting on environmental change; and while certain interest groups had advocated for such climate change disclosure guidance, the climate change disclosure guidance's usefulness for most investors is unclear. In the 112th Congress, Senator John Barrasso and Representative Bill Posey introduced identical bills (S. 1393 and H.R. 2603, respectively) that would prohibit the enforcement of the SEC's climate change disclosure guidance. To date, in the 113th Congress, no bills involving the Guidance have been introduced. Since the Guidance went into effect on February 8, 2010, there have been several attempts to gauge its impact. For example, a 2011 report from Ceres, a nonprofit coalition of institutional investors, environmental organizations, and other public interest groups, concluded that most corporate filers needed more experience at communicating the risks associated with climate change. Although it found that large public companies had improved their climate-change risk disclosures in recent years, the report concluded that there was more work to be done in this area. A report from the law firm of Davis Polk & Wardwell found that the Guidance did not appear to have had as significant an impact on disclosure as some had expected; that new disclosures emerged involving potential changes in demand for products and services and increases in fuel prices; and that there was little disclosure of actual or potential reputational harm that might result from climate change. A study published for the American Bar Association found that many companies reported seeing little upside and even less downside in climate change disclosures. It also found that many companies reported few meaningful business opportunities resulting from climate change disclosures, which instead carried a potential for creating risks. In addition, many companies indicated that disclosing frequently uncertain climate change-related information was often a very speculative process and that there were few, if any, penalties from the SEC for nondisclosure of climate change matters. This perception was underscored by other observations that characterized the SEC's level of enforcement in this area as negligible. This report will be updated as events warrant.

By mid-March of 2008, gasoline prices exceeded $3.39/gallon (gal) while diesel fuel prices were $3.97/gal, a differential of almost $0.60/gal. In mid-March of 2007, the relationship between the two fuels was the reverse: gasoline prices were higher than diesel prices. At that time, diesel prices were roughly $2.68/gal, while the average price of gasoline for all grades was $2.76—more than $0.08 higher than the average price of on-highway diesel. Additionally, where gasoline prices in mid-March 2008 are roughly $0.63/gal higher than year-ago averages, diesel fuel prices have risen over $1.29/gal over the same period. Over $0.60/gal of this increase has occurred since the beginning of 2008. This has prompted questions of why the historic gap between gasoline and on-highway diesel prices has widened so greatly and over such a relatively brief period of time. Because diesel fuel costs affect the cost of shipping by truck, price increases affect the delivered cost of most consumer goods purchased in the United States, contributing to the over-all level of price inflation. This report provides background and identifies some of the likely factors and forces in world markets that may have contributed to the evolution of the relative prices of gasoline and diesel fuel over the past several years. Among these are strong international demand for diesel fuel; product mix decisions by refiners, and refinery investment to meet more stringent limits on the sulfur content of diesel fuel; the similarities between diesel fuel and home heating oil; and the effect on retail prices from local market conditions. A barrel of crude oil is a composite of hydrocarbons of varying densities. The initial step in refining crude oil is to separate its heavier and lighter "fractions" by heating it. The lighter products are recovered at, or near the top of a distillation column where the temperature is lowest. The heavier fractions are recovered from the bottom where the heat is greatest. Gasoline is among the lighter components. Diesel fuel and home heating oil come from the portion of the barrel that is termed "middle distillates" because the feedstock for these fuels settle out roughly in the middle of the distillation tower. Crude oil itself is of varying densities, as well as sulfur content, generally distinguished as "light" or "heavy," or high and low quality oil. Light crude will furnish a higher percentage of lighter products than heavy crude; additional processing can increase the yield of lighter products from the heavier end of the barrel, but will add to product costs. Once distilled, gasoline and middle distillates are further processed "downstream," where the addition of blending components and other steps create the finished petroleum products that are released to markets. The typical yields from a barrel of crude oil of gasoline and middle distillates range, respectively, around 45-47% and 25-27% depending on the time of year (see Table 1 ). Typically, refiners take some of their facilities offline for brief periods to perform maintenance and make seasonal adjustments to slightly favor the yield of gasoline or middle distillates. During the spring, refiners seek to build inventories of gasoline for the summer driving season. Conversely, production of home heating oil for the heating season is maximized beginning during the summer. Gasoline consumption has been averaging 9.0 million barrels daily (mbd), while all distillate consumption is roughly 4.5 mbd. In 2007, U.S. imports of middle distillates averaged 348,000 b/d in 2007. As is discussed later in this report, world demand for middle distillates has grown and added to the pressure on prices for middle distillate imports. The typical product yield from a barrel of crude oil is shown in Table 1 . As is also noted later in this report, some of the sharp runup in on-highway diesel fuel prices in recent months likely stems from the close similarity between diesel fuel and residential home heating oil. Both, as has been noted, are middle distillates and, to some extent, in competition with one another. Home heating oil and transportation diesel are chemically identical, but in the refinery they are processed in slightly different ways for their respective purposes. In addition to having specified regulations and taxes, transportation diesel has a low sulfur standard, meaning that it must contain 0.05% sulfur or less. Home heating oil is required by law to contain not more than 0.5% sulfur content, but due to unintentional mixing of transportation diesel and home heating oil at the refinery, the sulfur content of home heating oil usually hovers around 0.2%. Table 2 shows recent demand for products that fall within the parameters of distillate fuels. In 2006, diesel fuel represented nearly 63% of distillate sales while residential home heating oil was 8% of sales. This is compared with 58% and 10.8%, respectively, in the year 2002. Table 2 also suggests that the distillate fuel market in the United States is not a growth market. The total demand for distillates was no higher in 2006 than in 2003, and less than 2% higher than the weak demand year of 2002. On-highway diesel was the only sector that showed continuous growth over the period. Other sectors, like residential and commercial, suggest seasonality related to the weather. Some sectors, like vessel bunkering, electric power, and military showed declining demand. Differing sectoral demand patterns within the same product group makes it likely that, in pricing terms, those sectors with the relatively strongest demand patterns might be charged prices which help to offset the lower returns that might be earned in sectors with weaker demand. For example, since all of the distillates are joint products of the refining process, all must find a market. However, if one segment of the market, say use in electric power generation, is relatively weak and declining, and another, on-highway use is increasing, it is likely that electric power distillates may be sold at a discount, while on-highway distillates may be sold at a premium. The retail prices of gasoline and diesel fuel have four major components: the price of the crude feedstock; federal and state taxes; the cost of refining, reflected in what is referenced as the "refiner margin"; and the costs of distribution (transportation) and marketing. As the price of crude rises or fluctuates, along with any demand pressures, the relative percentage share of these components of retail price will shift. The observed drop in the share represented by state and federal taxes—values that are constants over the period shown below—is a reflection of the significant change in the retail sales price for gasoline and diesel fuel. These percentages for the last year for both gasoline and diesel fuel are set out in Tables 3 and 4 , and depicted as graphs in Figures 1 and 2 . Tables 3 and 4 suggest that the reason for the shift in the relative prices of gasoline and diesel fuel cannot be easily be identified through cost growth at any particular stage of the production process. However, part of the explanation may be in the behavior of refining as a percentage of price. The decline in refining cost in gasoline has been greater than the decline in refining cost in diesel. This pattern suggests that the ability of refiners to pass through cost increases to the consumer is stronger in diesel than in gasoline, and that there are significant recoverable costs that have been added in diesel refining. Both may play a role. As is discussed later in this report, mandated refinery investments have been required in diesel fuel refining to meet new product specifications. On the demand side, the second half of 2007 and early 2008 have been characterized by record-setting crude oil prices. Gasoline prices lagged the increase in crude oil prices, leading to shrinking refiner margins and profitability. Possibly, because diesel fuel is an intermediary product in commercial use, and as such can be expected to be passed through to final consumers, refining costs as a percentage of cost remained stronger. It is expressly because refiners often absorb the initial increases in crude prices that some are predicting that, if crude prices remain roughly in their current range or go higher, further price increases in all highway fuels are likely. How steep these increases may prove to be will depend very critically on the demand response to the price of motor fuels. Gasoline demand is recently observed to be relatively flat, and stocks of gasoline are unseasonably high. However, with the start of the summer driving season still some weeks off, any prediction about the price, supply, and demand for gasoline (and diesel fuel) during the summer of 2008 would be conjecture at best. A variety of factors, some cyclical, and some structural, have likely contributed to the break-down of the traditional pattern of relative prices between gasoline and diesel fuel. These are identified and described in turn. Growing petroleum product demand, including demand for diesel fuel, in China, Europe, and the United States has put pressure on the ability of refineries to meet production requirements. Demand growth in China is primarily tied to the level of economic growth, expanding both industrial and consumer demand. While the over-all growth in petroleum demand in Europe has not been high, demand for diesel fuel over gasoline has increased. The European automobile and light truck fleet has moved in the direction of diesel fuel. In the United States, the demand for gasoline has continued to increase. Even though crude oil prices have risen since 2004, demand for gasoline in the United States over the same period continued to increase. In a world market where the major producers sell their products in virtually every geographic and product segment, price effects will have a tendency to move from one part of the market to another. If strong demand for diesel fuel exists in Europe and places upward pressure on prices, the effect is also likely to be felt in the U.S. market. Even if it were possible to wall off the U.S. market from higher prices, it is unlikely that it would be helpful. If a price spread between gasoline and diesel, greater than the cost of shipping, develops between Europe and the United States, a major oil company might be inclined to draw diesel fuel from the U.S. market and sell it in Europe to earn a greater profit. The potential for transactions of this type transmit price increases from one geographic market to others, even if the trade flow does not occur. U.S. imports of diesel fuel have been in the 200 to 400 thousand barrels per day range since 2004. If the import price of diesel fuel exceeds the domestic price of the same fuel, and given that in the market all product is sold at the same price, all prices will rise to the level of the higher cost imported fuel. In terms of the example cited above, tight demand and supply conditions in the European diesel fuel market are transmitted to the U.S. markets as prices tend to equalize. U.S. refinery utilization rates in recent years have been high, generally at or near 90%, reflecting strong domestic demand for most petroleum products. The product mix has generally been optimized to produce a maximum amount of gasoline. This could be true even in times when the price of diesel fuel is above the price of gasoline. Record profit levels in the oil industry have increased public scrutiny of oil company operations. Although prices of all petroleum products have been high, and market conditions tight, physical shortages of transportation fuels have not been generally observed. If the general motoring public had to confront high gasoline prices at the same time that physical shortages were developing, the pressure to tax or regulate oil company profits and product prices might grow. As a result, it may be that a major priority of the oil companies supplying the U.S. market is to avoid shortages. To avoid shortages, the U.S. imports gasoline and gasoline blending components. These imports now generally exceed 1 million barrels per day, augmenting domestic gasoline production, and avoiding the likelihood of physical shortages of gasoline. A possible result of maximizing gasoline output at the refinery may be to make the supply of diesel fuel relatively less available when compared to any particular level of demand, resulting in stronger upward pressures on diesel fuel prices compared to gasoline prices. In this way, even though all petroleum product prices are rising due to the increasing price of crude oil, the relative prices of diesel fuel and gasoline could shift because of an emphasis on gasoline production. The Environmental Protection Agency (EPA) in 2001 promulgated new rules concerning the sulfur content of diesel fuel that began to go into effect in 2006. Ultra low sulfur diesel (ULSD) contains 15 parts per million of sulfur, compared to 500 parts per million or more in uncontrolled diesel fuel. Refineries were to begin producing 80% of their output of diesel fuel as ULSD in June 2006, with availability at fuel outlets for on-highway use by October 2006. Because the sulfur content is measured at the pump according to EPA regulation, special transportation and distribution systems were also needed to avoid fuel contamination. Use of reduced sulfur diesel for off-highway purposes began in 2007, with full implementation of ULSD by 2010. The American Petroleum Institute estimated that over $8 billion have been spent by refiners to acquire and implement refinery processes for sulfur removal. In addition, hundreds of millions of dollars have been spent to upgrade transportation and distribution systems. These investment costs to meet federal regulation are likely to be passed on to consumers in the form of higher diesel fuel prices. These investment costs increase the refinery cost component of diesel fuel, and if the refiners allocate costs specifically to the cost-generating product, diesel prices should rise relative to gasoline prices. Home heating oil and diesel fuel are essentially the same product from the refining point of view, and as such, their prices are related in the market. As a result, peaking demand for home heating oil in cold months can have an effect on the price of diesel fuel. For parts of the United States, the winter of 2007-2008 was colder than usual. Heating oil prices reached a record price of $3.55 per gallon for the week ending March 3, 2008. This record price represented an increase of almost 9 cents from the previous week. These prices represented higher than a year-ago prices for the 22 nd consecutive week this heating season. Heating oil demand and high prices have likely contributed to the increases observed in diesel fuel prices. In addition, the linkages between the domestic diesel fuel market and international markets suggest that cold weather which increases heating oil demand anywhere in the world is likely to contribute to higher heating oil and diesel fuel prices in the United States. In a market economy, sellers of a commodity may set prices at whatever level they think the market will bear. Consumers respond by adjusting their level of purchases. If the consumer's demand is inelastic, or insensitive to price, then sellers have an incentive to charge higher prices. Transportation demand, and hence the demand for fuels including gasoline and diesel fuel, is thought to be relatively price insensitive in the short term. In addition, since diesel fuel is used for mostly business purposes in the United States, it may be treated as an intermediate good; one that is a cost component of a production process leading to some final consumer good or service. As such, any increases in diesel fuel costs are likely to be passed on to the ultimate consumers. If costs can be passed on through a pricing process, there is little need for those who use the product to make adjustments as a result of higher costs. Although gasoline and diesel fuels are joint products of the refining process, refining companies have the right to apportion the costs of production to segments of the product mix in whatever blend they choose. Refiners may choose to change relative prices within the product mix to take advantage of demand conditions, to alter the composition of demand to match available supply, or simply as a strategy to increase shareholder value. On the basis of the market dynamics described in this report, the future price path of highway fuels and the relative disparity between the price of gasoline and diesel fuel cannot be predicted with any confidence. At this time, the price support for diesel fuel is primarily demand-driven, with the United States competing for world supply to supplement domestic production of middle distillates with product imports. It could be anticipated that, at some point, the price of a fuel could reach a level where there is some demand response. It is unclear what these price points may be. However, owing to the primary use of diesel fuel in the commercial sector for the delivery of goods and some services, demand for diesel is likely to be less elastic because, as has been noted, those costs will be passed on to consumers. Demand outside the United States may also prove to be less elastic. A supply response could ameliorate prices somewhat, but any supply response is bounded by the nature of crude oil and refinery investment.

Over time, gasoline has typically been more expensive than diesel fuel. However, their relative prices have now reversed. In mid-March of 2008, gasoline prices exceeded $3.39/gallon (gal) while diesel fuel prices were above $3.97/gal, a differential of almost $0.60/gal. This has prompted questions of why the historic gap between gasoline and on-highway diesel prices has widened so greatly and over such a relatively brief period of time. Crude oil, when refined, produces a mix of products. Diesel fuel and home heating oil are derived from the portion of the barrel that produces what are termed "middle distillates." Another part of the barrel furnishes the feedstock for gasoline. Refiners process barrels of crude oil of differing quality, depending on the relative prices for oil of different qualities, and their available technology. Within technology-defined limits refiners can vary the proportions of middle distillate and gasoline production. Because the entire range of petroleum products derive from the same barrel, it is difficult to attribute general refining costs to any single product, making it also difficult to ascertain the relative cost proportions. The exception to this would be when the investment costs of changing product specifications to meet seasonal or environmental requirements can be measured. A number of specific factors may be identified that have contributed to the shifting relative prices of gasoline and diesel fuel. It is important to recognize that the U.S. market for these fuels is part of a broader world market. World demand patterns are shifting as diesel fuel becomes a primary consumer transportation fuel in Europe and other parts of the world. World price differentials are transmitted to the U.S. market. Other factors affecting diesel prices include refinery investment costs, as well as investment costs in the product distribution system to accommodate new specifications for diesel fuel that require lower allowable sulfur content; the seasonality of home heating oil demand, a similar product, which transmits the price effects of cold weather from the heating market to the on-highway diesel fuel market; world market effects that might affect the pricing and output mix decisions of refiners; and circumstances affecting the local market at point of purchase. One other factor should be noted. The primary demand sectors for gasoline and diesel fuel are different in the United States. Gasoline is a mass consumer good and home heating oil an important regional and seasonal residential product, while diesel fuel is used in a wide variety of commercial and industrial applications. Diesel fuel is often part of the cost of delivering goods and providing services. As a consequence, demand for diesel fuel may be less elastic, and therefore, likelier to be passed on to consumers.

The Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act, P.L. 93-288 ) authorizes the President to issue major disaster declarations in response to certain incidents that overwhelm the capabilities of tribal, state, and local governments. The Stafford Act defines a major disaster as any natural catastrophe (including any hurricane, tornado, storm, high water, wind-driven water, tidal wave, tsunami, earthquake, volcanic eruption, landslide, mudslide, snowstorm, or drought), or, regardless of cause, any fire, flood, or explosion, in any part of the United States, which in the determination of the President causes damage of sufficient severity and magnitude to warrant major disaster assistance under this chapter to supplement the efforts and available resources of states, local governments, and disaster relief organizations in alleviating the damage, loss, hardship, or suffering caused thereby. Major disaster declarations can authorize several types of federal assistance to support response and recovery efforts following an incident. The primary source of funding for federal assistance following a major disaster is the Disaster Relief Fund (DRF), which is managed by the Federal Emergency Management Agency (FEMA). While this fund also provides assistance as a result of emergency declarations and Fire Management Assistance Grants, major disaster declarations historically account for the majority of obligations from the DRF. This report provides a national overview of actual and projected obligations funded through the DRF as a result of major disaster declarations between FY2000 and FY2015. In addition to providing a national overview, the electronic version of this report includes links to CRS products that summarize actual and projected obligations from the DRF as a result of major disaster declarations in each state and the District of Columbia. Each state profile includes information on the most costly incidents and impacted localities. In both the national and state-level products, information is provided on the types of assistance that have been provided for major disasters. Many other federal programs that provide assistance following a major disaster are not funded through the DRF. While the specific agencies and programs called upon will vary from one disaster to another, an overview of selected programs can be found in CRS Report R42845, Federal Emergency Management: A Brief Introduction , coordinated by [author name scrubbed]. A total of 936 major disaster declarations were made between FY2000 and FY2015. These declarations resulted in more than $133.6 billion in actual and projected obligations from the DRF. There was a high level of variation in the amount of actual and projected funding obligated for major disasters each year, with more than $48.6 billion in actual and projected obligations for disasters in FY2005 alone. Figure 1 displays the actual and projected obligations for all major disaster declarations each fiscal year. In Figure 1 , obligations associated with each declaration are reported in the fiscal year in which the major disaster was declared. However, disaster response and recovery expenses are often incurred over several years following an incident, including some of the incidents from FY2000 to FY2015. To account for the total amount of federal assistance ultimately obligated for major disasters, the obligations data used throughout this report reflect actual obligations as well as obligations projected under FEMA-approved spending plans. A major disaster declaration can authorize funding for different purposes, depending on the needs of the state. These purposes include the following: Public Assistance , which is used by tribal, state, or local governments, or certain private nonprofit organizations to provide emergency protective services, conduct debris removal operations, and repair or replace damaged public infrastructure; Individual Assistance , which provides direct aid to impacted households; Hazard Mitigation Assistance , which funds mitigation and resiliency projects and programs, typically across the entire state; FEMA administrative costs associated with each disaster declaration; and Mission Assignment , which tasks and reimburses other federal entities that provide direct disaster assistance. The decision concerning which types of assistance to provide is made either when the major disaster is declared or when the declaration is amended. For many major disasters, all of the assistance types outlined above are authorized. For others, some assistance types are not authorized. Figure 2 compares the actual and projected obligations for different types of assistance provided as a result of a major disaster declaration from FY2000 to FY2015. In addition to the major disaster assistance described above, there are other forms of assistance that are funded through the DRF. These include assistance associated with Emergency Declarations and with Fire Management Assistance Grants. The funding associated with these types of assistance typically results in lower obligation levels than assistance provided as a result of major disaster declarations, although there is significant variation across incidents. Emergency Declarations are often made at the time a threat is recognized in order to assist tribal, state, and local efforts prior to an incident. For the period FY2000 through FY2015, total obligations for emergency declarations were just over $2.37 billion. Fire Management Assistance Grants (FMAGs) provide aid for the control, management, and mitigation of fires. Total obligations for FMAGs from FY2000 through FY2015 were slightly more than $1.21 billion. Floods represent a majority of all major disaster declarations nationwide. One of the primary sources of assistance for flooding events is the National Flood Insurance Program (NFIP), which is not funded through the DRF. For more information on the NFIP, please refer to CRS Report R44593, Introduction to FEMA's National Flood Insurance Program (NFIP) , by [author name scrubbed] and [author name scrubbed]. Many existing CRS products address issues related to the DRF, the disaster declaration process, and types of DRF assistance. Below is a list of several of these resources: CRS Report R41981, Congressional Primer on Responding to Major Disasters and Emergencies , by [author name scrubbed] and [author name scrubbed] CRS Report R43519, Natural Disasters and Hazards: CRS Experts , by [author name scrubbed] and [author name scrubbed] CRS Report R43784, FEMA's Disaster Declaration Process: A Primer , by [author name scrubbed] CRS Report R43537, FEMA's Disaster Relief Fund: Overview and Selected Issues , by [author name scrubbed] CRS Report R44619, FEMA Disaster Housing: The Individuals and Households Program—Implementation and Potential Issues for Congress , by [author name scrubbed] CRS Report R43990, FEMA's Public Assistance Grant Program: Background and Considerations for Congress , by [author name scrubbed] and [author name scrubbed] In the electronic version of this report, Table 1 includes links to CRS products that summarize major disaster assistance from the DRF for each state and the District of Columbia. Actual and projected obligations from the DRF as a result of major disaster declarations for tribal lands, American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, the Virgin Islands, the Federated States of Micronesia, the Marshall Islands, and the Republic of Palau are available upon request.

The primary source of funding for federal assistance authorized by a major disaster declaration is the Disaster Relief Fund (DRF), which is managed by the Federal Emergency Management Agency (FEMA). Major disaster declarations have occurred in every U.S. state since FY2000, with obligations for each incident ranging from a few hundred thousand dollars to more than $31 billion. This report summarizes DRF actual and projected obligations as a result of major disaster declarations at the national level for the period FY2000 through FY2015. CRS profiles for each state and the District of Columbia are linked to this report. Information on major disaster assistance from the DRF for tribal lands, U.S. territories, and freely associated states is available upon request. This report also includes lists of additional resources and key policy staff who can provide more information on the emergency management issues discussed.

Most Americans view health care for their children and for themselves as one of their topconcerns. The adverse consequences of going without health insurance may include unmet healthand dental needs, lower receipt of preventive services, avoidable hospitalizations, increasedlikelihood of receiving expensive emergency room care, and reduced likelihood that the doctor isfamiliar with the patient's medical history. From a public health perspective, early and frequentmonitoring of children's health is a key component to ensuring the appropriate growth and healthydevelopment of children. From a family perspective, health insurance coverage greatly reducesparental financial and emotional stress. Medical child support benefits families by increasing theincidence of noncustodial parents who obtain private health insurance coverage for their dependentchildren. With medical child support, Congress found a way to make noncustodial parentsresponsible for their children and lessen taxpayer burden by shifting costs from the taxpayers backto the noncustodial parents. Since 1977, Congress has tried to offset some of the costs associated with the Medicaid program by allowing states to require Medicaid recipients to assign their child support rights to thestate and allowing the state to pursue reimbursement of the cost of Medicaid benefits provided to thechild from the child's noncustodial parent (in 1984 mandatory assignment became law). Since 1984,Congress has tried to increase provision of private health care coverage for children whosenoncustodial parent has access to employer-related or group health insurance that is provided at areasonable cost. This is seen as a way to make noncustodial parents responsible for their childrenand lessen taxpayer burden by shifting costs from the taxpayers back to the noncustodial parents. For a detailed legislative history, see Appendix A . In 1984, federal law required that state Child Support Enforcement (CSE) agencies petition for the inclusion of medical support as part of any child support order whenever health care coverageis available to the noncustodial parent at reasonable cost. A 1993 amendment to the EmployeeRetirement Income Security Act (ERISA) required employer-sponsored group health plans to extendhealth care coverage to the children of a parent/employee who is divorced, separated, or nevermarried when ordered to do so by the state CSE agency via a Qualified Medical Child Support Order(QMCSO). The 1996 welfare reform law further strengthened medical support by stipulating thatall orders enforced by the state CSE agency must include a provision for health care coverage. (1) The1996 law also directed the CSE agency to notify the noncustodial parent's employer of theemployee's medical child support obligation. To help obtain health care coverage for children, a1998 law authorized the creation of the National Medical Support Notice (NMSN), a standardizedform, that is the exclusive document which must be used by all state CSE agencies. Anappropriately completed NMSN is considered to be a "Qualified Medical Child Support Order," andas such must be honored by the noncustodial parent's employer's group health plan. The reader should recognize that efforts to improve the establishment and enforcement of medical child support need to be viewed in the current context of high health care costs, a declinein employer-provided health insurance coverage (which is the foundation of the current medical childsupport system), an increase in the share of health insurance costs borne by employees, and a largenumber of children who are uninsured. Moreover, cash support and medical support are not alwayscompatible. For example, if premiums, co-payments, and deductibles of noncustodial parents rise,fairness might suggest that the cash child support payment of noncustodial parents be reduced toreflect payment of additional medical costs. The result, however, would be that custodial parentswould have less income to provide for the basic food, clothing, and shelter needs of their dependentchildren; conversely, if medical support is not available, the family will undoubtedly face direeconomic circumstances if a child becomes seriously ill. The public and policymakers generally agree that establishment and enforcement of medical support, where it is available on reasonable terms, promotes family responsibility, improveschildren's access to health care, and usually saves federal and state dollars. This report provides alegislative history of medical support provisions in the CSE program, describes current policy withrespect to medical child support, examines data on medical child support, and discusses some of theissues related to medical child support. Federal law mandates that states have procedures under which all child support orders arerequired to include a provision for the health care coverage of the child (section 466(a)(19) of theSocial Security Act). Medical support is the legal provision of payment of medical, dental,prescription, and other health care expenses for dependent children by the noncustodial parent. Itcan include provisions to cover health insurance costs as well as cash payments for unreimbursedmedical expenses. The requirement for medical child support is a part of the child support order,and it only pertains to the parent's dependent children. The reader should note that states canestablish child support orders (and thereby medical child support orders) either by a judicial oradministrative process (i.e., through the state courts or through the state CSE agencies). Activitiesundertaken by the state CSE agencies to establish and enforce medical support are eligible for federalreimbursement at the general CSE matching rate of 66%. (2) Medical support can take several forms. The noncustodial parent may be ordered to: (1) provide health insurance if available through his or her employer, (2) pay for private health insurance(health care coverage) premiums or reimburse the custodial parent for all or a portion of the costsof health insurance obtained by the custodial parent for the child, or (3) pay additional amounts tocover some or all of ongoing medical bills as reimbursement for uninsured medical costs. (3) PDFversion Congress has realized for many years that medical support enforcement activities need to bestrengthened. Congress recognized early in the implementation of the CSE program that manynoncustodial parents had private health insurance coverage available through employers, unions orother groups and that such coverage could be extended when available at reasonable cost to providefor dependents' medical expenses. The medical child support provisions benefit families byincreasing the incidence of noncustodial parents who obtain health insurance coverage for theirdependent children. Moreover, the medical child support provisions result in cost savings to statesand the federal governments by reducing Medicaid expenditures when such health care insuranceis available to families who are eligible for Medicaid services. (4) According to federal regulations (45 CFR 303.31), for both families who have assigned their medical support rights to the state and families who have applied for CSE services, the CSE agencymust: (1) Petition the court or administrative authority to include in the child support order health insurance that is available to the noncustodial parent at reasonable cost in new or modified childsupport orders, unless the child has satisfactory health insurance other than Medicaid; (2) Petition the court or administrative authority to include medical support whether or not --(a) health insurance at reasonable cost is actually available to the noncustodial parent at the timethe order is entered; or (b) modification of current coverage to include the child(ren) in questionis immediately possible; (3) Establish written criteria to identify cases not included under the previous two provisionswhere there is a high potential for obtaining medical support based on -- (a) evidence thathealth insurance may be available to the noncustodial parent at a reasonable cost, and (b) facts,as defined by state law, regulation, procedure, or other directive, which are sufficient to warrantmodification of the existing support order to include health insurance coverage for a dependentchild(ren); (4) Petition the court or administrative authority to modify child support orders for cases thatare likely to have access to health insurance to include medical support in the form of healthinsurance coverage; (5) Provide the custodial parent with information pertaining to the health insurance policywhich has been secured for the dependent child(ren); (6) Inform the Medicaid agency when a new or modified court or administrative order for childsupport includes medical support and provide specific information to the Medicaid agencywhen the information is available; (7) If health insurance is available to the noncustodial parent at reasonable cost and has notbeen obtained at the time the order is entered, take steps to enforce the health insurancecoverage required by the support order and provide the Medicaid agency with the necessaryinformation; (8) Periodically communicate with the Medicaid agency to determine if there have been lapsesin health insurance coverage for Medicaid applicants and recipients; and (9) Request employers and other groups offering health insurance coverage that is beingenforced by the CSE agency to notify the CSE agency of lapses in coverage. In addition, a medical child support order must contain the following information in order to be " qualified ": (1) the name and last known mailing address of the participant and each childcovered by the order, except that the order may substitute the name and mailing address of a stateor local official for the mailing address of any child covered by the order; (2) a reasonabledescription of the type of health coverage to be provided (or the manner in which such coverage isto be determined); and (3) the period to which the order applies. To help obtain health care coverage for children, a 1998 law authorized the creation of the NMSN. The NMSN is a standardized federal form that all state CSE agencies are supposed to usewhen issuing a medical support order to employers. An appropriately completed NMSN isconsidered to be a "Qualified Medical Child Support Order," and as such must be honored by thenoncustodial parent's employer's group health plan. (5) Cash child support collections by CSE agencies are distributed in several ways, including in the form of medical support. They may be sent to the family, divided between the state and federalgovernments, used as incentive payments to states, or used for medical support (and sent to theMedicaid agency or the family). For FY2001, total child support collections were distributed asfollows: 87.7% went to families; 5.3% went to the states; 4.7% went to the federal government;1.8% were paid out as incentive payments to states; and 0.5% was paid as medical support. To theextent that medical support has been assigned to the state, medical support collections are forwardedto the Medicaid agency for distribution. Otherwise, the amount collected as medical support is forwarded to the family. (6) (It should be noted thatthe provision of medical support in the form ofhealth insurance coverage is not quantified in the above data.) In general, health insurance is preferred over other types of medical support because it usually is relatively inexpensive for the employee/noncustodial parent (due to the employer contribution),it is easier for the CSE agency to monitor, and it can cover children who otherwise would bedependent on Medicaid benefits (at taxpayer expense). (7) In FY2001, medical support orders wereissued in the form of health insurance in 93% of the cases that included a medical support order (see Table 2 ). The conference report on the Child Support Enforcement Amendments of 1984 (whichbecame P.L. 98-378 ) stated: "... the conferees believe that the best long run solution to achieving medical insurance coverage for all families is the use of private medical insurancewhich is or can be made available through a parent's employer." (8) The medical child support process requires that a state CSE agency issue a notice to the employer of a noncustodial parent, who is subject to a child support order issued by a court oradministrative agency, informing the employer of the parent's obligation to provide health carecoverage for the child(ren). The employer must then determine whether family health care coverageis available for which the dependent child(ren) may be eligible, and if so, the employer must notifythe plan administrator of each plan covered by the National Medical Support Notice. If thedependent child(ren) is eligible for coverage under a plan, the plan administrator is required to enrollthe dependent child(ren) in an appropriate plan. The plan administrator also must notify thenoncustodial parent's employer of the premium amount to be withheld from the employee'spaycheck. (9) This section examines data from three different sources: national data from the U.S. CensusBureau, state CSE program data from the federal Office of Child Support Enforcement (OCSE), andlongitudinal data from the Survey of Income and Program Participation. All of the data indicate thatmuch more needs to be done to improve the establishment and enforcement of medical support, inaccordance with current law. In reviewing the data, it is important to note that (1) in some caseschildren did not receive a child support award of any kind, cash or medical care; (2) even if there wasa cash award, in many cases, health insurance coverage was not included in the award; and (3) evenwhen health insurance coverage was included, in many cases, it was not actually provided by thenoncustodial parent. The U.S. Census Bureau periodically collects national survey information on child support. The Census Bureau interviews a random sample of single-parent families to gather data that can be usedto assess the performance of noncustodial parents in paying child support and providing healthinsurance coverage. The Census data are based on all single-parent families in the United Stateswith children under age 21 who are living apart from their other parent. The Census data are morecomprehensive than CSE program data but do not disaggregate the data on a state-by-state basis. Figure 1 displays data obtained from April supplements to the Census Bureau's Current Population Survey. These supplements provide information on the receipt of child support paymentsby parents living with their own children whose other parent is not living with the family. Figure1 only displays information from cases in which the mother is the custodial parent. (10) Figure 1 indicates that during the period from 1989-1999, the percentage of child support awards thatincluded health insurance increased from 40.1% to 55.6%. Thus, in 1999 about 56% of mothersawarded child support payments had health insurance included in their award. This coincides withcongressional efforts to make health care coverage part of the child support obligation. However,the examination of enforcement, i.e., whether health insurance was actually provided, shows adifferent picture. During the 1989-1999 period, the percentage of child support awards that includedhealth insurance in which health insurance coverage was actually provided by the father droppedalmost 28%, from 67.6% in 1989 to 48.9% in 1999. Thus, in 1999, only 49% of custodial mothersexpecting to receive health benefits for their children actually did so. Source: Prepared by the Congressional Research Service based on data from Census Bureaureports. The third trend line in Figure 1 looks at cases in which health insurance was actually providedby the father as a percentage of all cases in which child support was awarded (as opposed to justthose that included health insurance). It shows a relatively flat line. In other words, during theperiod 1989-1999, the percentage of cases in which health insurance was required to be provided bythe father relative to all cases in which child support was awarded remained relatively unchanged. The percentage was 27.1% in 1989, it jumped to 28.5% in 1991, dropped back to 26.1% in 1993,rose to 27.7% in 1995 and to 29.1% in 1997, and dropped back to 27.2% in 1999. Thus, even thoughthere were some gains in the requirement for provision of health insurance, the actual provision ofhealth insurance to children living with their custodial mothers did not improve much over the 1989-1999 period. Table 1 provides detailed information for 1999, the most recent year for which national data are available, on the inclusion of the father's health insurance in orders received by families headedby mothers. Although the 1999 survey, like the 1997, 1995, 1993, and 1991 surveys, includedcustodial fathers, the table and following discussion are focused solely on custodial mothers. Whileindicating that about 56% of all mothers have health insurance included in their child support award,the table also shows that the probability of health insurance coverage is greatly reduced fornever-married women (39%), black (42%) and Hispanic women (42%), and women with lessschooling (i.e., high school dropouts, 36%). Table 1. Child Support Award Status and Inclusion of HealthInsurance in Child Support Award, by Selected Characteristics of Custodial Mothers,1999 Source: U.S. Census Bureau. 2002. Note: Custodial mothers are defined as women 15 years and older with children under 21 years ofage present from absent fathers as of Spring 2000. a.  Excludes a small number of currently widowed women whose previous marriage ended indivorce. b.  Persons of Hispanic origin may be of any race. PDFversion The medical support provisions appear to be having an impact on the number of children insingle-parent families with medical coverage in their child support orders. According to CSEprogram data, which reflect welfare families who are automatically eligible for CSE services andnonwelfare families who have applied for CSE services, 49% of child support orders in FY2001included health insurance coverage, up from 35% in FY1991. Although the CSE system has beenmaking progress in including health insurance coverage in child support orders, these figures indicatethat many children still lack health insurance coverage. P.L. 105-200 required the Secretary of the Department of Health and Human Services (HHS) to submit a report to Congress containing recommendations on a medical support indicator and itsintegration with the new performance-based incentive funding system established for the federalChild Support Enforcement program. The Medical Support Incentive Work Group (MSIWG), whichwas formed pursuant to this mandate, recommended in 2000 that a medical support performancemeasure be delayed because of the lack of reliable historical information on medical support. Threeof the data elements suggested by the group are now part of the data-reporting form OCSE-157 thatstates are required to complete. The three elements are: (1) cases where medical support is ordered(includes cash medical support and/or health insurance coverage); (2) cases where health insurancespecifically is ordered; and (3) cases where health insurance is provided as ordered. These dataelements appear in Table 2 . Table 2 shows that in FY2001, only 5.452 million (49%) of the 11.050 million families with child support orders had an order that included health insurance. The inclusion of health insurancein child support orders varied considerably from state to state, from a high of 100% in SouthCarolina and 83% in Idaho to a low of 2.1% in the District of Columbia and 10% in Kansas. Moreover, only 18% of health insurance orders actually resulted in health benefits. In other words, in 2001, only 18% of custodial families expecting to receive health benefits for their childrenactually did so. Again, there was wide variation by state; in Ohio health insurance was provided asordered in 86% of the cases that included a health insurance order; the comparable figure in Vermontwas 76%. At the other end of the spectrum, nine states reported that less than 2% of the cases thatincluded a health insurance order actually provided health insurance coverage. Table 2. Medical Child Support, FY2001 Source: Table prepared by the Congressional Research Service based on data from the Office ofChild Support Enforcement. A report prepared in 2000 by the Urban Institute provides longitudinal data on the health care coverage of children living with their mothers (and apart from their fathers). The report is based onanalysis of the 1993 Survey of Income and Program Participation (SIPP), a longitudinal surveycontaining detailed income and demographic information on a nationally representative sample ofapproximately 20,000 households. Two tables from the report are presented in Appendix B . Table B.1 shows that 37% of the child support awards ordered in 1993 included an award ofhealth insurance coverage by the noncustodial father, 16% required the custodial parent to providecoverage, 9% made some other provision for medical costs such as requiring the noncustodial parentto pay medical costs directly or including cash medical support in the child support award. Thirty-eight percent(38%) of child support awards ordered in 1993 included no provision for health carecoverage of any kind. Table B.2 examines the health care coverage of custodial children based on whether the noncustodial father was required to provide health care coverage for his dependent children. Thesecond panel of Table B.2 provides information on the health care coverage status of custodialfamilies in which the father was ordered to provide health care coverage for his dependent children. It shows that 68% of the custodial families reported receiving health care coverage from thenoncustodial father in at least one month of 1993, 17% reported the use of the custodial parent'shealth insurance to provide health care for the children, 11% relied exclusively on Medicaid orMedicare, and 4% were uninsured. Sixty-five percent of the custodial families reported that theprivate coverage from the noncustodial father or custodial mother was valid for all 12 months of theyear. The author of the report made the following remarks regarding the current applicability of the 1993 findings. The results presented in this paper are based on data from 1993, the most recent year for which information on nonresident fathers is readily available. To what extent have changes since 1993 affected nonresident fathers' ability to provide health carecoverage? If nonresident fathers have experienced the same health care coverage trends as theoverall workforce, then the flattening out of several health care coverage trends since 1993 suggeststhat the findings are still relevant. (11) Although SIPP also collected information on health insurance coverage of custodial children in its 2001 topical module questionnaire, those data are not yet available. The national Census Bureau data, which reflect the universe of custodial families, show that in 1999 about 56% of mothers awarded child support payments had health insurance included intheir child support award. It also showed that only 49% (i.e., 49% of the 56%) of custodial mothersexpecting to receive health benefits for their children actually did so. In contrast, the CSE programdata, which reflect welfare families who are automatically eligible for CSE services and nonwelfarefamilies who have applied for CSE services, show that in FY2001 about 49% of child supportawards included a health insurance order. Further, only 18% of health insurance orders wereprovided as ordered (i.e., only 18% of custodial mothers expecting to receive health benefits for theirchildren actually did so). The CSE program data show a less effective medical support effort than the national Census Bureau data. This may be because noncustodial parents that are not part of the CSE program havemore income and are more able to provide medical support for their children. Even so, as notedearlier, the national data also indicate that much more needs to be accomplished with regard toestablishment and enforcement of medical support. Establishment of Health Insurance Order as Part of Child SupportAward/Order. As noted, the CSE program data indicate that in 2001, only 49% offamilies with child support awards had a health insurance order included as part of their childsupport award/order. An HHS IG report released in June 2000 found " child support agenciesdeficient in pursuing health insurance availability ..." The report noted that CSE staff indicated thatwhile they do try to obtain employment and health insurance information pertaining to noncustodialparents, they believe their primary efforts should be spent in obtaining cash child support payments. (12) Some observers contend that medical support provisions should be expanded to require bothnoncustodial and custodial parents to disclose information about actual and potential private healthcare coverage to help CSE agencies better and/or more quickly determine whether private healthinsurance coverage is available to the dependent children. Also, during the last several years therehas been a decline in the number of employers that provides health insurance for their employees(which is the foundation of the current medical child support system), and among employers whodo provide health insurance, the share of health insurance costs borne by employees has increased. Enforcement of Health Insurance Order. Of perhaps more significance is the fact that only 18% of CSE families with a health insurance orderincluded in their child support award actually received the health care coverage mandated by theorder (2001 data). Clearly, enforcement of the health insurance order can only come after the healthinsurance order has been established. However, higher enforcement levels are not necessarilycorrelated to higher levels of establishment of health insurance coverage. Some reasons for the low compliance with health insurance orders may be that the health care coverage is not (1) affordable -- health care costs have risen dramatically over the last decade andthose costs have in many instances been passed on to the beneficiary, so that noncustodial parentswho can no longer meet the premium fees, co-payments, deductibles, and other costs associated withthe coverage and may let the coverage lapse or terminate the coverage altogether; (2) accessible --the rise in the use of Health Maintenance Organizations to deliver health insurance coverage has ledto many cases in which the dependent child is not in the HMO service area and therefore not eligiblefor coverage; (3) stability -- not all workers are full-time, year-round employees, thus in the casesof temporary or seasonal workers, any access they had to health care coverage would generally endwhen their employment ended. To improve establishment and enforcement of medical child support, there are a range of healthcoverage options. Generally speaking for the last several years the focus has been on obtainingprivate health care coverage exclusively from noncustodial parents. The extent to which custodialparents work and have access to employer-sponsored health insurance has increased significantlyduring the last 20 years. Similarly, Medicaid coverage based on child poverty has also increased. Today, in many cases health care coverage is more accessible if it is based on the custodial parent'scoverage. (13) Moreover, over the last several yearshealth care costs have dramatically increased, andit can no longer be assumed that all employer-sponsored health insurance is affordable. Requiringand enforcing expensive health care insurance may negatively affect the custodial parent and childas well as the noncustodial parent. Most policymakers agree that health care coverage must beavailable, accessible, affordable, and stable. Observers state that if the goal is to reduce the numberof uninsured children with child support orders, in some cases, the only way to obtain this result willbe to rely on publicly-funded health care. As indicated by the data discussed earlier, federal law has not been fully effective in addressing medical child support. However, two provisions of federal law have yet to be fully implemented. P.L. 105-200 stipulated that a medical child support incentive payment system be developed -- thathas not yet happened. Further, although the National Medical Support Notice was promulgatedDecember 27, 2000 and became effective on March 27, 2001, as discussed below, only half of thestates are using it. The discussion below provides context and background to some of the issues that are preventing states from effectively establishing and enforcing medical child support. As mentioned elsewhere in this report, the 1984 law ( P.L. 98-378 ) basically requires CSE agencies to secure medical support information, and to secure and enforce medical supportobligations whenever health care coverage is available to the noncustodial parent at a reasonablecost. Recognizing that states were making slow progress in establishing and enforcing medicalsupport, Congress in the 1993 amendments ( P.L. 103-66 ) sought to remove some of the barriers toeffective medical support enforcement. The 1993 law prohibited discriminatory health care coveragepractices, created "qualified medical child support orders" to obtain coverage from group healthplans that were covered by the Employee Retirement Income Security Act (ERISA), and allowedemployers to deduct the costs of health insurance premiums from the employee/obligor's paycheck. Even with the enactment of the 1996 welfare reform law ( P.L. 104-193 ), which required inclusionof health care coverage in all child support orders established or enforced by CSE agencies, it isgenerally agreed that the establishment and enforcement of medical support has remainedinadequate. A 1998 law ( P.L. 105-200 ) required the development and use of a "National Medical Support Notice" and also established a Medical Child Support Working Group charged with makingrecommendations to overcome the barriers to effective enforcement of medical support. (14) TheWorking Group submitted a report to the Secretaries of the Departments of Health and HumanServices (HHS) and Labor in June 2000 containing 76 recommendations related to medical childsupport. These recommendations have not been considered by Congress. Although some critics claim that much more needs to be accomplished with regard to the provision of medical support for children receiving CSE services, some analysts contend that thefederal government has made tremendous strides. They note the following accomplishments. Thefederal government has moved from recoupment of Medicaid costs to pursuit of private medicalsupport. The federal government has moved from simply petitioning for medical support torequiring that medical support be included in all CSE orders. The federal government has movedfrom simply establishing medical support to requiring a uniform national medical support notice thatmust be honored by employer group health plans. They conclude that the 19-year period from 1984-2003encompasses much progress in both establishing medical support orders and in enforcing thoseorders. Some proponents advocate the collection of medical support through income withholding. They assert that child support and medical support should be fully integrated and enforced primarilythrough income withholding. They point out that income withholding as a percentage of all childsupport collections went from about 50% right before automatic income withholding was mandatedin 1994 to 65% of collections in FY2002. They contend that just as income withholding has beenso successful for cash child support, so too could medical support benefit from the mandatory useof income withholding. (15) Others warn that incomewithholding is too intrusive and does not accountfor changing financial circumstances. They also contend that the combination of both child supportand medical support may exceed the limits imposed by the Consumer Credit Protection Act. (16) According to federal regulations [45 CFR 303.31(b)(1)], if the custodial parent is already providing satisfactory private health care coverage for herself and the children, state CSE agenciesare not required to petition the court or administrative agency to include private health insurancecoverage that is available to the noncustodial parent at reasonable cost in new or modified childsupport orders. This means that if the custodial parent is bearing the full cost of premiums, co-payments anddeductibles -- without assistance from the noncustodial parent -- the CSE agency willtake no action. In such cases, cash child support may be used to pay health care costs. In somecases, a child may have private health care coverage but live in poor housing or lack adequate foodor clothing. (17) Some observers argue that healthinsurance should be an adjunct to, not a substitutefor, the noncustodial parent's obligation to provide financial support for his or her child; they notethat when insurance costs are subtracted from the noncustodial parent's financial obligation, thecustodial parent has less resources to spend in the best interest of the child. (18) Others argue that whenmedical child support is not provided, the custodial parents may not be able to oversee the medicalhealth of their children. According to the Medical Child Support Working Group, it often is assumed that only the noncustodial parent has access to private health insurance. It cites a number of statistics that affirmsthis is a fallacy. It recommends that a new paradigm should be adopted in which coverage availableto both parents is examined in determining the medical support obligation. Under this paradigm, ifonly the custodial parent has coverage, that coverage should be ordered and the noncustodial parentshould contribute toward the cost of such coverage. When both parents are potentially able toprovide coverage, the coverage available through the custodial parent (with a contribution towardthe cost by the noncustodial parent) should normally be preferred because it -- (1) most likely isaccessible to the child, (2) involves less difficulty in claims processing for the custodial parent, theprovider, and the insurer, and (3) minimizes the enforcement difficulties of the CSE agency orprivate attorney responsible for the case. (19) Some analysts caution that this policy may cause conflict if the state has to enforce a medical support order against the custodial parent, especially if the custodial parent contends that the reasonthe medical obligation was unmet was because the noncustodial parent failed to make his or hercontribution. Such conflict may occur because there is much confusion over whom the CSE attorneyrepresents. Most custodial parents believe that the CSE agency represents them when in fact theCSE agency represents the state. In general, private health care coverage that is available to the custodial parent usually is accessible to the child even if the plan coverage has a limited service area, as is the case with manyHealth Maintenance Organizations (HMOs). However, this may not be the case when it is the noncustodial parent whose health insurance coverage is being used, particularly if that coverage isprovided through an HMO. (20) Thus, for childrenliving far from their noncustodial parent, managedcare reduces the attractiveness of coverage under the noncustodial parent's plan relative to otheroptions for health care coverage. For example, HMO coverage in California may be useless to achild living in Massachusetts. Likewise, coverage available in upstate New York may be too faraway to be useful to a child living in New York City. According to one report, since managed careis now the norm and only 40% of noncustodial fathers live in the same city or county as theirchildren, this can be a serious problem. (21) Under the Medical Child Support Working Group's paradigm, when private health care coverage is available to a child, the CSE agency should consider the accessibility of covered servicesbefore it decides to pursue the coverage. According to the Working Group, children should not beenrolled in any plan whose services/providers are not accessible to them, unless the plan can providefinancial reimbursement for services rendered by alternate providers. (22) The Working Group recommended that federal regulations be developed to define "accessible" coverage and that it be made clear that coverage that is not accessible should not be ordered. TheWorking Group reported the following with regard to a definition of "accessible": Coverage is accessible if the covered children can obtain services from a plan provider with reasonable effort by the custodial parent. When the only healthcare option available to the noncustodial parent is a plan that limits service coverage to providerswithin a defined geographic area, the decision maker should determine whether the child lives withinthe plan's service area. If the child does not live within the plan's service area, the decision makershould determine whether the plan has a reciprocal agreement that permits the child to receivecoverage at no greater cost than if the child resided in the plan's service area. The decision makershould also determine if primary care is available within the lesser of 30 minutes or 30 miles of thechild's residence. If primary care is not available within these constraints, the coverage should bedeemed inaccessible. (23) In addition, the Medical Child Support Working Group cautioned that to be deemed accessible, the health care coverage also should be stable. The Working Group maintained that the decisionmaker should base accessibility partly on whether it can reasonably be expected that the health carecoverage will remain effective for at least one year, based on the employment history of the parentwho is to provide the coverage. In other words, it is the Working Group's opinion that it might notalways be feasible to pursue health insurance coverage in the case of parents who are seasonalworkers. Some observers contend that if noncustodial parents cannot provide continuous health carecoverage for their dependent children, it may be in the best interest of the child to receive privatehealth care coverage from the custodial parent or coverage from Medicaid or the State Children'sHealth Insurance Program (SCHIP) Under SCHIP, which was established in 1997, low-incomechildren may be better off without any coverage from the noncustodial parent, if that parent is unableto provide continuous coverage because some states do not grant SCHIP eligibility until childrenhave been uninsured for a waiting period of three or more months. (24) As noted earlier, the federal government provides 66% of the funding for most CSE program activities, including those related to medical support. In order to receive any federal funding, statesand/or local governments must provide 34% of the funds needed to operate their CSE programs. Inthe past, when Congress wanted to encourage activity in an area it considered vital to theeffectiveness of the CSE program, it offered federal financial participation (FFP) at a higher thannormal level. For example, Congress provided enhanced FFP to encourage paternity establishment and automation in the CSE program. (25) The Medical Child Support Working Group contends that Congress should provide enhanced FFP at a 90% rate for medical child support activities to encourage states to more aggressivelypursue medical support enforcement. The Working Group's recommendation limits the 90%matching requirement for medical support to 5 years. P.L. 105-200 (enacted in 1998) also required the HHS Secretary, in consultation with state CSE directors and representatives of children potentially eligible for medical support, to develop a newmedical support incentive measure based on the state's effectiveness in establishing and enforcingmedical child support obligations. The medical support incentive was to be part of the new revenue-neutralperformance-based child support incentive system, established for the overall program in1998. The 1998 law required that a report on this new incentive measure be submitted to Congressnot later than October 1, 1999. According to the House report on the legislation: Several witnesses who appeared before the Committee recommended that we consider including medical child support as a performance measure. Afterdiscussion, the Committee decided not to include this measure because of the lack of informationabout the reliability of state data on medical support as well as lack of historical information aboutstate performance on the measure that could be used to estimate payments. However, becausemedical support is of central importance to a good child support system, the Committee decided toask the Secretary to study the feasibility of using medical support as a performance measure and toreport her findings to Congress. (26) Pursuant to this mandate, the HHS Secretary formed the Medical Support Incentive Work Group (MSIWG). (27) The work group met twiceover a period of nine months to makerecommendations to the Secretary. The work group recommended that the development of themedical support incentive be delayed until 2001 so that it could obtain the necessary data anddevelop an appropriate measure. This recommendation was included in the Secretary's report toCongress. A reconstituted MSIWG was later convened and -- in September 2001 -- recommended that the HHS Secretary not develop a medical support performance measure for incorporation into theexisting CSE incentive payment system. Again noting the lack of data, the second MSIWGrecommended that a measure be developed, but not for incentive payment purposes. To date, theHHS Secretary has not acted on this report. Hence, a recommendation to Congress has not beenmade and there remains no incentive payment for medical support activities. CSE agencies are required to pursue private family health coverage whenever it is available at reasonable cost. Federal regulations state that "health insurance is considered reasonable in cost ifit is employment-related or other group health insurance." The definition deemingemployment-related coverage or group (e.g., union) health insurance policies to be per se reasonablein cost was first promulgated in 1985. It was justified by a 1983 study by the National Center forHealth Services Research, which found that employers paid 72% of the premium cost for low-wageemployees. The federal Office of Child Support Enforcement (OCSE) thus concluded that mostemployment-related or other group health insurance is inexpensive to the employee/noncustodialparent. Rising health care costs have changed the picture. Recent research indicates that therequired employee contribution for health care coverage represents a much larger share of familyincome for low-income workers. Some data suggest that on average, employee contributions tofamily health care coverage premiums are equal to 45% to 52% of the typical cash child supportpayment. (28) Although federal regulations (45 CFR section 302.56) require that child support guidelines "provide for the child(ren)'s health care needs, through health insurance coverage or some othermeans," they do not stipulate how this is to be done. In practice, integrating child support andmedical support can be difficult. Most states operate under the position that if the custodial parentprovides the health care coverage, the cash support award is suppose to increase, to reflect somecontribution from the noncustodial parent toward the cost. If the noncustodial parent provides thecoverage, the cash support award is suppose to decrease, to reflect the fact that the noncustodialparent is subsidizing the cost of health care coverage through a separate deduction from wagestoward the premium. The results may be problematic in that if the premium associated with thehealth care coverage is too high, cash support will be substantially reduced, leaving the custodialparent without enough money to take care of the child's food, clothing, and shelter needs. If cashsupport is not adjusted downward, however, poorer noncustodial parents will pay an unreasonablyhigh portion of their income as support. (29) Under the Medical Child Support Working Group's paradigm, in deciding whether to pursue private coverage, the cost of coverage should be considered. To the maximum extent possible,public dollars (through, for example, enrollment in Medicaid or the State Children's HealthInsurance Program (SCHIP) should be the payment of last resort. Moreover, according to theWorking Group, private insurance should not be ordered when its cost significantly lowers theamount of cash child support available to meet the child's basic needs and the child is eligible forsome other form of coverage. (30) According to a Policy Interpretation Questions memorandum, (31) issued by the Office of ChildSupport Enforcement, concerning "reasonable cost" of medical support, states in which the childsupport order is established by the courts can enact statutes governing their courts that define"reasonable cost" in a way that the state deems appropriate and still meet federal requirements. Forexample, under the Texas statute (Section 154.181(e) of the Texas Family Code) "reasonable cost"means the cost of a health insurance premium that does not exceed 10% of the responsible parent'smonthly net income. In contrast, states that set the child support order administratively through their CSE agencies would be subject to federal law and regulations, which stipulate that health insurance is consideredreasonable in cost if it is employment-related or other group health insurance. The Working Group recommended that federal policy be changed to reflect the view that if the cost of providing private health insurance coverage does not exceed 5% of the gross income of theparent who provides coverage, then the cost should be deemed reasonable, regardless of whether thechild support order was established by the courts or administratively by the state CSE agency. (32) Even though private health care coverage has advantages over public coverage -- namely greater likelihood of full family coverage, a wider range of providers, no stigma, less taxpayerburden, and greater satisfaction with various aspects of care (33) -- for the 8.5 million children who didnot have any health insurance coverage in 2002, public health care coverage may need to be pursuedif private health care coverage is not available or not accessible. There is general agreement that theCSE agency should work more closely with Medicaid/SCHIP to ensure that children who haveaccess to private health care coverage obtain such coverage, and that those who are eligible forpublicly-subsidized health coverage are covered by Medicaid or SCHIP. Alternate Methods to Offset Health Insurance or Medicaid Costs. Although focused solely on the state of Connecticut, a 1998 report by theHHS Office of Inspector General (OIG) found many noncustodial parents who were required bycourt order to provide health care coverage to their children were unable to meet their obligationbecause either their employers did not offer health insurance or available health insurance was notreasonable in cost. One of the report's recommendations was for Connecticut to requirenoncustodial parents to pay all or part of the Medicaid premiums for their dependent children. Thereport estimated that Connecticut would save about $11.4 million annually in combined federal andstate Medicaid costs if it required noncustodial parents to offset Medicaid premiums paid by the stateon behalf of the children of these noncustodial parents. (34) Similarly, a 2003 HHS OIG report focused on North Carolina found that about $17.4 million could have been collected from the noncustodial parents of 30,987 children to partially offset theMedicaid cost incurred by the state and federal governments to provide health care to thesechildren. (35) Although federal law does not requirenoncustodial parents to provide medical supportif the employer does not offer health insurance or the insurance is too costly, states have the authorityto modify state laws to require noncustodial parents to contribute to their dependent children'sMedicaid costs. In cases where a parent has access to private health care coverage but it is too costly, the child may then be enrolled in Medicaid, if eligible. In such cases, it may be less expensive for the stateif the child were enrolled in the private health care coverage. For example, the noncustodial parent'sshare of the private health insurance premium might be less than what the state pays an HMO for thechild's Medicaid coverage. In that case, many experts believe that it would make sense for Medicaidto pay the private health coverage premium. (36) Federal law allows individuals to obtain private healthcare coverage with a public subsidy. Specifically, section 1906 of the Social Security Act allowsstate Medicaid agencies to use Medicaid funds to purchase group health insurance coverage if suchcoverage is available to a Medicaid-eligible individual. Closing the Gap Between Those Eligible for Medicaid and ThoseEnrolled. In many cases, children are uninsured because private health insurancecoverage is not available through either parent, and the custodial parent has not enrolled the childin the available public health care system, i.e., Medicaid or SCHIP. One study estimates thatenrolling uninsured, child support-eligible children in Medicaid or SCHIP could reduce the shareof these children who are uninsured from 15% to 3%. According to some analysts, requiring thatthe child be enrolled in Medicaid or SCHIP (if eligible) when private coverage is not availableshould be a standard part of the child support process. Also, as mentioned above, considerationcould also be given to having the noncustodial parent contribute to any premiums, co-payments, ordeductibles associated with SCHIP coverage if the state in which the child is to be enrolled has aseparate SCHIP program that imposes these costs. These types of procedures might spread the costmore equitably between the parents, and between parents and the state. (37) If the state does not want to require enrollment in publicly-funded medical programs, it could provide information on the availability of the programs. It has been estimated that 66% of uninsuredchild support-eligible children are eligible for Medicaid, and another 15% are eligible for SCHIP. One of the main reasons for this lack of healthcare coverage of children who are eligible for public health care programs is that many parents donot know about Medicaid and SCHIP or do not know how to enroll their children. About one-thirdof the parents of eligible but not-enrolled children reported that they had not heard of Medicaid orSCHIP. Another 10% had difficulty with the enrollment process. An option would be for the CSEagency to provide parents with information about these programs and assist them in the enrollmentprocess. (38) The ability to move back and forth between the noncustodial parent's health insurance plan and an alternative source of coverage is an important factor in determining the best source of coveragefor a child whose noncustodial parent has access to employment-based health care coverage on anirregular or seasonal basis. According to one author: Transitions to and from Medicaid can be quite seamless, since children can remain enrolled in Medicaid even when they are also covered by the nonresidentparent's health care plan (in which case, the nonresident parent's health care plan takes precedence). However, if the alternative source of coverage is SCHIP, then the transition may not be seamless,since some states require a child to be uninsured for three or more months before gaining eligibility. Unless some exemption can be made for children losing coverage from a nonresident parent,SCHIP-eligible children whose nonresident parent can provide only irregular access toemployment-based health care coverage may be better off if some other form of medical support isrequired, such as a contribution to the health plan premiums paid by the custodial family, orcontributions toward co-payments and deductibles. (39) P.L.105-200 provided for a uniform manner for states to inform employers about their need to enroll the children of noncustodial parents in employer-sponsored health plans. It required the CSEagency to use a standardized "National Medical Support Notice" (developed by HHS and theDepartment of Labor) to communicate to employers the issuance of a medical support order. Employers are required to accept the form as a "Qualified Medical Child Support Order" (QMCSO)under ERISA. (40) An appropriately completednational medical support notice is considered to be aQMCSO and as such must be honored by the employer's group health plan. P.L. 105-200 also requires plans sponsored by churches and state and local governments to provide benefits in accordance with the requirements of an appropriately completed NMSN. Thelegislation envisioned that all states would be using the NMSN by October 1, 2001 or, at the latest,by the end of first legislative session to occur after that date, if state legislation was needed. It alsorequired employers to honor any appropriately completed NMSN and send it to the appropriate planadministrator within 20 business days. The plan administrator has 40 days from the date on theNMSN to respond to the CSE agency. Finally, employers were required to notify the state CSEagency if the employee was terminated thereby alerting the CSE agency of the need to enforcemedical support against any new employer by issuing another NMSN. A draft NMSN was issued for public comment on November 15, 1999. Changes were made in response to comments from the Medical Child Support Working Group, as well as the public. TheDepartment of Labor and the Department of Health and Human Services adopted final regulationson December 27, 2000, implementing the National Medical Support Notice provisions of the ChildSupport Performance and Incentive Act of 1998 ( P.L. 105-200 ). On January 26, 2001, the FederalRegister published a notice that delayed the effective date of the final NMSN regulations until March27, 2001. Although Congress required all state CSE agencies to use the NMSN once it was promulgated, few states had implemented it by the target date of October 2001. According to OCSE, 37 states andterritories had to delay implementation of the NMSN because their legislatures needed to pass therequired legislation. According to National Women's Law Center, as of September 2002, about 30states had passed NMSN implementation legislation. (41) According to the Center on Law and SocialPolicy, as of April 4, 2003, about half the states were not yet using the NMSN. (42) Federal law mandates that states have procedures under which all child support orders are required to include a provision for the health care coverage of the child (section 466(a)(19) of theSocial Security Act). Federal law does not, however, stipulate state use of the NMSN in the CSEstate plan requirements on provision of health care coverage. (43) Thus, a state that does not use theNMSN is not considered to be in noncompliance with the state CSE plan, and thereby is not subjectto a financial penalty. Some observers contend that imposing financial sanctions on states that donot use the NMSN could increase its use and thereby increase enforcement of medical child support. Some states contend that the NMSN is much too long and cite the expense of mailing such a lengthydocument to a large number of employers. Further, others note that federal law does not require thatstates impose financial penalties on employers who fail to comply with the NMSN (states, however,can impose such sanctions under state law). According to the National Women's Law Center, somestates without relevant employer and plan administrator sanctions are concerned that the lack ofsanctions may be an barrier to successful enforcement of medical child support. (44) Just as Temporary Assistance for Needy Families (TANF) recipients must assign their childsupport rights to the state, so too must Medicaid recipients assign their medical support rights to thestate. The impetus for the federal government moving into the arena of financial child support wasto reduce federal expenditures on the old Aid to Families with Dependent Children (AFDC)entitlement program (which was replaced in 1996 by the time-limited TANF block grant program). Similarly, the impetus for the federal government moving into the arena of medical support forchildren (eligible for child support) was to reduce federal costs of the Medicaid program. Thissection of the report summarizes major medical child support provisions. The first link between child support and medical support came as an attempt to recoup the costs of Medicaid provided to public assistance families under Title XIX of the Social Security Act. Justtwo years after the creation of the CSE (i.e., IV-D of the Social Security Act) program, theMedicare/Medicaid Anti-fraud and Abuse Amendments of 1977 established a medical supportenforcement program that allowed states to require that Medicaid applicants assign their rights tomedical support to the state. Further, in an effort to cover children with private insurance instead ofpublic programs, when available, it permitted CSE and Medicaid agencies to enter into cooperativeagreements to pursue medical child support assigned to the state. (It should be noted that activitiesperformed by the CSE agency under a cooperative agreement with the Medicaid agency must befunded by the Medicaid agency.) The 1977 law also required state CSE agencies to notify Medicaidagencies when private family health coverage was either obtained or discontinued for aMedicaid-eligible person. P.L. 98-369 mandated states to require that Medicaid applicants assign their rights to medical support to the state (Section 1912(a) of the Social Security Act). Section 16 of Public Law 98-378, enacted in 1984, required the HHS Secretary to issue regulations to require that state CSE agencies petition for the inclusion of medical support as partof any new or modified child support order whenever health care coverage is available at "reasonablecost" to the noncustodial parent of a child receiving AFDC, Medicaid, or foster care benefits orservices. According to federal regulations, any employment-related or other group coverage wasconsidered reasonable, under the assumption that health insurance is inexpensive to theemployee/noncustodial parent. Implementing Regulations. On October 16, 1985, the Office of Child Support Enforcement (OCSE) published regulations amending previousregulations and implementing section 16 of P. L. 98-378. The regulations required state CSEagencies to obtain basic medical support information and provide this information to the stateMedicaid agency. The purpose of medical support enforcement is to expand the number of childrenfor whom private health insurance coverage is obtained by increasing the availability of third partyresources to pay for medical care, and thereby reduce Medicaid costs for both the states and thefederal government. If the custodial parent does not have satisfactory health insurance coverage, thechild support agency must petition the court or administrative authority to include medical supportin new or modified support orders and inform the state Medicaid agency of any new or modifiedsupport orders that include a medical support obligation. The regulations also required CSE agenciesto enforce medical support that has been ordered by a court or administrative process. States receivechild support matching funds at the 66% rate for required medical support activities. Before these 1985 regulations were issued, medical support activities were pursued by CSE agencies only under optional cooperative agreements with Medicaid agencies. Some of the functionsthat the CSE agency may perform under a cooperative agreement with the Medicaid agency include:receiving referrals from the Medicaid agency, locating noncustodial parents, establishing paternity,determining whether the noncustodial parent has a health insurance policy or plan that covers thechild, obtaining sufficient information about the health insurance policy or plan to permit the filingof a claim with the insurer, filing a claim with the insurer or transmitting the necessary informationto the Medicaid agency, securing health insurance coverage through court or administrative order,and recovering amounts necessary to reimburse medical assistance payments. More Regulations. On September 16, 1988, OCSE issued regulations expanding the medical support enforcement provisions. These regulationsrequired the CSE agency to develop criteria to identify existing child support cases that have a highpotential for obtaining medical support, and to petition the court or administrative authority tomodify support orders to include medical support for these cases even if no other modification isanticipated. The CSE agency also is required to provide the custodial parent with informationregarding the health insurance coverage obtained by the noncustodial parent for the child. Moreover,the regulation deleted the condition that CSE agencies may secure health insurance coverage undera cooperative agreement only when it will not reduce the noncustodial parent's ability to pay childsupport. Before late 1993, employees covered under their employers' health care plans generally could provide coverage to children only if the children lived with the employee. However, as a result ofdivorce proceedings, employees often lost custody of their children but were nonetheless requiredto provide their health care coverage. While the employee would be obliged to follow the court'sdirective, the employer that sponsored the employee's health care plan was under no similarobligation. Even if the court ordered the employer to continue health care coverage for thenonresident child of their employee, the employer would be under no legal obligation to do so. Aware of this situation, Congress took the following legislative action in the Omnibus Budget Reconciliation Act of 1993 ( P.L. 103-66 ): (1) Insurers were prohibited from denying enrollment of a child under the health insurance coverage of the child's parent on the grounds that the child was born out of wedlock, is notclaimed as a dependent on the parent's federal income tax return, or does not reside with theparent or in the insurer's service area; (2) Insurers and employers were required, in any case in which a parent is required by court order to provide health coverage for a child and the child is otherwise eligible for family healthcoverage through the insurer: (a) to permit the parent, without regard to any enrollment seasonrestrictions, to enroll the child under such family coverage; (b) if the parent fails to providehealth insurance coverage for a child, to enroll the child upon application by the child's otherparent or the state child support or Medicaid agency; and (c) with respect to employers, not todisenroll the child unless there is satisfactory written evidence that the order is no longer ineffect or the child is or will be enrolled in comparable health coverage through another insurerthat will take effect not later than the effective date of the disenrollment; (3) Employers doing business in the state, if they offer health insurance and if a court order is in effect, were required to withhold from the employee's compensation the employee's shareof premiums for health insurance and to pay that share to the insurer. The HHS Secretary mayprovide by regulation for such exceptions to this requirement (and other requirements describedabove that apply to employers) as the Secretary determines necessary to ensure compliance withan order, or with the limits on withholding that are specified in section 303(b) of the ConsumerCredit Protection Act; (4) Insurers were prohibited from imposing requirements on a state agency acting as an agent or assignee of an individual eligible for medical assistance that are different from requirementsapplicable to an agent or assignee of any other individual; (5) Insurers were required, in the case of a child who has coverage through the insurer of a noncustodial parent to: (a) provide the custodial parent with the information necessary for thechild to obtain benefits; (b) permit the custodial parent (or provider, with the custodial parent'sapproval) to submit claims for covered services without the approval of the noncustodial parent;and (c) make payment on claims directly to the custodial parent, the provider, or the stateagency; and (6) The state Medicaid agency was permitted to garnish the wages, salary, or other employment income of, and to withhold state tax refunds to, any person who: (a) is required by court oradministrative order to provide health insurance coverage to an individual eligible forMedicaid; (b) has received payment from a third party for the costs of medical services to thatindividual; and (c) has not reimbursed either the individual or the provider. The amount subjectto garnishment or withholding is the amount required to reimburse the state agency forexpenditures for costs of medical services provided under the Medicaid program. Claims forcurrent or past due child support take priority over any claims for the costs of medical services. Under the 1996 welfare reform legislation, the definition of "medical child support order" in the Employee Retirement Income Security Act (ERISA) was expanded to clarify that any judgment,decree, or order that is issued by a court or by an administrative process has the force and effect oflaw. In addition, the 1996 welfare reform law stipulated that all orders enforced by the state CSEagency must include a provision for health care coverage. If the noncustodial parent changes jobsand the new employer provides health coverage, the state must send notice of coverage to the newemployer; the notice must serve to enroll the child in the health plan of the new employer. (Beforeenactment of P.L. 104-193 , families who were not receiving public assistance benefits could choosenot to seek medical support.) P.L.105-200 provided for a uniform manner for states to inform employers about their need to enroll the children of noncustodial parents in employer-sponsored health plans. It required the CSEagency to use a standardized "National Medical Support Notice" (developed by HHS and theDepartment of Labor) to communicate to employers the issuance of a medical support order. Employers are required to accept the form as a "Qualified Medical Support Order" under ERISA. States were required to begin using the national medical support notice in October 2001, althoughmany states had to delay implementation until enactment of required state enabling legislation. Anappropriately completed national medical support notice is considered to be a "Qualified MedicalChild Support Order" and as such must be honored by the employer's group health plan. P.L. 105-200 also called for the joint establishment of a Medical Support Working Group by the Secretaries of HHS and Labor to identify impediments to the effective enforcement of medicalsupport by state CSE agencies and to submit to the Secretaries of HHS and Labor a report containingrecommendations addressing the identified impediments. In addition, the HHS Secretary, in consultation with state CSE directors and representatives of children potentially eligible for medical support, was directed to develop a performance measurebased on the effectiveness of states in establishing and enforcing medical support obligations andto make recommendations for the incorporation of the measure in a revenue neutral manner into theChild Support Incentive Payment System, no later than October 1, 1999. Table B.1. Provision for Health Care Costs in the Child SupportAward or Agreement, 1993 Source: Laura Wheaton, The Urban Institute, Nonresident Fathers: To What Extent Do They HaveAccess to Employment-Based Health Care Coverage? , June 2000, p. 6 of web version http://fatherhood.hhs.gov/ncp-health00/report.htm . Table B.2. Health Care Coverage of Children in Custodial Families in 1993 Source: Laura Wheaton, The Urban Institute, Nonresident Fathers: To What Extent Do They HaveAccess to Employment-Based Health Care Coverage? , June 2000, p. 7 and 8 of web version http://fatherhood.hhs.gov/ncp-health00/report.htm . * If at least one custodial child receives health care coverage from a given source in at lest one month of the year, then the family is considered to have received health care coverage from that source. The family is placed into the first of the categories that applies to it.

Medical child support is the legal provision of payment of medical, dental, prescription, and other health care expenses of dependent children. It can include provisions to cover health insurancecosts as well as cash payments for unreimbursed medical expenses. According to 2001 ChildSupport Enforcement (CSE) data, 93% of medical child support is provided in the form of healthinsurance coverage. The requirement for medical child support is apart of all child support orders(administered by CSE agencies), and it only pertains to the parent's dependent children. Activitiesundertaken by CSE agencies to establish and enforce medical child support are eligible for federalreimbursement at the CSE matching rate of 66%. The medical child support process requires that a state CSE agency notify the employer of a noncustodial parent who owes child support, that the parent is obligated to provide health carecoverage for his or her dependent children. CSE agencies notify employers of a medical childsupport order via a standardized federal form called the National Medical Support Notice. The planadministrator must then determine whether family health care coverage is available for which thedependent children may be eligible. If eligible, the plan administrator is required to enroll thedependent child in an appropriate plan, and notify the noncustodial parent's employer of thepremium amount to be withheld from the employee's paycheck. Although establishment of a medical support order is a prerequisite to enforcing the order, inclusion of a health insurance order does not necessarily mean that health insurance coverage isactually provided. According to CSE program data, in 2001, only 49% of child support ordersincluded health insurance coverage, and the health insurance order was complied with in only 18%of the cases. Most policymakers agree that health care coverage for dependent children must beavailable, accessible, affordable, and stable. Since 1977 and sporadically through 1998, Congresshas passed legislation to help states effectively establish and enforce medical child support. TheNational Medical Support Notice, mandated by 1998 law and promulgated in March 2001, wasviewed as a means to significantly improve enforcement of medical child support -- to date onlyabout half the states are using the Notice. The 1998 law also called for an advisory body to designa medical child support incentive which would become part of the CSE performance-based incentivepayment system -- a recommendation was made to Congress in 2001 to indefinitely delaydevelopment of a medical child support incentive mainly because it was argued that the appropriatedata was not yet available upon which to base such an incentive. Improving the establishment and enforcement of medical child support has been hampered to some extent by factors such as high health care costs, a decline in employer-provided healthinsurance coverage, an increase in the share of health insurance costs borne by employees, and thelarge number of uninsured children. This report provides a legislative history of medical supportprovisions in the CSE program, describes current policy with respect to medical child support,examines available data, and discusses some of the issues related to medical child support. Thisreport will not be updated.

In the last few years, the United States has considered bilateral and regional free trade areas (FTAs) with a number of trading partners. Such arrangements are not new in U.S. trade policy. The United States has had a free trade arrangement with Israel since 1985 and with Canada since 1989. The latter was suspended when the North American Free Trade Agreement (NAFTA) that included the United States, Canada, and Mexico went into effect in January 1994. U.S. interest in bilateral and regional free trade arrangements surged, and the Bush Administration accelerated the pace of negotiations after the enactment of the Trade Promotion Authority in August 2002. U.S. participation in free trade agreements can occur only with the concurrence of Congress. In addition, FTAs affect the U.S. economy, with the impact varying across sectors. The 112 th Congress and the Obama Administration faced the question of whether and when to act on three pending FTAs—with Colombia, Panama, and South Korea. Although the Bush Administration signed these agreements, it and the leaders of the 110 th Congress could not reach agreement on proceeding to enact them. No action was taken during the 111 th Congress either. In addition, the Trade Promotion Authority (TPA) expired on July 1, 2007, meaning that any new FTAs agreed to would not likely receive expedited legislative consideration, unless the authority is renewed. After discussion with congressional leaders and negotiations with the governments of Colombia, Panama, and South Korea to assuage congressional concerns regarding treatment of union officials (Colombia), taxation regimes (Panama), and trade in autos (South Korea), President Obama submitted draft implementing legislation to Congress on October 3, 2011. The 112 th Congress approved each of the bills in successive votes on October 12, along with legislation to renew an aspect of the Trade Adjustment Assistance (TAA) program. In the meantime, on November 14, 2009, President Obama committed to work with the current and prospective partners to form the Trans-Pacific Partnership (TPP) Agreement. The TPP is a free trade agreement that includes nations on both sides of the Pacific. The TPP grew out of an FTA that included Brunei, Chile, New Zealand, and Singapore. Besides the United States, Australia, Canada, Japan, Malaysia, Mexico, Peru, and Vietnam have also joined the negotiations. Furthermore, the United States is negotiating with the European Union to form the Transatlantic Trade and Investment Partnership (TTIP). FTAs raise some important policy issues: Do FTAs serve or impede U.S. long-term national interests and trade policy objectives? Which type of an FTA arrangement meets U.S. national interests? What should U.S. criteria be in choosing FTA partners? Are FTAs a substitute for or a complement to U.S. commitments and interests in promoting a multilateral trading system via the World Trade Organization (WTO)? What effect will the expiration of TPA have on the future of FTAs as a trade policy strategy? This report will monitor pending and possible proposals for U.S. FTAs, relevant legislation, and other 113 th Congress interest in U.S. FTAs. Free trade areas are part of the broad category of trade arrangements under which member-countries grant one another preferential treatment in trade. Preferential trade arrangements include the following: free trade areas (FTAs), under which member countries agree to eliminate tariffs and nontariff barriers on trade in goods within the FTA, but each country maintains its own trade policies, including tariffs on trade outside the region; customs unions , in which members conduct free trade among themselves and maintain common tariffs and other trade policies outside the arrangement; common markets , in which member countries go beyond a customs union by eliminating barriers to labor and capital flows across national borders within the market; and economic unions , where members merge their economies even further by establishing a common currency, and therefore a unified monetary policy, along with other common economic institutions. The European Union is the most significant example of a group of countries that has gone from a customs union to an economic union. The process of forming an FTA usually begins with discussions between trading partners to ascertain the feasibility of forming an FTA. If they agree to go forward, then the countries undertake negotiations on what the FTA would look like. At a minimum, participants in an FTA agree to eliminate tariffs and some other nontariff trade barriers and agree to do so over a specific time period. In addition, the partner countries usually agree on rules of origin, that is, a definition of what constitutes a product manufactured within the FTA and, therefore, one that is eligible to receive duty-free and other preferential trade treatment. Rules of origin prevent products from nonmembers entering an FTA market over the lowest tariff wall. Most FTAs also include procedures on the settlement of disputes arising among members and rules on the implementation of border controls, such as product safety certification and sanitary and phytosanitary requirements. Most recent FTAs contain rules on economic activities besides trade in goods, including foreign investment, intellectual property rights protection, treatment of labor and environment, and trade in services. The size and complexity of the FTA will largely reflect the size and complexity of the economic relations among the participating countries. U.S. FTAs with Israel and Jordan are relatively basic, while the NAFTA (the United States, Canada, and Mexico) is very complex. Countries form free trade areas for a number of economic and political reasons. Most basically, by eliminating tariffs and some nontariff barriers, FTAs permit the products of FTA partners easier access to one another's markets. The 1989 FTA between the United States and Canada was formed arguably for this purpose. Developed countries have also formed FTAs with developing countries to encourage them toward trade and investment liberalization. FTAs may be used to protect local exporters from losing out to foreign companies that might receive preferential treatment under other FTAs. For example, some supporters of the U.S.-Chile FTA argued that U.S. firms were at a disadvantage vis-à-vis their Canadian competitors whose exports face no Chilean tariffs under the Canada-Chile FTA. Slow progress in multilateral negotiations has been another impetus for FTAs. For example, when the 1986-1994 Uruguay Round negotiations got bogged down, the impetus for the United States, Mexico, and Canada to form NAFTA seemed to increase. Arguably, the surge in FTA formation worldwide in the past few years has been a result of the difficulties encountered in launching and implementing the Doha Development Agenda round of negotiations in the WTO. Political considerations are also a motivation to form FTAs. The United States formed FTAs with Israel and with Jordan to reaffirm American support of those countries and to strengthen relations with them. 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. political leaders have formed and conducted trade policy along three tracks. One track has been the use of multilateral negotiations to establish and develop a rules-based trading system. The United States was a major player in the development and signing of the General Agreement on Tariffs and Trade (GATT) in 1947. It was a leader in nine rounds of negotiations that have expanded the coverage of GATT and that led to the establishment in 1995 of the World Trade Organization (WTO), the body that administers the GATT and other multilateral trade agreements. The United States has continued this approach as a leader in the latest round—the Doha Development Agenda (DDA). U.S. policy makers have used a second track, which can be labeled the "unilateral" track. Under this approach, the United States threatens retaliation, usually in the form of restricting trade partners' access to the vast U.S. market, in order to get the partner to open its markets to U.S. exports or to cease other offensive commercial practices and policies. The United States has employed this approach primarily against foreign practices not covered by GATT/WTO rules or because the multilateral dispute settlement process proved too slow and ineffective to meet U.S. needs. For several decades, especially in the 1970s and 1980s, the United States conducted its trade policy with Japan "unilaterally" to get Japan to amend domestic laws, regulations, and practices that prevented U.S. exporters from securing what they considered to be a fair share of the Japanese market. More and more, however, U.S. trade policy is becoming dominated by a third track—bilateral and regional negotiations to establish FTAs. The United States completed its first FTA with Israel in 1985 under President Reagan. It completed its second with Canada in 1989 under President Bush, whose Administration was involved in the process of expanding it to Mexico, a process that was completed by the Clinton Administration in 1993. However, even after the completion of NAFTA, it was still unclear whether bilateral and regional FTAs had become a fixture in U.S. foreign trade policymaking or anomalies to cement already strong economic relationships. By 1994 it seemed apparent that FTAs were indeed becoming a fixture when the United States, under the Clinton Administration, led a group of trade ministers from 33 other Western Hemispheric countries in agreeing to work toward establishing a Free Trade Area of the Americas (FTAA) by 2005. In the same year, political leaders from the United States and other member-countries of the Asian-Pacific Economic Cooperation (APEC) forum signed a declaration in Bogor, Indonesia, to work toward free trade and investment in the region by 2010 for developed countries and by 2020 for all member-countries. Both of those efforts have flagged. The pursuit of FTAs continued when, on June 6, 2000, President Clinton and Jordanian King Abdullah announced that their two countries would begin negotiations on establishing a free trade area. An agreement was quickly reached and was signed on October 24, 2001. Similarly, President Clinton and Singapore Prime Minister Goh Chok Tong announced, somewhat unexpectedly, on November 16, 2000, that their two nations would launch negotiations to complete a free trade agreement. And on December 6, 2000, the United States and Chile started negotiations to establish an FTA. Chile had long been mentioned as a potential addition to NAFTA or as a partner in a stand-alone FTA. In the meantime, many countries, including the other major trading powers, were actively negotiating free trade agreements. The WTO has reported that more than 200 FTAs are in force. For example, Canada formed an FTA with Chile, as did Mexico. The EU has formed FTAs with a number of countries. Japan, which had shunned the use of FTAs, formed an FTA with Singapore and is exploring the possibility of forming an FTA with Korea, although those negotiations have been suspended. The Bush Administration had affirmed the strategy of pursuing U.S. trade policy goals through the multilateral trade system but gave strong emphasis to building bilateral and regional trade ties through free trade agreements through a policy called a competition in liberalization. The Bush Administration continued negotiations that the Clinton Administration initiated. At the end of 2002, the Bush Administration completed FTA negotiations with Chile and Singapore first begun by the Clinton Administration in 2000. The FTAs with Chile and Singapore entered into force on January 1, 2004. Perhaps encouraged by the passage and enactment of legislation granting the President trade promotion authority (TPA), as contained in the Trade Act of 2002 ( P.L. 107-210 —signed into law on August 6, 2002), the Bush Administration moved ahead with a trade agenda that contained an unprecedented number of FTAs. In 2004, agreements with Australia and Morocco were signed, approved by Congress. The agreement with Australia entered into force on January 1, 2005, and the one with Morocco on January 1, 2006. An agreement with Central American countries and one with the Dominican Republic were also signed and combined into one agreement, the DR-CAFTA. The President sent Congress draft implementing legislation on June 23, 2005. The House and Senate passed the legislation ( H.R. 3045 ) on July 27 and 28, 2005, respectively, and President Bush signed it into law on August 2, 2005 ( P.L. 109-53 ). The agreement with El Salvador entered into force on March 1, 2006, with Honduras and Nicaragua on April 1, 2006, with Guatemala on July 1, 2006, with the Dominican Republic on March 1, 2007, and with Costa Rica on January 1, 2009. An agreement with Bahrain was signed on September 14, 2004, for which Congress passed and the President signed implementing legislation ( H.R. 4340 / P.L. 109-169 , January 11, 2006). The agreement entered into force on August 1, 2006. Congress passed and the President signed implementing legislation ( P.L. 109-283 ) for an FTA with Oman, which entered into force on January 1, 2009. Under the Bush Administration, the United States signed FTAs with Colombia, Peru, Panama, and South Korea (see Table 1 ). The House passed (285-132) on November 8, 2007, and the Senate passed on December 4, 2007, implementing legislation ( H.R. 3688 ) for the U.S.-Peru FTA. The President signed the bill into law ( P.L. 110-138 ) on December 14, 2007. The FTA entered into force on February 1, 2009. After several months of negotiations, on May 10, 2007, congressional leaders and the Bush Administration reached an agreement on new policy priorities that are to be included in pending FTAs. These priorities included the enforcement of five core labor standards that are part of the International Labor Organization's Declaration on Fundamental Principles and Rights of Work; commitment to enforce seven multilateral environmental agreements to which FTA partners are parties; the availability of affordable generic pharmaceuticals; port security; and foreign investor rights in investor-state disputes. President Obama and his Administration had expressed support for three pending FTAs from the Bush Administration—with Colombia, Panama, and South Korea—but with the understanding that some outstanding issues needed to be addressed. Specifically, regarding Colombia, critics, particularly labor unions, remain concerned about the treatment of union leaders and other labor activists. While supporters cited data showing that violence against union leaders had decreased, critics charged that the violence was still unacceptably high. Regarding Panama, the primary concerns raised pertained to Panamanian tax policy, which, critics charged, allowed Panama to be a haven for companies and individuals to avoid taxes. The South Korean agreement was the most challenging case. Some Detroit-based car manufacturers, especially Ford and Chrysler, had opposed the agreement because, they asserted, the agreement did not adequately address South Korean barriers to auto imports. (GM had taken a neutral position on the KORUS FTA.) However, as a result of the modifications agreed to in December 2010, most of which pertain to autos, both Ford and Chrysler support approval of the KORUS FTA, as does the United Auto Workers (UAW) union. U.S.-based steel manufacturers have also opposed the agreement because, they argued, it would weaken U.S. trade remedy (antidumping, countervailing duty) laws. Other major labor unions, including the AFL-CIO, oppose the agreement. On April 6, 2011, the Obama Administration announced that Colombia had agreed to an "Action Plan Related to Labor Rights" laying out steps it was prepared to take to resolve the labor rights issues. Panama and the United States came to a resolution on the tax transparency issue by agreeing to a Tax Information and Exchange Agreement (TIEA), which Panama ratified on April 13, 2011. The TIEA permits either country to request information on most types of federal (U.S.) or national (Panama) taxes. To address the tax haven issue, Article 7 specifically allows for tax information exchange "under the existing Treaty on Mutual Legal Assistance in Criminal Matters," which covers money laundering among other illicit financial activities. Eventually, President Obama submitted draft implementing legislation to Congress on October 3, 2011, for each of the FTAs. The 112 th Congress approved each of the bills in successive votes on October 12, along with legislation to renew an aspect of the Trade Adjustment Assistance (TAA) program, and the President signed them into law on October 21, 2012. The U.S.-South Korean agreement entered into force on March 15, 2012, the U.S.-Colombia FTA entered into force on May 15, 2012, and the U.S.- Panama FTA entered into force on October 31, 2012. In the meantime, on November 14, 2009, President Obama committed to work with the current and prospective members of the Trans-Pacific Strategic Economic Partnership Agreement (TPP). The TPP is a free trade agreement that includes nations on both sides of the Pacific. Negotiations on the TPP, which grew out of an FTA among four countries—Brunei, Chile, New Zealand, and Singapore—now include, besides the United States, Australia, Japan, Malaysia, Mexico, Peru, and Vietnam. Furthermore, the United States and the European Union have expressed their intention to negotiate an FTA—the Transatlantic Trade and Investment Partnership (TTIP). The surge in U.S. interest in FTAs and in the formation of FTAs worldwide raises the question of their impact on the countries included in an FTA and on the rest of the world. It is an issue that economists have long studied and debated. Interest in the issue has peaked at various times in the post-World War II period. The first time was the formation of the European Common Market. Interest has peaked again with the current trends in FTAs. The debate has relied largely on theory since empirical data are scarce save for the experience of the European Union. The debate has also divided economists between those who strongly oppose FTAs as an economically inefficient mechanism and those who support them as a means to build freer trade. Economists usually base their analysis of the impact of FTAs on the concepts of trade creation and trade diversion . These concepts were first developed by economist Jacob Viner in 1950. Viner focused his work on the economic effects of customs unions, but his conclusions have been largely applied to FTAs and other preferential trade arrangements. His analysis was also confined to static (one-time) effects of these arrangements. Trade creation occurs when a member of an FTA replaces domestic production of a good with imports of the good from another member of the FTA, because the formation of the FTA has made it cheaper to import rather than produce domestically. The creation of the trade is said to improve economic welfare within the group because resources are being shifted to more efficient uses. Trade diversion occurs when a member of an FTA switches its import of a good from an efficient nonmember to a less efficient member because the removal of tariffs within the group and the continuation of tariffs on imports from nonmembers make it cheaper to do so. Trade diversion is said to reduce economic welfare because resources are being diverted from an efficient producer to a less efficient producer. In most cases, it appears that FTAs lead to both trade diversion and trade creation with the net effects determined by the structure of the FTA. Therefore, even if two or more countries are moving toward freer trade among themselves in an FTA, the FTA could make those countries and the world as a whole worse off if the FTA diverts more trade than it creates, according to economic theory. (See box below for illustrative examples of trade diversion and trade creation.) Trade policy makers encounter circumstances much more complicated than those depicted in economic theory. Many functioning and proposed FTAs encompass more than two countries and involve a range of products, both goods and services, making it much more challenging to evaluate their economic impact. To provide an analytical framework, some economists have developed sets of conditions under which, they have concluded, an FTA would create more trade than it diverts. They state that trade creation is likely to exceed trade diversion— the larger the tariffs or other trade barriers among members before the FTA is formed; the lower the tariffs and other barriers in trade with nonmembers; the greater the number of countries included in the FTA; the more competitive or the less complementary the economies joining the FTA; and the closer the economic relationship among the members before the FTA was formed. Economists also have determined that, along with the immediate, static effects of trade diversion and creation, FTAs generate long-term dynamic effects that might include the following: increased efficiency of production as producers face increased competition with the removal of trade barriers; economies of scale, that is, decreased unit costs of production as producers can have larger production runs since the markets for their goods have been enlarged; and increased foreign investment from outside the FTA as firms seek to locate operations within the borders of the FTA to take advantage of the preferential trade arrangements. Until recently not many FTAs were in operation; therefore, available data on their impact have been limited to the experience of the formation of the European Common Market and subsequently the European Union. Most studies have concluded that the European Community has resulted in more trade creation than trade diversion. However, in some sectors, such as agriculture, the net effect has been trade diversion because the EU's Common Agricultural Policy raised barriers to agricultural trade outside the EU. A basic principle of the General Agreement on Tariffs and Trade (GATT) that is administered by the WTO is the most-favored nation (MFN) principle. Article I of GATT requires that "any advantage, favor, privilege, or immunity granted by any contracting party to any product originating in or destined for any other country shall be accorded immediately and unconditionally to the like product originating in or destined for the territories of all other contracting parties." FTAs, by definition, violate the MFN principle, since products of FTA member countries are given preferential treatment over nonmember products. However, the original GATT signatories recognized that FTAs and customs unions, while violating the MFN principle, improve economic welfare of all members, if certain conditions are met to minimize trade diversion. Article XXIV of the GATT requires that FTA members shall not erect higher or more restrictive tariff or nontariff barriers on trade with nonmembers than existed prior to the formation of the FTA. Furthermore, Article XXIV requires the elimination of tariffs and other trade restrictions be applied to "substantially all the trade between the constituent territories in products originating in such territories." In addition, Article XXIV stipulates that the elimination of duties and other trade restrictions on trade within the FTA be accomplished "within a reasonable length of time," meaning a period of no longer than 10 years, according to the "Understanding of the Interpretation of Article XXIV of the General Agreement on Tariffs and Trade" reached during the Uruguay Round. Member countries are required to report to the WTO their intention to form FTAs. In addition to Article XXIV, the "Enabling Clause," agreed to by GATT signatories in 1979, allows developing countries to form preferential trading arrangements without the conditions under Article XXIV. Article V of the General Agreement on Trade in Services (GATS), the agreement that governs trade in services under the WTO, provides for the preferential treatment of trade in services within FTAs or similar regional trading arrangements. Article V lays out requirements of substantial coverage of the elimination of trade restrictions and the prohibition on the ex post facto imposition of higher restrictions on services trade with nonmember countries. The WTO formed the Committee on Regional Trade Agreements (CRTA) in 1996 to review pending and operating FTAs and customs unions to determine whether they conform to WTO rules under the GATT and the GATS. However, the rules are sufficiently ambiguous as to be subject to continuing debate within the CRTA. For example, the members have been unable to agree on what constitutes "substantially all trade" under Article XXIV (GATT) or "substantially all sectors" under Article V (GATS). The number of FTAs and customs unions worldwide has increased at a rapid rate. As of July 2010, 474 FTAs and customs unions had been notified to the GATT/WTO. Some 283 FTAs and customs unions are in force. The remaining FTAs and customs unions were largely superseded by other agreements involving the same participants. Yet, none of the reports of notifications has been completed because CRTA members have not been able to reach a consensus on any of them. Nevertheless, the vast majority of the FTAs have gone into operation. For example, the CRTA has not completed its report on NAFTA, which went into effect in January 1994. The proliferation of FTAs and disagreements on rules have crippled the WTO review process and led WTO members to place review of the rules on regional agreements on the agenda of the Doha Development Agenda round. The Doha Ministerial Declaration, which established the agenda for the new round, states that the negotiations will strive at "clarifying and improving disciplines and procedures under the existing WTO provisions applying to regional trade agreements." The surge in the number of FTAs worldwide has been driving a spirited debate among experts, policy makers, and other observers over whether they promote or damage U.S. economic interests and the economic interests of the world at large. The differing views can be categorized into three main groups. One group consists of those who oppose FTAs because, they assert, FTAs undermine the development of the multilateral trading system and act as a "stumbling block" to global trade liberalization. A second group supports FTAs because, they believe, FTAs act as a "building block" to multilateral trade liberalization. The third category are those individuals and groups that are opposed to trade liberalization in general because they believe its impact on workers in import-sensitive sectors or on the environment is unacceptable, or because, they assert, it undermines U.S. sovereignty. Among representatives of the first group of experts are international economists Jagdish Bhagwati and Anne O. Krueger, who have strongly advocated that the United States and other national governments should not pursue FTAs at the expense of multilateral negotiations in the WTO. Bhagwati has concluded that FTAs are by definition discriminatory and therefore trade diverting. He argues that tariffs remain high on many goods imported into developing countries and even on some labor-intensive goods (such as wearing apparel and agricultural products) imported into developed countries. Consequently, he asserts, trade diversion will likely result when an FTA is formed. Both Bhagwati and Krueger cite the "rules of origin" and other conditions of an FTA's establishment for strong criticism. Bhagwati claims, for example, that the rules of origin in one FTA more than likely do not coincide with the rules of origin in many of the other FTAs. Furthermore, he argues, the schedule of implementation of the tariff reductions and other conditions for one FTA will not match the schedule of other FTAs. The incongruity of these regulations across FTAs has created what Bhagwati sees as a customs administration nightmare and calls the "spaghetti-bowl" phenomenon. In her criticism, Krueger claims that in order to meet the input thresholds of rules of origin requirements, producers in one FTA partner will be encouraged to purchase as many inputs as possible from other partner countries, even if a non-FTA member can produce and sell the inputs more cheaply and even if the tariff rate on inputs from non-FTA producers is zero. Importing inputs from within the FTA to meet the rules of origin threshold allows the producer to sell the final product within the FTA duty free. Under such circumstances imports of inputs are diverted from efficient producers outside the FTA to less efficient producers inside the FTA. A corollary to Krueger's conclusion is that the higher the threshold established in the rules of origin, the greater the chance that trade diversion will take place. A range of economists, policy makers, and other experts embrace a second view that FTAs can enhance trade and should be pursued. Economist Robert Z. Lawrence argues, for example, that recent FTAs involve much more economic integration than the elimination of tariffs. NAFTA, he points out, has led to the reduction in barriers on services trade, foreign investment, and other economic activities not covered by the GATT/WTO. In addition, under NAFTA, Mexico has affirmed its commitment to economic reform, making its economy more efficient. Lawrence asserts that the theory traditionally applied to FTAs (by Bhagwati, Krueger, and others) does not take into account these dynamic welfare enhancing characteristics of FTAs, which he believes are likely to outweigh any trade diversion that results from the elimination of tariffs. A CATO Institute study by economist Edward L. Hudgins argues that while it may be preferable to liberalize trade multilaterally, countries should take any available avenue, including bilateral or regional FTAs, even if they lead to some trade diversion. Furthermore, Hudgins asserts that FTAs can be more efficient vehicles for addressing difficult trade barriers than the WTO, where the large membership requires compromise to the least common denominator to achieve consensus. FTAs have also have provided momentum for GATT/WTO members to move ahead with new trade rounds, he claims. Economist C. Fred Bergsten holds a position similar to the one expressed in the CATO study, that in lieu of multilateral trade negotiations, FTAs are the next best thing and promote global trade liberalization. Bergsten has advocated establishing U.S. FTAs with New Zealand and with South Korea. Economist Jeffrey Schott argues that some U.S. firms are being discriminated against because FTAs are rapidly forming in which the United States is not a participant; therefore, in his review, the United States must negotiate FTAs. Bergsten and others have also advocated structuring FTAs in a manner that could serve as building blocks of a global free trade system. Using the APEC plan as a model, Bergsten argues for an FTA based on "open regionalism," that is, establishing the road map for free trade and investment in the Asian-Pacific region for 2010/2020 among the members but allowing other countries to join if they agree to accede to the conditions. In order to minimize trade diversion, he suggests that trade and investment could be implemented on an MFN principle, perhaps conditional MFN in order to limit the "free rider" effects. Other countries, and other regional groupings, Bergsten presumes, would be willing to accept the conditions having been enticed by the trade and investment opportunities until most of the membership of the WTO would be engaged in forming a free trade area. A Heritage Foundation report draws up a similar proposal for a "Global Free Trade Association." A third group opposes FTAs but also trade liberalization or "globalization" in general. Included in this group are representatives of import-sensitive industries, for example labor unions, and representatives of social action groups such as some environmentalists, who question the wisdom of trade liberalization whether done through multilateral negotiations or through bilateral and regional trading arrangements. They assert that trade liberalization unfairly affects workers by exporting jobs to countries with lower wages and undermines the nation's ability to protect the environment by allowing companies to relocate to countries with less stringent environmental regulations. For example, the United Auto Workers (UAW) union has stated the following position regarding the Free Trade Area of the Americas (FTAA): Such an agreement would provide broader protections for the rights of corporations, further undermine the ability of governments in the region to regulate their economies in the interests of their citizens and intensify the downward pressure on workers' incomes through competition for jobs and investments. All of this would take place in the absence of any counter-balancing protections for workers, consumers or the environment. This is why the UAW has consistently opposed the direction of these negotiations, the positions taken by the U.S. government, and worked closely with other organizations in the region to oppose the creation of an FTAA. Free trade agreements are viewed by many as a significant trade policy vehicle for the United States and for other major trading nations. Over the last 10-15 years, the debate in U.S. trade policy has shifted from, "Should the United States form FTAs?" to "Should the United States form any more FTAs and, if so, with whom, when, and under what conditions?" Congress has a direct role in addressing those questions. Before any FTA can go into effect, Congress must review it as part of implementing legislation. A number of questions regarding FTAs could arise as the Obama Administration pursues the TPP, and Congress oversees and evaluates overall U.S. trade policy strategy. One question pertains to the economic impact of an FTA. As with any trade liberalizing measure, an FTA can have positive effects on some sectors and adverse effects on others. An FTA may create trade for one sector of the U.S. economy but divert trade away from others. A Member of Congress is placed in the position of weighing the effects on his/her constituency versus the overall impact on the United States and other trading partners. Because conditions can differ radically from one FTA to another, the evaluation will likely differ in each case. Furthermore, Members might take into account not only the immediate static effects of FTAs but also the long-term, dynamic effects, which could play an important role in evaluating their contribution to U.S. economy. A second, broader question is whether bilateral and regional FTAs are the appropriate trade policy strategy to promote U.S. national interests. Economic specialists differ sharply on this question, with some viewing the proliferation of FTAs as leading to confusion and serving as stumbling blocks to the development of a rules-based multilateral trading system. Other specialists consider FTAs as appropriate trade policy vehicles for promoting freer trade, as building blocks to a multilateral system, and as necessary to protect U.S. interests against the FTAs that other countries are forming without the United States. Still others oppose trade liberalization in any form as counter to U.S. interests. A third question is whether the Office of the United States Trade Representative and other trade policy agencies have sufficient time and human resources to negotiate a number of FTAs simultaneously while managing trade policy in the WTO and other fora. Others might find some U.S. interests being short-changed. A fourth question is to what degree, if any, should non-trade concerns be included in FTAs? This issue has emerged in a number of completed and ongoing FTA negotiations. A fifth overarching question is what criteria should the United States employ in determining which countries would make appropriate FTA partners. For example, to what degree should political factors be given weight over economic factors?

Free trade areas (FTAs) are arrangements among two or more countries under which they agree to eliminate tariffs and nontariff barriers on trade in goods among themselves. However, each country maintains its own policies, including tariffs, on trade outside the region. In the last few years, the United States has engaged or has proposed to engage in negotiations to establish bilateral and regional free trade arrangements with a number of trading partners. Such arrangements are not new in U.S. trade policy. The United States has had a free trade arrangement with Israel since 1985 and with Canada since 1989, which was expanded to include Mexico and became the North American Free Trade Agreement (NAFTA) effective in January 1994. U.S. interest in bilateral and regional free trade arrangements surged, and the Bush Administration accelerated the pace of negotiations after the enactment of the Trade Promotion Authority in August 2002. U.S. participation in free trade agreements can occur only with the concurrence of Congress. In addition, FTAs affect the U.S. economy, with the impact varying across sectors. The 112th Congress and the Obama Administration faced the question of whether and when to act on three FTAs pending from the Bush Administration—with Colombia, Panama, and South Korea. Although the Bush Administration signed these agreements, it and the leaders of the 110th Congress could not reach agreement on proceeding to enact them. No action was taken during the 111th Congress either. After discussion with congressional leaders and negotiations with the governments of Colombia, Panama, and South Korea to assuage congressional concerns regarding treatment of union officials (Colombia), taxation regimes (Panama), and trade in autos (South Korea), President Obama submitted draft implementing legislation to Congress on October 3, 2011. The 112th Congress approved each of the bills in successive votes on October 12, along with legislation to renew an aspect of the Trade Adjustment Assistance (TAA) program. President Obama signed the bills into law on October 21, 2011. In the meantime, on November 14, 2009, President Obama committed to work with the current and prospective partners in the negotiations to form a Trans-Pacific Partnership (TPP) Agreement. The TPP is a free trade agreement that includes nations on both sides of the Pacific. The TPP negotiations emerged from an FTA that included Brunei, Chile, New Zealand, and Singapore and that entered into force in 2006. Besides the United States, Australia, Canada, Japan, Malaysia, Mexico, Peru, and Vietnam have joined the negotiations. Furthermore, the United States has been negotiating with the 28-member European Union to form the Transatlantic Trade and Investment Partnership (TTIP). FTAs raise some important policy issues: Do FTAs serve or impede U.S. long-term national interests and trade policy objectives? Which type of an FTA arrangement meets U.S. national interests? What should U.S. criteria be in choosing FTA partners? Are FTAs a substitute for or a complement to U.S. commitments and interests in promoting a multilateral trading system via the World Trade Organization (WTO)? What effect will the expiration of TPA have on the future of FTAs as a trade policy strategy?

The war in Afghanistan began with a U.S.-led military response to the terrorist attacks of September 11, 2001, designed to remove the Taliban-led regime and prevent future terrorist safe havens. The war, currently in its 10 th year, is now a multi-faceted joint, civil-military, combined campaign, including a NATO-led military effort and substantial multi-lateral and bilateral civilian initiatives, broadly aimed at ending the insurgent threat to the Afghan government and helping the Afghan people lay the foundations for lasting stability. For the government of Afghanistan, the war is first of all an existential struggle for survival against the Taliban and other insurgents, as well as a longer-term effort to establish sustainable security and stability. For the Afghan people, the war is only the latest proximate cause of instability and insecurity in 30 years of conflict and dislocation. Their daily lives are shaped by the hardships of providing for their families in settings with very limited economic development and opportunity, intimidation in some areas from insurgent groups, and frustration with the limited capacity and, sometimes, corruption of official government structures. For the major insurgent groups, the war is about achieving some combination of political power, economic leverage, and radical Islamic cultural influence. For the U.S. government—which leads the international military effort, provides substantial civilian expertise, and plays a significant role in shaping the overall strategic direction—the war in Afghanistan concerns helping ensure the security of both Afghanistan and the region, including denying safe haven to terrorists, in order to establish a stable regional security balance and protect U.S. national interests. For regional states, including India and Russia as well as Afghanistan's immediate neighbors Pakistan and Iran, the war is critical because it may have a powerful impact on both security and the balance of power and influence in the region. Pakistan in particular, which willingly or otherwise provides safe haven to Afghan insurgent groups, has deeply vested interests in the outcome of the conflict. For individual member states of the NATO Alliance, the war may be about some combination of defeating terrorist networks, ensuring regional stability, proving themselves as contributing NATO members, and demonstrating the relevance of the Alliance to 21 st century global security challenges. Under the Obama Administration, the war in Afghanistan—after years of being perceived by many as "the other war"—has become the focus of significantly greater leadership time and attention, and the recipient of significantly greater resources. The U.S. government's core goals for the war have remained unchanged since March 2009: to disrupt, dismantle and defeat al-Qaeda in Afghanistan and Pakistan, and to prevent their return. In December 2009, following a comprehensive strategic review, President Obama announced two decisions: to "surge" both military and civilian personnel to Afghanistan, and to begin withdrawing U.S. forces from Afghanistan, on a "conditions-based" basis, in July 2011. In November 2010, at the NATO Lisbon Summit, the governments of the United States, the other NATO Allies, and Afghanistan expressed support for the full transition of lead responsibility for security to Afghans by the end of 2014. Allies also reaffirmed their "long-term commitment to a better future for the Afghan people." In December 2010, announcing the results of the Administration's Afghanistan Pakistan Annual Review, President Obama confirmed U.S. commitment to both transition by 2014 and a long-term U.S.-Afghan strategic partnership. In early 2011, General David Petraeus, Commander of NATO's International Security Assistance Force (ISAF) in Afghanistan, in a letter to the ISAF troops, credited the hard work of the force, together with its Afghan partners, for "halting a downward security spiral in much of the country and to reversing it in some areas of great importance." In his December 2010 speech, President Obama recognized "considerable gains toward our military objectives," but acknowledged that they were still "fragile and reversible." The U.S. government continues to face major strategic and operational decisions about its engagement in the war in Afghanistan. Elements of the debate that continue to attract attention include refining U.S. national interests in Afghanistan and the region, and a desired end-state based on those interests; determining which diplomatic, economic, and military approaches to adopt, what resources to commit to support those approaches, and how those approaches ought to evolve over time; helping marshal a coordinated application of international efforts in Afghanistan; and prioritizing the Afghanistan war versus other U.S. national security imperatives in the context of a constrained fiscal environment. Avenues available to Congress for exercising oversight of these issues include authorizing and appropriating funding for U.S. efforts in Afghanistan and the region; shaping policy through directive legislation; confirming senior administration officials with responsibility for the Afghanistan effort; holding oversight hearings to assess policy formulation and execution; and extending or adjusting Administration reporting requirements. While the proximate cause of the current war in Afghanistan was the set of terrorist attacks of September 11, 2001, the war takes place against the backdrop of three decades of tumultuous Afghan history including communist rule, the Soviet invasion, civil war, and the repressive Taliban regime. In December 1979, the Soviet Union invaded Afghanistan to shore up a puppet communist regime. During the 1980's, armed Afghan resistance groups known as mujahedin waged war against Soviet forces and their allies among the Afghan security forces. During that period, the U.S. government, through the Central Intelligence Agency (CIA), provided covert assistance to mujahedin groups, working through Pakistan's Inter-Services Intelligence Directorate (ISI). In 1989, Soviet forces withdrew from Afghanistan, and in April 1992, the Soviet-backed Afghan regime in Kabul fell to mujahedin forces, which established a form of rule including a rotating presidency. In November 1994, the ethnic Pashtun-dominated Taliban movement led by Mullah Omar seized the city of Kandahar in southern Afghanistan. In 1996, the Taliban captured Kabul and then retained control over much of the country until ousted by the U.S.-led military campaign in 2001. Throughout its tenure, the Taliban continued to face armed opposition, in particular from the Northern Alliance, a loose network dominated by ethnic Tajiks and Uzbeks primarily from northern Afghanistan. Key legacies of Afghanistan's years of civil war, conflict, and oppressive rule included the deaths of over a million people, the displacement of millions more, the proliferation of available weapons, and the destruction of key institutions and infrastructure. The immediate reason for U.S. military operations in Afghanistan was the linkage of the September 11, 2001, terrorist attacks to al Qaeda, which had trained and operated under Taliban protection in Afghanistan. In an address to a joint session of Congress on September 20, 2001, President George W. Bush stated U.S. demands for Taliban action, warning: "The Taliban must act, and act immediately. They will hand over the terrorists or they will share in their fate." On October 7, 2001, following the refusal of the Taliban regime to cease harboring al Qaeda, the U.S. government launched military operations in Afghanistan, with the stated purpose of disrupting the use of Afghanistan as a terrorist base of operations and of attacking the military capability of the Taliban regime. In contrast to the lengthy, iterative preparations that preceded the launch of Operation Iraqi Freedom, the U.S. planning process for Operation Enduring Freedom (OEF) in Afghanistan was extremely condensed. The concept of operations was based on Secretary of Defense Donald Rumsfeld's vision of defense transformation, including the idea that a heavier reliance on cutting-edge technology and precision weaponry could make possible the deployment of smaller-sized conventional ground forces. Military operations were preceded and complemented by work by the Central Intelligence Agency (CIA) with Afghan opposition groups on the ground. Initial U.S. operations relied on the use of special operations forces (SOF), enabled by air assets, working by, with and through indigenous partners, in particular the Northern Alliance. Many U.S. defense experts regarded the operations as an important demonstration of operational "jointness"—the ability of Military Services to work together seamlessly. The United Kingdom and Australia also deployed forces to support the major combat phase of operations, and dozens of other countries provided basing, access and overflight permission. The demise of the Taliban regime came quickly. In November 2001, the Taliban fled Kabul, and in December they left their stronghold, the southern city of Kandahar. It is generally understood that in December 2001, key al Qaeda and Taliban leaders fled across the border into Pakistan. The major combat operations phase was regarded as a quick success by its Afghan protagonists and their U.S. and other international partners, but the challenges were far from over. The new Afghan leadership faced the profound political challenge of consolidating a fractious, scarred state with very few resources. The new leaders also faced potential violent challenges, both from resurgent al Qaeda and Taliban leaders who were defeated but not eliminated, and from Afghan local powerbrokers, strengthened by years of battle-hardened autonomy and resistance, who might be displeased by their own loss of influence in the emerging post-Taliban order. To fill the political void, in December 2001, in Bonn, Germany, the United Nations launched the so-called Bonn Process by hosting the Bonn Conference. Participants included representatives of four Afghan opposition groupings, and observers included representatives of neighboring and other key countries including the United States. The resulting Bonn Agreement created an Afghan Interim Authority to serve as the "repository of Afghan sovereignty" and outlined a political process for producing a new constitution and choosing a new Afghan government. In contrast to the model pursued in Iraq from 2003 to 2004, in Afghanistan there was no period of formal occupation in which an international authority exercised sovereignty on behalf of the Afghans. In accordance with the provisions of the Bonn Agreement, a large meeting—a loya jirga —was held in June 2002, at which Hamid Karzai was elected head of the new Afghan Transitional Authority. A new constitution was adopted in January 2004; presidential elections, in which Karzai was elected, were held in October 2004; and National Assembly elections were held in September 2005. Afghan people have reportedly experienced post-Taliban Afghanistan in a variety of ways, depending in part on their geographical home bases and their circumstances under Taliban rule. For many Afghans, the end of the Taliban regime has meant an end to some specific forms of repressive rule. For some, displaced from home by years of war and conflict, regime change has meant an opportunity to return to their home villages. For Afghans in some areas, a growing insurgent presence and the proximity of fertile fields for profitable poppy-growing have created new sources of instability and fear. For Afghans across the country, regime change has not yet led to any certainty about future prospects for stability. "Strategy" is commonly understood to include a statement of objectives, or desired ends; the ways and means designed to achieve those ends, prioritized by importance; and the roles and responsibilities of key players in executing those ways and means. Strategy-making for Afghanistan is particularly complex for two main reasons. First, the process is complicated by the range of major stake-holders acting in Afghanistan to achieve strategic ends. These include—in addition to the insurgent groups—the Afghan government, NATO, the U.S. government and other bilateral partners, and key regional leaders and neighboring states including Pakistan. Each of these may have its own—or even competing sets of—interests and priorities. Military strategy, in turn, is not easily separable from broader grand strategy for Afghanistan, since security is essential for progress in other areas, and since military forces play key supporting roles in non-security activities. Second, the process is complicated by the wide range of activities many stake-holders undertake. These include not only security but also, for example, civilian capacity-building, the rule of law, and economic development. Those fields, in turn, are closely linked empirically—for example, long-term development requires a relatively stable environment, and successful local law enforcement efforts must be predicated on some form of rule of law. Arguably the most important strategic vision for the future of Afghanistan is the vision of Afghans themselves. President Hamid Karzai's own views are particularly salient since he leads a very centralized, presidential state structure, and he has been the lead executive authority since the end of the Taliban regime. Over time, the consistent theme of President Karzai's strategic vision for Afghanistan has been Afghan sovereignty. At the January 2010 London Conference, co-hosted by the governments of Afghanistan and the United Kingdom, and the United Nations, and with participation by representatives of more than 60 states, President Karzai summarized this theme as "Afghan leadership, Afghan ownership." The theme of sovereignty has undergirded Karzai's discussions of a wide range of specific issues, from governance and development to security. For example, calling for bringing all international and Afghan private security contracting companies under control and regulation by the Afghan government, he stressed, "We must ensure the monopoly of the Afghan state over the use of force." Calling for Afghan leadership of detention and prosecution activities, in his second presidential inaugural speech in November 2009, he called these activities "the authority and responsibility of the Afghan government." U.S. government strategy for Afghanistan has evolved over time from immediate military aims in the wake of the terrorist attacks of September 11, 2001, to a comprehensive strategy with multiple components. When the U.S. government launched military operations in Afghanistan shortly after the 9/11 attacks, the stated U.S. aims were narrow: to disrupt the use of Afghanistan as a terrorist base of operations, and to attack the military capability of the Taliban regime. The U.S.-led operations quickly achieved those aims by removing the Taliban from political power. For the war in Afghanistan, the Bush Administration did not conduct a rigorous internal strategic review or produce a formal written strategy along the lines of the November 2005 National Strategy for Victory in Iraq. In general, most practitioners and observers agree that under the Bush Administration, the war in Afghanistan largely took a back seat, in terms of leadership time and attention, and resourcing, to the war in Iraq. Yet while no strategy was formally articulated, the multi-faceted approaches adopted and resources committed, though limited, suggested an effort broadly aimed at helping to stabilize the new, post-Taliban order. Toward the end of the Administration, in September 2008, in a speech at the National Defense University announcing the commitment of additional resources, President Bush gave a clear characterization of the major facets of the effort. He stated that the 3,500 additional U.S. Marines would deploy to Afghanistan, and that together with additional troops supplied by NATO Allies, they would constitute a "quiet surge." Those troops would be used "to provide security for the Afghan people, protect Afghanistan's infrastructure and democratic institutions, and help ensure access to services like education and health care." U.S. efforts would also include helping Afghans develop additional security forces, and increasing the direct involvement of Afghan tribes. More experts from U.S. government civilian agencies would be deployed to help Afghans improve governance and to jumpstart the economy. And the United States would help Pakistan "defeat Taliban and al Qaeda fighters hiding in remote border regions of their country." What President Bush did not include in this description of the effort in Afghanistan was a statement about overarching U.S. goals and objectives. From the outset, the Obama Administration has indicated its intention to direct more leadership time and attention to the war in Afghanistan. In his inaugural address, President Obama mentioned the war, noting that the United States would help "forge a hard-earned peace in Afghanistan." Shortly afterward, he launched a comprehensive policy review, led by Bruce Riedel of the Brookings Institution. Even before the review was completed, he approved the deployed of approximately 17,000 additional U.S. forces to Afghanistan, based on requests that had been submitted earlier by ISAF Commander ("COMISAF") General David McKiernan. In March 2009, President Obama announced the results of the policy review, noting that the process had included consultations with the governments of Afghanistan and Pakistan, and of key Allies and partners, as well as with some international organizations. The primary result, he stated, was a "comprehensive new strategy for Afghanistan and Pakistan." That close linkage of U.S. strategy for the two neighboring countries was new, and it was underscored by the appointment of Ambassador Richard Holbrooke to serve as Special Representative for Afghanistan and Pakistan (SRAP). In the March 2009 speech, President Obama stated that the U.S. "core goal" was "to disrupt, dismantle and defeat al Qaeda in Pakistan and Afghanistan, and to prevent their return to either country in the future." Key lines of activity, toward that end, were to include reversing the Taliban's gains; "promoting a more capable and accountable Afghan government"; growing and training the Afghan National Security Forces; deploying civilian technical expertise to support governance and economic development; and supporting a reconciliation process to pull all but the "uncompromising core" of insurgent fighters off of the battlefield. In May 2009, Secretary of Defense Robert Gates requested the resignation of General David McKiernan, who served simultaneously in the NATO role of ISAF Commander, and the U.S. role of Commanding General of U.S. Forces-Afghanistan. Secretary Gates stated that he sought "fresh thinking" and "fresh eyes" for the mission. GEN McKiernan's successor in both roles, General Stanley McChrystal, was tasked by both the U.S. and NATO chains of command to conduct a "60-day initial assessment" of the mission and the feasibility of accomplishing it. To do so, GEN McChrystal invited a small team of outside experts to take a look at the overall strategy and campaign, while ISAF staff teams conducted assessments of specific issues such as civil-military integration, detention operations, civilian casualties, and strategic communications. The final Initial Assessment report, submitted by GEN McChrystal under his own signature to both chains of command was leaked to the Washington Post and published in redacted form. In the assessment, GEN McChrystal characterized the situation in Afghanistan as "serious" and noted that "the overall situation is deteriorating." He argued forcefully that "failure to gain the initiative and reverse insurgent momentum in the near-term (next 12 months) ... risks an outcome where defeating the insurgency is no longer possible." In order to gain the initiative, GEN McChrystal called for a "properly resourced", comprehensive counter-insurgency campaign. His assessment introduced several major innovations in thinking about the campaign. First, he prioritized efforts to support responsive and accountable governance equally with security efforts, stressing the Afghan people's "crisis of confidence in the government." Second, he advocated raising the target endstrengths for the Afghan National Security Forces substantially, to a total of 400,000 forces, and ensuring their effectiveness through "radically improved partnership [with ISAF forces] at every level." Third, he introduced geographic prioritization of effort across Afghanistan as a whole—a significant change from past approaches in which each part of the country was managed de facto as a "national" campaign led by the Allied country with troops deployed there. And fourth, he stressed the need to change ISAF's operational culture in two key ways—to more closely interact with the population, and to significantly improve internal unity of effort. In Fall 2009, the Obama Administration launched a wide-ranging review of strategy and resource options for the war in Afghanistan. The review considered both GEN McChrystal's Initial Assessment, and a separate, classified set of "resource recommendations"—options for troop level increases together with risks associated with each option—that he submitted. At issue was the need to balance achieving sufficient results to protect U.S. national interests with avoiding an open-ended commitment. During the review, some U.S. government officials reportedly argued for a narrow focus on counter-terrorism, including deploying a small additional number of Special Operations Forces (SOF). Some others reportedly amended that view by supporting a "CT-plus" approach, which called for some additional SOF together with some additional emphasis on training the Afghan National Security Forces. Still others reportedly argued in favor of a more comprehensive approach, more closely in line with the multi-faceted campaign described in GEN McChrystal's Assessment. In December 2009, in a speech at West Point, President Obama announced the results of his Administration's strategy review. He confirmed that the U.S. core goal, articulated in March 2009, remained unchanged: "to disrupt, dismantle, and defeat al Qaeda in Afghanistan and Pakistan, and to prevent its capacity to threaten America and our allies in the future." He described the main objectives of the effort: "deny[ing] al Qaeda a safe haven"; "revers[ing] the Taliban's momentum and deny[ing] it the ability to overthrow the government"; and "strengthen[ing] the capacity of Afghanistan's security forces and government so that they can take lead responsibility for Afghanistan's future." To these ends, he stated, the United States would employ a military effort, launch a civilian "surge", and work to further an "effective partnership with Pakistan." In the West Point speech, President Obama announced the deployment of an additional 30,000 U.S. troops, reportedly 10,000 fewer than the middle-range option presented by GEN McChrystal. The President noted the expectation that NATO Allies and partners would increase their own troop commitments. Some practitioners noted at the time that while relying on Allies could conceivably yield 40,000 additional troops altogether, troop contributions from different countries should not be regarded as completely fungible, given different formal caveats on their activities, different capabilities, and the additional friction inherent in all coalition rather than national operations. In the speech, President Obama also, for the first in the history of the war, established a partial timeline. He stated that in July 2011, the United States would "begin the transfer of our forces out of Afghanistan." This measure was intended in part, he stated, to give Afghans a "sense of urgency" about making progress. His explanation that "we will execute this transition responsibly, taking into account conditions on the ground," did not clarify the scope or scale of the drawdown slated to begin in July 2011, or the criteria that would be used to make those determinations. In June 2010, President Obama relieved his top commander on the ground, GEN McChrystal, based on inflammatory comments reported by the Rolling Stone, and replaced him with General David Petraeus, who had served until then as the Commander of U.S. Central Command, which has responsibility for a broad region including Afghanistan. Unlike the arrival of GEN McChrystal one year earlier, the arrival of GEN Petraeus did not trigger a top-to-bottom strategic review, although the new COMISAF did gradually refine ISAF's approaches. In late 2010, the Obama Administration conducted the Afghanistan Pakistan Annual Review (APAR), which was designed, according to Administration officials, to gauge progress in the campaign rather than to re-evaluate the strategy. In a December 2010 speech, President Obama announced the results of the review. He confirmed that the core goal remained unchanged—"disrupting, dismantling and defeating al Qaeda in Afghanistan and Pakistan, and preventing its capacity to threaten America and our allies in the future", and he pointedly contrasted that goal to "nation-building, because it is Afghans who must build their nation." President Obama's characterization of the major elements of the effort was quite similar to his December 2009 characterization: targeting the Taliban; growing the Afghan National Security Forces; supporting the "delivery of basic services, as well as transparency and accountability"; supporting an Afghan political process of reconciliation; and working with Pakistan to insist "that terrorist safe havens within their borders must be dealt with." Characterizing progress on the ground, the President noted that "we are seeing significant progress" against the core goal—that al Qaeda senior leadership was under more pressure, and that "we are clearing more areas from Taliban control and more Afghans are reclaiming their communities." He cautioned, however, that "… the gains we've made are still fragile and reversible."  The speech included two new elements. First, President Obama affirmed the goal agreed to at the November 2010 Lisbon NATO Summit, to move toward "a transition to full Afghan lead for security that will begin early next year [2011] and will conclude in 2014." The 2014 marker, initially proposed by President Karzai and later embraced by NATO, was a marked addition to U.S. strategy. Second, President Obama stressed that the U.S. commitment to Afghanistan would be enduring, in the form of a "new strategic partnership" to be elaborated in 2011, as a signal of U.S. commitment. President Obama did not address the proposed content or expected resource implications of that partnership. In early 2011, the Obama Administration was reportedly at work on several related initiatives—further refining a description of desired conditions that ought to pertain in Afghanistan in 2014, and drafting a basic vision for the long-term U.S.-Afghan strategic partnership, to prepare for talks with the Afghan government. A refined strategic partnership document would presumably update the Joint Declaration on Strategic Partnership from 2005. NATO plays a central role in Afghanistan as the sponsor of ISAF. NATO strategy is articulated in decisions and declarations by its political leadership body, the North Atlantic Council, and then further reflected in classified NATO operational planning. As a multi-lateral organization, NATO is both a collective and the sum of its parts. The U.S. government plays a significant leadership role in both ISAF and NATO as a whole, and thus helps shape NATO and ISAF strategy and approaches. At the same time, the United States and all other Allies may have national interests in Afghanistan and the region that are not shared by all ISAF troop contributors. At the Bucharest NATO Summit in April 2008, NATO issued a streamlined but clear strategic vision for Afghanistan. That vision established four "guiding principles": a firm and shared long-term commitment; support for enhanced Afghan leadership and responsibility; a comprehensive approach by the international community, bringing together civilian and military efforts; and increased cooperation and engagement with Afghanistan's neighbors, especially Pakistan. The document also included a "vision of success," which is essentially a statement of objectives: "extremism and terrorism will no longer pose a threat to stability; Afghan National Security Forces will be in the lead and self-sufficient; and the Afghan government will be able to extend the reach of good governance, reconstruction, and development throughout the country to the benefit of all its citizens." What this strategic vision did not provide was a clear articulation of the specific ways and means ISAF would use to achieve those objectives. In October 2009, at an informal ministerial meeting of NATO Defense Ministers in Bratislava, including the Defense Ministers of non-NATO troop-contributing countries, GEN McChrystal briefed participants on the findings of his Initial Assessment. NATO Secretary General Anders Fogh Rasmussen noted "broad support from all ministers of this overall counterinsurgency approach." Participants in Bratislava also agreed on four priorities for the campaign in Afghanistan: (1) focus upon the Afghan population; (2) enhance efforts to build the capacity of the Afghan National Security Forces; (3) promote better Afghan governance; (4) engage more effectively with Afghanistan's neighbors, particularly Pakistan. At the same session, the Ministers approved a new strategic concept for the process of "transitioning" lead security responsibility to Afghans. In November 2010, at the NATO Lisbon Summit, NATO articulated a clear strategic vision for Afghanistan, expressing its support for: "a sovereign, independent, democratic, secure and stable Afghanistan that will never again be a safe haven for terrorists and terrorism, and ... a better future for the Afghan people." Allies reaffirmed their "long-term commitment to Afghanistan," and NATO and the government of Afghanistan committed to a "robust, enduring partnership." That partnership would complement the work of ISAF and extend beyond it; specific cooperation measures would be elaborated later, by mutual agreement. Practitioners and observers suggest that Afghanistan faces critical challenges from more than a single insurgency. The insurgencies themselves are multiple with varying degrees of cohesion, various aims, various links to al Qaeda, and various ties across the border into Pakistan. Criminal patronage networks—including drug lords, powerbrokers, and some government officials—empower the insurgencies directly through funding and other forms of support, and indirectly by alienating the Afghan people. Finally, many of the practices of the international community, over time, have inadvertently empowered malign actors and frustrated the Afghan people, further bolstering at least tacit support for the insurgencies. The insurgent threat in Afghanistan is best characterized as a loose network that includes three major insurgent groups—the Taliban, the Haqqani network, and Hezb-e Islami Gulbuddin (HiG)—most of whose members are Afghans. Each reportedly enjoys some facilitation from foreign fighters, and some degree of safe haven in Pakistan for its senior leadership. The three groups do not follow a single over-arching strategy. While all three utilize violence as a tool, the primary aim is to control the Afghan population—whether through intimidation, the provision of some services, or a combination thereof—and to drive coalition forces out of the country in order to better exercise that influence. The role of al Qaeda in the insurgency in Afghanistan is largely indirect, as a provider of funding, facilitation, and some ideological support, and al Qaeda's presence inside Afghanistan may be quite limited. In January 2011, the Commander of ISAF's Regional Command based in Kandahar noted, "I know of no al Qaeda in Regional Command South." In general, the security climate in Afghanistan has tended to follow cyclical patterns, based on the seasons. The spring poppy harvest season draws some workers-for-hire away from the insurgency; insurgent leaders, who profit from the poppy crop, support this pattern. The forbidding winter cold makes movement and many activities harder, and usually finds some insurgents recuperating across the border in Pakistan. The warmer spring weather provides an opportunity for insurgents to attempt operations. Given the cyclical patterns, changes in security trends are best evaluated by year-to-year rather than month-to-month comparisons. Recent years, by all accounts, have witnessed an upswing in security incidents. Many practitioners date the growing violence from mid-2006, when NATO assumed security responsibility first for southern, and then for eastern Afghanistan. Minister of Defense Wardak, for example, noted that in 2006 the insurgents "came on in a big way," and suggested that their intent had been to weaken political will in NATO capitals. As of Fall 2010, the Department of Defense reported that "overall kinetic events [were] up 300 percent since 2007, and up an additional 70 percent since 2009." In early 2011, officials and observers noted that as insurgent networks increasingly came under pressure and were disrupted by the stronger operational tempo of Afghan and coalition military operations, insurgent groups were seeking ways to make a more spectacular impact. It was reported that over a four-week period ending in February 2011, 116 Afghan civilians had been killed in seven suicide attacks, ranging from Nangarhar province in the east, to Kandahar in the south, to Faryab in the north. ISAF officials expected such high-profile attacks, including assassination attempts against government officials and community leaders, to continue. The Taliban itself, Afghan and ISAF officials note, is more a network than a single organization. The Taliban emerged from the Afghan civil war of the early and mid-1990's, and then the organization ruled Afghanistan from its capture of Kabul in 1996 until its defeat in 2001. Mullah Mohammed Omar, the de facto head of state during Taliban rule, is generally assumed to be alive and leading the organization from Pakistan. In July 2010, he reportedly released guidance to his "force", calling on them to fight coalition forces to the death; to capture or kill Afghans, including women, who support the Afghan government or the coalition; to actively recruit workers with access to coalition facilities; and to acquire more heavy weapons. The group is often referred to as the Quetta Shura Taliban, after the city in Pakistan that serves as home to its leadership council. The Taliban reportedly receives support from some current and/or former Pakistani officials, including members of the Inter-Services Intelligence Directorate (ISI), in the form of logistics, medical, and training assistance. In Afghanistan, the Taliban's central geographical focus is their "spiritual home", Kandahar, but they reportedly maintain a "shadow governance" presence in most or all of Afghanistan's provinces. The apparent purpose of the shadow governments is to deepen their control over the population, in part by providing some basic services such as rapid justice and by capitalizing on popular disaffection with the current government. The Haqqani network (HQN) is closely associated with the Taliban and falls under the broad umbrella of its Quetta-based leadership, but it also maintains a distinct identity and organizational cohesion. HQN was long led by Jalaluddin Haqqani, who fought as a mujahedin leader against Soviet forces, receiving substantial assistance from the CIA by way of Pakistan's ISI. When the Taliban came to power, he joined the government as a Minister but retained a separate power base in his home Zadran district and tribe, east of Kabul. His son Sirajudin has reportedly assumed day-to-day leadership of the organization while Jalaluddin maintains an advisory role. The Haqqani network reportedly utilizes a base of operations in North Waziristan, part of Pakistan's Federally Administered Tribal Areas (FATA) along the border with Afghanistan. ISAF officials believe that HQN uses the base to plan and launch attacks targeting Afghan and coalition forces inside Afghanistan. Pakistani forces have long been unwilling, or unable, to take military action against HQN in North Waziristan. The Haqqani network's primary geographical focus inside Afghanistan is the eastern provinces of Paktia, Paktika and Khowst—the traditional Zadran tribal homeland. HQN has been able to use these areas as launching pads to carry out violence in the approaches to Kabul and in Kabul city itself. HQN reportedly enjoys closer ties with al Qaeda than the other major Afghan insurgent groups. Some recent reports suggest emerging close links between HQN and Lashkar-e Taiba, the Pakistani terrorist group responsible for the 2008 terrorist attacks in Mumbai and expert in orchestrating complex suicide attacks. The third major Afghan insurgent group is Hezb-e Islami Gulbuddin (HiG), named after its leader, Gulbuddin Hekmatyar, who led mujahedin fighters against Soviet forces. At that time, his organization, then known as the Hezb-e Islami, received substantial aid from the U.S. government, which reportedly considered him a key ally. He twice held the title of Prime Minister during the early 1990's civil war period, before seeking refuge in Iran when the Taliban came to power. Hekmatyar later re-emerged in Afghanistan as the leader of the HiG insurgent group. Like the other groups, the HiG enjoys safe haven across the border in Pakistan. The HiG's primary geographical focus inside Afghanistan is in the northeast, in Nangarhar, Kunar, and Nuristan provinces, areas rich in timber and gem resources that the HiG is interested in exploiting. Unlike the other two groups, the HiG maintains a political wing including affiliates who serve in the Afghan government. The HiG has leaned forward in exploring potential reconciliation opportunities, including putting forward to the Afghan government a 15-point peace proposal. The HiG's relations with the Taliban are sometimes fraught—affiliates of the two groups have clashed in a struggle for influence in northeastern Afghanistan. Practitioners and observers suggest that a significant challenge to Afghanistan's prospects for future stability is posed by "criminal patronage networks", broadly understood to be loose networks linking powerbrokers, criminal bosses, and some government officials, at the national and sub-national levels, which skim state revenues and distribute patronage and largesse selectively. In some cases they may fund the insurgencies directly. They also fuel the insurgencies indirectly by alienating the Afghan people, who may then choose to give their active or tacit support to insurgents. In his 2009 Initial Assessment, then-ISAF Commander GEN McChrystal recognized the deleterious impact that powerbrokers were having on stability. He stressed the "unpunished abuse of power by corrupt officials and powerbrokers" as a key contributing factor to the Afghan people's "crisis of confidence" in the Afghan government. He described that crisis as one of the two elements, together with the insurgencies, of the threat to the overall mission. By Summer 2010, ISAF officials and other members of the international community had begun to think of the challenge posed by powerbrokers in terms of networks—linked sets of relationships used to foster and exercise power and influence. That growing understanding was facilitated by both a broader definition of the "threat" to the overall effort, and the availability of more and better analytical tools for teasing out key relationships. For example, the Afghan Threat Finance Cell (ATFC), which reports to both U.S. Embassy Kabul and the Commander of U.S. Forces-Afghanistan, has made substantial contributions to current understanding. In his January 2011 letter to the troops, ISAF Commander GEN Petraeus argued that in order to build on security gains made in 2010, "we will have to expand our efforts to help Afghan officials implement President Karzai's direction to combat corruption and the criminal patronage networks that undermine the development of effective Afghan institutions." One critical question is the extent to which criminal patronage networks extend their reach into the highest levels of the Afghan government. In a recent article in The New Yorker , Dexter Filkins argued that "it's no longer enough to say that corruption permeates the Afghan state. Corruption, by and large, is the Afghan state... The Afghan government does not so much serve the people as it preys on them." A recent focus of particular concern has been Kabul Bank. The Bank faces allegations that some seven hundred million dollars are missing from the bank, and that those funds were used to buy property in Dubai and to purchase political patronage through "campaign contributions" to senior Afghan officials. Kabul Bank is of interest and concern in part because the U.S. government has used it to channel funding to pay some Afghan salaries, including for members of the Afghan National Security Forces. Of potentially greater concern are the Bank's links with Afghanistan's political leadership: its key shareholders include close relatives of Afghanistan's senior-most officials, and the Bank's "campaign contributions," some allege, were directed toward some senior officials of the Afghan government. Many practitioners and observers agree that patronage networks are alive and well at sub-national levels, where opportunities for access to revenue streams include international border crossings, as well as the contracts let and the assistance programs supported by the international community. In the pervasive exercise of "influence" at sub-national levels, it is not always clear whether the law has been violated. But the influence exercised raises tough questions for the international community about the appropriate balance between getting things done by working closely with those Afghans who can produce results, and crafting an Afghan system that the Afghan people will accept. Some observers suggest that since the leverage that local powerbrokers are able to exert depends at least in part on the patronage, access, and resources they receive from higher levels of the Afghan system, the challenges—and possible remedies—cannot easily be locally circumscribed. Perhaps the most prominent "powerbroker", in the literal sense of the term, has been Ahmed Wali Karzai (AWK), President Karzai's half-brother. AWK's official position as the head of the Provincial Council of Kandahar province does not convey significant authority or resources on its own, but his personal influence, by all accounts, is quite extensive. AWK has faced allegations of involvement in the poppy trade, of maintaining his own private militia, of illegally seizing land, of orchestrating profitable monopolies over business sectors including private security contracting and long-distance trucking, and of exercising undue influence over government appointments within the province. His largesse, it is claimed, benefits some but explicitly leaves others out and may be serving to exacerbate inter-tribal tensions. At the same time, AWK is widely regarded as someone who can get things done—a view attested to by the long lines of Afghan petitioners usually to be found at his doorstep. Reportedly, he has also long enjoyed a close relationship with the Central Intelligence Agency. And to date, little if any formal evidence of wrong-doing has been put forward. As the focus of the combined Afghan and international campaign, including support to governance as well as security, shifted to Kandahar province in 2010, the international community was forced to wrestle with the extent to which AWK could serve as a factor of stability, and the extent to which the Afghan people would be likely to accept that role. General Abdul Razziq—until recently "Colonel"—is the Afghan Border Police commander in Spin Boldak, Kandahar province, at the border crossing with Weesh Chaman, Pakistan. Most observers agree that Razziq enjoys the patronage of Provincial Council Chairman Ahmed Wali Karzai; that he has profited mightily by skimming state revenues at the border crossing; and that he ensures the loyalty of his own border police forces through patronage and by filling the ranks with members of his own Achekzai tribe. Many international civilian and military practitioners have long regarded him as a "thug"—the Washington Post quoted one civilian official as saying, "Razziq is the poster child for all that is wrong with Afghanistan's government." By some accounts, many Kandaharis are afraid of him. Yet in 2010, AWK paved the way for Razziq and his forces to play a key role leading clearing operations in and around Kandahar city. ISAF officials noted that in those military operations, Razziq was clearly getting things done. Said one U.S. officer, according to the Wall Street Journal: "Now the first priority is to beat the Taliban. Once this is done, we can shift our attention to these illicit actors. Razziq can beat the Taliban." The challenges for the international community include whether, and if so to what extent, to rely on this opportunistic partnership; and whether, if expediency proves to be the trump card in the current debate, it will be possible later on to curb any of Razziq's behavior that is not based on the rule of law. Some practitioners and observers regard as equivocal the behavior and likely impact on long-term stability of Governor Gul Agha Sherzai of Nangarhar Province. Sherzai, originally from Kandahar, enjoys President Karzai's personal patronage. Many observers suggest that Sherzai has been a dynamic leader—rallying his fellow Governors of nearby Laghman, Kunar and Nuristan provinces to pursue common interests, and organizing with them a broad Peace and Reconciliation Jirga aimed at reaching out to former fighters and offering them opportunities to rejoin peaceful society. Sherzai has reportedly distributed patronage to a fairly wide circle of recipients, but still selectively, drawing on revenues generated at the Torkham Gate border crossing with Pakistan, and on the drug labs that remain open despite the elimination of virtually all poppy growing in the province . Some of Sherzai's actions have appeared to some observers to contravene the rule of law. But a number of senior civilian and military U.S. officials working in the region have argued that Sherzai "gets things done", and that he is a "force of stability." Both practitioners and outside observers have increasingly recognized the many ways in which the practices of the international community in Afghanistan directly or indirectly fuel the insurgency. Through inattentive contracting and programming practices, international funds apparently have been channeled into the hands of local powerbrokers, who may pocket some of the money or use the opportunity to distribute jobs and other forms of patronage to bolster their own influence. The perceived unfairness of both kinds of behavior, in turn, tends to alienate the Afghan people. ISAF Commanders have recognized the nature and gravity of the problem. In his Initial Assessment, GEN McChrystal described the problem of corruption and added, "ISAF errors have further compounded the problem," and he noted that this "generate[s] recruits for the insurgent groups." In his recent letter to the ISAF troops, GEN Petraeus stated that in order to help Afghan officials counter corruption, "we will need to pursue initiatives to ensure that our contracting and procurement activities are part of the solution rather than a continuing part of the problem." The problems have attracted the attention of Members of Congress. In a report issued in June 2010, a Subcommittee of the House Committee on Oversight and Government Reform examined the sizable contract known as "host nation trucking" (HNT) supporting the U.S. supply chain in Afghanistan, in which prime contractors are responsible for providing security. The Subcommittee found that the "principal private security subcontractors on the HNT contract [were] warlords, strongmen, commanders, and militia leaders" who were effectively running protection rackets. In a report issued in September 2010, the Senate Armed Services Committee assessed the role of private security contractors in Afghanistan by examining several case studies in great detail. The Committee concluded that U.S.- and UN-funded contracts were directly benefiting Afghan warlords and that those warlords, in turn, had been "linked to anti-coalition activities, murder, bribery, and kidnapping." Over time, since the removal of the Taliban regime, the complex and multi-faceted international effort in Afghanistan has evolved in scope, scale, participation, and focus. Afghanistan, which lacks sufficient institutional, material, and human resources to make substantial progress on its own, relies deeply on the international community to provide support. Over time, there have been changes in both leadership responsibility for international community efforts, and the balance of responsibilities between the international community and the Afghan government. The "lead nation" model of international assistance to Afghanistan was adopted at a donors' conference held in Tokyo in early 2002. Five countries each agreed to assume lead coordination responsibility for assistance to a single area of security-related Afghan administration: the United States for the army, Germany for the police, Italy for the judiciary, the United Kingdom for counternarcotics, and Japan for the disarmament, demobilization and reintegration (DDR) of militias. The Afghanistan Compact, a formal statement of commitment by the Afghan government and the international community, finalized in January 2006, shifted responsibility from lead nations to Afghanistan itself, with international support. The premise was a shared Afghan and international vision of Afghanistan's future, including the commitment of the international community to "provide resources and support" to realize that vision. The Compact established three broad pillars of activity for future efforts—security; governance, the rule of law and human rights; and economic and social development. In order to "ensure overall strategic coordination of the implementation of the Compact," the document established the Joint Coordination and Monitoring Board (JCMB) process, co-chaired by an Afghan government representative and the UN Special Representative of the Secretary-General (SRSG), who leads the United Nations Assistance Mission in Afghanistan (UNAMA). UNAMA was established by UN Security Council Resolution 1401 (2002) on March 28, 2002. The mandate is renewed annually. The current mandate emphasizes UNAMA's lead coordination for civilian assistance efforts; it states that UNAMA and the SRSG "will continue to lead the international civilian efforts," and that as JCMB co-chair, will promote "…more coherent support by the international community to the Afghan government's development and governance priorities." Concerning military efforts, the mandate states that UNAMA and the SRSG will "strengthen cooperation with ISAF and the NATO Senior Civilian Representative at all levels ... in order to improve civil-military coordination ... and to ensure coherence between the activities of national and international security forces and of civilian actors in support of an Afghan-led development and stabilization process." In practice, UNAMA has sometimes faced criticism for its inability to provide comprehensive coordination of all international community efforts in non-security areas, from prioritization to synchronized execution. Many practitioners and observers agree that those best placed to coordinate international community efforts—to firmly establish a single set of priorities—are the Afghans themselves. At his second presidential inauguration, President Karzai announced, "... we are seeking a new cooperation framework with the international community. This cooperation will be based on Afghan ownership.... Afghans will have the central role in prioritizing, designing and implementing development projects." The new "Kabul Process"—deliberately borrowing its name from the earlier "Bonn Process"—is considered to date from that inauguration. The basic premise of the Kabul Process, as President Karzai stated in his speech at the January 2010 London Conference, is "Afghan leadership, Afghan ownership." As the London Conference Communiqué confirmed, the Process is intended to include stronger Afghan leadership aimed at securing, stabilizing and developing the country, drawing more heavily on Afghan institutions and resources to meet the needs of the people. The complement to the updated Afghan role was a redefined role for the international community, stressing "partnership" and "support." The Communiqué of the July 2010 Kabul Conference described the two roles this way: To achieve success in Afghanistan, the partnership between the Afghan Government and the international community should be based on the leadership and ownership of the Afghan Government, underpinned by its unique and irreplaceable knowledge of its own culture and people. This partnership should include coherent support by the international community, lending its resources and technical knowledge to the implementation of Afghan-defined programmes. NATO plays a substantial role in Afghanistan by providing the International Security Assistance Force (ISAF), and through the political role of the NATO Secretary-General and his personal representative in Afghanistan, the NATO Senior Civilian Representative. ISAF itself had been established in the wake of the Bonn Conference in December 2001, to help provide security to support the fledgling new Afghan regime. The legal basis for the ISAF presence in Afghanistan was a United Nations mandate, under Chapter VII of the United Nations Charter. A UN Security Council Resolution authorized the establishment of ISAF to "assist…in the maintenance of security in Kabul and its surrounding areas." That mandate was based on the specific appeal for such a force in the December 2001 Bonn Agreement. The United Kingdom agreed to lead the force initially, and then it was led by a series of lead nations until mid-2003. In January 2002, the Interim Authority of Afghanistan signed a Military Technical Agreement with the newly formed ISAF. NATO assumed responsibility for the ISAF mission on August 9, 2003. ISAF represents NATO's first significant out-of-area deployment, and it is viewed by many observers as a key test for the Alliance—a measure of both its current capabilities and its possible future relevance. On September 12, 2001, in response to the 9/11 terrorist attacks, NATO had, for the first time, invoked Article 5 of the North Atlantic Treaty, which confirms the commitment of the allies to collective self-defense in the event of armed attack on any party to the treaty. That action helped clear the way for future NATO operations in Afghanistan. In October 2003, the UN Security Council authorized an expansion of the ISAF mandate to include supporting the Afghan government in maintaining security outside Kabul and its environs, and providing security to support the accomplishment of other objectives outlined in the Bonn Agreement. The current UN mandate extends the authorization of ISAF for a period of 12 months beyond October 13, 2010. ISAF's current mission statement states: In support of the Government of the Islamic Republic of Afghanistan, ISAF conducts operations in Afghanistan to reduce the capability and will of the insurgency, support the growth in capacity and capability of the Afghan National Security Forces (ANSF), and facilitate improvements in governance and socio-economic development in order to provide a secure environment for sustainable stability that is observable to the population. ISAF, initially mandated to support Afghan efforts to secure Kabul and its immediate environs, expanded its geographical scope in four stages. During Stage 1, completed on October 1, 2004, ISAF expanded to the north of Kabul, assuming responsibility for a German-led Provincial Reconstruction Team (PRT) and establishing new PRTs. In Stage 2, completed in September 2005, ISAF expanded to the west. In Stage 3, completed on July 31, 2006, ISAF assumed responsibility for southern Afghanistan. In Stage 4, completed on October 5, 2006, ISAF assumed control of U.S.-led forces in eastern Afghanistan, making ISAF's responsibility to support security contiguous and complete throughout the country. ISAF is led by a four-star combined headquarters, based in Kabul and headed by U.S. Army General David Petraeus. NATO's North Atlantic Council provides political direction for the mission. NATO's Supreme Headquarters Allied Powers in Europe (SHAPE), based in Mons, Belgium, and led by Supreme Allied Commander Europe (SACEUR), U.S. Navy Admiral James Stavridis, provides strategic command and control. NATO's Joint Force Command Headquarters, which is based in Brunssum, The Netherlands, and reports to SHAPE, provides "overall operational control," including many administrative responsibilities. ISAF itself, which reports to SHAPE through Joint Forces Command-Brunssum, exercises "in-theater operational command." This arrangement, including two levels of operational headquarters, is somewhat unusual. One of the major conclusions of GEN McChrystal's 2009 Initial Assessment was that both unity of command within ISAF, and unity of effort throughout the international community in Afghanistan, needed to be improved. One major step in that direction was the creation, in October 2009, of the ISAF Joint Command (IJC), a three-star-led operational-level headquarters that falls under ISAF itself. The rationale for creating the IJC was that doing so would allow the ISAF four-star headquarters to look "up and out"—that is, to focus on strategic-level concerns, including partnership with senior Afghan leaders, relationships with neighboring states including Pakistan, civil-military coordination at the national level, and communications with troop-contributing national capitals and NATO headquarters. The IJC, meanwhile, would look "down and in"—it would be able to lead day-to-day operations throughout the country, while focusing on partnerships with Afghan and international counterparts. The IJC has been led since its inception by Lieutenant General David Rodriguez, U.S. Army. The current IJC mandate states: In full partnership, the combined team of Afghan National Security Forces, ISAF Joint Command and relevant organizations conducts population-centric comprehensive operations to neutralize the insurgency in specified areas, and supports improved governance and development in order to protect the Afghan people and provide a secure environment for sustainable peace. In November 2009, the NATO Training Mission-Afghanistan (NTM-A), was established in order to strengthen NATO's assistance to the Afghan National Security Forces (ANSF). NTM-A, like the IJC, reports to ISAF. It has been led since its inception by Lieutenant General William Caldwell, U.S. Army, who is dual-hatted as the Commanding General of the U.S. organization, the Combined Security Transition Command- Afghanistan (CSTC-A). The NTM-A mission statement says: NTM-A/CSTC-A, in coordination with NATO nations and partners, international organizations, donors and non-governmental organizations, supports the government of the Islamic Republic of Afghanistan in generating and sustaining the ANSF, develops leaders, and establishes enduring institutional capacity to enable accountable, Afghan-led security. In Afghanistan, ISAF oversees six contiguous Regional Commands (RC), most led by a two-star General Officer: RC-Capital, led by Turkey; RC-East, based at Bagram Air Field, led by a U.S. Army Division headquarters; RC-South, based in Kandahar province, also led by a U.S. Army Division headquarters; RC-Southwest, based in Helmand province, led by a U.S. Marine Expeditionary Force-forward; RC-West, based in Herat province, led by Italy; and RC-North, based in Balkh province, led by Germany. Troop contingents from other Allies, and from some non-NATO partners, serve under these Regional Commands. As of February 3, 2011, ISAF included approximately 132,000 troops from 48 countries, including NATO Allies and non-NATO partners. From the outset, NATO has struggled to secure sufficient troop contributions, with the appropriate capabilities, for ISAF. One consideration for potential troop contributors is cost—NATO's long-standing practice, "costs lie where they fall," typically means that countries pay their own costs when they contribute troops to a mission such as Afghanistan. Another consideration is the need for domestic political support. From the outset, ISAF operations have been constrained by "national caveats"—restrictions that individual troop-contributing countries impose on their own forces' activities. These restrictions are classified. According to the Department of Defense, as of April 2010, 27 ISAF troop contributors had placed caveats of some kind on their contingents; of those caveats, 20 imposed limitations on operating outside of originally assigned geographic locations. Caveats tend to be informed by domestic political constraints—a government may consider, for example, that only by limiting its troops' activities, and hedging against taking casualties, can it guard against strong popular domestic opposition to its troop contribution. As a rule, troop-contributing countries state their caveats explicitly; but additional constraints may surface when unanticipated requirements arise and contingents seek additional guidance from their capitals. National caveats tend to frustrate commanders on the ground because they inhibit commanders' freedom to apportion forces across the battlespace—to move and utilize forces freely. With caveats, the "whole" of the international force, as some observers have suggested, is less than the sum of its parts. Even more damaging, ISAF officials note, is the impact caveats can have on ISAF's relationship with Afghan National Security Forces (ANSF) partners. For example, ISAF advisory teams that are unable to accompany ANSF counterparts on offensive operations quickly lose both the Afghans' respect, and their own ability to shape and mentor the Afghan forces. Afghan Minister of Defense Abdul Rahim Wardak stated that ISAF training teams "don't have the same quality" as their U.S. counterparts. U.S. senior military officials in Afghanistan have noted that the ANSF appreciate their U.S. counterparts because "we drink from the same canteen." The U.S. government has consistently urged ISAF troop contributors to drop or ease their national caveats, with some success. Provincial Reconstructions Teams (PRT) in Afghanistan grew out of a U.S. military initiative in late 2002. In general, PRTs help Afghan provincial governments develop the capacity and capabilities to govern, provide security, ensure the rule of law, promote development, and meet the needs of the population. As ISAF's area of responsibility expanded geographically, it assumed responsibility for PRTs in each new area. As of early 2011, ISAF maintains PRTs in 28 of Afghanistan's 34 provinces, including two new contributions provided within the past year: the South Korean-led PRT in Parwan province, and the Turkish-led PRT in Jowzjan. PRTs vary greatly in size, composition, and focus. The Swedish-led PRT based in Balkh province, for example, is primarily a Swedish military unit, augmented by a small handful of U.S. and Finnish civilian experts, which has conducted various training and partnering activities with Afghan security forces. It is based in the capital city of Balkh, Mazar-e Sharif, separate from the headquarters of ISAF's German-led Regional Command-North. In contrast, the two Turkish-led PRTs, based in Wardak and Jowzjan provinces, are civilian organizations led by diplomats from Turkey's Ministry of Foreign Affairs, which focus primarily on relationships with provincial political leadership and visible reconstruction projects—some of which they have painted bright red to match the color of the Turkish flag. Perhaps the largest PRT is the British-led team based in Helmand province, where the UK has long had a significant civilian and military presence. The PRT is led by a UK senior civilian and includes a large staff from multiple UK agencies, as well as some U.S. government civilian personnel. It is co-located with the Helmand-based UK military contingent, to facilitate integration of effort. The PRT in Uruzgan province, also in Regional Command-South, is the only one without a single national lead. After the drawdown of Dutch forces from Uruzgan, an agreement was reached to re-organize that PRT under the ISAF flag, with contributions from the Netherlands, the United States, and Australia. U.S.-led PRTs have undergone substantial evolution in the last several years. As originally created, they were primarily military organizations, led by either an Air Force Lieutenant Colonel or a Navy Commander, and reporting to the nearest U.S. battlespace owner. They typically included between 80 and 120 total personnel, including Civil Affairs troops and support staff. Each PRT usually featured one representative each from the Department of State, the Agency for International Development (AID), and the Department of Agriculture (USDA). Today, each U.S. PRT has a U.S. government civilian lead, as well as a military PRT commander, and the civilian staffs have been significantly augmented. U.S. government civilians also serve on the staffs of non-U.S.-led PRTs throughout the country. Practitioners and observers variously evaluate the successes of PRTs to date. Some argue that while PRTs have carried out useful work, they have not been resourced sufficiently to meet requirements. This may be particularly true for some Allies, for example Lithuania, that have fewer resources available in general for international assistance efforts. Others, including senior Afghan officials, have argued that PRTs do not coordinate their efforts sufficiently with Afghan authorities. In November 2008, during a visit to Kabul by a U.N. Security Council delegation, President Karzai claimed that PRTs were setting up "parallel governments" in the countryside, a claim he subsequently repeated. In February 2011, at the Munich Security Conference, President Karzai called for the speedy dismantling of the PRTs, on the grounds that they serve as an impediment to the extension of Afghan authority. Other Afghan officials have reportedly expressed that international resources channeled through PRTs are frequently "lost" amidst multiple layers of contractors and subcontractors before they reach the Afghan people. The NATO Alliance is directly represented in Kabul by a Senior Civilian Representative (SCR), who serves as the personal representative of the NATO Secretary-General. The NATO SCR has no formal relationship with the ISAF Commander or headquarters, other than coordination. In past years, the NATO SCR focused primarily on Afghan political developments and on reporting up to NATO's political leadership. That dynamic changed with the appointment, in February 2010, of a new NATO SCR, Ambassador Mark Sedwill, who had served formerly as the UK Ambassador to Afghanistan. While the formal terms of reference for the job were not changed, with NATO, UK, and U.S. encouragement, Ambassador Sedwill and then-ISAF Commander GEN McChrystal forged a much closer partnership than had pertained in the past. The two took important briefings together, held some key meetings with senior Afghan officials together, and conducted some travel around the country together. They also coordinated their presentations for their respective NATO chains of command. Together, the two fostered more effective integration of effort among key international actors—UNAMA, the European Union, and a handful of key Embassies—by bringing together the leaders of these organizations frequently in a small group format. In February 2011, NATO Secretary General Anders Fogh Rasmussen announced the decision to appoint Ambassador Simon Gass, currently serving as the UK Ambassador to Iran, to succeed Ambassador Sedwill as NATO SCR in Afghanistan. Over the past several years, with the surge of both military forces and civilian personnel, the U.S. government footprint on the ground in Afghanistan has grown substantially. At the same time, both military and civilian command and control arrangements, and modalities for civil-military coordination, have also changed significantly. As the NATO ISAF mission in Afghanistan grew and changed, the unilateral U.S. footprint adapted accordingly. During major combat operations in 2001, the U.S. military established a special operations forces (SOF) presence in Afghanistan, reporting directly to U.S. Special Operations Command (SOCOM). By early 2002, some U.S. conventional forces, including a two-star U.S. Army Division Headquarters, had flowed into Afghanistan, but the footprint remained light—only one brigade combat team (BCT)—until early 2007. In October 2003, a U.S.-led three-star Combined Forces Command-Afghanistan (CFC-A) was established in Kabul. CFC-A oversaw two U.S.-led two-star commands that also included coalition partners—a training command for the ANSF; and a Combined Joint Task Force (CJTF) built around a U.S. Army Division headquarters, leading conventional forces in eastern Afghanistan. CFC-A served until ISAF assumed security responsibility for all of Afghanistan, and was then deactivated, in February 2007. Following the deactivation of CFC-A, its subordinate ANSF training command, the Combined Security Transition Command-Afghanistan (CSTC-A), began reporting directly to U.S. Central Command (CENTCOM), and its subordinate CJTF assumed a dual U.S./NATO reporting chain, to CENTCOM for U.S. issues and to ISAF in its NATO capacity as Regional Command-East. In October 2008, the Department of Defense activated United States Forces-Afghanistan (USFOR-A), a new four-star headquarters designed to streamline command and control for U.S. forces operating in Afghanistan. The ISAF Commanding General, then GEN McKiernan, was dual-hatted as the USFOR-A Commanding General. Today, the USFOR-A Commanding General has "operational control" of U.S. conventional forces operating at ISAF's Regional Commands, of the U.S. training mission CSTC-A, and of some U.S. Special Operations Forces (SOF); he has a "tactical control" relationship with some other U.S. SOF. As the head of ISAF, General Petraeus reports up the NATO chain of command to SACEUR Admiral James Stavridis; as the head of USFOR-A, he reports to the Commanding General of CENTCOM, General James Mattis. According to the Joint Staff, as of January 1, 2011, there were 96,700 U.S. military personnel serving in Afghanistan. Of those, 78,400 were assigned to ISAF, while the rest were serving under the U.S. flag. Major U.S.-provided headquarters units include the 101 st Airborne Division, serving as the nucleus of Regional Command-East; the 10 th Mountain Division, serving as the nucleus of Regional Command-South; and I Marine Expeditionary Force-Forward, serving as the nucleus of Regional Command-Southwest. U.S. troop levels in Afghanistan have grown significantly over time. In December 2006, U.S. forces included only one Brigade Combat Team. In early 2007, an additional BCT was added, by extending the tour of the 3 rd BCT, 10 th Mountain Division (3/10) by 120 days, flowing in its originally scheduled replacement, 4 th BCT, 82 nd Airborne Division, on schedule, and later replacing 3/10 with the 173 rd Airborne BCT. In January 2008, the Department of Defense announced that President Bush had approved an "extraordinary, one-time" deployment of 3,200 additional Marines to Afghanistan. Those forces did redeploy in November 2008, but were replaced by a Marine Air Ground Task Force (MAGTF), including 3 rd Battalion, 8 th Marine Regiment, plus additional logistics and air support. It was not until 2009 that the U.S. footprint began to grow substantially, including a Combat Aviation Brigade that had been approved by the Bush Administration in December 2008; approximately 17,000 troops approved by President Obama in February 2009; and some 30,000 further troops approved as a result of the Obama Administration's strategic assessment that fall. Two separate sets of arrangements are in place, for ISAF and for U.S. forces deployed under U.S. command, to provide a legal basis for the presence of those forces in Afghanistan. In 2002 and 2003, U.S. Embassy Kabul and the Afghan Ministry for Foreign Affairs exchanged diplomatic notes, which together constituted a formal agreement. The notes, which remain in force, confirmed that military and civilian personnel of the Department of Defense shall be accorded a status equivalent to that of Embassy administrative and technical staff under the 1961 Vienna Convention on Diplomatic Relations. The notes also addressed freedom of movement, licenses, the wearing of uniforms, the use of vehicles, exemption from taxation, and imports and exports. They confirmed U.S. criminal jurisdiction over U.S. personnel. Some of the basic provisions of that exchange of notes were reconfirmed by a Joint Declaration signed by President Karzai and President Bush, in May 2005, in which the two countries committed themselves to a strategic partnership with the goal of "strengthen[ing] U.S.-Afghan ties to help ensure Afghanistan's long-term security, democracy and prosperity." The Declaration confirmed the bilateral intent to work together closely on a range of activities including, in the security sector: training the Afghan National Security Forces, security sector reform, counterterrorism operations, counternarcotics programs, intelligence-sharing, border security, and strengthening ties with NATO. The Declaration included the specific, practical commitment that U.S. military forces operating in Afghanistan would continue to have access to Bagram Air Base "and facilities at other locations as may be mutually determined," and that U.S. and coalition forces would continue to enjoy freedom of action to conduct military operations "based on consultations and pre-agreed procedures." Over time, the Afghan leadership has expressed interest in making sure that ISAF- and U.S.-led forces coordinate their operations with the ANSF and with each other. For example, the 2006 Afghanistan Compact, the basic framework for international community engagement in Afghanistan in all sectors, stated that all U.S. "counter-terrorism operations will be conducted in close coordination with the Afghan government and ISAF." In August 2008, President Karzai called for a review of the presence of all foreign forces in Afghanistan and the conclusion of formal status of forces agreements. He issued the call during the heated U.S.-Iraqi negotiation process aimed at achieving a status of forces-like agreement, and just after U.S. airstrikes in Azizabad, Afghanistan, had apparently produced a number of civilian casualties. In January 2009, GIRoA reportedly sent a proposed draft agreement to NATO, which outlined terms and conditions for the presence of NATO forces in Afghanistan. Officials have suggested that U.S.-Afghan talks designed to update the bilateral strategic partnership, scheduled for 2011, may consider revising the legal basis for the presence of U.S. forces in Afghanistan. In recent years, the U.S. government civilian presence in Afghanistan has grown substantially in numbers of personnel, numbers of participating U.S. government agencies, and the reach of its footprint on the ground. In addition, new measures have been introduced to better organize the U.S. government effort internally. Of course, U.S. civil-military efforts do not take place in a vacuum—they are linked in most locations and at most levels with efforts by Afghan civilian and security officials, and with efforts by Allies and partners. Many practitioners and observers had long suggested that the capacity-building challenges in Afghanistan required additional international civilian expertise, as well as the effective integration of such expertise with military efforts. In 2008, ISAF commanders argued that a stronger commitment to build responsive capacity was required because it was governance, more than security or development, that was lagging in Afghanistan. Then-RC-East Commanding General, Major General Schloesser, argued, "We need an interagency surge!" Senior officials from other Allied countries within ISAF echoed this argument—in November 2008, then-RC-North Commanding General, German Major General Weigt, argued that he needed "civilian advisory teams," as analogues to the military training teams working with Afghan forces. "The main problem for me," he stated," is not security, but deficits in governance." Outside experts too stressed the need for additional civilian expertise. In December 2008, Sarah Chayes wrote that the problem of governance in Afghanistan was particularly acute, and she argued, "Western governments should send experienced former mayors, district commissioners and water and health department officials to mentor Afghans in those roles." In late 2008, U.S. Embassy Kabul outlined a proposal for a "civilian surge" to support provincial- and district-level governance in Afghanistan. Spearheaded by then-Special Representative for Afghanistan and Pakistan (SRAP), Ambassador Richard Holbrooke, the initiative, also known as the "civilian uplift", grew quickly. During 2009, the number of U.S. civilian personnel under Chief of Mission authority in Afghanistan increased from about 300 to nearly 1,000. By early 2011, according to Secretary of State Hillary Clinton, there were more than 1,100 civilian experts from nine federal agencies serving in Afghanistan. The additional civilians have come from multiple U.S. government agencies—the Department of State, the Agency for International Development (AID), and the Department of Agriculture (USDA), which have long provided some personnel to serve at PRTs, but also the Departments of Treasury, Justice, Homeland Security and others. Some are reinforcing the staff of U.S. Embassy Kabul, including serving in "growth" areas such as rule of law; others are deploying to the field to serve at Regional Commands, at PRTs, or close to local communities at District Support Teams (DSTs). U.S. civilian agencies have faced significant challenges in meeting the full demand for civilian expertise, a pressure that reportedly continued in early 2011. Unlike the military, most civilian agency personnel are not readily deployable—their full-time jobs are not, effectively, preparation for deployment, but rather full-time concerns in their own right; and civilian agencies do not typically maintain a personnel "float" that can easily backfill positions for others who are deploying. Agencies have explored a variety of solutions to meet the requirement in Afghanistan. USDA, for example, has made deployment opportunities available not only to members of its Foreign Agricultural Service, whose members do regularly serve overseas, but also to staff of USDA as a whole. Both State and AID rely very heavily on temporary hires, including State's "3161" system of contracting, and AID's "Foreign Service Limited" appointments. Perhaps not surprisingly, the results are a mixed bag. Ideally, U.S. government civilians would bring to their deployments three forms of expertise: technical expertise in their fields; familiarity with the programs and culture of their home organization; and knowledge of Afghanistan. While technical expertise is the norm, new hires are unlikely to be familiar with their new organization, and most new and old hires have little or no prior experience in Afghanistan. Moreover, looking ahead, much of the accumulated Afghanistan experience of temporary hires is likely to be lost, because there are few if any ready mechanisms for bringing temporary hires on board as permanent agency staff. In 2009, a significant change was introduced by the creation of U.S. "Senior Civilian Representative" (SCR) positions and a streamlined chain of command for all U.S. civilians working under Chief of Mission authority—that is, for the U.S. Ambassador in Kabul. At each level—Regional Command, Brigade, provincial, and district—one of the U.S. civilians, usually the highest in seniority regardless of home agency, is designated the SCR. All other U.S. civilians on that team or in that command report to the SCR. The SCR, in turn, is responsible for reporting up to the next higher level. The change was designed to "raise the profile" of the civilian effort, to put civilian efforts on par with those of the military, and to ensure better unity of effort among civilian agencies. The structure marks a change from the familiar past role of State Department Political Advisors (POLADs), based at State's Bureau of Political-Military Affairs. POLADs typically played an advisory role to the military commander—effectively serving as the commander's (senior) staff rather than counterpart. During the war in Iraq, the State Department found it challenging to meet the requests of military commanders at all levels for POLADs; the Department of Defense obliged by hiring civilians with political-military backgrounds to serve in analogous advisory capacities. The SCR structure has reportedly created some tensions among U.S. civilian agencies, as many personnel in "field" position continue to reach back directly to their home organizations in Kabul or back in Washington in addition to utilizing the SCR chain. That dynamic is not surprising—field personnel, particularly if they are new to their home organizations, may need ongoing familiarization with agency programs; they may want to remain in direct contact with a view to future assignments; and they may seek support if and when disagreements about policy or approaches arise within their inter-agency team on the ground. Some observers have suggested that Afghanistan might be a useful test case for an integrated, balanced application of all instruments of U.S. national power. Practice in Afghanistan to date highlights some remarkable innovations in civil-military integration but also the persistence of stubbornly distinct cultures that do not necessarily give each other the benefit of the doubt. Some military practitioners in Afghanistan still tend to regard civilian efforts as "too slow," while some civilian practitioners still tend to regard with concern a perceived military tendency to "charge ahead." The significantly larger U.S. military and civilian presence in Afghanistan, together with more co-location of U.S. civilian and military officials working in a given location, has, practitioners suggest, underscored the need for both strong integration and clear division of labor. On the ground, civilian and military practitioners have frequently crafted innovative arrangements for better integrating their efforts. One illustration of arrangements that foster greater integration is the "Board of Directors" concept created and practiced, through several rotations, by the U.S. Army Brigade and its civilian counterparts responsible for efforts in Paktia, Paktika and Khowst provinces ("P2K"). In that arrangement, the civilian and military leaders collectively take briefs from their civilian and military subordinates on the full range of topics—security, governance, and development. They collectively brief their higher headquarters—the Commander of Regional Command-East and his SCR counterpart. And senior leaders of the Board travel together throughout their area of responsibility. Board members have indicated that as a rule, the Brigade Commander makes decisions in the security arena; civilian officials make decisions in the arenas of governance and development; and group consultation on the full spectrum of issues is common and facilitated by the scheduled of shared briefings. In some cases, the strongly enhanced civilian presence and the growth of SCR-led civilian teams as counterparts to military commands has had a different impact, fostering a sharp division of labor between the two. Some military staffs have been eager to hand off responsibilities in non-security arenas to civilians—an "over to you" approach. Meanwhile, some civilian teams have been eager to assume undisputed leadership of those efforts. Too strong an emphasis on division of labor can leave gaps in understanding and approach between military and civilian officials, and can draw the military's focus away from their critical supporting roles in governance and development activities. Several years ago, the State Department's Office of the Coordinator for Reconstruction and Stabilization (S/CRS) deployed a handful of civilian planners to Afghanistan to help the U.S. Embassy and U.S. military forces craft more effective modalities for cooperation. Their efforts helped to establish a senior-level civil-military forum, the Executive Working Group (EWG), intended to serve as a civil-military decision-making body with the authority to issue guidance. Its initial stated mission was to "unify U.S. Government efforts in Afghanistan through coordinated planning and execution" across four lines of operation—security, governance, development, and information. Original members of the U.S.-only forum included senior leaders from the U.S. Embassy, U.S. Forces-Afghanistan, and some ISAF Regional Commands. The EWG was supported by a standing secretariat and planning body, the Integrated Civilian-Military Action Group (ICMAG), established in late 2008. Today, the Executive Working Group continues to function, with participation expanded to include the leaders of additional staff sections from the U.S. Embassy and ISAF, as well as Senior Civilian Representatives from the Regional Commands. The EWG is supported by a growing series of Working Groups focused on specific issues, such as borders; Working Group membership may now include non-U.S. personnel. The whole structure feeds up into a regularly convening forum of ISAF and Embassy senior leadership. The architecture alone—designed and elaborated on the ground in Afghanistan—represented a significant step toward closer civil-military integration. In practice, while there have been few impediments to regularly convening the participants at each level, the system—not unlike the Washington-based National Security Council system—has not always generated decisions in a timely fashion. "Discussing" issues, some participants say, is more common that resolving them. U.S. civil-military planning in Afghanistan has had several key jumpstarts in recent years. In 2008 and 2009, drawing on the planning resources of the ICMAG, and capitalizing on the more frequent interaction that the EWG process fostered, the U.S. Embassy and USFOR-A crafted the first civil-military campaign plan in Afghanistan. The Integrated Civilian-Military Campaign Plan for Support to Afghanistan was published in August 2009, under the signatures of both U.S. Ambassador Karl Eikenberry and USFOR-A Commanding General GEN McChrystal. The 40-page document laid out 11 "transformative effects"—areas for combined civil-military effort such as justice, governance, agriculture, and reintegration. The paper did not articulate a comprehensive strategic vision for Afghanistan itself, or prioritize or sequence the efforts it prescribed. Some practitioners stressed that the primary achievement of the strategy was further fostering the practice of civil-military planning. In late 2010, efforts were reportedly underway to update the U.S. Civil-Military Campaign Plan in order to better synchronize it with the ISAF campaign plan, which was undergoing its usual annual update. Meanwhile, the October 2009 stand-up of the ISAF Joint Command (IJC), NATO ISAF's three-star operational-level headquarters, created a natural planning partner for Embassy officials focused on governance and development efforts at sub-national levels. The IJC extended an open invitation to U.S. Embassy officials—as well as to partners from other key Embassies and from UNAMA—to participate in planning efforts. In 2009 and throughout 2010, extensive planning for the "main effort" operations in Helmand province, and later in Kandahar province, as well as for refining civil-military support to key districts across Afghanistan, provided opportunities for collaboration. Over time, Embassy participation in these planning activities increased substantially. The critical challenge faced by the U.S. Embassy in participating fully in these activities was a lack of dedicated personnel. Those officials best able to speak authoritatively about plans in a particular sector were typically occupied working full-time on that set of issues, so while they were available for decision-making meetings, they were not typically available for full-time, long-term planning efforts. Civilian planners provided to the Embassy by S/CRS, serving in the Political-Military section, contributed substantially to these efforts. The overall campaign broadly aimed at the stabilization of Afghanistan is multi-faceted in both participation and focus. The campaign is joint, combined, and civil-military, and includes governance, development and security efforts. It addresses conflict settlement as well as current counter-insurgency and stabilization efforts—including the transition process by which Afghans assume lead responsibility for security, and the twin processes of reintegration and reconciliation which may bring former insurgents at all levels back into peaceful Afghan society. In general, the campaign is Afghan-led, particularly in the sense of priority-setting. Operation Omid ("hope") is the joint, combined, and civil-military operational-level operation designed to implement the campaign plan across Afghanistan over time. Its main points of emphasis draw on the major themes of GEN McChrystal's 2009 Initial Assessment , which were later captured in the 2009 revision of the ISAF campaign plan: geographical prioritization across the theater, based on population centers, commerce centers, and trade routes; and full integration of security, governance, and development efforts in those prioritized locations. Its most important contribution, according to IJC Commander LTG Rodriguez, was to "focus and synchronize efforts." In 2009, during the months before the stand-up of the ISAF Joint Command (IJC), future IJC staff officers, directed by then-future IJC Commander LTG Rodriguez, began laying out operational-level plans to support the strategic-level ISAF campaign. From the start, they reached out to Afghan counterparts at the Afghan Ministries of Defense and Interior, fully engaging them in a combined planning effort—and helping "create" new Afghan planners when Afghan experience was lacking. As these efforts got underway, future IJC staff also reached out to the U.S. Embassy, and to several other key international civilian partners including the UK Embassy and UNAMA, to seek input and, as much as possible, full participation. The results of these early joint, combined and civil-military planning efforts was the first Operation Omid plan, signed by both Afghan and ISAF officials. Over the next year, through a succession of operations in specific areas, the multi-faceted planning effort grew to include Afghan civilian as well as security ministry officials; Afghan civilian officials from the provincial and district levels; Afghan police and army commanders; and their respective civilian and military counterparts from the international community. The Operation Omid plans underwent their first revision in late 2010. The first major test of the broad Operation Omid plans was Operation Moshtarek ("together"). Moshtarek focused on the six central districts of Helmand province—the central Helmand River valley. Helmand, like Kandahar province next door, is heavily Pashtun-populated. Helmand long served as a key "breadbasket" for the region, and as a significant source of poppy-growing and revenue-generation for the Taliban. The six districts were chosen due to their relatively dense population concentration, and their importance for commerce routes linking the province's key agricultural areas to the center of commerce, the capital Lashkar Gah, and then on to Kandahar next door. Planning efforts encompassed all levels of government—Kabul-based Ministers from both civilian and security ministries; Governor Mangal of Helmand province; Afghan army and police regional commanders; and international counterparts. Plans were rehearsed using a series of combined, civil-military backbriefs. Shaping operations for Moshtarek included targeted operations by Special Operations Forces, as well as significant governance activities including identifying Afghan officials to serve at the district level and fostering more inclusive district-level councils to help give local populations a stronger voice. President Karzai personally gave his approval for the launch of "clearing" operations, carried out by combined Afghan, U.S. and UK forces. Officials noted that the operation was quickly successful in clearing the area of Taliban fighters; the process of establishing governance—forming local citizens' councils and filling district-level government positions—proceeded more slowly. The second large-scale manifestation of Operation Omid was Operation Hamkari ("cooperation") in Kandahar province next door, based on the same model of "shaping" key areas by engaging with local councils and identifying competent personnel to serve as government officials; "clearing" insurgent strongholds; and "holding" those areas with a combination of Afghan and international forces and emerging Afghan civilian leadership. Kandahar province presented some greater challenges than had Helmand. It is the spiritual home of the Taliban, and Taliban leaders and fighters had long made use of safe havens in districts adjacent to Kandahar city, including Zhari, Panjwai, and parts of Arghandab. In contrast to the relatively strong and balanced political leadership by Governor Mangal in Helmand, political power in Kandahar was far more narrowly channeled through the hands of key powerbrokers including President Karzai's half-brother Ahmed Wali Karzai, the Chairman of the Provincial Council. Beneficial or otherwise, his strong de facto authority reportedly was not exercised evenly, resulting in deeply unequal opportunities for political and economic participation. In the view of some practitioners, the imperative to temper any of his activities that did not benefit all the Afghan people clashed with the imperative to accomplish the mission. Planning efforts for Hamkari were even more robust than for Moshtarek , including pre-briefs to President Karzai, and a joint, video-teleconferenced pre-brief to Presidents Karzai and Obama together. President Karzai personally conducted shaping activities—meeting with large and small gatherings of key community leaders in Kandahar to seek their support. As of early 2011, ISAF officials credited the combined operation to date with significantly disrupting insurgent networks around Kandahar city, and with laying the foundations for future responsive governance through the establishment of an Afghan civilian government presence, including ministry representatives, at the district level. LTG Rodriguez noted that in January 2011, in Arghandab district just north of the city, a new district governor, a new police chief, and 16 government employees were working at the district center. In early 2011, ISAF and its Afghan partners were conducting a "winter campaign", designed to harden areas cleared of a Taliban presence by strengthening Afghan security force and civilian governance presence and activities, and by further fostering representative local councils that help the Afghan people hold their officials accountable. Officials expect that the spring fighting season will bring more concerted Taliban attempts to reassert influence and reclaim territory. In early 2011, looking ahead at the rest of the year, ISAF and its Afghan partners planned to focus on expanding the "security bubbles" in Central Helmand and Kandahar, including connecting them with each other and extending them out to the border with Pakistan, to facilitate freedom of movement and trade. They also planned to expand the security bubble around Kabul city south into Wardak and Logar provinces, and east into Nangarhar province. In eastern Afghanistan, in Paktia, Paktika and Khowst provinces, officials planned to focus on continuing to decimate the Haqqani network, challenging their freedom of movement across the border from Pakistan into the traditional Zadran tribe. In northern Afghanistan, plans included reducing the strength of a growing Taliban presence, particularly in Baghlan province. In western Afghanistan, the city of Herat, already home to a robust socio-economic life and little threatened by violence, was a good candidate, LTG Rodriguez observed, for early transition. In his December 2009 West Point speech, President Obama firmly established the "July 2011" marker, yet many practitioners and observers expressed some confusion about what changes were expected at that time, and what relationship "July 2011" was likely to have to the rest of the campaign. The development of debates and then activities concerning the process of "transition"—rooted in both President Karzai's stated policy positions and long-standing NATO plans—has provided a broader context, extending out until the end of 2014, for the "July 2011" marker. Under the rubric of further extending the exercise of Afghan sovereignty, President Karzai introduced the basic tenets of "transition" that now shape NATO and U.S. strategic thinking and planning. As part of his second inaugural address in November 2009, he stated that "within the next three years" Afghanistan would "lead and conduct military operations in the many insecure areas of the country." He added that within five years, Afghan forces would "take the lead in ensuring security and stability across the country." President Karzai repeated these statements at the January 2010 London Conference in even more powerful language: "We will spare no effort and sacrifice to lead security of our country within the next five years all over Afghanistan."   The term "transition" has roots in formal NATO planning documents. Over the course of the past two years, through combined Afghan and international efforts, the concept of transition has been refined significantly. "Transition" is the name of Phase IV of NATO's operational plans for Afghanistan, during which lead security responsibility transitions from the International Security Assistance Force (ISAF) to the Afghan National Security Forces (ANSF). Parts of Afghanistan that have not entered Phase IV remain in Phase III, "Stabilization." On October 23, 2009, NATO Defense Ministers, meeting in Bratislava, approved a Strategic Concept for Phase IV "Transition." That step gave ISAF the go-ahead to work with Afghan partners to codify the process. In the official Communiqué of the January 2010 London Conference on Afghanistan, conference participants supported the decision by NATO's political governing body, the North Atlantic Council (NAC), to develop, before the Kabul Conference scheduled to be held that summer, "a plan for phased transition to Afghan security lead province by province, including the conditions on which transition will be based." Participants stressed their "shared commitment to create the conditions to allow for transition as rapidly as possible." The London Conference Communiqué introduced a timeline: a "number of provinces" would transition to ANSF lead "by late 2010 or early 2011, with ISAF moving to a supporting role in those provinces." In April 2010, at the informal meeting of NATO Foreign Ministers in Tallinn, Estonia, participants agreed on conditions that would need to be met before any given area could transition. As discussed in Tallinn, the term "transition" still referred to a change in security responsibilities, but the scope of decision-making criteria was explicitly broadened to include governance and development factors, as well as security-related considerations. The premise was that a stable broader environment would be necessary to ensure durable security. The Tallinn meeting launched a series of follow-on consultations in Kabul among Afghan officials, the NATO Senior Civilian Representative, ISAF leaders, and representatives of key Allied troop-contributing nations. The talks focused on elaborating a concept paper for Inteqal (which means "transition" in both Dari and Pashto). The July 2010 Kabul Conference confirmed several key outcomes of the Inteqal consultations. Participants endorsed the Afghan government's broad plan for phased transition, including establishing a decision-making process led by the Afghan government and the NAC, and they confirmed the goal of announcing, by the end of 2010, that transition was "underway." At the NATO Lisbon Summit in November 2010, the transition "way forward" was formally announced. The Summit Declaration stated that the transition process was "on track to begin in early 2011." Afghan forces would "be assuming full responsibility for security across the whole of Afghanistan" by the end of 2014. ISAF officials have stressed that several key principles will guide transition decision-making: each transition decision will be conditions-based; transition will signal the start of a progressive shift in the role of the international community from supporting to mentoring to enabling to sustaining; transition must be irreversible; and transition will be based on the capabilities of the civilian Afghan government as well as the ANSF. The concept was broadened to allow for the transition of districts and even institutions, in addition to provinces. In Kabul, the Joint Afghan NATO Inteqal Board (JANIB) was tasked with conducting assessments and formulating recommendations, on a rolling basis, concerning the timelines for transitioning geographic areas and institutions. In February 2011, at the Munich Security Conference, President Karzai stated that he expected to announce the first tranche of provinces for transition on March 21, 2011. Security efforts including counter-terrorism, combined clearing operations, and growing the Afghan National Security Forces are widely regarded as critical to the success of the overall campaign. To the extent that differences of opinion emerge, among practitioners and observers who believe in general that a campaign should be carried out, those differences concern the relative importance of security versus other efforts, and the most appropriate timing and sequencing of security efforts and other elements of the campaign. Most would agree that growing sufficient capacity and capability in the Afghan National Security Forces (ANSF) is essential to the overall campaign, in order to support the process of transitioning lead responsibility for security to those Afghan forces. Decades of war, displacement, and mismanagement, followed by the ousterof the Taliban regime, left Afghanistan without organized, functioning security forces or equipment, so rebuilding the ANSF has been a challenge as well as a high priority of the post-Taliban international assistance effort. The ANSF consists of the Afghan National Army (ANA), which falls under the Ministry of Defense; and the Afghan National Police (ANP), which falls under the Ministry of Interior. Afghanistan's third so-called security ministry is the National Directorate of Security (NDS), which is Afghanistan's intelligence agency. The ANA consists primarily of ground forces. As of early 2011, the ANA had six ground forces Corps Headquarters—the 201 st Corps near Kabul, the 203 rd Corps in Gardez in the east, the 205 th Corps in Kandahar in the south, the 207 th Corps in Herat in the west, the 209 th Corps in Mazar-e Sharif in the north, and the newest Corps, the 215 th in Helmand in the southwest. ANA "Corps" follow the European model, in which a Corps is a two-star headquarters, whose subordinate units are brigades—much like a U.S. Army Division. The ANA also includes the ANA Air Force (ANAAF), known until June 2010 as the ANA Air "Corps." While the ANAAF remains part of the ANA, the change in nomenclature recalls Afghanistan's tradition, dating back to 1924, of maintaining an independent air force. By the 1980's, after several periods of substantial Soviet assistance, Afghanistan had built a rather formidable air force. During the Taliban era, Pakistan assumed the foreign patronage role. During the war in 2001 that ousted the Taliban, Afghanistan's fleet was largely destroyed. Years of flying experience left the Afghans some human capital to draw on, in building a post-Taliban air force, although experienced pilots are aging—as of 2009 their average age was approximately the average life expectancy for Afghan males. As of September 2010, the ANAAF had 50 aircraft, with plans to grow to 146 by 2016. The 50 aircraft included 27 Mi-17 helicopters; 9 Mi-35 attack helicopters; 6 C-27 airlifters; 5 AN-32 airlifters; 1 AN-26 airlifter; and 2 L-39 fixed wing jets. The Afghan National Police (ANP) are Afghanistan's civilian security forces. The ANP includes the Afghan Uniform Police (AUP), responsible for general policing, who serve at regional, provincial and district levels; the Afghan Border Police (ABP), who provide law enforcement at Afghanistan's borders and entry points; the Afghan National Civil Order Police (ANCOP), a specialized police force that provides quick reaction forces; and the Counternarcotics Police of Afghanistan (CNPA), which provides law enforcement support for reducing narcotics production and distribution. Over time, the target endstrengths for the army and police have grown significantly, and debates about both medium-term and long-term appropriate endstrengths are ongoing. The Bonn Agreement established remarkably low targets: 70,000 for the ANA, and 62,000 for the ANP, for a total force of 132,000 personnel. Though the debates took several years to coalesce, in time, Afghan and international practitioners, and outside experts, began to urge raising the target figures. Counterinsurgency experts suggested that based on estimated population figures—difficult to calculate after 30 years of war and displacement—Afghanistan could require a total force of as many as 600,000, including army and police, even after taking into consideration that the insurgencies are not active in all parts of Afghanistan. Counterinsurgency expert John Nagl, who had helped train U.S. personnel to train the ANSF, paring back the "COIN math" still further, argued in November 2008 that the army alone should grow to 250,000. Meanwhile, Afghan Minister of Defense Wardak has argued consistently for a larger force. In 2008 he stated that Afghanistan had never yet had the proper proportion of troops to the area to be secured and to the population to be protected. Current force sizing, he noted, assumed the presence of a large international force—which would not always be there, and whose capabilities, he argued, were roughly double that of their Afghan counterparts. He concluded that "between 200,000 and 250,000 would be the proper size for the ANA." In his 2009 Initial Assessment , then-ISAF Commander GEN McChrystal argued that the total ANSF target endstrength should be raised to 400,000 troops, including 240,000 in the ANA, and 160,000 in the ANP. After several incremental increases, in January 2010, the Joint Coordination and Monitoring Board—the high-level forum co-led by the Afghan government and UNAMA—endorsed increasing the endstrength targets to 134,000 ANA and 109,000 ANP by October 2010, and to 171,600 ANA and 134,000 ANP by October 2011. As of February 2011, a little more than 270,000 ANSF were assigned, including 152,000 ANA and 118,000 ANP. As of early 2011, the Afghan government, the U.S. government and other Allied governments were reportedly considering a proposal to raise the total target endstrength for October 2012 as high as 378,000, including 208,000 ANA and 170,000 police. In many countries, "force sizing" would be based on a rigorous calculus concerning expected future security challenges and the most effective combination of capabilities for meeting those challenges. Minister of Defense Wardak has taken a longer-term look at possible future requirements, including the traditional military role of providing external defense. He has suggested sizing the ANA by comparing it with the armies of Afghanistan's neighbors—Pakistan, Iran, and "the bear to the north." To balance between current and future requirements, he has urged equipping the ANA "with a mix, right from the beginning, so it works for COIN and later on." Afghanistan needs a force that is "light but as effective as heavy forces," he added, and should include tanks and an infantry combat vehicle—protected mobility with some firepower. Yet it is not clear to what extent the new proposed endstrength increase reflects a detailed analysis of requirements of all of Afghanistan's forces over time, including their respective roles and missions. Command and control arrangements for the ANSF have been adapted to current counterinsurgency efforts, which require "joint" action by multiple Afghan forces together with coalition counterparts. The Ministry of Defense and the Ministry of the Interior maintain formal command authority over their own forces—the ANA and the ANP, respectively. To facilitate coordination, the Afghan government created a series of Operations Coordination Centers, at the regional (OCC-R) and provincial (OCC-P) levels. OCCs at both levels are physical (not virtual) facilities that are designed to facilitate monitoring and coordination of operational and tactical-level operations. In principle, OCCs include representatives from the ANA; the ANP; and the National Directorate of Security (NDS), Afghanistan's intelligence service, though ISAF officials note that achieving full staffing has been a challenge. The command relationships among the participating organizations are purely "coordination," not "command." For example, as contingencies arise, OCC members provide direct conduits of information to their respective organizations—OCC-P members reach out to ANA brigades and ANP provincial command centers; while OCC-R members reach out to ANA Corps and ANP regional command centers. OCC-Ps do not report to OCC-Rs, and there is no national-level analogue. The ANA generally serves as the "lead agency" for OCCs, although OCCs may be physically located in police facilities. Looking to the future, some observers have wondered how appropriate the OCC construct will prove to be for a "post-COIN" context when, for example, the focus of the ANA shifts from domestic to external concerns. A future transition might not prove especially difficult, since the OCC coordination relationships complement but do not replace the formal service command relationships. Training Afghan forces has been a key concern of the international community since the Taliban fell. The history of those efforts to date includes a great variety of actors and approaches, though with a tendency toward greater cohesion over time catalyzed by strong U.S. leadership and by the creation of the NATO Training Mission-Afghanistan (NTM-A). The December 2001 Bonn Conference recognized the need for the international community to help the fledgling Afghan authorities with "the establishment and training of new Afghan security and armed forces." In early 2002, broad agreement was reach on a model in which individual "lead nations" would assume primary responsibility to coordinate international assistance in five different areas of security—these included placing ANA development under U.S. leadership, and police sector development under German leadership. The 2006 Afghanistan Compact transferred formal "lead" responsibility to the Afghan government. In 2002, to execute its "lead nation" role, the United States created the Office of Military Cooperation-Afghanistan (OMC-A) to train the ANA. That year, to supplement German efforts, the U.S. government also launched a police training initiative, led by the State Department's Bureau of International Narcotics and Law Enforcement Affairs (INL), through U.S. Embassy Kabul, with contractor support. In 2005, the U.S. government restructured its ANSF training efforts, shifting responsibility for supporting Afghan police development to the Department of Defense, and renaming the OMC-A the Office of Security Cooperation-Afghanistan (OSC-A). Early in 2007, when the U.S. three-star military headquarters, the Combined Forces Command-Afghanistan (CFC-A), was deactivated, OSC-A was re-designated the Combined Security Transition Command-Afghanistan (CSTC-A), and assigned directly to U.S. Central Command. CSTC-A was assigned to USFOR-A when that headquarters was established in 2008. When NTM-A was established in 2009, with a mandate to support institutional training and development for both the army and the police, its new Commander, LTG Caldwell, was dual-hatted as the Commanding General of CSTC-A. Today, NTM-A supports institutional training for all of Afghanistan's forces: from basic training, to military branch schools, to service academies, and eventually to "war college" (senior service school). In each case, the proposed trajectory includes transitioning lead responsibility for the institution to Afghans, and later pulling back even further to provide only minimal oversight and support. NTM-A officials point out that Afghans have increasingly assumed the training roles. A major constraint has been that with low numbers of forces in the middle of a war, ANSF leaders found it difficult to pull experienced officers and non-commissioned officers from the fight to serve as trainers. As the total force has grown, that pressure has eased somewhat. The other major form of training, in addition to training in institutions, is training on the job, with the support of coalition embedded training teams. Over time, and depending on the nationality of the team members, the teams have varied in terms of size, composition, and focus. With the establishment of the ISAF Joint Command in October 2009, both U.S. and other NATO teams were brought under the IJC, to help ensure synchronization of the teams' work with combined operations. Operational Mentoring and Liaison Teams (OMLTs), which work with the Afghan army, generally have between 11 and 28 members. As of October 2010, 22 countries were providing OMLTs, the significant majority from the United States. Police OMLTs (POMLTs) typically have between 15 and 20 members. They teach and mentor Afghan police, and may also plan and execute missions with them. As of October 2010, 11 countries were providing POMLTs, the vast majority from the United States. U.S. and NATO officials have long underscored the need for more training teams. In a January 2011 report, the U.S. Government Accountability Office assessed that as of November 2010, there was a shortfall of 275 out of 1,495 institutional trainers, and as of September 2010, there was a shortfall of 41 out of 205 embedded training teams, both for the ANA alone. The rest of the required positions were either filled or pledged to be filled. The use of small embedded training teams to coach and mentor host nation units is distinct from the practice of "unit partnering", in which full coalition units build relationships with a host nation security force units. In Afghanistan in late 2008, the use of unit partnering was still ad hoc and infrequent, a natural consequence of a light coalition footprint. Nevertheless, at that time, commanders of battlespace-owning U.S. units underscored the importance of such partnerships—as one commander described it, "ANSF capacity-building is our main effort, and we accept some risk in our operational capabilities to focus on this." One U.S. brigade-sized Task Force had taken the initiative in sending a tactical command post including key brigade staff, for two weeks every month, to co-locate and partner with the nearest ANA Corps headquarters. In late 2008, some senior Afghan officials remained skeptical about the whole "unit partnering" concept. Defense Minister Wardak argued forcefully: "There is some talk that we should do partnering, but I am against it—our units are standing on their own feet. I will try very hard to push against this partnering. If they have partner units, they would lose their ability to learn and operate independently." CSTC-A officials argued similarly, at the time, that ANSF units tended to perform less well when partnered with coalition units, and that advisory teams were more effective than "partners" in encouraging the ANSF to take initiative. In his August 2009 Initial Assessment , GEN McChrystal called for a consistent and radically enhanced partnering effort, based on living, eating, sleeping, planning, training, and executing with Afghan partners, 24/7. Since then, the practice of co-locating units has grown substantially. The earliest and in many ways most intuitive partnering efforts were with the ANA—between units of relatively like size and like purpose. In 2009, ISAF's Regional Command-East took the bold step of deploying each of its two Deputy Commanding Generals, each supported by a tactical command post staff, to co-locate with an Afghan National Army Corps headquarters. Some ISAF and Afghan army brigades are similarly co-located, as are some ISAF battalions with counterpart Afghan kandaks ("battalions"). ISAF Regional Command-South Commander Major General Terry reported in January 2011 that partnering with the ANA had paid dividends, that Afghan army units were "becoming more and more competent," and that this had allowed ISAF "to thin our partnership with them and refocus our efforts on the Afghan National Police and the Afghan Border Police." Partnering with Afghan police forces may be a less natural or obvious "fit" since their roles are not equivalent, for example, to those of U.S. Army infantry troops. In practice, partnering with the Uniformed Police or Border Police may also involve co-location, 24/7, at police stations. For Afghan police units with dispersed footprints, partnering may involve substantial planning and execution of missions together. Partnering with all of the ANSF, ISAF commanders frequently stress, yields dividends quite different from those generated by embedded teams alone—partnering allows coalition forces to "show", not just "tell", across all staff positions. It establishes close relationships between Afghan and coalition commanders of roughly equivalent rank, who are well-placed to hold each other accountable for living up to commitments. Where Afghan units have been tainted by corruption, partnering allows ISAF units to keep an eye on their Afghan partners around the clock. One major downside of partnering is the quantity of forces—of warfighting military units—required to make it work. A partial mitigation of that concern may be that the requirement for intensive, 24/7 partnering with any given host nation unit is typically temporary—perhaps 18 months or two years, depending on the circumstances. Using a classified assessment system, the ISAF Joint Command regularly evaluates the operational effectiveness of ANSF units and their leadership. In general, the ANA remains the most capable force, benefiting in part from a significant head start in terms of force generation, training, and real-world experience. According to ISAF Commanders, one of the great emerging strengths of the ANA is its leadership. Many though not all Afghan commanders clearly take responsibility for combined operations and appear to be increasingly effective in leading their own staffs and subordinate units. The ANA is under some pressure to foster emerging leaders due to a significant demographic gap of personnel roughly between the ages of 35 and 55, the legacy of Afghanistan's recent history of warfare. While the ANA can draw on its "older" personnel now to serve in leadership capacities, it will effectively take a generation to fully train and prepare the next contingent of ANA senior leaders. Meanwhile, one of the biggest challenges to full ANA effectiveness is the lingering lack of sufficient enablers, including logistics; intelligence, surveillance and reconnaissance (ISR); and air capabilities such as close air support (CAS). The ANA continues to rely on U.S. and ISAF forces in these areas. By most accounts the ANA Air Force has generated real capabilities, if not yet the capacity that Afghan leaders project they will need in the future. The ANAAF has made significant use of their Mi-17 helicopter fleet to move Afghan troops, to conduct search and rescue missions including after an avalanche in the Salang pass north of Kabul, and to provide humanitarian assistance at home and in Pakistan in the wake of the floods. In general, the operational effectiveness of the Afghan National Police is regarded as lagging. The most fundamental challenge faced by the ANP is a deeply embedded system of graft and corruption in which would-be police officials purchase their jobs, pay on a regular basis to keep those jobs, and seek every opportunity to extract or extort revenues from the Afghan people in order to make those payments. Some observers charge that such corruption is more than an obstacle to a job well done, in that it also alienates the Afghan people, who may turn to the Taliban with active or passive support, in frustration. Within the ANP, the growth and development of the Afghan Border Police is further behind than that of the Afghan Uniformed Police. The ABP face challenges from insufficient capacity, endemic corruption similar to that of the AUP but with more even more temptation to cheat in the form of border crossing revenues, and the tough problem of securing Afghanistan's borders themselves. Afghanistan has nearly 3,500 miles of borders, primarily in difficult, remote, mountainous terrain. Minister of Defense Wardak has flatly observed, "We will never be able to secure the whole border." Protecting the borders, some officials suggest, may require not only better trained and more professional ABP personnel stationed along the border, but also additional aerial reconnaissance and quick response forces. Integration of effort among the various security forces is improving, ISAF officials report, catalyzed in part by necessity including many months of intensive combined operations, particularly in southern Afghanistan, in 2009 and 2010. At the same time, ISAF and Afghan officials report the clear preservation of distinct "cultures", including a tendency for the army and police not to give each other the benefit of the doubt. Past examples of disregard for the authority of other forces have included racing through each other's check points. Some officials point to the July 2010 nomination of Bismillah Khan Mohammadi to serve as Minister of Interior—after many years of service as the Army's Chief of the General Staff in the Ministry of Defense—as a potentially helpful bridge between the two ministries. An additional element of effectiveness is the ability of all of Afghanistan's security forces to be accepted by the communities, as well as the nation, in which they work. One key to that end is achieving a roughly representative ethnic balance within the forces. Some observers have pointed to the ANA as Afghanistan's only truly "national" institution because most troops agree to serve anywhere in the country, and because the force is roughly ethnically balanced. In the immediate post-Taliban years, ethnic Tajiks and Uzbeks—strongly represented in the Northern Alliance—predominated in Afghanistan's fledgling army, at the expense of ethnic Pashtuns. To help rebalance the force, the MoD established targets for the ANA that roughly mirror the population as a whole: 44% Pashtun, 25% Tajik, 10% Hazara, 8% Uzbek, and 13% other ethnicities. The U.S. Government Accountability Office reported that as of September 2010, Pashtuns remained under-represented, while Tajiks and Hazaras remained over-represented—and in particular, Tajiks comprised 40% of the Army's officer corps. While the Army's ethnic balance is becoming more representative, its geographical balance is still skewed—most of the Army's ethnic Pashtun recruits do not come from predominantly Pashtun-populated southern Afghanistan. Relatively new recruiting drives that promise southern Pashtun recruits the opportunity to serve in the ANA Corps that are based in the south may help to shift the balance. Afghan, ISAF, and Administration officials have indicated that the Afghan Local Police (ALP), established by President Karzai in August 2010, is a critical part of the overall campaign. The intent is to foster organized local groups to provide some security for their communities, under formal command by the Ministry of Interior, and with oversight provided by local government officials, local security force leaders, and local communities. In February 2011, ISAF Commander General Petraeus estimated that the growing program included just over 3,000 participants, at 17 validated sites. Officials have indicated an intention to further develop the program significantly. For some observers, ALP reflects the model of "arbakai"—a traditional Pashtun institution in which a tribally based auxiliary force is formed to defend a village and its surrounding area on a temporary basis. It also suggests several past coalition-Afghan experiments that yielded inconclusive results at best. In 2006, the coalition supported the creation of the Afghan National Auxiliary Police (ANAP) program, amidst some controversy, as a stop-gap measure in southern Afghanistan. The locally recruited force, including many men who had previously worked for warlords, had an approved size of 11,271. Recruits were given ten days of training, and members received the same salaries as regular ANP street cops—$70 per month. A number of practitioners and observers argued at the time that the training was insufficient to produce a credible security force, and perhaps more importantly, the ANAP received little to no oversight by the coalition or Afghan forces. In 2008, looking back, one CSTC-A Commanding General called the program "an attempt to take short-cuts" and its participants "a bunch of thugs," and an RC-East senior official concluded that they "went brigand." By late 2008, the program had been completely dismantled. In 2008, far more artfully, ISAF, under GEN McKiernan, launched a "community guard program," designed to take a bottom-up, community-based approach to security. It shared a key assumption with the current ALP program, that neither international forces nor the ANSF had sufficient numbers to provide full population security, and were not likely to have them in the near future. The program was sparked by recognition of the need to protect Highway 1, the key artery running south from Kabul to Kandahar and the site of escalating insurgent attacks in mid-to-late 2008. In the program, community-based shuras (councils) helped select and vet program participants. Participants received some training from the Ministry of Interior, and then served in their local communities, providing a neighborhood watch function and guarding fixed sites, with oversight provided by coalition forces. The first major geographical focus for the program was Wardak province, just south of Kabul, where it was known as the Afghan Public Protection Program ("AP3"). Muhammad Halim Fidai, Governor of Wardak province, was quoted as saying: "We don't have enough police to keep the Taliban out of these villages and we don't have time to train more police—we have to fill the gap now." In practice, it required a quite significant commitment from U.S. Special Operations Forces, always in high demand but short supply, who partnered very closely with each AP3 team. By 2009, community defense programs had become a growth industry. The U.S. Combined Forces Special Operations Component Command-Afghanistan (CFSOCC-A) maintained small teams in less-populated areas, with little to no formal ANSF or conventional coalition force presence—areas ideally suited to some form of community defense. CFSOCC-A identified opportunities and then worked closely with ISAF, and through ISAF with Afghan senior officials, to ensure support for such efforts. Nomenclature included the Community Defense Initiative (CDI), Local Defense Initiative (LDI), and an array of similar initiatives designed for individual special circumstances. Meanwhile, Afghan institutions also recognized the potential value of using local communities to fill in gaps in the provision of security. The National Directorate of Security (NDS), led until 2010 by Director Amrullah Saleh, an ethnic Tajik from Panjshir province, was particularly vigorous in launching local self-defense initiatives in northern provinces of Afghanistan. In 2009 and 2010, some observers were struck by the realization that no single institution had a full accounting of all the local armed groups, including ad hoc formations, operating throughout the country. The formalization of ALP, including the apparent intent to develop the program on a relatively large scale, initially prompted concerns from some Afghan officials. Defense Minister Wardak echoed statements he had made two years earlier: "We should not create new warlords or reinforce old ones." The 2010 Afghan Local Police program was designed in part to address some of the concerns and issues raised by past local defense initiatives. To avoid controversy, it began with clear Afghan and ISAF agreement, hammered out in a series of meetings between President Karzai and GEN Petraeus in Summer 2010. In the absence of a comprehensive accounting of all existing self-defense bodies, the ALP program was nevertheless designed to consolidate all known coalition and Afghan local self-defense programs. The ALP program included strong oversight role for community shuras —easier to achieve, by 2010 and 2011, as improved security and some community development efforts by the international community helped foster inclusive local councils. To ensure oversight by the coalition, ISAF dedicated a conventional infantry battalion to support CFSOCC-A in its ALP efforts; in early 2011 GEN Petraeus indicated his willingness to dedicate even more forces for that purpose, if required. Counter-terrorism activities that directly target insurgent leaders in Afghanistan have long been part of the campaign, designed to eliminate direct threats to the Afghan people, disrupt the ability of insurgent networks to operate, and change the calculus of remaining insurgent leaders about continuing the fight. Under the leadership of GEN Petraeus since June 2010, both the tempo and the impact of these efforts have increased; and ISAF has taken significant steps to publicize the results to both Afghan and international audiences. Officials note that one reason for the increase in effectiveness is the substantial increase in the availability of intelligence, surveillance, and reconnaissance assets, including personnel—analysts and linguists—as well as equipment such as full-motion video platforms. Another reason, officials note, is the growing capacity of Afghan Special Operations Forces. Over time, President Karzai has frequently expressed concern about civilian casualties resulting from coalition military operations. Civilian casualties have been a consistent theme of President Karzai's remarks at formal events. During his second inaugural speech, he stated, "Civilian casualties continue to remain an issue of concern to the people and government of Afghanistan." In his opening remarks to the January 2010 London Conference, he noted, "... regrettably, civilian casualties continue to be a great concern for the people of Afghanistan," and he added, "we should also do our best to minimize the need for night raids." In the wake of incidents with significant apparent civilian casualties, President Karzai has typically expressed himself, to the press and senior coalition officials and diplomats, in even more direct terms. In March 2011, following an incident in which nine children gathering firewood in Kunar province were killed, after being mistaken for insurgents, by fires from coalition helicopters, President Karzai reportedly contacted President Obama to express deep concern. Also in early March 2011, while testifying before the Defense Subcommittee of the House Appropriations Committee, Secretary of Defense Gates acknowledged President Karzai's concerns and added this comment: "I think we have done a lousy job of listening to President Karzai, because every issue that has become a public explosion from President Karzai has been an issue that he has talked to American officials about repeatedly in private." To help address these concerns, successive ISAF Commanders have each issued a Tactical Directive to the ISAF force, designed to explain and limit judiciously the circumstances under which deadly force may be applied. In December 2008, GEN McKiernan, while assuring the force that "no one seeks or intends to constrain the inherent right of self-defense of every member of the ISAF force," underscored that "minimizing civilian casualties is of paramount importance," and "we must clearly apply and demonstrate proportionality, requisite restraint, and the utmost discrimination in our application of firepower." The Directive set specific conditions for searches and entries, stressing the importance of an ANSF lead whenever possible and the need to train our own forces "to minimize the need to resort to deadly force." In July 2009, shortly after assuming command of ISAF, GEN McChrystal issued a revised Tactical Directive, intended to emphasize more clearly the need for judicious restraint. Though the Directive itself remained classified, ISAF Headquarters released portions of it in unclassified form. The Directive articulated the theory of the case: while "disciplined employment of force entails risks to our troops....excessive use of force resulting in an alienated population will produce far greater risks." Regarding fires, it stated that "the use of air-to-ground munitions and indirect fires against residential compounds is only authorized under very limited and prescribed conditions;" the original classified version reportedly listed those conditions. In August 2010, after assuming command of ISAF in June, GEN Petraeus issued a revised Tactical Directive, intended in part to put a stop to the tendency of subordinate commanders at each successively lower step in the chain of command to impose increasingly stringent restrictions on the use of force. That practice had contributed to growing concerns back home in the United States, and in other troop-contributing countries, that servicemembers on the ground were not allowed to protect themselves sufficiently. The Directive stated: "Subordinate commanders are not authorized to further restrict this guidance without my approval." The Directive also restated the broad emphasis on judicious fires, noting that "prior to the use of fires, the commander approving the strike must determine that no civilians are present," and spelling out (in the classified document) the exceptions to that rule. A major challenge to the counterinsurgency effort in Afghanistan is the fact that the Afghanistan-Pakistan border is largely porous, and insurgents fighting in Afghanistan have long relied on safe haven and other forms of support in Pakistan. As a rule, counterinsurgency efforts assume a "closed system," in which persistent COIN efforts, and growing popular support, can gradually smother an insurgency, but Pakistan's open border disrupts that premise by giving Afghanistan's insurgents a ready escape hatch. Both the U.S. government and ISAF have worked closely with Pakistani counterparts to address this challenge, at the strategic and operational levels. The cross-border insurgency problem is complicated by the fact that the Government of Pakistan (GoP) has traditionally enjoyed only limited control over Pakistan's Federally Administered Tribal Areas (FATA), which border Afghanistan. The FATA is a legacy of British rule. To boost the border defenses of British India, the British gave semiautonomous status to tribes in that area by creating tribal "agencies," largely responsible for their own security. The area became the "FATA" after independence. Regional experts Barnett Rubin and Ahmed Rashid have argued that today, the area is used as a "staging area" for militants preparing to fight in both Kashmir and in Afghanistan. Throughout its short history, Pakistan has had deeply vested interests in Afghanistan. The international border—the British-drawn Durand Line—cuts through territory inhabited, on both sides, by ethnic Pashtuns, with significantly more Pashtuns living in Pakistan than in Afghanistan. The Pashtun population of southern Afghanistan provided the primary base of support for the Taliban during its rise. Further, many observers underscore that the Government of Pakistan has a general interest in ensuring that Afghanistan is a regional ally, in part as a balance against Pakistan's long-simmering conflict with neighboring India. That broad interest was reflected in Pakistani support for the Afghan mujahedin fighting the Soviet occupiers in the 1980's, and later, for the Taliban regime—relationships that have created difficulties in post-Taliban Afghan-Pakistani relations. In recent years, the GoP has attempted to achieve a measure of stability along the border with Afghanistan by following the example of the British Raj and striking a series of "truces" with local power brokers. In February 2005, for example, the Pakistani military reportedly reached a peace deal with Baitullah Mahsud, leader of the Pakistani Taliban umbrella organization Tehrik Taliban-i Pakistan (TTP), and withdrew its forces from check points in the region. In mid-2006, Islamabad struck a major peace deal with insurgents in the North Waziristan agency of the FATA, agreeing to end military operations and remove local checkpoints, in return for an end to insurgent attacks on government officials. In early- and mid-2008, Pakistani forces, tried a similar approach, pulling back from TTP's stronghold in the South Waziristan agency. By all credible accounts, these "deals" did not lead to greater stability. For several years, under two successive Administrations, the U.S. government has sought to encourage Pakistani military action against insurgent strongholds inside Pakistan, through various combinations of encouragement and pressure at the strategic level. Some U.S. officials have reportedly aimed at "changing Pakistan's strategic calculus"—that is, encouraging the GoP to view not only its neighbor India but also its domestic insurgency and its Afghan affiliates, as an existential threat to the Pakistani state. Both practitioners and observers have noted that the GoP may face any of several significant challenges in taking action against Afghan insurgents enjoying safe haven on its territory: limited capabilities of the Pakistani military, faced with well-organized, well-armed insurgent groups; limited political will at the highest levels of the GoP to undertake military actions that might prove unpopular with the Pakistani people; and limited ability to directly control the behavior of "rogue" elements of the ISI. The Obama Administration, from the outset, has characterized the war in Afghanistan as a regional problem that involves Pakistan by definition. In his March 2009 strategy speech, President Obama stated: Pakistan's government must be a stronger partner in destroying these safe havens, and we must isolate al Qaeda from the Pakistani people. And these steps in Pakistan are also indispensable to our efforts in Afghanistan, which will see no end to violence if insurgents move freely back and forth across the border.   By 2008, President Bush had reportedly authorized U.S. military cross-border operations into Pakistan, by ground or Predator unmanned aerial vehicles (UAV). Neither the Central Intelligence Agency nor the U.S. military officially confirms the use of the drone strikes. To be clear, NATO's policy for ISAF does not include cross-border strikes. Asked in July 2008 whether the Alliance would go after militants in Pakistan, Secretary-General Jaap de Hoop Scheffer said, "My answer is an unqualified 'no.' We have a United Nations mandate for Afghanistan and that's it. If NATO forces are shot at from the other side of the border, there is always the right to self-defense but you will not see NATO forces crossing into Pakistani territory." According to publicly available reporting, based primarily on accounts from people on the ground, a major early focus of the drone strikes was the South Waziristan agency in the FATA, long the home base for the TTP, the Pakistani Taliban umbrella organization; a drone strike killed TTP leader Baitullah Mahsud in August 2009. Subsequently, the focus of the drone strikes shifted to the North Waziristan agency, understood to be the stronghold of the Haqqani network, one of the major insurgencies active in Afghanistan. Observers have suggested that under the Obama Administration, the frequency of the drone attacks has increased markedly. Senior ISAF officials have noted that cross-border attacks have yielded big operational and tactical benefits for the campaign in Afghanistan—by causing the insurgent networks to feel disconnected, and by prompting local residents in Pakistan to want al Qaeda and other outsiders to leave their communities. At the same time, U.S. civilian and military officials acknowledge that such cross-border strikes have the potential to spark local protest and to destabilize the Government of Pakistan, still struggling to consolidate civilian rule. Outside critics point to civilian casualties reportedly caused by the drone strikes, arguing that the casualties are deeply problematic in themselves, and are also likely to generate popular disaffection with Pakistan's fragile political leadership. On the ground at the tactical and operational levels, the last several years have witnessed both stepped-up Pakistani unilateral military operations against domestic insurgent threats including the Pakistani Taliban; and growing tri-lateral coordination of planning and execution among Pakistani, Afghan, and ISAF forces. In early 2011, the outstanding question was whether Pakistani forces would undertake military operations in the North Waziristan agency targeting the leadership of the Haqqani network. In July 2008, the U.S. government reportedly confronted Pakistani authorities with evidence of ties between members of the Pakistani military's Inter-Services Intelligence (ISI) and the Haqqani network in the FATA. That "demarche", together with unilateral U.S. drone strikes, may have served to catalyze an ongoing series of unilateral Pakistani military operations in the FATA. By late 2008, efforts by the Pakistani military to tackle the insurgency problem had increased noticeably. In August 2008, the Pakistani military stepped up operations in Bajaur agency, the northernmost of the seven agencies in the FATA, across from Afghanistan's Kunar province. ISAF officials with access to imagery noted that after the operations, Bajaur resembled Fallujah, Iraq, after kinetic coalition operations there in November 2004—that is, with some allowances for the more rural setting in Pakistan, destruction from the relatively heavy-handed Bajaur operations was considerable. According to ISAF officials, while the Pakistani operations suggested some room for improvement in the "soft" skills of counterinsurgency, they had an impact by disrupting insurgent networks. In late 2009, after the August 2009 death of Pakistani Taliban leader Baitullah Mahsud, the Pakistani military launched an offensive in South Waziristan agency, the TTP stronghold. In 2010, Pakistani forces launched operations in Orakzai agency, where some TTP affiliates had fled in the wake of the South Waziristan operations. Subsequent foci included the Kurram agency, and then—and currently—the Mohmand agency, still primarily targeting the TTP. Meanwhile, tri-lateral cooperation among Pakistani, Afghan, and ISAF forces has been quietly growing at the tactical and operational levels. By late 2008, at the tactical level, U.S. ground forces in eastern Afghanistan reported that the tenor of their regular tactical-level border coordination sessions had grown more constructive. Tactical-level coordination had improved—including cases of direct cross-border coordination with Pakistani forces, to "fix and defeat the enemy at the border," particularly along the border with Afghanistan's Paktika province. By early 2011, three-way operational-level planning sessions were being held regularly, to coordinate "complementary" operations on both sides of the border. In February 2011, IJC Commander LTG Rodriguez explained that ongoing Pakistani military operations in Bajaur and Mohmand agencies in Pakistan complemented combined Afghan and ISAF operations in Kunar province in Afghanistan, and served to "squeeze" insurgents caught in the middle. Afghan officials, international practitioners, and outside observers have all stressed the centrality of "governance" to the combined Afghan and international effort. In his second inaugural address, President Karzai stressed the importance of good governance "practiced by good and authoritative executives." In December 2010, announcing the results of the Afghanistan Pakistan Annual Review, President Obama confirmed that governance—"our civilian effort to promote effective governance and development"—remained one of the three key areas of U.S. strategy for Afghanistan, together with security and Pakistan. And state-building expert and long-time Afghanistan practitioner Clare Lockhart has asserted, "A country is not stable until it has a functioning state that performs key functions for its citizens." While civilian agencies typically play the lead roles in supporting Afghan governance, international military forces typically play strong supporting roles in this arena, through engagement with Afghan interlocutors at all levels. There is less agreement, however, about two key aspects of the role of governance in the overall campaign. First, there a lack of consensus on the relationship between governance and security efforts, including both their relative timing and their relative importance. For several years, some officials have characterized the relationship this way—that security "creates time and space" for governance and development. That formulation suggests that once sufficient security conditions pertain, governance will simply—automatically—take root and grow. Others suggest that governance requires efforts as concerted as those in the security realm, and also that while some initial security may be necessary to begin governance efforts, governance itself is part of what ensures durable security. Second, there is a marked lack of consensus about just how "good" that governance needs to be in order to provide a solid foundation for Afghanistan's future stability. The U.S. and Afghan governments have affirmed repeatedly that countering corruption is a key part of the effort. Rolling out the results of his Administration's first strategy review, in March 2009, President Obama stated, "We cannot turn a blind eye to the corruption that causes Afghans to lose faith in their own leaders."   President Karzai has repeatedly pledged to put a stop to corruption. In his second inaugural address he stated, "The Government of Afghanistan is committed to end the culture of impunity and violation of law and bring to justice those involved in spreading corruption and abuse of public property." At the January 2010 London Conference, he told the gathering emphatically: Fighting corruption will be the key focus of my second term in office. My government is committed to fighting corruption with all means possible, including punishing those who commit it and rewarding those who avoid it....We are determined to put an end to the culture of impunity as we move along the path of rule of law and democracy. We will stridently follow those who break the law, and encourage and protect those who assist in implementing the law. Yet practitioners and observers have disagreed markedly about "how much is enough", that is, about the extent to which corruption—a recognized facet of the Afghan landscape—fundamentally threatens Afghanistan's future stability. Early coalition and Afghan efforts focused on fostering governance through capacity-building, with an emphasis on ensuring that minimum required numbers of Afghan personnel were in place. The perceived significant need for capacity-building has been driven by serious challenges in the realm of human capital. Decades of war, displacement, and repression have decimated much of Afghanistan's real and potential work force. Some observers stress that many Afghans lack the skills, the experience, the education, or even the basic literacy to work effectively in the post-Taliban polity or economy. But the human capital landscape may not be as bleak as some suggest. First, in geographic areas into which the insurgencies have encroached, local officials may have removed themselves and their families—for example, in Helmand province, relocating from Taliban-influenced districts such as Nawa to the provincial capital Lashkar Gah. Such officials may be available and willing to serve, once security conditions so permit. Second, even through years of conflict and displacement, many Afghans did acquire education and experience, and they are now well-qualified to play professional roles. But for many of these Afghans, the most natural career choice is to work for the international community—for Embassies, international organizations, or non-governmental organizations—which pay significantly higher salaries and impose fewer roadblocks to employment, than do government positions. Some Afghans working as Foreign Service Nationals at the U.S. Embassy, or at U.S. PRTs, have described their own preference, in principle, to work for Afghan ministries. But they argue that to do so, they would have to pay bribes even to get an interview, and that ministry salaries are not high enough to support a family. Salaries would be even less sufficient, they argue, if they were assigned to relocate to a remote, unfamiliar district in which they had no relatives to live with. The problem in these cases is thus not a lack of human capital, but rather a market broadly defined that does not favor government service. Finally, some coalition officials point out that the standards for serving in the Afghan government need meet only the basic requirements for Afghanistan. For example, it is argued, while at the highest levels, senior officials of the Afghan National Security Forces now frequently communicate with coalition partners by means of PowerPoint, at the tactical level, it is perfectly acceptable for small units to conduct planning using hard copies of terrain maps. In 2009, in Sarkani district, Kunar province, an Afghan ministry representative charged with adjudicating local disputes described both his background and his work, explaining that he did not need a great deal to support his efforts. During years of displacement in Pakistan he had acquired an education. To carry out his work in Sarkani, he fostered close relationships with tribal and community leaders and relied in part on their traditional justice mechanisms. Without a computerized record-keeping system, he maintained records in stacks of giant folios. To make his services available, he traveled throughout the province—his one request, in 2009, was for a bicycle to facilitate those travels. At the sub-national level—for provinces and districts—capacity-building efforts in 2009 and 2010 focused on filling the relevant tashkil —the organizational table listing the personnel required at each level of government in each location. Provincial- and district-level governments generally include representatives from a number of key, Kabul-based "line ministries." Such representation is considered critical in Afghanistan's highly centralized political system, because most resources flow out from the central government through ministerial channels, rather than directly to provincial or district governors whose formal authorities and access to resources are quite limited. Since 2009, under the rubric of Operation Omid, the ISAF Joint Command, the U.S. Embassy, and several other international civilian partners have supported the Afghan-led District Delivery Program (DDP). DDP is an inter-ministerial initiative, led by the Independent Directorate of Local Governance (IDLG), designed to establish a basic presence of Afghan government, including some capability to be responsive to the needs of the Afghan people, in key, prioritized districts. As part of that effort, the international community has supported the Afghan Civil Service Institute's efforts to refine a set of core capabilities required for effective provincial- and district-level service, and to make training available for current staff and new recruits assigned to work at sub-national levels. Both Afghan and international officials have recognized that capacity in the sense of quantity alone may not be sufficient. At least as important, it is suggested, is Afghan officials' accountability and responsiveness to the Afghan people and in turn, the people's trust and confidence in the system. Key questions for the U.S. government and the rest of the international community include how best to encourage Afghan accountability, and how best to refine their own practices to avoid enabling corruption. U.S. and ISAF efforts received a significant jumpstart from the establishment, in August 2010, of the Combined Joint Interagency Task Force (CJIATF) Shafafiyat ("transparency") within ISAF. Shafafiyat's mission includes fostering a shared understanding among Afghan and international practitioners of the corruption problem, including the composition and dynamics of patronage networks that enable corrupt practices. Shafafiyat is also charged with helping plan and execute combined anti-corruption activities, including integrating efforts with external partners, and ensuring that an anti-corruption focus pervades ISAF's normal staff functions including intelligence and operations. A key mechanism by which the Afghan government can hold its own officials accountable is through the appointment and removal of government officials. In practice, according to practitioners and observers, regardless of the formal modalities in place at the time, the system of appointments to key ministerial posts, and to provincial and district governor positions, has tended to operate on the basis of patronage, ultimately dispensed in many cases by President Karzai. Particularly influential provincial governors, such as Balkh province Governor Atta Mohammad Noor, and Nangarhar province Governor Gul Agha Sherzai, have tended to wield authority over district governor selections in their provinces, although that role was not formally mandated. During the last two years, the Afghan government has taken several steps to support merit-based appointments. In November 2009, in his second inaugural address, President Karzai paved the way, stating, "We must use full care and foresight in appointing all government officials and members of the administration." In March 2010, the IDLG issued the 400-page Sub-National Governance Policy, long in development, based on the premise that "the Provincial, District, Municipal, and Village Administrations and the Provincial, District, Municipal and Village Councils shall be accountable to people living in their jurisdictions. The government at all levels exists to serve the people." The Policy introduced some measures designed to substitute merit for favoritism in key appointments—while provincial governors would remain political appointees, based on proposals by the IDLG and approval by the President, both deputy provincial governor and district governor positions would be treated as civil servant positions, subject to merit-based hiring. In October 2010, President Karzai issued a decree, based on a decision by the Council of Ministers, shifting responsibility and authority for appointing senior ministry officials and governors' senior staff to the Independent Administrative Reform and Civil Service Commission. Previously, ministers and governors had exercised authority in making those appointments; based on the decree, they retained the right to make recommendations. To date, the removal of officials charged with corruption, or perceived more broadly as pursuing their own interests rather than those of the people, has proven to be fraught with controversy. The United States and key international partners have strongly supported a series of discrete initiatives by the Afghan government to develop the capability to investigate, detain, and prosecute allegedly corrupt officials. The U.S. Department of Justice (DoJ) and others have helped mentor and train the Anti-Corruption Unit (ACU), a small team of specially selected and vetted Afghan prosecutors working for the Afghan Attorney General, which focuses on official corruption. The Drug Enforcement Agency (DEA) has worked closely with the Afghan Sensitive Investigative Unit (SIU) within the Ministry of Interior, which focuses on gathering evidence and building cases in the counter-narcotics arena. The Federal Bureau of Investigation (FBI) and the U.K. Serious Organized Crime Agency (SOCA) have mentored the Afghan Major Crime Task Force (MCTF), a specially vetted unit of investigators and prosecutors focused on so-called "major crimes"—corruption, narcotics, and kidnapping. In November 2009, announcing the creation of the MCTF, then-Minister of Interior Hanif Atmar reportedly stated: "The idea of the unit is that all top-level employees in Afghanistan involved in corruption should be held responsible, both civilian and military, and if proved guilty they should be fired and prosecuted in accordance with the law." The work of the Anti-Corruption Unit, in particular, has been facilitated by the Afghan Threat Finance Cell (ATFC), a team established in 2008 with an initial focus on tracing funding streams supporting the insurgency. The ATFC, led by the U.S. Drug Enforcement Agency, also includes representatives from DoD, the Treasury Department, the FBI, and Immigration and Customs Enforcement (ICE), as well as from the UK's SOCA, and the Australian Federal Police. Over time, according to ATFC officials, the team discovered that funding channels utilized networks linking insurgents with both narcotics bosses and some Afghan government officials, and thus necessarily broadened the scope of their inquiry and analysis. In Summer 2010, based on substantial investigative work by the SIU and MCTF and a warrant issued by the Afghan Attorney General, the head of administration for the Afghan National Security Council, Mohammad Zia Salehi, was arrested on charges of corruption including accepting bribes. President Karzai responded by launching an investigation of allegedly improper practices by the officials who arrested Salehi, and by releasing Salehi from confinement. In August 2010 during a visit to Kabul, Senator John Kerry met with President Karzai and stressed the importance of the SIU and MCTF. In a press statement, Senator Kerry noted: "We agreed on the importance of strengthening the Major Crimes Task Force and the Sensitive Investigative Unit. This means ensuring that they always operate as independent entities, led by Afghans welcoming expert support, and can fully pursue their mission of enhancing transparency and combating corruption." In his own comments to the press, President Karzai broadly endorsed the SIU and MCTF but used the occasion to underscore the theme of Afghan sovereignty. He stated that the two units "would always operate as independent sovereign Afghan entities, run by Afghans, allowed to pursue their mission of enhancing transparency and combating corruption free from foreign interference or political influence." In September 2010, the activities of the ACU were suspended, and in November 2010, all corruption charges against Salehi were dropped. A key mechanism by which the Afghan people can help hold Afghan officials accountable—if somewhat indirectly—is the formation and exercise of inclusive local shuras (councils) at both the local community and the district levels. IJC Commander LTG Rodriguez has repeatedly stressed the importance of representative local councils to the overall campaign, to help ensure accountability. The voice of local shuras , backed by some form of engagement by the international community at appropriate levels of the Afghan government, can help achieve change in cases that do not meet the threshold for prosecution, or in which a sufficient evidentiary base is not available. Such bodies reflect the traditional practice of Afghan communities to self-organize and to self-regulate, including ensuring a rough inclusiveness of all key components of the local population (except women). They are all the more important in a society largely bereft, after 30 years of conflict, of other types of checks and balances such as a vibrant well-developed media and a robust civil society. The Afghan Constitution calls for the election of district councils and prescribes a role, although not a very authoritative one, for those bodies; but those elections, initially scheduled for 2010, have been postponed indefinitely. Across Afghanistan, three variations of local shuras are prevalent. The first variation is the Community Development Councils (CDC), created to support the National Solidarity Program (NSP) launched by the Ministry for Rural Rehabilitation and Development (MRRD) in 2003. The purpose of the NSP program, according to the MRRD, is "to develop the ability of Afghan communities to identify, plan, manage, and monitor their own development projects." Local communities elect representatives to a CDC. CDCs identify priorities and craft project proposals for MRRD approval, and then the MRRD makes available block grants to the CDCs to support project execution. The program does not readily lend itself to graft and corruption—the sums are not especially large, and more importantly, the CDC, and thus all the people it represents, have full visibility on the entire funding stream. MRRD reported that as of February 25, 2011, since the inception of NSP, 26,230 communities had elected CDCs, 55,783 project proposals had been approved, and 45,215 projects had been completed. From the perspective of the broader campaign, what may be most notable about the CDCs is their tendency to persist as standing shuras used by their communities for additional functions including dispute resolution even after the completion of NSP-sponsored projects. In some cases, community shuras have also aggregated to form district-level councils known as District Development Assemblies, which are better placed to propose and execute projects with broader geographical impact. The second council variation is the temporary district council generated by the Afghanistan Social Outreach Program (ASOP), launched by the Independent Directorate of Local Governance (IDLG) in August 2007. Unlike the National Solidarity Program, in which the formation of local councils is one means toward the end of fostering community engagement in the broader development process, the creation of temporary district-level councils is the raison d'être of the ASOP program. The program uses a caucus-based process to facilitate the election of between 30 and 50 community leaders, religious scholars and tribal heads, to serve on the council. The councils are intended to "channel" public needs and grievances, and to provide a forum for conflict resolution, in close coordination with the District Governor. The program got off to a slow start, with a particular emphasis on Wardak province, supported by U.S. funding, and in Helmand province, supported by UK funding. In 2009 and 2010, however, as the IDLG assumed the lead coordination role for multiple Afghan civilian ministries in partnering with the international community to execute Operation Omid , IDLG's ASOP program grew to play a central role in combined activities in Helmand and Kandahar provinces. In the Nawa district of Helmand province, for example, IDLG sponsored an ASOP district council election process in October 2009, some months after U.S. Marines, with some partnered Afghan forces, had conducted clearing operations and established a sustained, robust presence. Nawa residents participated actively in the election process, choosing an approximately 35-member council. Within a month, Taliban insurgents assassinated three members of the new shura , including its chairman. But by several months later, shura members had begun convening regularly again and had selected a new chairman. The third council variation relies on spontaneous, ground-up generation, drawing on traditional community self-organization practices. For example, in March 2010, approximately 150 community leaders and tribal elders gathered in the center of Manogai district, in the Pech River valley in Kunar province, to protest what they perceived as the rampant corruption of the Manogai District Governor. The young Governor had been widely rumored to have paid for his position; the District Chief of Police was also widely regarded as soliciting bribes. At the March meeting, the elders signed a petition calling for the Governor's removal—at no small risk to their personal security—even though no formal mechanism existed for popular recall of appointed officials. Although the process took some time, the Governor was replaced later that year. The shura , for its part, continued to convene, organizing itself into a district-level standing body in April 2010. In December 2010, the IDLG and the Provincial Governor invited the shura to elect 45 of its members to serve as a formal ASOP council. In January 2010, 50 elders from the Shinwari tribe, which populates several districts including Shinwar of Nangarhar province, signed a document of their own, pledging their opposition to the Taliban including vowing to "burn the houses" of anyone who harbored Taliban affiliates. This bold stance was reportedly the result of months of engagement with some elements of the coalition. The Shinwari elders simultaneously took a bold stand against their own local government officials, condemning, in writing, "all the corruption and illegal activities that threaten the Afghan people." Over the past several years, the international community has had a somewhat difficult time crafting—and then describing—a supporting role to the Afghan government that also includes helping hold that government accountable. Understandably, official documents tend to err on the side of emphasizing "support." The ISAF mandate begins, "In support of the Government of the Islamic Republic of Afghanistan (GIRoA), ISAF conducts operations...." Over time, "support GIRoA" became shorthand for the international community's overall governance effort. Such formulations reflect one premise of counter-insurgency doctrine—the central importance of support to the host nation. Yet in practice, some practitioners and observers concluded that the "support GIRoA" shorthand, without further elaboration, can lead practitioners astray. For example, in 2010, one young platoon leader, fresh out of West Point, was assigned to partner with a wizened old District Governor in an eastern province of Afghanistan. Understanding his guidance to be, "Support GIRoA," the platoon leader made a point to accompany the District Governor everywhere, to provide him with transportation throughout the district in order to "connect him with the people", and in general to associate himself as closely as possible with the official. But local residents of that district, when queried away from the presence of any Afghan officials, expressed skepticism or even fear regarding both the Governor and his District Chief of Police. Moreover, the platoon leader's close association with these officials had convinced local residents that ISAF was part of the problem, and that change was highly unlikely. The solution, officials have suggested, is to "support GIRoA", but judiciously, and to continually gauge popular views of Afghan officials and of our own actions by engaging directly with the people. The Counterinsurgency Guidance issued by GEN Petraeus in August 2010 instructed the force to "consult and build relationships, but not just with those who seek us out," and to "be aware of others in the room and how their presence may affect the answers you get." Practitioners have noted a growing awareness over the last several years of the impact the practices of the international community can have by creating—or reducing—opportunities for graft and corruption. One critical step, officials say, is better understanding of where international funding goes and whom it empowers. In Summer 2010, USFOR-A established Task Force 2010, assigned to establish a clear picture of U.S. contracting practices and their impact, and then to help devise remedies. The Task Force was led for its first four months by Rear Admiral Kathleen Dussault, who had served previously as the head of the Joint Contracting Command Iraq/ Afghanistan; assigning a two-star flag officer to lead the effort was understood to signal the importance of the initiative. In September 2010, General Petraeus issued "COIN Contracting Guidance" to the ISAF force. In it, he argued that if "we spend large quantities of international contracting funds quickly and with insufficient oversight, it is likely that some of those funds will unintentionally fuel corruption, finance insurgent organizations, strengthen criminal patronage networks, and undermine our efforts in Afghanistan." The Guidance called for making contracting "Commander's business," for gaining understanding from local officials and the local population, for knowing who contract recipients are and how they are using the money, and for making contracting activities an integral part of the concerns of the full staff. Afghan and international officials have long agreed that development efforts are essential to Afghanistan's stabilization. Development is considered important to the campaign in two critical ways. Near-term efforts aimed at meeting people's basic needs may help to reassure people that their needs are also likely to be met in days to come, and to encourage them to place their trust and confidence in the future. Efforts aimed at laying the groundwork for Afghanistan's longer-term economic viability may help Afghanistan sustain itself in the future with relatively limited support from the international community. For the international community, the choices concerning how best to support Afghan economic development include both how much support to provide, and also what kinds of support are best suited to fostering an economic system that the Afghans can sustain. For the U.S. government, such questions may be addressed by mid-2011, through the process of crafting a comprehensive economic strategy. The Ike Skelton National Defense Authorization Act for Fiscal Year 2011 required that the President, working with the Departments of State and Defense, produce and provide an economic strategy for Afghanistan. According to the NDAA, that strategy should support the broader counterinsurgency campaign; promote economic stabilization and development; and help create sustainable Afghan institutions. President Obama has made clear that the U.S. goal in Afghanistan is "not nation-building, because it is Afghans who must build their nation." What is less universally agreed is the extent to which support for Afghanistan's economic development is required in order to realize the United States' core goals, regarding al Qaeda and future safe havens. Charting out an economic strategy, as the legislation requires, may ameliorate the apparent tension by more clearly indicating the many supporting roles that might be played by other members of the international community, including those with specialized skills such as international financial institutions. The fundamental challenge for development work in Afghanistan is that Afghanistan is not simply a developing country, as complicated as that status alone would be. It is certainly a country that has benefitted very little to date from general growth and development, from technological advances, and from exposure to world markets and global trade opportunities. But in addition, 30 years of war and disruption have meant the deterioration of existing infrastructure, sharp though not complete limitations on the availability of human capital, and stalled or reversed development of internal supply chains and internal trade opportunities. The international community's presence and activities over the last ten years, in turn, have deeply distorted the labor market. In some senses the international community has made the challenge of providing assistance in Afghanistan all the more difficult, by failing for many years to coordinate sufficiently, let alone integrate, its efforts. Several key steps in recent years have encouraged greater coherence in international community support to development—by placing Afghan priorities, and more recently Afghan institutions, in the lead. First, in 2008, the Afghan government issued the Afghanistan National Development Strategy (ANDS) , a robust document that described at length the areas of development activity that were important to the Afghan government. The ANDS was organized around the three pillars of the 2006 Afghanistan Compact, the joint commitment to shared goals by the Afghan government and the international community. Those pillars included security; governance, rule of law and human rights; and economic and social development. The ANDS also addressed six other "cross-cutting issues" including regional cooperation, counter-narcotics, and anti-corruption. If the ANDS's great strength was comprehensiveness, according to many practitioners its great weakness may have been a lack of prioritization. A second major step that has helped foster greater coherence among international community efforts was the launch of the Kabul Process, under President Karzai's second administration. The Process is based on the theme of "Afghan leadership, Afghan ownership." In the development arena, that has meant streamlining and refining the priorities of the ANDS , and then organizing the work of key ministries into three cluster groups, focused on new National Priority Programs—agriculture and rural development; human resources development; and economic and infrastructure development. The Ministry of Finance was assigned to provide broad leadership for the new organizational framework. Both practitioners and outside experts have suggested that further development efforts should be based on a clear vision of Afghanistan's future economy, including its projected sources of revenue. Components of that economy might include a better-developed agricultural sector able to process and export its produce; more comprehensive collection of revenues due to the state from border crossings and other sources; and judicious exploitation of Afghanistan's apparently sizable mineral resources. In June 2010, the Department of Defense and the U.S. Geographical Survey, who had partnered in conducting field research, announced initial findings that Afghanistan possessed mineral wealth in the form of iron, copper, cobalt, gold, and lithium, which could have a market value of one trillion U.S. dollars. Some experts have cautioned, however, that successfully managing an extractive industry would require substantial physical and legal infrastructure, which are currently lacking. Experts have suggested an array of macro-level requirements that may be particularly important to support economic development in Afghanistan. One major requirement, it is suggested, is infrastructure—including both transportation and energy supply. In the Kabul Conference Communiqué, the Afghan government pledged to set out detailed plans to "rehabilitate and expand regional transport and energy networks." Several experts have argued that the primary focus of further economic strategy ought to be transport corridors, within Afghanistan—including road and rail—and regionally, linking Afghanistan more closely with its neighbors, particularly those in Central Asia. Such regional ties could build in part on the Northern Distribution Network, established to help move nonlethal equipment and supplies to Afghanistan through Russia, the Caucasus, and Central Asia. Another major requirement, many suggest, is developing Afghanistan's current and future labor force. At the January 2010 London Conference, President Karzai called for "improving the skill base of the labor force and creating more jobs in public and private sectors." Experts suggest that more specific steps might include generating additional opportunities for vocational training and higher education. Generating a broad vision of the rough distribution of Afghanistan's future labor force, and how it might evolve over time, could help constructively shape the design of new training and educational programs. Steps might also include rationalizing public sector salaries, as well as those offered by the international community, in order to rebalance the economic incentives of the skilled and educated labor force. As of early 2011, it still made more economic sense for an educated Afghan professional to drive cars for an international NGO—or to place improvised explosive devices (IEDs) for the Taliban—than to serve as a district-level official for the Afghan government. A third major requirement, Afghan officials and outside experts suggest, is fostering an Afghan government that can manage and execute its own budget. At the January 2010 London Conference, participants pledged to support the Afghan government's goal that within two years, 50% of international aid would be delivered through the Afghan government. Participants, including the Afghan government, agreed that reaching this target would be "conditional on the Government's progress in further strengthening public financial management systems, reducing corruption, improving budget execution, [and] developing a financial strategy and Government capacity towards that goal." Members of the international community have tended to bypass the ministries in favor of utilizing off-budget funding channels, for two major reasons. One reason is that Afghan ministries tend to have limited capacity to execute their budgets, and so more direct funding channels can be a way to accomplish a specific mission. Another reason is the perceived pervasiveness of corruption—avoiding ministerial structures at national and sub-national levels is viewed by some as eliminating opportunities for graft. While avoiding the Afghan ministerial system may prove effective for completing a given project in a timely fashion, it contradicts another fundamental purpose of assistance—to encourage the growth of Afghan systems that can sustain themselves. For some practitioners, one logical solution is to impose stringent accountability mechanisms on ministries to guard against corruption, and then to channel funding through those institutions. This approach, it is acknowledged, can be time-consuming. Some experts suggest, perhaps counter-intuitively, that particularly robust accountability measures imposed on ministries by the international community can prove cumbersome—they may slow the process of execution and may also, with their requirements for many different signatures, create additional opportunities for corruption. An alternative, they suggest, might be the use of streamlined accountability measures that maintain adequate standards but reduce the numbers of forms and signatures required and harmonize the process across agencies and donors. Meanwhile, at the micro-level on the ground, the international community's theory of the case for development assistance has evolved, if unevenly, over time. For years, practitioners have reported, the emphasis was on directly carrying out projects that seemed to benefit the local community—such as building a clinic or digging a well. Such approaches may sometimes have demonstrated good will, but they could as easily have demonstrated a certain obliviousness—for example if a clinic was built in a location with no available medical professionals to staff it, or wells were dug inadvertently in patterns that gave one local tribe better access than another to fresh water. From that approach, the next step was frequently to consult more closely with Afghan interlocutors—to ask local officials and people what they needed. This approach has frequently been combined with an emphasis on providing assistance "through" local officials, so that they could be "seen" to be delivering services to local residents. Such efforts may have met some needs of local populations, but those needs may not have been the most urgent ones since such approaches failed to prioritize. From the "what do you need?" approach, a further step has been more directly involving Afghan officials in the decision-making process. For example, one U.S. Brigade Combat Team (BCT) launched a "CERP as a budget" initiative, based on use of the U.S. military's Commander's Emergency Response Program. In this approach, the BCT "made available" a stated sum of money to provincial- and district-level Afghan officials, who prioritized requirements and created budgets based on the total sum available. (The BCT maintained actual control of the funding, for accountability purposes.) When given discretion over a total sum of money, the BCT found, Afghan officials were more likely to carefully scrutinize and prioritize their requirements. A final step, representing a fundamental shift in thinking, has been toward making the Afghan budgetary system itself work. In practice, this evolution in thinking about tactical-level development assistance has been both non-linear and incomplete, and all of these approaches toward "development" persist to some extent. Through much of 2009 and 2010, some officials from the U.S. Agency for International Development, and some U.S. military officials, continued to report on "progress" in terms of the number of projects completed and the amount of dollars spent. Historically, many practitioners have found it simplest to demonstrate "results" to their higher headquarters, and to Congressional oversight committees, in quantitative form; there may be relatively few precedents for demonstrating the impact of assistance in qualitative terms. One further, recent evolution in the collective thinking of many U.S. government civilian and military practitioners is greater awareness of the power structures and patronage networks that are empowered by assistance from the international community in Afghanistan. The early post-Taliban-regime years offered a perfect storm for neglect in this arena: large numbers of disparate donors, limited numbers of donor personnel on the ground to provide oversight, and few if any functioning Afghan institutions to help ensure the accountability of the process. Furthermore, understanding exactly who benefits from each dollar spent can be a tough analytical challenge, only recently made somewhat easier by the growing availability of intelligence, surveillance and reconnaissance (ISR) assets including analysts. By late 2010, there was a growing consensus among U.S. practitioners that if completing a project meant funding a thug, then not completing the project was the better choice. In his August 2010 Counterinsurgency Guidance, General Petraeus instructed ISAF: Money is ammunition; don't put it in the wrong hands. Pay close attention to the impact of our spending and understand who benefits from it. And remember, we are who we fund. How we spend is often more important than how much we spend. Afghan and international civilian and military practitioners have long suggested that both reintegration and reconciliation are integral parts of the overall campaign effort. Less fully agreed is the conceptual distinction between the two terms—a distinction apparently not more intuitively obvious in Dari or Pashto than it is in English. Some suggest that reintegration focuses on low-level fighters, while reconciliation concerns senior insurgent leaders. Others draw the distinction somewhat differently, associating reintegration with individual decision-making, and reconciliation with authoritative decisions by insurgent leaders on behalf of groups of followers. A further open question is the logical relationship between reintegration and reconciliation—in general, it is assumed that pulling lower-level fighters off the battlefield would improve prospects for higher-level conflict settlement, but there is no single agreed theory describing the predicted logic. While the Afghan government is far from monolithic, in a strong presidential system in which most other institutions are weak, President Karzai is generally considered the leading authoritative voice and ultimate decision-maker on reintegration and reconciliation matters. In major public statements, he has consistently advocated inviting fellow Afghan "upset brothers" back into peaceful Afghan society, and seeking broadly inclusive solutions to the overall conflict. He has distinguished the hard core of insurgents from "disenchanted compatriots who are willing to return to their homes", by establishing basic conditions for return: no links to al Qaeda or other terrorist networks, and acceptance of the Afghan Constitution. Some observers suggest that President Karzai's apparent embrace of reconciliation may stem in part from grave uncertainty about Afghanistan's future, lack of clarity about the scope and scale of future commitment on the part of the international community, and thus a desire to leave as many options open as possible. U.S. government policy strongly supports Afghan-led processes for reconciliation and reintegration. Announcing the results of his Administration's first strategy review, in March 2009, President Obama argued that Afghans "who have taken up arms because of coercion, or simply for a price" must have an opportunity to rejoin society, and he pledged that the United States would work with Afghan and international partners to support such a process. Announcing the results of the 2010 review, President Obama echoed the conditions set by President Karzai for former fighters who want to reconcile: they must break ties with al Qaeda, renounce violence, and accept the Afghan Constitution. In 2010, key events of the Kabul Process launched by President Karzai at his second inaugural, helped push reintegration and reconciliation to the front of the political stage. In June 2010, the National Consultative Peace Jirga (NCPJ) brought together some 1,600 delegates from across Afghanistan with the stated goal of fostering consensus about a path forward toward peace. In the event's concluding Resolution, participants applauded President Karzai's "commitment and initiative to consult the nation to reach through peaceful means to a lasting peace and end to the conflict and bloodshed." The NCPJ also called specifically for the adoption of a formal program for reintegration, and for the creation of a high peace council to help manage reconciliation efforts. In July 2010, Kabul Conference participants welcomed the outcomes of the Peace Jirga, noting approvingly in their concluding, "The Consultative Peace Jirga demonstrated the strong will within Afghan society to reconcile ...differences politically in order to end the conflict." Participants also endorsed in principle detailed new plans for a formal reintegration program, and they echoed the NCPJ's call for the creation of a high peace council. In September 2010, a new 70-member High Peace Council was established. The Council, which convened for the first time in October 2010, was charged with facilitating the process of reconciliation. Based on substantial work carried out throughout Spring 2010, in June 2010 President Karzai signed a decree establishing a structure for a new Afghanistan Peace and Reintegration Program (APRP). Following the July 2010 endorsement by the Kabul Conference, in September 2010 the Afghan government issued a Joint Order instructing ministries and provincial governors to participate in the program. The program includes three basic components: social outreach designed to explain the program to both fighters and local communities and to encourage their participation and support; demobilization designed to remove fighters and their weapons from the battlefield and to provide accountability through registration, vetting, and biometrics; and "consolidation of peace" including training and employment opportunities to help former fighters settle down. Basic principles underlying the program include Afghan leadership with support from the international community, and the involvement of whole communities rather than just the target individuals. ISAF officials noted that as of early 2011, approximately 1,000 former fighters had sought formally to join the reintegration program, and close to 20 provinces had created provincial-level Reintegration Councils to oversee the process. Officials also noted that many more former fighters may have opted for "silent reintegration"—simply laying down their weapons and quietly rejoining their communities, without fanfare or formal declaration. Some practitioners and observers have raised questions about the ability of the APRP to avoid accusations of favoritism and special treatment to former fighters, when most local communities themselves are deeply in need after decades of war. Some have also suggested that the initiatives needed to meet the needs of local communities as well as those of reintegrating fighters, are the basic pillars of the campaign itself: improved security conditions and freedom from insurgent intimidation, trustworthy local members of the Afghan National Security Forces, responsive local Afghan government officials, and inclusive shuras that give the people a voice. War termination theorists generally agree that most wars end with some form of political settlement, formal or informal. In Afghanistan, reconciliation may be more likely to take the form of an ongoing and somewhat fluid process, rather than a single series of formal talks. One reason is that the Afghan government faces challenges from multiple insurgencies—most prominently the Afghan Taliban, the Haqqani network, and Hezb-e Islami Gulbuddin, which do not share the same goals and which cannot speak authoritatively for one another. Further, Afghanistan experts suggest that in such a profoundly relationship-based society, channels of communication between insurgents and regular members of society, linking fellow members of families or of tribes, are open and flowing more or less continually. Informal efforts to test the climate may be quite frequent. Observers suggest that while "exploration" may be multi-faceted and fluid, final decisions would likely be made personally by President Karzai, perhaps in consultation with a small circle of advisors. The role of the large High Peace Council is likely to focus more on outreach and exploration than on conducting sensitive negotiations. Practitioners and observers have raised a number of concerns, from a variety of angles, about the inclusiveness of any reconciliation process. Some stress that a process should stringently avoid alienating non-Pashtuns, who may understandably fear the return of a Taliban-influenced political order; if a reconciliation process exacerbates those fears, non-Pashtuns might seek to mobilize their own political and security forces patronage networks to express opposition. Some stress instead the potential impact of the apparent exclusion of potentially more progressive elements of society from the nascent reconciliation process, pointing the dearth of members of Afghanistan's emerging, young civil society, and corps of journalists, in the High Peace Council. Many others have expressed concern that a Taliban-inflected political order might be unlikely to respect the rights of Afghan women. Others stress broadly the importance of giving the Afghan people a significant say throughout the process—not simply presenting them with a fait accompli and seeking their "buy-in." Practitioners and observers have also raised concerns about—and debated—the timing of any reconciliation efforts against the backdrop of the overall campaign. For some, the most important factor to consider is when insurgent leaders would be most likely to agree to end the conflict, on the most favorable terms for the Afghan government and people. Some suggest that insurgent leaders are likely to be interested in talking only once they are powerfully convinced that their battlefield efforts cannot succeed—that is, they need not be defeated, but they must believe that defeat is inevitable if they continue to fight. Others argue, entirely differently, that insurgent leaders are likely to want to negotiate only from a position of strength, when they believe that they are perceived as powerful enough to warrant discussion of quite favorable—from their perspective—terms and conditions; in this view, insurgents in a position of weakness, feeling there was nothing to gain from talks, would be likely to continue their violent opposition. These two theories, perhaps disconcertingly, would lead to two very different policy prescriptions concerning the timing of potential talks against the backdrop of the campaign. Meanwhile, others stress that the most important timing factor concerns the strength and viability of the Afghan polity—the more progress that the campaign has achieved in building competent security forces, fostering responsive government, and laying the foundations for future economic growth, the more stable the system will be, and the more readily it will be able to absorb potentially dissonant elements. Finally, debates about reconciliation have taken place simultaneously with—but not always well-integrated with—debates about the structure of Afghanistan's political system. Over time, a number of experts have suggested that a more de-centralized political order might better correspond to historical practice in Afghanistan and might have better success in meeting the needs of the Afghan people. In the context of reconciliation, one risk of significant de-centralization would be enhancing the power and authority of former insurgent leaders who might be given regional leadership roles. In theory, orchestrating a complex contingency operation has at least three major facets. Strategy names broad objectives. Plans—working backwards from those objectives—lay out the specific steps, sequenced over time, by which those objectives will be achieved. And then a well-crafted system of assessments indicates to practitioners and outside audiences whether and to what extent the plans are working and the strategy remains valid. For the war in Afghanistan, Congress has pressed the Executive Branch to assess progress on the ground by means of a clear system of metrics, and to report regularly on those results to the Congress. The Obama Administration, for its part, has also undertaken unilateral assessments and reviews. At the outset, announcing the results of his Administration's first strategy review for Afghanistan and Pakistan, President Obama stated, "We will set clear metrics to measure progress and hold ourselves accountable." He also indicated that the intent would be not merely to mechanically mark progress against fixed indicators, but also to re-examine the validity of the "ways and means" of the strategy itself: "we will review whether we are using the right tools and tactics to make progress towards accomplishing our goals." In order to help generate clear assessments and reporting, Congress, in Section 1230 of the National Defense Authorization Act for Fiscal Year 2008 , P.L. 110-181 , as amended, required the Department of Defense, in coordination with other agencies, regularly to submit "Reports on Progress Toward Security and Stability in Afghanistan." These reports have become known commonly as the "1230 reports." The requirement includes "a description of the comprehensive strategy of the United States for security and stability in Afghanistan", as well as a "separate detailed section" addressing each of these topics: NATO and its International Security Assistance Force (ISAF); the Afghan National Security Forces (ANSF); Provincial Reconstruction Teams (PRTs) and other development initiatives; counter-narcotics activities; corruption and the rule of law; and regional considerations. In practice, the 1230 reports tend to be robust documents that include substantial description in each focus area. The description typically provides a comparison with conditions that pertained in the previous 180-day reporting period. What the 1230 reports do not include, as a rule, is "how much progress is enough" in any of the focus areas; what campaign logic connects the focus areas; or what the timetable for further progress is likely to be. They also tend to lag behind current strategic- and operational-level thinking. For example, the most recent 1230 Report, submitted to Congress in late November 2010, covers the period from April 1 through September 30, 2010. It states that it reflects the campaign plan of NATO's International Security Assistance Force (ISAF) from September 2009. The 2009 ISAF campaign plan had been under revision since Summer 2010, to reflect emerging conditions on the ground and refined guidance from the new ISAF Commander, General Petraeus, and it was scheduled to be finalized in late 2010. In 2009, reportedly amidst some frustration with communications from the Administration about the progress of the Afghanistan war effort, Congress imposed a new reporting requirement. In the Supplemental Appropriations Act, 2009, Congress required the President on behalf of the Administration as a whole to submit regularly a "policy report on Afghanistan and Pakistan." This new requirement did not change the requirement for DoD to submit its own 1230 reports. The new legislation required the President, as a first step, to submit "a clear statement of the objectives of United States policy with respect to Afghanistan and Pakistan, and the metrics to be utilized to assess progress toward achieving such objectives." The Administration met this requirement with an initial report submitted on September 24, 2009. That initial report spelled out eight objectives, one of which was classified, of U.S. policy toward Afghanistan and Pakistan, together with an assigned lead agency: 1. Disrupt terrorist networks in Afghanistan and especially Pakistan to degrade any ability they have to plan and launch international terrorist attacks (Office of the Director of National Intelligence) 2. Classified 3. Assist efforts to enhance civilian control and stable constitutional government in Pakistan (Department of State) 4. Develop Pakistan's counterinsurgency (COIN) capabilities; continue to support Pakistan's efforts to defeat terrorist and insurgent groups (Department of Defense) 5. Involve the international community more actively to forge an international consensus to stabilize Pakistan (Department of State) 6. In Afghanistan, reverse the Taliban's momentum and build Afghan National Security Force capacity so that we can begin to transition responsibility for security to the Afghan government and decrease our troop presence by July 2011 (Department of Defense) 7. Selectively build the capacity of the Afghan government which enables Afghans to assume responsibility in the four-step process of clear-hold-build-transfer (Department of State) 8. Involve the international community more actively to forge an international consensus to stabilize Afghanistan (Department of State). The legislation required simply that subsequent reports describe and assess progress toward each objective named in the initial report, together with any modifications to those objectives required by changing circumstances. In March 2010, the Administration submitted the first so-called metrics report, based on the September 2009 statement of objectives. It submitted the second and most recent metrics report in October 2010. The Administration followed each report submission with a classified briefing to selected Hill Staffers. The October 2010 report was not entirely current—it covered events through June 30, 2010. Some recipients on the Hill have pointed to perceived short-comings in the metrics reports submitted to date. Some have argued that most of the "objectives" are more accurately descriptions of process, of avenues to pursue, rather than desired "ends" in the classical sense of strategy. Some have noted that while the reports describe developments in each "objective" area, they do not state how much progress in each area will be sufficient in order for the effort to be successful. Further, the reports do not link the objectives together in a clear strategy including both priorities and appropriate sequencing of the various efforts over time. In fall 2010, without a Congressional requirement to do so, the Administration undertook its own review of progress to date in Afghanistan and Pakistan. The process, originally nicknamed "the December review", was re-christened the Afghanistan and Pakistan Annual Review ("APAR"), suggesting that future annual reviews are envisaged. The Administration did not provide the Congress with the results of the review. Instead, it produced and provided to the Hill a five-page, unclassified summary entitled, "Overview of the Afghanistan and Pakistan Annual Review." The overview paper confirmed the "core goal" initially articulated by President Obama in March 2009, argued that "specific components of our strategy for Afghanistan and Pakistan are working well," and stated that "the challenge remains to make our gains durable and sustainable." The APAR summary stated, and Administration officials have confirmed, that the APAR was intended to be "diagnostic" rather than "prescriptive"—that is, while it might identify shortcomings it was not intended to propose remedies. In a brief section on methodology, the summary stated that the APAR was intended as an "assessment of our strategy in Afghanistan and Pakistan." In practice, Administration officials suggested, the APAR process focused primarily on reviewing progress to date, based on input from multiple agencies and from the field, rather than on re-examining the assumptions of U.S. strategy. The summary's methodology section also noted that a series of high-level discussions were used to "assess the trajectory and pace of progress." Since the actual APAR results were not released, it is difficult to gauge what conclusions Administration officials may have reached about the pace and trajectory of progress in each component of the overall campaign, about possible short-comings in current approaches that might require remedy, or about the overall prospects for success. The Obama Administration has suggested that progress is being made in the campaign. Both the Summary of the results of the Administration's 2010 Afghanistan Pakistan Annual Review and the National Security Council's September 2010 "metrics report" stressed that momentum is shifting in a positive direction in the counter-insurgency effort on the ground. Some practitioners on the Hill and other observers have noted, however, that the Administration has never yet articulated "how much progress is enough." While the Administration has named its "objectives" for U.S. efforts in Afghanistan and Pakistan, those objectives—as outlined in the "metrics reports"—are more properly considered descriptions of lines of activity than endstates per se. A refined Administration statement about the desired "endstate" in Afghanistan might include: The set of minimum conditions in Afghanistan that would allow Afghanistan to sustain stability with relatively limited support from the international community. The rough timeframe in which those conditions are likely to be achieved. To support genuine sustainability, some suggest, those minimum conditions would need to address relevant aspects of Afghanistan's political architecture, and its foundation for economic development, as well as immediate security conditions. Without such a stated vision of "success," it is difficult to gauge how far any observed progress to date takes Afghanistan toward sustainable stability, or how much further effort, and of what kinds, might be required. President Karzai has called for an inclusive solution to the conflict, and the Obama Administration has supported an Afghan-led reconciliation process. Both governments have emphasized that the criteria for those wishing to rejoin peaceful society must include renouncing al Qaeda and violence, and accepting the Afghan Constitution. Some observers have urged accelerating reconciliation efforts, with a view to achieving at least a minimally acceptable settlement in the relatively near future. Supporters of this approach suggest that it could yield tremendous savings in terms of resources and more importantly lives, while still achieving an acceptable outcome. Other practitioners and observers argue that while reconciliation should be part of the overall campaign, reconciliation efforts should pay due attention to a number of issues likely to shape the prospects for lasting success: The extent to which proposed settlement arrangements take account of the concerns of northern, non-Pashtun Afghans who may be wary of renewed Taliban influence in Afghan state and society. Some northern non-Pashtun Afghans, if faced with the prospect of a "bad deal", might be tempted to mobilize around their own patronage networks, drawing in part on relationships from Northern Alliance days, and in part on networks built through the current Afghan National Security Forces, to oppose a Taliban-influenced new order. Whether a reconciliation process includes Afghan women in its discussions, and takes appropriate account of women's concerns in settlement arrangements. The extent to which a reconciliation process seeks active input—not just post facto "buy-in"—from the Afghan people across the country and from all walks of life. The High Peace Council, established in September 2010, has taken first steps toward engaging the population by making visits to some provinces; but genuine Afghan participation, it is argued, would depend on community-level debate and input. The nature of the Afghan state itself, into which "reconciled insurgents" would be reintroduced. Key practitioners suggest that the stronger and more resilient the state—including the capabilities of its key institutions and, especially, the responsiveness and accountability of its officials to the Afghan people—the more easily it will be able to absorb some potentially dissonant factors. The structure of the Afghan state, and in particular the balance between centralization and decentralization. While the Bonn Agreement established a highly centralized state structure, the 2010 Sub-National Governance Policy 302 sought to devolve some authorities to the sub-national level, and some experts argue that the Afghan state might function more effectively with a de-centralized structure more closely reflecting its history. To the extent that a reconciliation process might consider offering former insurgent leaders sub-national leadership roles, the structure of state authority will be shape the influence they might exercise from such positions. Both practitioners and observers have argued that power in Afghanistan is exercised through criminal patronage networks that include both powerbrokers and some government officials, who skim state resources and distribute patronage unevenly, alienating many Afghan people. Some suggest that such a system—and such alienation—could prove deeply detrimental to the project of stabilizing Afghanistan. Efforts to date to counter corruption include significant support from multiple U.S. government agencies, together with other international partners, for specialized Afghan bodies including the Anti-Corruption Unit, the Sensitive Investigative Unit, and the Major Crime Task Force. Efforts have also included the establishment of a series of Task Forces at ISAF— Shafafiyat ("transparency"), 2010, and Spot Light—aimed at more actively supporting Afghan anti-corruption efforts and also at improving international community practices to lessen inadvertent contributions to corruption. The Afghan and U.S. governments have underscored repeatedly the importance of fostering good governance and limiting corruption to the overall campaign. Yet critical policy debates remain unresolved. Open issues that may be of interest to Congress include: The extent to which responsive, accountable Afghan governance is essential for achieving the objectives of the overall campaign. Whether some forms of corruption are more harmful than others to the campaign, and the extent to which, in such a deeply networked society, specific incidents of corruption can be corrected without addressing the broader networks in which they are situated. The appropriate role of the international community—its nature and extent—in supporting Afghan anti-corruption efforts. At the November 2010 NATO Lisbon Summit, Allies and the Afghan government agreed to complete a process of transitioning lead responsibility for security to Afghans, district-by-district and province-by-province, by the end of 2014. That decision has raised questions for Afghan, U.S., and other international practitioners. Congress may choose to explore the following unresolved issues: The nature of the role of the international community in locations that have transitioned, including both the footprint and activities of international forces, and the supporting role to be played by international civilian organizations. Some observers suggest that the international community's supporting role could be quite significant, particularly just after a transition decision, in order to ensure that the transition process is irreversible. The meaning of transition in those locations in which ISAF has a very limited presence, and thus little to literally "transition." NATO ISAF has a significant force presence in 17 of Afghanistan's 34 provinces, but in Panjshir province, for example, where Ahmed Shah Mahsood staged successful resistance to Soviet forces in the 1980s, the local population has long effectively provided security for itself. The mechanisms in place to ensure deliberate, thoughtful transition decisions, in the face of significant political pressure to "show progress" from the capitals of countries contributing troops and providing other significant assistance. The plans for balancing resources of all kinds—including leadership time and attention as well as personnel and programs—between transitioning provinces, and those areas that are the operational "main effort" in the ongoing campaign, including Kandahar and Helmand provinces in the south. The Afghan National Security Forces (ANSF) are, by many accounts, the "ticket" to a successful transition process, to Afghanistan's long-term stability, and to the ability to draw down U.S. and other coalition forces responsibly. The current approved target endstrength for the ANSF, by October 2011, is 305,600, including 171,600 Afghan National Army (ANA), and 134,000 Afghan National Police (ANP). Discussions are underway concerning a proposal that would raise the total target endstrength up to as much as 378,000 personnel—including 208,000 ANA and 170,000 ANP—by October 2012. Debates centered on troop numbers obscure more fundamental questions, including Afghanistan's future requirements for security forces and how those forces will be sustained. Congress may wish to explore these open issues: Afghanistan's future requirement for security forces, starting with an assessment of likely future security challenges. Experts suggest that requirement analyses should consider the appropriate roles and missions of the various forces and how those might be expected to evolve over time. Options for sustaining the ANSF in the future, including support by the Afghan government, support by the international community, and partial demobilization. Some observers suggest that this would require a broader look at Afghanistan's economic prospects including potential sources of revenue, and the government's future ability to capture that revenue and execute its budgets. ISAF and Administration officials have indicated that the Afghan Local Police (ALP) program is an important part of the overall campaign, because it "thickens the lines" and creates further resistance to insurgent encroachments, in areas in which formal ANSF and coalition partners have limited reach. The program, personally approved by President Karzai, creates organized local groups that provide some security for their local communities, under formal command by the Ministry of Interior, and with oversight provided by local government officials, local security force leaders, and local communities. Officials have indicated an intention to develop the program significantly beyond its February 2011 total of about 3,000 participants. The program draws on the long-standing Afghan tradition of community organization for self-defense, but for many observers, it also recalls recent failed experiments in community-based defense such as the ill-fated Afghan National Auxiliary Police, which was poorly supervised, terrorized local residents, and had to be disbanded. Unresolved issues concerning the ALP include: The degree of confidence of the Afghan government and ISAF that ALP teams will not become the armed proxies of local powerbrokers. The ability of coalition forces to provide sufficient oversight of the program should it grow substantially. To date local security forces initiatives have relied heavily on close partnering with highly qualified U.S. Special Operations Forces (SOF), which are in high demand and short supply. Future plans for the ALP. One option would be to absorb ALP participants into the formal ANSF, if ANSF target endstrengths allow for such absorption. Another option would be to channel ALP participants into alternative training and employment opportunities, but that approach could create a competition for resources with both reintegration efforts, and economic development initiatives for the population at large, since jobs are in short supply. A third option would be to maintain the ALP indefinitely with its current roles and missions; that approach would require continued oversight by local shuras , and continued funding to support the program. A fourth option would be to simply disband the formations, but that could provoke serious disaffection among former participants who might be tempted to seek out less constructive employment opportunities. President Obama has committed the United States to begin a "responsible drawdown" of U.S. forces from Afghanistan. He has also explicitly supported the shared NATO and Afghan goal of transitioning the lead responsibility for security to Afghans by the end of 2014. These important policy decisions leave open a number of basic questions that Congress may wish to explore further: The criteria and logic for determining the extent of the first tranche of the U.S. troop drawdown. Some observers suggest that achieving significant progress by July 2011 might allow ISAF to "thin the lines", using fewer forces to cover the same territory, and that this could allow a significant redeployment of U.S. troops. Others suggest that the opposite logic should apply—if conditions have not improved significantly by July 2011, this should be understood as indicating that the current strategy is not working, and therefore drawing down significantly might make sense, in order to "cut our losses." The proposed "decision point" for considering the second tranche of U.S. troop drawdowns. The relationship of future drawdown decisions to the process of transition, including the nature and scope of ISAF's role in locations that have begun the transition process. In particular, experts differ on the role and importance of unit partnering—with its substantial force requirements—once Afghans have assumed the lead. U.S. and Afghan officials have repeatedly stated their commitment to a long-term U.S. Afghan strategic partnership. Negotiations to define the contours of that partnership are scheduled to take place in 2011. Given the potential implications for U.S. national security, regional security, and U.S. resource commitments, Congress may wish to explore: The extent to which the strategic partnership may involve U.S. security commitments to Afghanistan to take specific actions in specific circumstances. Whether a revised strategic partnership should revisit the legal basis for the presence of U.S. forces in Afghanistan, including both opportunities a re-negotiation might open up, such as future U.S. basing rights; and potential constraints a re-negotiation could lead to, such as stricter limitations on counter-terrorism activities. The implications of a new bilateral strategic partnership for U.S. commitments of resources, troops, and assistance after 2014. The National Defense Authorization Act for Fiscal Year 2011 required, in Section 1535, that the President produce and provide an economic strategy for Afghanistan. According to the NDAA, that strategy should support the broader counterinsurgency campaign; promote economic stabilization and development; and help create sustainable Afghan institutions. Some practitioners worry that crafting a full-scale economic strategy will encourage "mission creep", while others suggest, instead, that the exercise could help delimit the U.S. role by underscoring areas appropriate for the specialized expertise of the private sector, international financial institutions, and other partners. Congress may wish to explore these issues: The importance of a viable economic strategy for Afghanistan to the success of the campaign. The appropriate balance between helping the Afghan government meet the near-term needs of the Afghan people, and helping that government develop the sustainable ability to meet the people's future needs. The ways in which development assistance of all kinds has contributed toward the empowerment of criminal patronage networks, and appropriate approaches for ameliorating those effects. The prospects for the commitment of U.S. government civilian agencies to increase, in order to leverage new opportunities to support government and development, even as the U.S. force presence diminishes. The Obama Administration has frequently noted the importance to the success of the campaign in Afghanistan of Pakistani military action against insurgent safe havens inside Pakistan. In his December 2010 speech, President Obama stated that "we will continue to insist to Pakistani leaders that terrorist safe havens within their borders must be dealt with." In a recent interview, asked whether the effort in Afghanistan can succeed "without Pakistan taking tougher action against Afghan militants on its soil", ISAF Commander General Petraeus replied, "We think you can certainly continue to make progress." In another recent interview, ISAF Joint Command Commander, asked the same question, Lieutenant General Rodriguez agreed that progress could be made in the absence of concerted Pakistani action but stressed that it is important to continue to encourage Pakistan to undertake operations, and also to build durability into the Afghan system. It is unclear whether Pakistan will undertake military operations targeting Afghan Taliban strongholds on their soil, or whether, should they do so, those operations would be successful. Congress may wish to probe the following matters: The extent to which Pakistani reluctance to undertake military operations against the Afghan Taliban, particularly in the North Waziristan agency of the Federally Administered Tribal Areas (FATA), stems from a lack of will, a lack of the requisite capabilities, or some combination thereof. Different root causes might reasonably suggest different U.S. approaches. The extent to which durable stability can be achieved in Afghanistan while the Afghan Taliban continue to enjoy safe haven just across the border in Pakistan. Some suggest that progress made in developing the capacity and capability of Afghan security forces and governing structures may be able to compensate, to some extent, for slower progress against safe havens, by giving the Afghan state greater resistance to insurgent incursions. Most NATO observers suggest that "Afghanistan" is a critical test for the Alliance, including its ability to conduct major out-of-area missions, and its relevance to 21 st century security challenges, and many have argued that failure in Afghanistan could spell the end of the Alliance. For a number of practitioners, that line of thinking implies an imperative to make sure that the Alliance is successful in Afghanistan—which is not quite the same thing, logically, as making sure that Afghanistan itself succeeds. Congress may wish to consider: The extent to which a "successful NATO" is important in general for supporting U.S. national security interests. What it would take for the outcome in Afghanistan to be considered a "NATO success," and what if any differences that might entail from a strict pursuit of security, good governance and development for Afghanistan. Defense practitioners and analysts are likely to continue to seek lessons from U.S. military prosecution of the wars in both Afghanistan and Iraq to apply to future U.S. force shaping and sizing. Such conclusions, and they way they are applied, are likely to have a profound impact on how the Military Services fulfill their responsibilities, in accordance with Title 10, U.S. Code, to organize, man, train and equip military forces. Congress may wish to consider: The nature and scale of the capabilities required to successfully prosecute complex contingency operations like those in Afghanistan and Iraq. The relative importance of such capabilities compared with more conventional capabilities, and with capabilities designed to meet emerging threats such as cyber. The impact of the role played by contractors on force size requirements for such complex contingencies. Media reports from the field, including the powerful documentary Restrepo about the experiences of one infantry platoon in the Korengal Valley of Kunar province, underscore the intensity of many U.S. servicemembers' combat experiences. Those experiences stand out as all the more singular, against the backdrop of what many experts see as a growing civil-military divide in the United States. Many observers have wondered, "Who will these kids talk to, when they come home?" Congress may wish to consider: How well prepared the Military Services are to provide adequate support to servicemembers returning from Afghanistan and their families. Some experts have suggested that Afghanistan could prove a useful test case for the balanced, integrated application of all elements of U.S. national power. U.S. experiences in Afghanistan to date have yielded some innovations in inter-agency collaboration, including the "Senior Civilian Representative" model for civil-military relations, and the Afghan Threat Finance Cell (ATFC) model for multi-agency task forces. At the same time, the Afghanistan effort continues to highlight the persistence of distinct agency cultures that are not always inclined to give each other the benefit of the doubt. Congress may wish to consider these issues: The extent to which the U.S. footprint in Afghanistan, following both the civilian and military personnel surges, reflects an appropriate civil-military distribution of labor. The factors which make some multi-agency undertakings, such as the ATFC, very effective. Some observers have suggested that in the case of the ATFC, key factors may have included either the specificity, or the criticality to the overall campaign, of the group's mission. Whether the persistent "clash of cultures" among agencies might be ameliorated to some extent by programs that support shared training, shared educational experiences, and service in other agencies. The most appropriate balance of roles and missions among U.S. government agencies, including the contractor workforce, in future complex contingencies, and the extent to which more explicit guidance about that balance may be required. CRS Report RL33110, The Cost of Iraq, Afghanistan, and Other Global War on Terror Operations Since 9/11 , by [author name scrubbed]. CRS Report RL32686, Afghanistan: Narcotics and U.S. Policy , by [author name scrubbed]. CRS Report R41084, Afghanistan Casualties: Military Forces and Civilians , by [author name scrubbed]. CRS Report R40991, Private Security Contractors in Iraq and Afghanistan: Legal Issues , by [author name scrubbed]. CRS Report RL33834, Defense Logistical Support Contracts in Iraq and Afghanistan: Issues for Congress , by [author name scrubbed]. CRS Report RL30588, Afghanistan: Post-Taliban Governance, Security, and U.S. Policy , by [author name scrubbed]. CRS Report RS21922, Afghanistan: Politics, Elections, and Government Performance , by [author name scrubbed]. CRS Report R41307, Pakistan: Key Current Issues and Developments , by [author name scrubbed]. CRS Report R40747, United Nations Assistance Mission in Afghanistan: Background and Policy Issues , by [author name scrubbed]. CRS Report R40835, The Department of Defense's Use of Private Security Contractors in Afghanistan and Iraq: Background, Analysis, and Options for Congress , by [author name scrubbed]. CRS Report R40764, Department of Defense Contractors in Iraq and Afghanistan: Background and Analysis , by [author name scrubbed]. CRS Report R40699, Afghanistan: U.S. Foreign Assistance , by [author name scrubbed]. CRS Report R41484, Afghanistan: U.S. Rule of Law and Justice Sector Assistance , by Liana Sun Wyler and [author name scrubbed].

In the aftermath of the terrorist attacks of September 11, 2001, the United States launched and led military operations in Afghanistan in order to end the ability of the Taliban regime to provide safe haven to al Qaeda and to put a stop to al Qaeda's use of the territory of Afghanistan as a base of operations for terrorist activities. Many observers argue that in succeeding years, as U.S. and world attention shifted sharply to the war in Iraq, the Afghan war became the "other war" and suffered from neglect. The Obama Administration, however, has made the war in Afghanistan a higher priority, by giving it early attention, regularly conducting strategy reviews, and making significant additional commitments of civilian and military resources. By early 2011, senior leaders, including the Commander of NATO's International Security Assistance Force (ISAF), General David Petraeus, were pointing to discrete progress on the ground, though noting that such progress was still "fragile and reversible." In late 2010, NATO and the Afghan government agreed to pursue a key medium-term goal: the transition of lead responsibility for security to Afghans throughout the country by the end of 2014. The U.S. government has stated its intention to begin drawing down some U.S. forces from Afghanistan in July 2011, and also to maintain a long-term strategic partnership with Afghanistan beyond 2014. Strategic vision for Afghanistan is still, many would argue, a work in progress. President Karzai has consistently stressed the theme of "Afghan leadership, Afghan ownership." President Obama has consistently stressed the core goals of the United States: to disrupt, dismantle, and defeat al-Qaeda in Afghanistan and Pakistan, and to prevent their return. Yet for the U.S. government, fundamental issues remain unresolved. These include determining the minimum essential conditions required for Afghanistan itself to be able to sustain stability with relatively limited international support; defining the appropriate combination of U.S. efforts, together with other international resources, over time, required to achieve those minimum conditions; and balancing U.S. national security interests in Afghanistan and the region against other imperatives, in a constrained fiscal environment. This report, which will be updated as events warrant, describes and analyzes the key players in the war in Afghanistan; the strategic outlooks of the Afghan government, the U.S. government, and NATO; the threats to the security and stability of the Afghan state and its people; the major facets of the current effort: security, governance and anti-corruption, development, reconciliation and reintegration, and transition; mechanisms in place to measure progress; and critical issues that Congress may wish to consider further.

Numerous federal, state, and local agencies share responsibilities for regulating the safety of the U.S. food supply. Federal responsibility for food safety rests primarily with the Food and Drug Administration (FDA) and the Food Safety and Inspection Service (FSIS). FDA, an agency of the Department of Health and Human Services, is responsible for ensuring the safety of the majority of all domestic and imported food products (except for meat and poultry products). FSIS, an agency at the U.S. Department of Agriculture, regulates most meat, poultry, and processed egg products. The Subcommittees on Agriculture, Rural Development, Food and Drug Administration, and Related Agencies of the House and Senate Appropriations Committees appropriate funds for all of FDA and FSIS. The FY2016 Agriculture appropriation was enacted in December 2015, as part of an omnibus appropriation ( P.L. 114-113 ). Including enacted funding provided in the FY2016 Agriculture appropriation, combined appropriations and fees collected to cover food safety activities at FDA and USDA will total an estimated $2.5 billion in FY2016, more or less split between the two agencies ( Table 1 ). As such, funding (and staffing levels) between FDA and FSIS is disproportionate to the volume of the food supply that each agency regulates for safety. FSIS is responsible for roughly 10%-20% of the U.S. food supply, while FDA is responsible for the remaining 80%-90%. In recent years, congressional appropriators have increased funding for FDA food programs, more than doubling funding over the past decade. Largely, that has been in response to comprehensive food safety legislation enacted in the 111 th Congress, as part of the FDA Food Safety Modernization Act (FSMA, P.L. 111-353 ). FSMA was the largest expansion of FDA's food safety authorities since the 1930s. Among its many provisions, FSMA authorized increased frequency of inspections at food facilities, tightened record-keeping requirements, extended oversight to certain farms, and also mandated product recalls. It requires food processing, manufacturing, shipping, and other facilities to conduct a food safety plan of the most likely safety hazards, and to design and implement risk-based controls. It also mandates improvements to foodborne illness surveillance systems and increased scrutiny of food imports. FSMA did not directly address meat and poultry products under USDA's jurisdiction. FSMA also authorized additional appropriations and staff for FDA's food safety activities. It provided limited additional funding through industry-paid user fees. Funding for FSIS has remained mostly unchanged in recent years. Staffing levels differ substantially between the two agencies: FSIS staff number around 9,000 full-time equivalents (FTEs), while FDA's food-related staff, who cover more than food safety, number about 3,700 FTEs. Although Congress authorized funds to be appropriated in FSMA, it did not provide the full funding needed for FDA to perform these expanded activities under the law. After FSMA was signed into law in January 2011, concerns were voiced about whether there would be enough money to overhaul the U.S. food safety system and also whether expanded investment in this area was appropriate in the budgetary climate that has since prevailed. Prior to enactment, the Congressional Budget Office (CBO) estimated that fully implementing FSMA could increase net federal spending subject to appropriation by about $1.4 billion over a five-year period (FY2011-FY2015). This cost estimate covered activities at FDA and other federal agencies and did not include offsetting revenue from the collection of new user fees authorized under FSMA. During the debate leading up to FSMA, Congress considered imposing a new facility registration fee that might have offset some of the costs of fully implementing the requirements under the new law but ultimately such fees were not enacted. Prior to enactment, CBO estimated that about $240 million in new fees would be collected from FY2011-FY2015. Taking into account these new fees, CBO estimated that covering the five-year cost of new requirements within FDA, including more frequent inspections, would require additional outlays of $1.1 billion. FDA continues to implement regulations under FSMA. According to FDA, during the past five years (FY2011-FY2015), the agency has received increases to its funding base totaling $162 million for enacted changes to its food safety programs, after accounting for permanent base reductions due to sequestration and other differences from enacted amounts as reported by FDA. Including enacted increases for other food safety activities, FDA's budget authority for food safety and FSMA implementation has totaled $168.4 million ( Table 2 ). Previously, FDA reported that an additional $400 million to $450 million per year above the FY2012 base is needed to fully implement FSMA. Available FDA funding for FSMA implementation and other food safety activities has been lower than what FDA has said it needs to fully implement the law. FSMA also authorized an increase in FDA staff, which was expected to reach 5,000 by FY2014. FDA reports actual staffing levels at 3,700 FTEs in FY2015 ( Table 1 ). FDA officials have continued to claim that without additional funding, as requested by the Administration, there will be a significant funding gap for FSMA implementation. State agriculture officials and representatives of the National Association of State Departments of Agriculture (NASDA) have continued to push for full FSMA funding so that front-line state officials can prepare for implementation. Food industry groups have asked congressional appropriators for increased budget authority for FDA to fully implement FSMA, at levels requested by the Administration, in order to maintain consumer confidence. Public health and consumer safety groups, as well as victims of food-borne illness, have also continued to call for additional food safety funding. For FDA's food safety activities, including FSMA implementation, the enacted FY2016 Agriculture appropriation provides for a $104.5 million increase in budget authority, nearly that requested in the Administration's budget ($109.5 million). This increase in budget authority is more than double what the House and Senate FY2016 committee bills had previously proposed: The House committee bill ( H.R. 3049 ) would have increased funding for FSMA by $41.5 million, whereas the Senate ( S. 1800 ) would have increased funding by $45.0 million bill. Both the House and Senate committees had noted that these increases and previous increases provided since FY2011 "should assist the FDA in preparation for the implementation of FSMA prior to the effective dates of the seven foundational proposed rules." Both committee reports specify budgeted amounts for the following program areas: Inspection Modernization and Training; the National Integrated Food Safety System; Education and Technical Assistance for Industry; Technical Staffing and Guidance Development; Import Safety; and Risk Analytics and Evaluation. The enacted FY2016 appropriations provide $987.3 million for FDA's Foods program—one of the agency's primary program areas focused on food safety activities. This amount is identical to that requested by the Administration ( Table 1 ). FDA's Foods program covers the agency's food safety activities, as well as certain other food-related programs. Its budget in FY2015 accounted for about one-third of the agency's total appropriation. FDA's Foods program plays a major food safety role. The program has the primary responsibility for assuring that the nation's food supply, quality of foods, food ingredients, and dietary supplements (and also cosmetic products) are safe, sanitary, nutritious, wholesome, and properly labeled. In recent decades FDA's Foods program has had to adapt to the increasing variety and complexity of the U.S. food supply, including rising import demand for products produced outside the United States, as well as other market factors including emerging microbial pathogens, natural toxins, and technological innovations in production and processing. However, FDA's total budget for food safety programs and activities extends beyond the agency's Foods program, encompassing other food and veterinary medicine programs at FDA. As reported by FDA, the agency's budget for food safety activities totaled $1.2 billion in FY2015. This amount includes most of FDA's Food program funding, along with aspects of other FDA program areas covering food additives, antimicrobial resistance, nutrition labeling and dietary supplements, cosmetics, and all related user fees, as well as administrative expenses associated with FDA headquarters and rent-related expenses. Including the enacted FY2016 appropriation that provides for a $104.5 million increase in budget authority, this could raise the budget authority for FDA's food safety activities to more than $1.3 billion annually. These congressional appropriations would be augmented by existing (currently authorized) user fees. These fees, as authorized under FSMA, include food and feed recall fees, food reinspection fees, and voluntary qualified importer program fees. In recent years these fees have generated less than $18 million per year. In addition to FSMA-authorized user fees, the Administration had reproposed a series of new user fees totaling $167.7 million to cover the cost associated with food facility registration and inspection, food imports, international couriers, and food contact notifications. From FY2012 through FY2015, the enacted appropriations have not included these proposed user fees. Both the House and Senate reported bills explicitly did not include the Administration's proposed new fees. In addition, two members of the House Appropriations Committee, Representatives Rosa DeLauro and Sam Farr, have repeatedly called on the Administration to stop requesting additional user fees but rather to "request the resources [FDA] needs to fully implement [FSMA]." Industry representatives also continue to actively oppose such fees. User fees are generally established in law by the authorizing committees and not by appropriators. The enacted FY2016 Agriculture appropriation specifies that "none of the funds" made available be used to implement or enforce any FSMA requirements with respect to "the regulation of the distribution, sale, or receipt of dried spent grain byproducts of the alcoholic beverage production process, irrespective of whether such byproducts are solely intended for use as animal feed." This reflects language in the House committee report that ensures dry and wet spent grains used for animal food are regulated equally under FSMA. The enacted FY2016 appropriation also provides $5 million for competitive grants to state agencies for local educational agencies and schools to purchase equipment to serve healthier meals and improve food safety, among other goals. In addition, both the House and Senate committee reports include a number of provisions requiring FDA to take certain additional food safety actions and other related activities. For example, both House and Senate appropriators make a number of recommendations regarding FSMA and FDA's ongoing efforts to develop regulations and guidance pertaining to the various provisions of the law. Both committee reports include language regarding FDA's Food Safety Centers of Excellence in supporting FSMA implementation, and also broadly encourage FDA to form partnerships under FSMA. The House committee reports would provide $2.5 million for FSMA implementation and interagency coordination between FDA and USDA's National Institute for Food and Agriculture (NIFA). Both committees also express concerns about the FSMA rulemaking process and potential economic impacts. For example, the Senate committee report expresses concerns about how FDA will determine whether and to what degree a farm or food business is subject to FSMA regulation. Both committees include language regarding the FDA's scientific integrity policy and scientific study data. The House committee report reminds FDA to submit required reports on schedule and to submit overdue scheduled reports. The inclusion of these provisions reflect a range of concerns that have been expressed by Members of Congress as FDA has developed regulations under FSMA, as well as concerns about extensive delays in FDA's rulemaking and implementation of FSMA. The enacted FY2016 appropriation contains a number of provisions related to fish and seafood labeling and safety. It clarifies that the term "Alaskan pollock" or "Alaska pollock" refer solely to fish harvested in the state waters or Alaska or in adjacent areas as defined in law. Both the House and Senate reports had directed FDA to expedite consideration of whether it is appropriate to change the nomenclature on the Seafood List from "Alaska pollock" to "pollock," given ongoing concerns about misleading FDA labeling that allows pollock sourced from Russia or Korea to be sold as Alaskan pollock. Separately, the enacted law directs FDA to "not allow the introduction or delivery for introduction into interstate commerce of any food that contains genetically engineered salmon until FDA publishes final labeling guidelines for informing consumers of such content." It directs FDA to spend "not less than $150,000" to "develop labeling guidelines" and "implement a program" to inform consumers whether salmon for sale is genetically engineered. This provision pertains to actions recently taken by FDA, approving a new animal drug application concerning a genetically engineered Atlantic salmon (AquAdvantage salmon). The Senate report contains a series of provisions related to seafood safety and directs FDA to publish updated advice to pregnant women on seafood consumption. The Senate report further encourages FDA to address seafood economic integrity issues, particularly with respect to mislabeling of species, weights, and treatment. The enacted appropriation did not include a policy rider seeking to preempt or delay state laws that require mandatory on-package labeling of foods containing genetically engineered ingredients. The possible inclusion of such a provision in the omnibus was widely circulated in a series of press reports. The Coalition for Safe Affordable Food, an industry coalition led by the Grocery Manufacturers Association (GMA), had supported the inclusion of language in the omnibus that would address state laws regarding such labeling, consistent with provisions contained in a voluntary labeling bill, H.R. 1599 , that would preempt current and future state laws from requiring mandatory labeling of genetically engineered foods. H.R. 1599 passed the U.S. House of Representatives in July 2015. To date, a reported 30 states have introduced bills to label genetically engineered foods, including Maine, Vermont, and Connecticut. Some groups, such as the Center for Food Safety, have opposed legislative efforts to block states from implementing food labeling laws regarding genetically engineered ingredients. The Senate committee report also encourages FDA to resolve a dispute between the United States and the European Union over sanitation protocols on U.S. molluscan shellfish to expedite its audit of growing areas in Europe and to seek equivalency in sanitary standards to address ongoing trade concerns. The House committee further addresses illnesses associated with imported pet food, given FDA's estimate of approximately 5,000 reports (dating back to 2007) of pet illnesses, including pet deaths, which may be related to consumption of jerky treats. Many attribute these concerns to jerky pet treats imported from China. House appropriators are asking FDA to provide a summary of all activities associated with the agency's ongoing investigation and requesting semi-annual reports on the status of its investigation. House appropriators further direct FDA to work with local governments at high-volume ports of entry to develop processes to reduce the risk of foodborne illnesses and support the capacity of local officials in dealing with foodborne threats. The enacted FY2016 Agriculture appropriation contains a number of other policy riders for a range of programs related to FDA's Foods program. Not all of these provisions are directly related to FDA's food safety activities; some involve other FDA food programs. For example, the enacted law prevents the use of any funds to implement the 2015 "Dietary Guidelines for Americans" unless USDA and the Department of Health and Human Services (HHS) comply with specified requirements. Also, USDA is directed to engage the National Academy of Medicine to conduct a comprehensive study and to establish an advisory committee to further examine the issue. In addition, the enacted FY2016 appropriation prevents any funds from being used to implement policies "that would require a reduction in the quantity of sodium contained in federally reimbursed meals, foods, and snacks sold in schools" below a certain level set in regulation. Both committee bills expressed concerns about FDA's "continued focus on voluntary sodium reductions and recommendations to remove the Generally Recognized as Safe (GRAS) status of sodium." The appropriation also allows states to grant exemption to schools from certain whole grain requirements that took effect in July 2014. The enacted law also prevents any funds from being used to enforce FDA's final regulations regarding restaurant menu labeling until a later specified date. The enacted law further states that no partially hydrogenated oils (PHOs) shall be deemed unsafe or adulterated until FDA's formal phase-out starting in June 2018. This provision reflects concerns expressed by the House committee about FDA's recent determination that PHOs are no longer considered GRAS. The Senate committee report further expresses concern that FDA has not published the results of its study of consumer responses to nutrition labeling regarding added sugars. The enacted FY2016 Agriculture appropriation provides $1.015 billion to FSIS for FY2016, slightly more than the Administration's request of $1.012 billion but less than that enacted for FY2015 ( Table 1 ). Appropriations would be augmented by existing (currently authorized) user fees that FSIS estimates to be nearly $180 million per year. FSIS appropriations are divided into various subaccounts, and the enacted FY2016 appropriation provides for the following amounts: Federal ($898.8 million); State ($61.0 million); International Inspection ($16.7 million); Codex Alimentarius ($3.8 million); and the Public Health Data Communications Infrastructure System ($34.6 million). The enacted law does not include the Administration's reproposed user fee of $4 million to cover additional inspection costs associated with performance issues at inspected facilities. The enacted FY2016 Agriculture appropriation directs FSIS to continue to implement the catfish inspection program, as required under the 2014 farm bill ( P.L. 113-79 , §12106). The agency promulgated final regulations in December 2015 and is expected to begin to implement the new rule starting in March 2016. The explanatory text of the omnibus provides $2.5 million for FSIS to implement the program, as proposed in the Administration's budget. In addition, both House and Senate committee reports include a number of provisions requiring FSIS to take certain additional food safety actions and other related activities. The House report expresses concern about countering economic fraud and improving the safety of the U.S. seafood supply. Both committees encourage FSIS and USDA research agencies to support developing technologies that will provide rapid, portable, and easy-to-use screening of seafood at ports and at wholesale and retail locations. The House committee report further encourages innovation and modernization at slaughter and processing establishments regarding water-conserving technologies for hand-washing facilities. The Senate committee report directs FSIS to submit a report on its recruitment of inspection program personnel. Consistent with provisions contained in previous appropriation bills, the enacted law requires that FSIS have no fewer than 148 FTEs dedicated to the inspection and enforcement of the Humane Methods of Slaughter Act (HMSA). The Senate committee report further directs FSIS to ensure compliance with humane handling rules for live animals and to continue to provide certain annual reports to Congress. The enacted FY2016 Agriculture appropriation contains a number of policy riders regarding related USDA programs. It repeals mandatory country-of-origin-labeling (COOL) requirements for certain beef and pork products, following a recent World Trade Organization (WTO) dispute panel ruling siding with Canada and Mexico that could impose retaliation measures costing the United States more than $1 billion annually. COOL requirements for poultry, lamb, fish, and fruit, vegetables, and nuts were not repealed. The enacted appropriation further states that "none of the funds" may be used for horse slaughter and inspection under the Federal Meat Inspection Act. It also prevents the use of funds to purchase imported processed poultry products from China for use in the U.S. school lunch program and other feeding programs because of ongoing concerns about China's food safety programs. The enacted law also includes some other provisions that had been part of the House and Senate committee bills regarding USDA's rules governing the importation of beef from certain regions of Argentina and Brazil. Specifically, it includes language requiring USDA's Animal and Plant Health Inspection Service (APHIS) to "establish a prioritization process for APHIS to conduct audits or reviews of countries or regions that have received animal health status recognitions by APHIS," among other requirements. The enacted FY2106 Agriculture appropriation does not address the proposal in the Administration's FY2016 budget request to establish a single food agency to provide "focused, centralized leadership, a primary voice on food safety standards, and clear lines of responsibility and accountability that will enhance both prevention of and responses to outbreaks of foodborne illnesses." The Administration's proposal would transfer existing food safety functions into a new agency within HHS. This proposal differs from legislation introduced in the 114 th Congress as part of the Safe Food Act of 2015 ( H.R. 609 /DeLauro; S. 287 /Durbin). H.R. 609 and S. 287 would create a single independent Food Safety Administration (FSA) by transferring and consolidating the food safety authorities at FDA and USDA, as well as portions of agencies under the Department of Commerce. Some groups who have traditionally favored the creation of a single food safety agency oppose the Administration's plan because it calls for consolidation of food safety operations within HHS. Some contend HHS does not have the necessary expertise or adequate resources to manage an expanded food safety function; others claim USDA has a better record regarding food safety inspection and enforcement and worry that transferring these functions to HHS will lower standards for meat and poultry inspection. In general, large-scale reorganization of existing agencies is under the jurisdiction of the authorizing committees.

The Subcommittees on Agriculture, Rural Development, Food and Drug Administration, and Related Agencies of the House and Senate Appropriations Committees oversee the budgets of two principal federal food safety agencies at the Food and Drug Administration (FDA) and the Food Safety and Inspection Service (FSIS). FDA, an agency of the Department of Health and Human Services, is responsible for ensuring the safety of the majority of all domestic and imported food products (except for meat and poultry products). FSIS, an agency at the U.S. Department of Agriculture, regulates most meat, poultry, and processed egg products. Combined appropriations and fees collected to cover food safety activities at FDA and USDA totaled an estimated $2.4 billion in FY2015, more or less evenly split between the two agencies. FSIS is responsible for roughly 10%-20% of the U.S. food supply, while FDA is responsible for the remaining 80%-90%. In the past few years, appropriators have increased funding for FDA's Foods program activities—one of the agency's primary program areas focused on food safety activities—more than doubling it from $435.5 million in FY2005 to $903.4 million in FY2015. In addition, FDA's food safety activities receive other program-level funding as part of FDA's overall budget. (FDA's Foods program accounts for about one-third of FDA's total appropriation.) FDA reports that food safety funding at FDA totaled $1.2 billion in FY2015. The FY2016 Agriculture appropriation was enacted in December 2015, as part of an omnibus appropriations act (P.L. 114-113). For FDA's food safety activities, including Food Safety Modernization Act (FSMA, P.L. 111-353) implementation, the enacted FY2016 appropriation provides for a $104.5 million increase in budget authority, nearly matching that requested in the Administration's FY2016 budget ($109.5 million). This could raise the budget authority for FDA's food safety activities to more than $1.3 billion annually. The enacted FY2016 appropriations provide $987.3 million for FDA's Foods program, which is identical to the amount requested by the Administration. Separately, for FSIS, the enacted FY2016 Agriculture appropriation is $1.015 billion, above the Administration's requested appropriation ($1.012 billion). These congressional appropriations would be augmented by existing (currently authorized) user fees. The Administration's FY2016 request for FDA and FSIS proposed a series of new user fees to augment both agencies' food safety activities. As in previous budget debates, however, appropriators did not include any new user fee proposals as part of either agency's FY2016 appropriations. The FY2016 appropriation further contains a number of policy riders for a range of FDA and USDA food safety and other food-related programs. Increased funding for food safety activities at FDA is largely in response to additional responsibilities following the enactment of the FDA FSMA in the 111th Congress. FSMA was the largest expansion of FDA's food safety authorities since the 1930s. FSMA authorized additional appropriations and staff for the agency's food safety activities, and also provided limited additional funding through industry-paid user fees. However, according to FDA, during the past five years (FY2011-FY2015) it has received increases to its funding base totaling $168 million for enacted changes to its food safety programs. Previously, FDA had reported that an additional $400 million to $450 million per year above the FY2012 base is needed to fully implement FSMA. FDA officials continue to note that without additional funding there will be a significant funding gap for FSMA implementation. FSMA did not directly address meat and poultry products under USDA's jurisdiction.

In 2003, Class Action Fairness Acts were reintroduced in the House and Senate after previouslegislation had died in the Congress. (1) Generallysimilar in content, each bill -- H.R. 1115 , and S. 274 / S. 1751 (2) -- has threemain sections: (1) an amendmentto the federal diversity statute, 28 U.S.C. � 1332; (3) (2) a provision regarding removal; (4) and (3) aconsumer class action "bill of rights." (5) Section 1. Short Title (H.R. 1115 and S.274/S. 1751). (6) The Act may becited as the "Class ActionFairness Act of 2003." This section also states that it amends title 28 of the United States Code. Section 2. Findings and Purposes of the Act. Both bills set out Congress' findings describing the: (1) circumstances in which class actions arevaluable to our legal system; (2) abuses of the class action process that have harmed class memberswith legitimate claims and defendants that have acted responsibly, adversely affected interstatecommerce, and undermined public respect for our judicial system; (3) the manner by which classmembers have been harmed by a number of actions taken by plaintiffs' lawyers, which provide littleor no benefit to class members as a whole, including (i) plaintiffs' lawyers receiving large fees, whileclass members are left with coupons or other awards of little or no value, (ii) unjustified rewardsmade to certain plaintiffs at the expense of other class members, and (iii) confusing published noticesthat prevent class members from being able to fully understand and effectively exercise their rights;(4) abuses in class actions which undermine the national judicial system, the free flow of interstatecommerce, and the concept of diversity jurisdiction as intended by the framers of the United StatesConstitution, in that State and local courts are (i) keeping cases of national importance out of federalcourt, (ii) sometimes acting in ways that demonstrate bias against out-of-state defendants, and (iii)making judgments that impose their view of the law on other states and bind the rights of theresidents of those states. Section 3. Consumer Class Action Bill of Rights and ImprovedProcedures for Interstate Class Actions. These sections would add seven (five in H.R. 1115 ) new sections to 28 U.S.C. which are intended to provide greater protectionsfor class members. In particular, section 3 would add the following: Section 1711-Judicial scrutiny of coupon and other noncash settlements (Section 1712 in S. 274/S. 1751) (7) This provision is aimed at certain proposed settlements of class actions, in which the plaintiffs' lawyer and the defendant work out a settlement that provides class members with essentiallyvalueless coupons while rewarding the lawyers with substantial attorneys' fees. To address thisproblem, this section provides that a judge "may approve a proposed settlement under which theclass would receive noncash benefits or would otherwise be required to expend funds in order toobtain part or all of the proposed benefits only after a hearing to determine whether, and making awritten finding that, the settlement is fair, reasonable, and adequate for class members." S. 2062 would require that attorneys fees be based either on (a) the proportionate value of the coupons actually redeemed by class members or (b) the hours actually billed inpresenting the class action. Section 1712-Protection against loss by class members (Section 1713 in S. 274/S. 1751) This provision provides that a judge may not approve a class action settlement in which the class member will be required to pay attorney's fees that would result in a net loss to the classmembers until after a hearing to determine whether the nonmonetary benefits to the class outweigh(or substantially outweigh in S. 274 ) the monetary loss, and if so making a writtenfinding to that effect. Section 1713-Protection against discrimination based on geographic location (Section 1714 in S. 274/S. 1751; deleted in S.2062) This provision provides that a settlement may not award some class members a larger recovery than others solely because the favored members of the class are located closer to the courthouse inwhich the settlement is filed. Section 1714-Prohibition on the payment of bounties (Section 1715 in Section in S. 274/S. 1751; deleted in S.2062) This provision provides that a class action may not be settled on terms that award special and disproportionate bounties to the named class representative. A class representative will, however,be able to be compensated for his reasonable time or costs that were required to be expended infulfilling his obligations as a class representative. Section 1715-Class action definitions (Section 1711 in S. 274/S. 1751) (1) Class Action-The term is defined to include any civil action filed in federal district court under Rule 23 of the Federal Rules of Civil Procedure, as well as actions filed under similar rulesin state court that have been removed to federal court. (2) Class Counsel-The term is defined as "the persons who serve as the attorneys for the class members in a proposed or certified class action." (3) Class Members-The term is defined as "the persons who fall within the definition of the proposed or certified class action." (4) Plaintiff Class Action-The term is defined as "a class action in which class members are plaintiffs." (5) Proposed Settlement-The term is defined as "an agreement that resolves claims in a class action, that is subject to court approval and that, if approved, would be binding on the classmembers." Section 1716-Clearer and simpler settlement information (In S. 274/S. 1751 only; see Section 7 in H.R. 1115-Enactment ofJudicial Conference Recommendations) This provision provides that class notices should present information in "plain English." The notices must be designed to attract the attention of class members by stating at the outset, in 18-pointtype, that the recipient is a plaintiff in a class action lawsuit and has legal rights that are affected bythe settlement described in the notice. In addition, the notice must offer: (A) the subject matter of the class action; (B) the members of the class; (C) the legal consequences of being a member of the class; (D) detailed information about any proposed settlement, (i) including a description of thebenefits for class members, (ii) the rights that class members will lose or waive through settlement,(iii) the obligations imposed on the defendant, and (iv) the amount of attorney's fee counsel will beseeking or, if not possible, a good faith estimate of such fee; (E) any other material matter. (8) S. 2062 would eliminate what was considered a complicated set of burdensome notice requirements for notice to potential class members and preserve the current federal law relatedto class notification. Section 1717. Notifications to appropriate federal and state officials (S.274/S. 1751 only) This provision requires defendants to notify the appropriate state and federal official of the particulars of any class action settlement and delays the effective date of the settlement until 90 daysafter they have done so. The appropriate federal officials include the Attorney General and in thecase of financial institutions the federal regulatory authorities. State officials entitled to noticeinclude the authorities with regulatory jurisdiction over a defendant in any state in which anymember of the class resides. Section 4. Federal District Court Jurisdiction of Interstate ClassActions. Article III of the Constitution protects out-of-state litigants against theprejudice of local courts by allowing for federal diversity jurisdiction when the plaintiffs anddefendants are citizens of different states. However, under current law, federal diversity jurisdictionfor a class action does not exist unless every member of the class is a citizen of a different state fromevery defendant, and every member of the class is seeking damages in excess of $75,000. (9) Thissection in both bills would change the law by providing additional protection for out-of-state litigantsby creating a minimal diversity rule for class actions and by determining satisfaction of theamount-in-controversy requirement by looking at the total amount of damages at stake. Under the proposals, federal district courts receive original jurisdiction over any class action in which the amount in controversy, exclusive of interest costs, exceeds $5,000,000 and in which(A) "any member of a class of plaintiffs is a citizen of a State different from any defendant;" (B)"anymember of a class of plaintiffs is a foreign state or a citizen or subject of a foreign state and anydefendant is a citizen of a State;" or (C) "any member of a class of plaintiffs is a citizen of a Stateand any defendant is a foreign state or a citizen or subject of a foreign state." This rule holds trueif less than one-third of the plaintiffs and the primary defendants come from the state where the suitis filed; has no application if two-thirds or more of the plaintiffs and the primary defendants comefrom the state where the suit is filed; and applies at the discretion of the federal court if more thanone-third but less than two-thirds of the plaintiffs and the primary defendants come from the statewhere the suit is filed. (10) In the exercise of their discretion, the federal courts must consider: (11) -- "Whether the claims asserted involve matters of national interstate interest" -- "Whether the claims asserted will be governed by laws other than those of the State in which the action was originally filed" -- "In the case of a class action originally filed in a State court, whether the class action has been pleaded in a manner that seeks to avoid Federal jurisdiction" -- "Whether the number of citizens of the State in which the action was originally filed in all proposed plaintiff classes in the aggregate is substantially larger than the number of citizensfrom any other State, and the citizenship of the other members of the proposed class isdispersed among a substantial number of States" -- "Whether 1 or more class actions asserting the same or similar claims on behalf of the same or other persons have been or may be filed." This section contains a similar class action definition as section 3, defining a class action as (A) any civil action filed pursuant to rule 23 of the Federal Rules of Civil Procedure or a similar statestatute or rule. It also deems to be class actions certain other types of civil actions: (1) an actionseeking monetary relief on behalf of persons who are not parties to the action (unless the namedplaintiff is the state attorney general); or (2) an action that asserts claims seeking monetary relief onbehalf of 100 or more persons, in which the claims involve common questions of law or fact and areto be jointly tried. (12) Again, in order that actions lacking national implications remain in state court, the minimal diversity rules does not apply in any action where "(A) two-thirds or more of the members of allproposed plaintiff classes in the aggregate and the primary defendants are citizens of the State inwhich the action was originally filed; (B) the primary defendants are States, State officials, or othergovernmental entities against whom the district court may be foreclosed from ordering relief; or (C)the number of members of all proposed plaintiff classes in the aggregate is less than 100." Section 5. Removal of Interstate Class Actions to Federal DistrictCourt. This section would allow class action lawsuits to be removed from statecourt to federal court, either by a defendant or by any plaintiff who is not a named or representativeclass member. (13) Section 6. Appeals of Class Action Certification Orders (H.R.1115 only). This section provides that orders granting or denying classcertification may be appealed if notice of appeal is filed within 10 days after entry of the order. Italso provides that discovery shall be stayed during the pendency of the appeal unless the judge findsthat specific discovery is necessary to preserve evidence or to prevent undue prejudice to a party. Section 6. Report on Class Action Settlements (Section 6 in S.274/S. 2062). This provision directs the Judicial Conferenceof the United States to report to the Judiciary Committees of the Senate and House ofRepresentatives within 12 months of the enactment with recommendations on the best practices tofurther ensure fairness in class action settlements with regard to class members and attorneys' feeswhich should appropriately reflect the extent and success of the attorneys' efforts. Section 7. Effective Date (Section 8 in H.R. 1115). This section provides that the legislation applies to any civil actioncommenced on or after the date of enactment. In the case of H.R. 1115 it also appliesto civil actions filed but not certified as class actions prior to enactment. An amendment adoptedby the House Judiciary Committee in reporting H.R. 1115 would apply the terms of thebill to some pending class action suits thereby causing them to be moved to federal courts thuschanging the original language that would make the legislation effective only after the bill wassigned by the President. Section 7. Enactment of Judicial Conference Recommendations(H.R. 1115 and S. 2062). This section, deferring the proposedclass action notification reforms, would put into effect the pending Federal Rule of Civil Procedure23 amendments simultaneously with the enactment of the bill should the bill pass prior to December1, 2003. Section 8. Effective Date (H.R. 1115 only). This section provides that the provisions apply to: (1) civil actionscommenced on or after the date of enactment of the bill, and (2) any civil action commenced beforethe date of enactment in which a class certification order is entered on or after the date of enactment. It further provides that in cases commenced before the date of enactment, the 30-day removal periodwould begin on the date on which the class certification order is entered by a state court. Section 8. Rulemaking Authority of Supreme Court and JudicialConference (S. 2062 only). This section provides the authority for theJudicial Conference and the Supreme Court to propose and prescribe the general rules of practiceand procedure for the federal courts. Section 9. Effective Date (S. 2062 only). This section provides that the legislation applies to any civil actioncommenced on or after the date of enactment. On June 12, 2003, the House of Representatives passed H.R. 1115 by a vote of 253-170. (14) As amended on the floor of theHouse, the bill would allow class actions to be movedfrom state to federal court if fewer than one-third of the plaintiffs in a case are from the same stateas the defendant, and the claims are at least $5,000,000 or more. (15) These amendments will broadenthe category of class action cases that would remain in state courts in two ways: (16) (1) the amendmentraises the aggregate amount in controversy required for federal court jurisdiction from $2,000,000and to $5,000,000, and (2) it would allow federal courts to exercise their discretion to returnintrastate class actions in which local law would apply after weighing five factors. This discretionwould only apply when more than one-third and less than two-thirds of the plaintiffs and the primarydefendants are citizens of the same state where the suit was filed. If less than one-third are citizensof the same state, the case would automatically be eligible for federal court jurisdiction under thenew diversity Rule 23 of the Federal Rules of Civil Procedure in H.R. 1115. Similarly,if more than two-thirds and the primary defendants are citizens of the same state where the case isfiled, it would not be subject to the new rules in the bill. On October 17, 2003, the Senate began the consideration of S. 274 . Everything following the enacting clause was struck and the text of S. 1751 (17) was inserted in lieuthereof and considered as original text for the purpose of amendment. (18) On October 21, 2003, Senator John Breaux introduced S. 1769 , "National Class Action Act of 2003," as an alternative bill which is considered to be much broader than S. 1751 . (19) On October 22, 2003, the Senate rejected, by one vote, (20) an attempt to limit debate on S. 1751 in the form of a cloture motion which in effect narrowed the chances forenactment of class action reform at this time. On December 15, 2003, Senator Dodd proposed Senate Amendment 2232 to S. 274 which was introduced in the Senate on January 20, 2004, (21) by Senator Grassley. Similarlanguage to that contained in Senate Amendment 2232 is also reflected in S. 2062 (theClass Action Fairness Act of 2004) which was introduced in the Senate on February 10, 2004 (22) andplaced on the Senate Calendar on February 11, 2004. (23) An attempt was made by the proponents of S. 2062 to move the bill on June 1, 2004, but it was withdrawn due to lack of support to end debate or for cloture which would haverequired 60 votes. (24) On July 8, 2004, the proponents of S. 2062 again failed to get 60 votes needed to proceed for further consideration of the bill. (25) The vote was 44-43. (26) This latest action willprobablyaid the demise of the legislation for this legislative year. Although balanced by the enhanced class member protection features, the jurisdictional and removal components of H.R. 1115 and S. 274 are much like theirantecedents in the 106th and107 th Congresses. Proponents argue: Class action process has been manipulated in recent years; (27) U.S. companies have been flooded with labor and employment litigation, much of which has been entirely without merit; (28) Proposed changes in the law will increase sanctions against lawyers who bring frivolous claims to court. (29) Opponents object that they: Would clog an already overburdened federal court system and slow the pace of certifying class action cases; (30) Are inconsistent with the principles of federalism; (31) Would make consumer and public interest litigation more difficult to bring, more expensive, and more burdensome. (32)

The House has passed H.R. 1115 and the Senate Judiciary Committee has reported out S. 274 (both styled the Class Action Fairness Act of 2003). Each (1) creates aconsumer class action bill of rights, and (2) allows the federal courts to try a greater number of largeclass action law suits (100 plaintiffs or more) arising out of state law where the parties come fromdiverse states. Current law requires that each plaintiff have suffered $75,000 in damages and thatthere be complete diversity before a state lawsuit may be filed in or removed to federal court, thatis to say all of the plaintiffs must be citizens residing in different states than all of the defendants. The bills ease the complete diversity requirement and eliminate the requirement of individualdamages of $75,000 as long as the damages suffered by the class as a whole is $5 million or more. The consumer class action bill of rights in each proposal contains safeguards which provide for judicial scrutiny of coupon and other noncash settlements, protection against a proposed settlementthat would result in a net loss to a class member, protection against discrimination based upongeographic location, and prohibition on a class representative receiving a greater share of the award. S. 274 / S. 1751 alone includes within its bill of rights explicit provisions for "plain English" settlement notices and settlement notifications for state and federalauthorities. H.R. 1115 instead defers to the notice reforms recommended in theamendments to Rule 23 of the Federal Rules of Civil Procedure forwarded to Congress by theSupreme Court on March 27, 2003. H.R. 1115 alone permits pre-trial review of a lowerfederal court's grant or denial of class certification and makes its provisions retroactively applicableto suits filed before the date of enactment (but prior to class certification). On October 21, 2003, Senator John Breaux introduced S. 1769 as an alternative bill which is considered to be much broader than S. 1751 . On December 15, 2003, Senator Dodd proposed Senate Amendment 2232 to S. 274 , introduced in the Senate on January 20, 2004, by Senator Grassley. Most of these amendmentsare also incorporated into S. 2062 (the Class Action Fairness Act of 2004) which wasintroduced by Senator Grassley in the Senate on February 10, 2004. On July 8, 2004, S. 2062 failed to get the 60 votes needed to proceed for further consideration which probably will aid the demise of the legislation for this legislative year.

Despite the prominence of the U.S.-Japan alliance in America's overall strategic posture in the Asia-Pacific region, local concerns about the U.S. military presence on Okinawa have challenged the management of the alliance for decades. In recent years, Okinawan resistance has crystallized around the relocation of a U.S. Marine Corps Air Station. The Japanese islands serve as the most significant forward-operating platform for the U.S. military in the region. With the United States pledging to rebalance its defense posture towards Asia, the uncertainty surrounding the medium and long-term presence of American forces on Okinawa remains a critical concern for national security decision-makers. Many regional analysts have posed the question of whether this issue is at its core simply a dispute over real estate, or if the controversy threatens the fundamental sustainability of the alliance. Some Okinawans contend that the U.S. military presence on the island constitutes a form of discrimination by Washington and Tokyo and the suppression of local democratic expression. The relocation of Marine Corps Air Station Futenma (MCAS Futenma) is the largest and most problematic part of a broad overhaul of the stationing of U.S. forces in Japan. A 2006 agreement between the U.S. and Japanese governments to relocate the Futenma base from its current location in the crowded city of Ginowan to Camp Schwab in Henoko, a less congested part of the island, was envisioned as the centerpiece of a planned realignment of U.S. forces. The anticipated air station is often referred to as the Futenma Replacement Facility (FRF). The arrangement was designed to reduce the local community's burden of hosting a loud air base that has generated safety concerns and, eventually, to return control of the Futenma land to local authorities as a way to boost economic development in the area. In addition, the relocation would have triggered the transfer of roughly 8,000 marines and their dependents from Japan to new facilities in Guam. Japan agreed to pay around 60% of the costs, then estimated at $10.3 billion. The agreement was struck at a moment when the bilateral relationship was strong, but implementation has been a struggle, due largely to political turmoil in Tokyo and resistance in Okinawa. In the watershed 2009 elections, the Democratic Party of Japan (DPJ) defeated the Liberal Democratic Party (LDP), which had held power nearly continuously since the mid-1950s. Incoming DPJ Prime Minister Yukio Hatoyama had pledged in his campaign to close MCAS Futenma and remove its functions from Okinawa. During Hatoyama's term, he examined a number of possible options for resolving the Futenma conundrum but ultimately discarded them and came to support the Henoko FRF site. Since then, successive prime ministers have endorsed the 2006 plan, but many Okinawans now insist on closure of Futenma and relocation outside the prefecture. In addition, the U.S. Congress raised major concerns about the ballooning costs of moving the Marines to Guam and for several years blocked funds dedicated to the Marine Corps realignment. In April 2012, the United States and Japan officially adjusted the policy by "de-linking" the transfer of marines to Guam with progress on the new base in the Henoko area of Camp Schwab. The announcement also stipulated that arrangements to return some land used by U.S. forces would not be contingent on the base relocation. As under the previous plan, about 9,000 U.S. marines are slated be transferred to locations outside of Japan: 5,000 marines to Guam, 1,500 to Hawaii, and 2,500 on a rotational basis to Australia. Alliance officials described the move as in line with their goal of making U.S. force posture in Asia "more geographically distributed, operationally resilient, and politically sustainable." In December 2013, then-Governor of Okinawa Prefecture, Hirokazu Nakaima, contradicted his campaign pledges and approved the central government's request to create a large landfill offshore of Camp Schwab at the Cape Henoko site, effectively approving construction of the FRF. Prime Minister Shinzo Abe promised to accommodate the governor's requests for a large financial support package, early closure of the MCAS Futenma and Makiminato Service Area (See Figure 1 ), and re-negotiation of certain privileges for U.S. military personnel. The apparent determination of Abe to follow through on the relocation of Futenma, coupled with Abe's strong political foundation for remaining in office, also may have been a major factor in Nakaima's decision. In the November 2014 Okinawa gubernatorial election, the incumbent governor Hirokazu Nakaima lost to his former political ally, who ran on a platform opposing construction of the Futenma replacement facility (FRF). The new governor, Takeshi Onaga, a former member of the conservative LDP, built a broad political coalition of liberals and conservatives by emphasizing his opposition to the base relocation. Since taking office, Governor Onaga has pursued a multi-pronged approach to halt construction of the FRF and dissuade Tokyo and Washington from proceeding with their plan (see section " Governor Onaga's Multi-Pronged Struggle against Futenma Relocation "). His political stance has reenergized the anti-base movement on Okinawa and renewed the political contestation over the U.S. military presence on Okinawa and the fate of the Futenma base. Onaga has declared his intent to use all the legal and administrative authorities at his disposal to prevent the construction of the FRF. The Okinawa prefectural government and the central government have initiated legal proceedings against each other, and observers expect that the byzantine process of rulings, suspensions, lawsuits, and counter-suits could continue for a year or more. Observers believe that it is highly likely that the central government eventually will be able to override Governor Onaga's objections, but the administrative and legal processes could create significant delays for the project and dredge up doubts about the viability of the FRF plan. Construction of the new facility will involve challenges for both law enforcement officials and engineers working on the project. Reportedly, the offshore runways will require 21 million cubic meters of soil to create 395 acres of reclaimed land. The bulk of this soil will be delivered by ship from other areas of Japan. (In an attempt to prevent or delay the construction of the FRF, the Okinawa prefectural legislature passed an ordinance that requires imported soil to undergo special screening and allows the governor to cancel the import of soil.) Japanese and U.S. officials have said that construction of the FRF would be finished in April 2022 at the earliest. A slightly larger offshore runway project at the Iwakuni Marine Corps base in mainland Japan took 13 years to complete, but the Henoko land reclamation project could proceed faster than the Iwakuni project if Tokyo commits more administrative attention and resources to it. Abe Administration officials have repeatedly declared their intent to return MCAS Futenma to local control as soon as possible, and the most plausible means of achieving that goal under the existing agreement would be to accelerate construction of the Henoko FRF. Construction of the new base will also be a law enforcement challenge for Japan. The ability and will of the Okinawan Prefectural Police to thwart determined anti-base protesters and enable smooth construction could be severely tested. The Japanese Coast Guard has been called into service to prevent sea-going protestors in kayaks from interfering with the land reclamation operation. The mayor of the local municipality (Nago City) has declared that he will not cooperate whatsoever in construction of the Henoko FRF (see section " Nago City Political Dynamics "), which could bring additional inconveniences and logistical delays. Okinawa's location has become more strategically important over the past few decades. (See Figure 2 .) In the post-World War II environment, Japan's northern islands were seen as a bulwark to contain the Soviet Union's Pacific fleet. Post-Cold War security threats include the potential flashpoints of the Korean Peninsula and the Taiwan Strait, but more recent assertiveness by the Chinese People's Liberation Army Navy (PLAN) in the South China Sea and East China Sea has drawn growing attention from Department of Defense (DOD) planners. The U.S. military presence in Japan, and particularly Okinawa, allows it to fulfill its obligations under the 1960 Treaty of Mutual Cooperation and Security to not only defend Japan but to maintain security in the Asia-Pacific region. The forward-deployed presence of the U.S. Air Force and Navy also allows for response to humanitarian disasters in the region, as demonstrated by the rapid U.S. assistance after the March 2011 earthquake and tsunami in northeastern Japan and after the November 2013 super-typhoon in the Philippines. The deployment of MV-22 "Osprey" tilt-rotor aircraft to Okinawa reportedly has enhanced the operational capability of the Marines based there, because MV-22s have a greater range and faster cruising speed than the helicopters they replaced. The intensification of the territorial dispute between Japan and China over small islands in the East China Sea has provided another rationale for the approximately 19,000 marines stationed on Okinawa. The main island of Okinawa is only 270 nautical miles from the disputed islets, called Senkaku in Japan, Diaoyu in China, and Diaoyutai in Taiwan. The potential role of U.S. Marines in defending and/or retaking uninhabited islands from a hypothetical invasion force is unclear, but the operational capabilities of the Okinawa-based Marines are aligned with the needs of such a mission. Although most strategists agree on the importance of Okinawa's location for U.S. security interests in East Asia, there is less consensus on the particular number of marines necessary to maintain stability. For example, two prominent analysts suggested a rethinking of U.S. military basing in light of cuts to the U.S. defense budget and Okinawan obstacles; they argue that leaving a force of 5,000-10,000 marines on Okinawa while also pre-positioning supply vessels in Japanese waters and bringing most of the marines home to California would amply serve U.S. rapid response and deterrence needs. Defense officials continue to assert the need for substantial numbers of U.S. marines to be positioned in Asia, but have offered a degree of flexibility in their exact location; current plans would deploy marines on a rotational basis through Guam and Australia. Congressional concerns, as discussed below, have focused on cost and implementation, but have not argued that the Marine presence itself is unnecessary. One negative aspect of Okinawa's proximity to the Asian continent is its vulnerability to missile attack. Harvard University professor and former defense official Joseph Nye observed in an interview in December 2014, "Fixed bases are still of value. But with the increase in Chinese ballistic missile capabilities, it means you have to be aware of their vulnerability, and if you put all your eggs in one basket, you are increasing your risks." Reducing the vulnerability of U.S. military facilities to air and missile attack, often referred to as "hardening," has become a central theme for Congress when considering priorities for overseas military construction. The attitudes of native Okinawans toward U.S. military bases are generally characterized as negative, reflecting a tumultuous history and complex relationships with "mainland" Japan and with the United States. Okinawans are ethnically distinct from most Japanese, which may heighten a sense of discrimination. The Ryukyu island chain, once a semi-autonomous kingdom ruled from Okinawa, was first officially incorporated into the Japanese state around the time of the Meiji Restoration in the late 19 th Century. These southern islands were largely neglected by the Japanese central government until World War II, when they became bloody battlegrounds in the final stages of the "island-hopping" campaign waged by the U.S. military. The Battle of Okinawa from early April through mid-June 1945 resulted in the deaths of up to 100,000 Japanese soldiers and 40,000-100,000 civilians, many of whom were forced by the Imperial Japanese Army to commit mass suicide. A total of 12,281 Americans were killed, the highest total of any battle in the Pacific campaign. Many Okinawans remember these few months as a dark episode in a long history of the Japanese central government sacrificing Okinawa for the good of the mainland. The United States maintained possession of the Ryukyu islands in the peace settlement ending World War II. The U.S. military appropriated existing Japanese military installations on Okinawa and built several more large bases on the strategically located island. The United States paid locals for the acquired land, but in some cases this purchase reportedly involved deception or outright coercion, using bulldozers and bayonets to evict unwilling residents. During the period of American administration, Okinawans had no political authority or legal redress for crimes committed by servicemembers—though the worst crimes were prosecuted through court martial. The Korean War and Vietnam War eras brought an influx of thousands of additional U.S. soldiers and added grievances to local residents, along with a major increase in revenue for businesses catering to GIs. After the reversion of Okinawa to Japanese sovereignty in 1972, the pattern of crimes by American servicemembers abated, but was nevertheless a major concern for the local population. The Japanese central government took measures to placate Okinawans, for example by increasing the rent paid to owners of land on U.S. military bases and by prosecuting eligible crimes in Japanese courts. Despite these steps and increased funds for prefectural development, many Okinawans continue to perceive themselves as the victims of policies drafted in Tokyo and Washington with little regard for their communities. The views of Okinawans are far from monolithic. Many residents of base-hosting communities appreciate the economic benefits, whether as employees on the bases, as local business owners who serve American customers, or as landowners of base property. Some locals resent the actions of outsiders who focus on environmental issues at the expense of economic development. Pro-relocation authorities point to the village of Henoko (in Nago City municipality) as an example of local citizens who are more in favor of additional U.S. facilities than the broader population, though this may have to do with the monetary compensation that Tokyo provides to specific host communities. There is also a "generation gap" between older Okinawans with personal memories of past incidents and younger residents who may not be as involved in the anti-base activist movement. There appear to be no reliable opinion polls that might illuminate the extent of the opposition to U.S. presence across demographic categories. The anti-base movement remains strong and vocal in Okinawa. Opposition to U.S. military bases derives from two main areas: (1) concerns that the American presence degrades the local quality-of-life with regard to personal safety, noise, crime, and the natural environment; and (2) pacifism and anti-militarism. These two strands are often interwoven in the rhetoric of the anti-base movement, but not all residents oppose the U.S. military presence on principle. There are those who support the U.S.-Japan security alliance while objecting to the significant and disproportionate "burden" imposed on Okinawa. These long-held grievances burst into the forefront of Okinawan political life after a 12-year-old girl was raped by three U.S. servicemembers in 1995, inciting a massive anti-base protest. In response, the bilateral Security Consultative Committee (composed of the U.S. Secretaries of State and Defense and their Japanese counterparts, also known as the "2+2") established the Special Action Committee on Okinawa (SACO) to alleviate the burdens of the base-hosting communities. SACO led to concrete changes that improved conditions on Okinawa, but these propitiatory moves were offset by a number of distressing incidents; for example, a U.S. military helicopter crashed on the campus of Okinawa International University near MCAS Futenma in August 2004. Ultimately, the unwillingness of Tokyo and Washington to close Futenma without a replacement facility has fostered the perception that the two governments are discriminating against Okinawans. Media outlets in Okinawa contribute to this narrative by viewing many developments in the base negotiations as further evidence of mainland discrimination. The two main daily newspapers, the Ryukyu Shim po and the Okinawa Times , are generally seen as left-leaning and deeply unsympathetic to Tokyo's security concerns. For example, the U.S. military's humanitarian response to the devastating March 11, 2011, tsunami and earthquake in northern Japan received scant coverage in local Okinawan newspapers compared to the mainland press. In its reporting on the 2014 summit between Prime Minister Abe and President Obama, rather than applaud their intention to reduce the "burden" of U.S. bases on Okinawans, the Ryukyu Shimpo drew attention to the phrase "long-term sustainable presence for U.S. forces" and criticized its implication of a permanent military presence on Okinawa. The concerns of environmental groups stem mainly from the possible degradation of natural habitats caused by construction of the proposed FRF at Henoko. The offshore landfill design for the runways could involve the destruction of coral reefs and could have a negative impact on the health and biodiversity of Oura Bay ecosystems. Activists are particularly concerned with the plight of the dugong, a manatee-like endangered species. The environmental impact study conducted by the Japanese government concluded that the proposed base construction would not do significant damage to the dugong's natural environment, but academics at Okinawan universities and elsewhere have disputed the report's findings. In February 2015, a U.S. federal judge dismissed a lawsuit against the DOD that sought to prevent construction of the FRF on the grounds that it would harm the dugong. Another environmental concern is the impact of toxic substances stored on U.S. bases, largely a legacy of chemical storage during the Vietnam War era. Attempts to make the U.S. presence in Okinawa more sustainable have been underway for years. As mentioned in the previous section, the 1996 SACO arrangement included measures "to realign, consolidate and reduce U.S. facilities and areas, and adjust operational procedures of U.S. forces in Okinawa consistent with their respective obligations under the Treaty of Mutual Cooperation and Security and other related agreements." The 1996 SACO Final Report mandated the release to Okinawa of thousands of acres of land that had been used by the U.S. military since World War II, including MCAS Futenma. (See Figure 1 .) Although the work was slated to be completed within a year, political gridlock and local resistance prevented significant progress on the agreement, a pattern that would repeat itself on a range of Okinawa basing issues in subsequent years. Efforts to adjust the U.S. military presence in Japan were given new impetus in 2002 by the Defense Policy Review Initiative (DPRI), a bilateral initiative to enhance the U.S.-Japan security alliance. Through the DPRI talks, the United States and Japan reviewed U.S. force posture, examined opportunities for practical cooperation, and developed common strategic objectives. The 2005 Security Consultative Committee (SCC) joint statement listed 19 areas for alliance transformation, such as improving interoperability, shared use of military and civilian facilities in Japan, and cooperation on ballistic missile defense. The 2005 statement endorsed the realignment of U.S. marines from Okinawa to Guam and the relocation of Futenma Air Station operations to a new base on the shoreline of Cape Henoko. The implementation plan for the DPRI is laid out in the May 2006 "U.S.-Japan Roadmap for Realignment Implementation," a document that was endorsed in three subsequent SCC joint statements. The Roadmap established the "linkages" that had been a central point of debate until 2012: (1) that the Third Marine Expeditionary Force (III MEF) relocation from Okinawa to Guam was dependent on "tangible progress toward completion" of the Henoko base at Camp Schwab and Japanese financial contribution to the development of facilities on Guam; and (2) that land return for areas south of Kadena Air Base was dependent upon completion of the relocation of III MEF personnel and dependents from Futenma to the FRF and Guam. In April 2012, Washington and Tokyo signed an agreement that endorsed the Henoko FRF but removed the linkage between construction of a new facility and relocation of the Marines to Guam. Since the U.S. and Japanese governments first agreed to relocate MCAS Futenma in the 1990s, outside experts have proposed several alternative plans. Some proposals have called for a similar runway in another part of Okinawa Prefecture. Other concepts would entail building a large heliport, instead of the offshore runways, on an existing U.S. base. One option that periodically has received serious attention is to integrate the functions of MCAS Futenma into the large Kadena Air Base on Okinawa. There have also been proposals to construct a wholly offshore facility, either floating or supported by stilts. According to reports, the U.S. and Japanese governments considered many of these alternatives before settling on the current Henoko FRF plan as the best option. The controversy surrounding relocation of MCAS Futenma has overshadowed progress in implementing other elements of the DPRI. With the exception of the slow progress on the FRF and movement of Marines to Guam, the initiative has been largely successful. The U.S. Navy's Carrier Air Wing Five (CVW-5) is being relocated from Naval Air Facility Atsugi to Marine Corps Air Station Iwakuni to reduce safety risks and noise. The Japanese government built a new offshore runway at the Iwakuni base, which began handling civilian flights in December 2012. The squadron of KC-130 cargo aircraft relocated to MCAS Iwakuni from Futenma in 2014. Increased joint training activities and shared use of facilities has improved the interoperability of the U.S.-Japan alliance. The Japanese military, known as the Self-Defense Forces (SDF), conducts joint exercises overseas with the U.S. military. Japan will have access to new training facilities on Guam and the Northern Marianas Islands as a result of a 2009 bilateral agreement. The two allies continue to discuss the potential costs and benefits of increasing the number of shared-use military facilities, which some observers believe would change the image of American troops as foreign occupiers. The U.S. and Japanese governments have implemented measures to mitigate some impacts of the U.S. military presence for Okinawan residents. The DPRI initiated several of these actions, whereas more recent steps were developed on an ad hoc basis. The Aviation Training Relocation program reduces noise pollution for local residents by having U.S. aircraft conduct training in Guam, away from crowded base areas. The United States has increased access for local fisherman to the ocean training area known as "Hotel/Hotel" off the eastern coast of Okinawa. Based on the DPRI and SACO agreements, the U.S. military has turned several plots of land over to the Okinawan local authorities, including Yomitan Auxiliary Airfield, Sobe Communications Site, and Gimbaru Training Area. A 125-acre plot, formerly the West Futenma Housing area, reverted to local control in April 2015. Several more areas of present-day U.S. military facilities are approved for expedited return in the near future. A 2015 report by former U.S. military officers recommends accelerating the schedule of land returns, especially from Camp Kinser, in order to reduce resentment toward the U.S. military presence. In response to Governor Nakaima's request in late 2013 for advance environmental screening of land schedule for reversion, the United States and Japan reached an environmental stewardship agreement to allow Japanese inspectors early access to those facilities. A rash of off-base criminal incidents involving U.S. servicemembers in 2012 spurred U.S. military leaders in Japan to institute new conduct policies for all U.S. troops in Okinawa. These restrictive policies likely played a role in the significant drop since 2013 in reported crimes linked to U.S. military personnel (including dependents and DOD civilian employees) on Okinawa. In the postwar period, alliance security arrangements largely have been negotiated between political-military elites in Washington and Tokyo, often ignoring local concerns. Even as democratic practices deepened and the anti-base movement became more empowered, many leaders in Tokyo were unable or unwilling to invest enough political capital to reduce the strains of hosting foreign troops on Okinawans. Contemporary politics surrounding basing issues in Japan are complex and ever-shifting and involve politicians from local village wards up to the Prime Minister's office. In 2009 and 2010, Prime Minister Hatoyama's involvement in the Futenma controversy elevated the issue to a major U.S.-Japan point of contention and, some assert, may have irrevocably shifted the political landscape in Okinawa by raising and then dashing the hopes of the anti-base movement. However, his Liberal Democratic Party (LDP) predecessors had made little progress in decades of trying to resolve the fundamental challenges of the U.S. military presence on Okinawa. The Abe government appeared to have broken this stalemate by wielding unprecedented pressure and inducements in late 2013 to win over key Okinawan politicians. However, Okinawan citizens in late 2014 voted out Nakaima, who had approved the landfill permit for the FRF, and turned out in large numbers to support the new governor, Takeshi Onaga, at an anti-base rally in early 2015. Although Washington-Tokyo relations play a role, the controversy over bases is seen by many as largely a mainland Japan versus Okinawa issue. Due to the legacy of the U.S. occupation and the islands' key strategic location, Okinawa hosts a disproportionate share of the continuing U.S. military presence. According to the Okinawan government, about 25% of all facilities used by U.S. Forces Japan are located in the prefecture, which comprises less than 1% of Japan's total land area, and roughly half of all U.S. military personnel are stationed in Okinawa. Many observers assert that Tokyo has failed to communicate effectively to Okinawans the necessity and benefits of the alliance. Some Okinawans see the decision to host the bulk of U.S. forces on Okinawa as a form of discrimination by mainland Japanese, who also do not want U.S. bases in their backyards. The Abe Administration at times has not received envoys from Okinawa and at other times has engaged in talks about the U.S. military presence, although neither Tokyo nor Okinawa appeared to change its position on the issue. However, Okinawa has received millions of dollars in subsidies from the central government in exchange for the burden of hosting U.S. troops. In December 2013, immediately prior to Governor Nakaima's decision to approve the FRF landfill permit, Prime Minister Abe announced a 15% increase in the FY2014 budget for Okinawa economic development, to 346 billion yen ($3.0 billion USD). Although the money was not explicitly linked to the basing issues, analysts assert that the generous sum influenced the governor's decision on the permit. After Nakaima lost his reelection bid in November 2014, the central government indicated that it will follow through on its plans to provide at least 300 billion yen ($2.6 billion USD) annually through 2021. The Okinawan governor's office wields significant influence over developments inside the prefecture. The governor has the authority to approve or reject off-shore landfill construction, which effectively gives him a veto over any base construction that relies on a landfill, such as the Henoko FRF plan. Toward the end of his second term, former governor Nakaima approved the landfill permit to build offshore runways at Camp Schwab, removing the most effective political leverage that the governor's office held. Takeshi Onaga, Nakaima's successor as governor and a former member of the conservative LDP, opposes the plan to relocate Futenma inside Okinawa. Since taking office at the end of 2014, Onaga has employed a variety of political and legal strategies to prevent or delay construction of the FRF at the Henoko site. First elected in 2006 with the backing of the LDP and Okinawa's business community, Nakaima was seen as a pragmatist rather than an anti-base ideologue. In his first term, Nakaima agreed to the relocation of MCAS Futenma to Henoko with specific conditions. However, when Hatoyama revisited the FRF relocation plan in 2009, the political calculus changed. The Okinawan movement against the FRF proposal was rejuvenated and gained strong support on the island. Nakaima modified his position, calling for the base to be located out of the prefecture during the 2010 gubernatorial campaign against a resolutely anti-base opponent. In late 2013, the top leadership of the ruling party, the LDP, placed heavy pressure on its Okinawa chapter to support relocation of MCAS Futenma. Governor Nakaima traveled to Tokyo to present a list of demands that appeared to be conditions for his approval of the landfill permit to construct the FRF. Nakaima requested that (1) the U.S. military terminate operations at MCAS Futenma within five years; (2) the U.S. military return Camp Kinser in full within seven years; (3) the U.S. military deploy at least half of its MV-22 Osprey aircraft outside of Okinawa immediately, then all Osprey after Futenma closes; and (4) the United States and Japan revise the SOFA to allow on-base investigations by prefectural officials for environmental and archaeological reasons. He also asked for supplemental funding for an Okinawan university, for a second runway at Naha airport, for a railway system, and to recover land returned by the United States. Prime Minister Abe agreed to provide the requested financial support and pledged his best efforts to fulfill the conditions regarding the U.S. military presence on Okinawa. However, it is not within the authority of the Japanese government to execute those base-related actions unilaterally, without assent from the U.S. government. Days later, Nakaima approved the landfill permit, putting pressure on the Abe government to deliver on its promises. The U.S. government, for its part, showed a willingness to negotiate in some areas but not all. However, U.S. officials have firmly rejected any plan that would close the Futenma base before a replacement facility on Okinawa is operational. Governor Onaga has used a variety of tactics to prevent or delay the construction of the FRF at the Henoko site. After Onaga's initial attempt to negotiate a new base relocation plan with the central government met firm resistance in Tokyo, in March 2015 he demanded that the Ministry of Defense stop work on the offshore landfill. A member of the Abe Cabinet judged that the construction was in compliance with regulations, and the government proceeded with survey work for the landfill. Onaga then appointed an expert commission to study the prior governor's approval of the landfill permit. The commissioners determined that the approval had been illegal, and Onaga used the commission's findings as the basis to revoke the permit in October 2015. Again, a Cabinet Minister rejected Onaga's maneuver, leading him to apply for screening by a third-party council that manages disputes between the central governments and local governments. On the political front, Onaga has sought to bring wider attention—from mainland Japan and around the world—to the issue of the U.S. military presence on Okinawa and to garner support for his positions. Onaga traveled to the United States in June 2015 to meet with U.S. officials and Members of Congress in an attempt to convince U.S. leaders that the current Futenma relocation plan is unwise. In August 2015, over 100 Japan scholars and peace activists from the United States and other countries signed a petition urging Onaga to revoke the landfill permit for the FRF. Although Onaga himself has remained at arm's length from anti-base civil society groups and has not engaged in protests outside U.S. bases, his political stance has energized the anti-base groups in Okinawa. Progressive political groups in mainland Japan have also held rallies to demonstrate opposition to the Abe Administration's plan to move forward with the Futenma relocation plan. Camp Schwab and the proposed new aviation facility are located in Henoko, a ward of the larger Nago City. The politics of Nago City mirror that of Okinawa in their complexity and tangle of interests. A 1997 city referendum revealed that a majority of voters opposed the new base construction, but despite this result successive mayors declared their conditional approval. In January 2014, the city reelected Mayor Susumu Inamine, who strongly opposes any increased military presence. Inamine has vowed that he will obstruct any cooperation with the central government on construction of the FRF. A slim majority of current city council members are also against the Henoko relocation plan. On the other hand, the residents who would be most directly affected have mixed, and even positive, feelings about the proposed base, possibly due to the economic benefits for the hosting community. A small mountain range about seven miles wide separates the designated base site in Henoko village from the densely populated area of Nago City (see Figure 3 ). It is unlikely that most people living in Nago City would experience the noise of overflights near the base. In May 2010 the administrative council of Henoko village, where the base would be built, passed a resolution accepting the relocation of Futenma on the conditions that the runway site be moved further into the sea and that the government provide additional compensation. Henoko village residents are reportedly more focused on the economic benefits of the new base and irked by the intrusion of environmentalists. In the past few years, Congress has exercised its oversight function on the military realignment initiatives in Japan and related movement to Guam. Members of the Senate Armed Services Committee in particular have voiced doubts about the viability of the Marine Corps realignment, questioned witnesses closely about the Defense Department's plans in the Asia-Pacific in a series of hearings, sent letters to the Secretary of Defense outlining their reservations, and inserted specific provisions into legislation to ensure that the executive branch heeds their concerns. In general, Members of the House Armed Services Committee have been more supportive of the Marine Corps realignment and more willing to fund initial components without a complete Master Plan. In May 2011, three Senators (Carl Levin, Chairman of the Armed Services Committee; John McCain, then-ranking minority Member of that committee; and James H. (Jim) Webb, Chairman of the Foreign Relations Subcommittee on East Asian and Pacific Affairs) released a joint statement that called the U.S. military realignment plans in East Asia, and particularly those on Okinawa, "unworkable and unaffordable." They recommended alternatives, including transferring Marine Corps assets to the Kadena Air Base on Okinawa and moving some Air Force assets to Andersen Air Force Base on Guam. Senator Webb further proposed in subsequent letters to the Secretary of Defense that co-basing arrangements with the Japanese military be explored, as well as the use of aviation facilities on Okinawa during military contingencies. Soon afterward, in June 2011, the Government Accountability Office (GAO) released a report commissioned by the Subcommittee on Military Construction, Veterans Affairs, and Related Agencies, Senate Appropriations Committee. The report concluded that the Department of Defense had neither adequately estimated the costs involved in transforming its military posture in Japan and Guam nor analyzed the alternatives to existing initiatives. The initial estimate was for an expense of $10.3 billion to move 8,000 Marines and their dependents to Guam, but the GAO reported that the actual costs would be more than double the DODestimate at $23.9 billion. The cost to DOD for the latest plan, to move roughly 5,000 Marines and their dependents to Guam, has been estimated at $8.6 billion. Increasing alarm about the overall U.S. fiscal situation drove further scrutiny of existing plans. Concern about the ballooning costs of the Guam construction and the uncertainty surrounding the realignment led Congress to reject the Administration's request for related military construction funding in the FY2012 National Defense Authorization Act (NDAA), P.L. 112-81 . Section 2207 of the act prohibited funds authorized for appropriation, as well as amounts provided by the Japanese government, from being obligated to implement the planned realignment of Marine Corps forces from Okinawa to Guam until certain justifications and assessments were provided. These included an explanation of the Marine Corps' preferred force lay-down in the region; a Master Plan for the construction involved in the plan; a certification by the Secretary of Defense that "tangible progress" had been made on the Futenma base relocation; the submission of the independent assessment required by Section 346 (see the section of this report immediately following); and a series of plans involving infrastructure and construction costs on Guam. The April 2012 "de-linking" agreement did not appear to assuage congressional concerns. After the announcement that the original policy would be adjusted and the base relocation and Marine redeployment de-linked, Senators Levin, McCain, and Webb wrote in a letter to Defense Secretary Panetta that ... we have serious questions that have not been fully addressed regarding the emerging agreement between the administration and the Government of Japan. These questions pertain to the core details of this or any basing arrangement, including cost estimates, military sustainment and force management, and how it would support a broader strategic concept of operations in this increasingly vital region. Congress has important oversight and funding responsibilities beyond its traditional consultative role for this basing agreement, and any new proposal should not be considered final until it has the support of the Congress. Section 346 of the FY2012 NDAA required an independent assessment of the U.S. strategic posture in the Asia-Pacific. The Center for Strategic and International Studies (CSIS) was commissioned by the Secretary of Defense to provide the report. CSIS delivered it in mid-July 2012 to the Secretary, who then forwarded the report with his comments to the Senate and House Armed Services Committees. In its unclassified version, the report broadly supports DOD's strategy to enhance U.S. defense posture in East Asia and recommends, with caveats, the implementation of the April 2012 agreement, including the construction of the FRF. While asserting that the Henoko plan is the best way forward geostrategically and operationally, it also acknowledges the budgeting and political obstacles that confront the FRF, concluding that other alternatives should still be explored. Among those other alternatives are Kadena Integration, the stationing of Marine air operations on an off-shore island, construction of a second runway at Naha Airport, and remaining at the current Futenma base. The report also recommends prioritizing infrastructure improvements on Guam that would facilitate the transfer of Marines. In a statement, Senators Webb, Levin, and McCain said that, "We agree with CSIS's emphasis on the need for DOD to articulate the strategy behind its force-posture planning more clearly. Congress must also be confident that the DOD force planning and realignment proposals are realistic, workable, and affordable." The realignment of the Marine Corps in the Asia-Pacific region has proceeded incrementally since 2013, even as Congress has restricted some spending for the realignment on Guam. The FY2013 NDAA ( P.L. 112-239 ) incorporated the Senate's language prohibiting DOD spending (including expenditure of funds provided by the Japanese government) to implement the realignment on Guam, with certain exceptions. The bill authorized DOD to do design work for future construction, conduct environmental assessments, and start construction of a project that would support the Marine Corps presence on Guam but has a justification independent from the realignment. The FY2013 NDAA also included requests for DOD to provide documents to help Congress understand the military's plans for the region and projected infrastructure needs on Guam. According to the conference report accompanying the NDAA, the conferees raised concerns that moving forward with the realignment prematurely could create operational risks for the military and the risk of wasteful spending. The FY2014 NDAA ( P.L. 113-66 ) took the same approach to the Marine Corps realignment: an overall freeze on DOD spending on Guam, but with exceptions that allowed some related construction to go forward. The GAO released another report in June 2013 that criticized DOD for unreliable cost estimates and the lack of an integrated plan for the realignment. Visiting Japan in August 2013, Senator McCain repeated his concerns that DOD did not have adequate plans for the Marine Corps realignment. In August 2014, DOD submitted to Congress a Master Plan describing the future disposition of the Marine Corps on Guam and the cost and schedule of necessary construction. The Guam Master Plan does not include information about the anticipated Marine Corps relocation from Okinawa to Hawaii. The beginning of construction on the Henoko FRF may provide some momentum to the supporters of the Marine Corps realignment. After then-Governor Nakaima approved the landfill permit in late December 2013, Senator McCain released a statement stating, "After 17 years of hard work and setbacks, today's action paves the way for the construction of the [FRF], the redeployment of U.S. Marines from [MCAS] Futenma, and the broader realignment of U.S. forces on Okinawa and in the Asia-Pacific region." When Governor Onaga met with several U.S. Senators on a trip to the United States in June 2015, the Senators affirmed their support for the Henoko FRF plan. The FY2015 NDAA ( P.L. 113-291 ) allows DOD to proceed with its planned military construction for the realignment on Guam, including the expenditure of Japanese government funds allocated for that purpose. Although challenges remain, especially those related to civilian infrastructure on Guam, Congress' removal of previous restrictions on military construction should facilitate the Marine Corps realignment and the reduction of the U.S. military presence on Okinawa. As Tokyo and Washington have struggled to overcome paralysis on the agreement, the problematic base at the center of the controversy has remained operational but in need of repair and maintenance. In recognition of the pressing repair needs, U.S. and Japanese government officials committed to "contribute mutually to necessary refurbishment projects" at MCAS Futenma in the joint statement issued by the bilateral Security Consultative Committee in April 2012. Although these projects are vital to continued operations at Futenma, Okinawans may interpret the repairs as a sign that the United States and Japan do not intend to fulfill their goal of closing the base. The joint consolidation plan for Okinawa released by the U.S. and Japanese governments in April 2013 states that Futenma will be turned over to local authorities no earlier than 2022. The base is located within a dense urban area, surrounded by schools and other facilities that are subjected to the high noise levels that accompany an active military training site. (See Figure 4 .) A new equipment accident or serious crime committed by a U.S. servicemember could galvanize further Okinawan opposition to the U.S. military presence on the island. The U.S. Marine Corps replaced the 24 CH-46E "Sea Knight" helicopters stationed at the Futenma base with 24 MV-22 "Osprey" tilt-rotor aircraft in 2012 and 2013. The deployment of the first 12 Osprey aircraft to Japan in mid-2012 caused a public outcry in Okinawa and mainland base-hosting communities. Japanese politicians and civil society groups opposed introduction of the MV-22 to Japan due to the aircraft's safety record. However, the arrival of the second batch of 12 Ospreys in 2013 was greeted by substantially smaller protests in Okinawa. Observers warn that a crash involving an MV-22 Osprey on Okinawa could galvanize the anti-base movement and create serious problems for the alliance. The crash of another model of helicopter, an HH-60G Pave Hawk, on a U.S. training area in Okinawa in August 2013 renewed the sense of danger among Okinawans, but it did not spark widespread demonstrations.

Although the U.S.-Japan alliance is often labeled as "the cornerstone" of security in the Asia Pacific region, local concerns about the U.S. military presence on the Japanese island of Okinawa have challenged the management of the alliance for decades. The Japanese archipelago serves as the most significant forward-operating platform for the U.S. military in the region; approximately 53,000 military personnel (39,000 onshore and 14,000 afloat in nearby waters), 43,000 dependents, and 5,000 Department of Defense civilian employees live in Japan. With the United States rebalancing its defense posture towards Asia, the uncertainty surrounding the medium and long-term presence of American forces on Okinawa remains a critical concern for national security decision-makers. Due to the legacy of the U.S. occupation and the island's key strategic location, Okinawa hosts a disproportionate share of the continuing U.S. military presence. About 25% of all facilities used by U.S. Forces Japan and about half of the U.S. military personnel are located in the prefecture, which comprises less than 1% of Japan's total land area. Many Okinawans oppose the U.S. military presence, although some observers assert that Tokyo has failed to communicate effectively to Okinawans the benefits of the alliance. However, Okinawa has received billions of dollars in subsidies from the central government to offset the "burden" of hosting U.S. troops. In 2006, as part of a broad realignment of U.S. basing in Japan, the United States and Japan agreed to relocate Marine Corps Air Station (MCAS) Futenma to a less-congested area on Okinawa and then redeploy 8,000 marines to U.S. bases in Guam. The arrangement was designed to reduce the local community's burden of hosting a loud air base that has generated safety concerns and, eventually, to return control of the Futenma land to local authorities as a way to boost economic development in the area. The controversy surrounding relocation of MCAS Futenma has overshadowed progress in other elements of the realignment of U.S. Forces Japan. Facing delays in relocating the Futenma base, in 2012 the United States and Japan agreed to "de-link" the replacement facility with the transfer of marines to Guam. The current plan is to relocate 9,000 marines (and their dependents) from Okinawa, deploying 5,000 to Guam, 2,500 to Australia on a rotational basis, and 1,500 to Hawaii as soon as the receiving facilities are ready. From 2011 to 2014, Members of Congress continually raised concerns about the cost and feasibility of moving the Marines to Guam and other locations, and blocked some funds dedicated to the realignment. These concerns appear to have diminished since 2014. In the last days of 2013, the United States and Japan cleared an important political hurdle in their long-delayed plan to relocate the Futenma base when Hirokazu Nakaima, then-Governor of Okinawa, approved construction of an offshore landfill necessary to build the replacement facility. Nakaima lost his reelection bid in late 2014, however, and his successor as Governor of Okinawa has used a variety of administrative, legal, and political tactics to prevent or delay construction of the Futenma replacement facility. A U.S.-Japan joint planning document in April 2013 indicated that the new base at Henoko would be completed no earlier than 2022. Many challenges remain to implementation of the Futenma relocation plan. Most Okinawans oppose the construction of a new U.S. base for a mix of political, environmental, and quality-of-life reasons. Okinawan anti-base civic groups may take extreme measures to prevent construction of the facility at Henoko. Any heavy-handed actions by Tokyo or Washington could lead to broader sympathy and support for the anti-base protesters from the public in Okinawa and mainland Japan. Meanwhile, the Futenma base remains in operation, raising fears that an accident might further inflame Okinawan opposition.

In recent years, deficit reduction commissions, including the National Commission on Fiscal Responsibility and Reform, have recommended using an alternative measure of consumer price change to make inflation adjustments to federal programs government-wide. The proposal would change, for example, the way the Social Security cost-of-living adjustment (COLA) is computed, as well as COLAs under other federal programs. Rather than using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) to compute the Social Security COLA, the proposal calls for basing the Social Security COLA on the Chained Consumer Price Index for All Urban Consumers (Chained CPI-U or C-CPI-U). In April 2013, a modified version of the Chained CPI-U proposal was included in President Obama's FY2014 budget. In general, the goal of the Chained CPI-U is to more accurately reflect how consumers alter their buying habits in response to changes in prices. The Chained CPI-U typically has risen more slowly than either the CPI-W or the traditional CPI-U, the Consumer Price Index for All Urban Consumers. Supporters of the proposal argue that the CPI-W overstates inflation and, therefore, overestimates how much money is needed for Social Security beneficiaries to maintain their standard of living. Opponents of the proposal, however, view using the Chained CPI-U to adjust Social Security benefits for inflation as a backdoor way of reducing benefits. They maintain that the market basket of goods and services purchased by the elderly is different from that of the general population around which the CPI is constructed. It is more heavily weighted with health care expenditures, which rise notably faster than the overall CPI, and thus opponents contend that the cost of living for the elderly is higher than reflected by the overall CPI. For this reason, some policy makers support using the experimental Consumer Price Index for the Elderly (CPI-E) to compute the Social Security COLA. The current discussion of a potential change in the way the Social Security COLA is computed has raised questions about indexing provisions in other federal entitlement programs. The purpose of this report is to identify key indexing provisions in major federal entitlement programs under current law and present the information in a summary table (see Table 1 ). The programs included in the table are based on the major mandatory spending programs and categories shown in The Budget and Economic Outlook: An Update, published by the Congressional Budget Office (CBO) in August 2011, with some modifications. For example, the Congressional Research Service (CRS) identified specific programs within CBO categories (such as "child nutrition") and included additional programs, such as Railroad Retirement, that are closely coordinated with the Social Security program. Although there are other federal entitlement programs with indexing provisions, the programs included in the table represent a majority of federal mandatory spending. Table 1 is not intended to address or fully explain all of the indexing provisions within the laws and regulations governing these programs. Rather, it is an overview and a general guide. The report also provides a description of the measures of consumer price change used to index various elements of these programs under current law and the measure of consumer price change that has been proposed for making inflation adjustments to a range of federal entitlement programs (the Chained CPI-U). It is not intended to evaluate the best measure of consumer price change for inflation adjustments within a particular program or programs. Similarly, broader issues, such as the technical aspects of different measures of consumer price change and the indexing of other items (for example, the federal poverty threshold and parameters of the tax code), are beyond the scope of this report. For information on how the Chained CPI-U is constructed and reported by the U.S. Bureau of Labor Statistics (BLS), see CRS Report RL32293, The Chained Consumer Price Index: What Is It and Would It Be Appropriate for Cost-of-Living Adjustments? , by [author name scrubbed]. For information on how Social Security benefits could be affected by using the Chained CPI-U to compute annual COLAs, see CRS Report R43363, Alternative Inflation Measures for the Social Security Cost-of-Living Adjustment (COLA) , by Noah P. Meyerson. BLS publishes the CPI-W and the CPI-U, whose month-to-month fluctuations reflect changes in the prices faced by consumers. More specifically, the change in the indexes is the average change in the retail price of a market basket composed of more than 80,000 items purchased by consumers at outlets (e.g., grocery stores and gasoline stations) in 87 urban areas across the nation. Changes in the prices of items in each area are averaged together using weights that reflect the items' importance in the spending of the CPI-W population and the CPI-U population. The national CPI-W and CPI-U are calculated by combining the local area data for all items in the market basket to obtain a U.S. city average. The rates of change in consumer prices as measured by the national CPI-W for all items and national CPI-U for all items have differed only slightly over time. In addition to their use in calculating constant-dollar estimates of other economic indicators (e.g., earnings), the national CPI-W and CPI-U, as well as indexes for specific goods and services (e.g., medical care), are used for inflation indexing by the federal government. The percentage change in the national CPI-W (all items) is the basis for determining the annual COLA of Social Security benefits, and the national CPI-U (all items) is the basis for determining certain features of the Earned Income Tax Credit, for example. In addition, the percentage change in the CPI-U for specific groups of items is used to inflation-adjust various features of other federal programs. For example, per-meal subsidies paid to schools under child nutrition programs are tied to changes in the CPI-U "food away from home" index (which is a combination of indexes for full-service meals and snacks, limited-service meals and snacks, food at employee sites and schools, food from vending machines and mobile vendors, and other food away from home). As part of its ongoing efforts to develop an index that more accurately measures changes in the cost of living, BLS developed the Chained CPI-U, also called the C-CPI-U. The population of the C-CPI-U and CPI-U are the same. The prices used to calculate the C-CPI-U, CPI-U, and CPI-W are the same. However, the formula for calculating the C-CPI-U better accounts for the ability of consumers to maintain their standard of living in the face of an increase in prices overall by changing their spending pattern toward items whose prices have increased more slowly and away from items whose prices have increased more quickly. Although the C-CPI-U was first published in 2002, the modified measure has not replaced the CPI-U or CPI-W and no federal program has used the C-CPI-U to date. Some members of the public policy community interested in curtailing growth of the U.S. budget deficit have proposed switching inflation-indexed federal programs and income tax provisions to the C-CPI-U, however. Because the C-CPI-U typically has risen more slowly than either the CPI-W and CPI-U, changing the basis for indexation could substantially lower outlays and raise revenues. But the proposal to switch from the CPI-W to the C-CPI-U has prompted concern in some quarters about the ability of Social Security beneficiaries to maintain their standard of living. Some have suggested instead changing to the experimental index for those at least 62 years of age (CPI-E) in the arguable belief that this index better reflects the elderly population's experience with inflation (i.e., this population's above-average spending on health care services whose prices have increased faster than overall prices). As shown in Table 1 , inflation adjustments affect many features of federal entitlement programs. The most recognized effect of inflation adjustments is on benefit levels. For example, monthly cash benefits, such as Social Security and Supplemental Security Income benefits, increase when a COLA is paid. Other types of benefits are indexed as well. Non-cash benefits provided under the Supplemental Nutrition Assistance Program (SNAP), for example, are indexed to reflect food-price inflation. Coverage amounts under Medicare's standard outpatient prescription drug benefit (Part D) are adjusted for inflation. Inflation adjustments also affect entitlement programs in ways that are less well known, from federal payments to providers to program eligibility requirements. For example, when a Social Security COLA is paid, the amount of wages subject to the Social Security payroll tax increases. Indexing affects the number of Medicare beneficiaries subject to higher income-related Part B and Part D premiums, as well as the amount of Medicare payments to providers. In another example, indexing affects cost-sharing amounts paid by Medicaid beneficiaries for prescribed drugs and for non-emergency services provided in an emergency room. Per-meal subsidies paid to schools, for example, under the National School Lunch program are indexed. Finally, indexing affects eligibility criteria for some programs, including Medicaid and the child tax credit. Generally, switching to the C-CPI-U to compute COLAs and index other elements of federal entitlement programs is considered as a cost-saving measure in an effort to reduce federal budget deficits. For example, CBO estimates that switching to the C-CPI-U to compute Social Security COLAs would reduce federal outlays by $31.0 billion over five years (FY2014-FY2018) and by $127.2 billion over 10 years (FY2014-FY2023). If applied on a government-wide basis, however, switching to the C-CPI-U could increase program costs in some cases. Under Medicare, for example, cost-sharing amounts for outpatient drugs paid by low-income beneficiaries who receive subsidies under Part D are indexed annually to the CPI-U under current law. Because the Chained CPI-U grows more slowly than the CPI-U when consumer prices increase, indexing cost-sharing amounts to the Chained CPI-U would result in an increase in federal Medicare spending. Similarly, consider the refundable portion of the child tax credit (referred to as the additional child tax credit or ACTC). Taxpayers must have earnings that exceed the refundability threshold to claim the ACTC. The lower the threshold, the greater the number of low-income taxpayers who become eligible for the refundable child tax credit. Indexing the refundability threshold to a lower inflation index would expand the availability of the refundable child tax credit. Additional considerations regarding use of the Chained CPI to index federal programs for inflation are reflected in congressional testimony by CBO on April 18, 2013. CBO stated, for example, Although many analysts consider the chained CPI to be a more accurate measure of the cost of living than the traditional CPI, using it for indexing could have disadvantages. The values of the chained CPI are revised over a period of several years, so affected programs and the tax code would have to be indexed to a preliminary estimate of the chained CPI that is subject to estimation error. Also, the chained CPI may understate growth in the cost of living for some groups. For instance, some evidence indicates that the cost of living grows at a faster rate for the elderly than for younger people, in part because changes in health care prices play a disproportionate role in older people's cost of living. However, determining the impact of rising health care prices on the cost of someone's standard of living is problematic because it is difficult to measure the prices that individuals actually pay and to accurately account for changes in the quality of health care. For more information on the programs referenced in the table, see the following CRS reports. Social Security : CRS Report R42035, Social Security Primer , by [author name scrubbed] Medicare : CRS Report R40425, Medicare Primer , coordinated by [author name scrubbed] and [author name scrubbed] Medicaid : CRS Report R43357, Medicaid: An Overview , coordinated by [author name scrubbed] Supplemental Security Income : CRS Report 94-486, Supplemental Security Income (SSI) , by [author name scrubbed] Earned Income Tax Credit : CRS Report R43805, The Earned Income Tax Credit (EITC): An Overview , by [author name scrubbed] and [author name scrubbed] Child Tax Credit : CRS Report R41873, The Child Tax Credit: Current Law and Legislative History , by [author name scrubbed] Unemployment Compensation : CRS Report RL33362, Unemployment Insurance: Programs and Benefits , by [author name scrubbed] and [author name scrubbed] SNAP : CRS Report R42505, Supplemental Nutrition Assistance Program (SNAP): A Primer on Eligibility and Benefits , by [author name scrubbed] Child Nutrition Programs : CRS Report R42353, Domestic Food Assistance: Summary of Programs , by [author name scrubbed] and [author name scrubbed] Civil Service Retirement System / Federal Employees Retirement System : CRS Report 98-810, Federal Employees' Retirement System: Benefits and Financing , by [author name scrubbed] Military Retirement : CRS Report RL34751, Military Retirement: Background and Recent Developments , by [author name scrubbed] and [author name scrubbed] Veterans Disability Compensation : CRS Report RL34626, Veterans' Benefits: Disabled Veterans , by [author name scrubbed] et al. Veterans Pensions : CRS Report RS22804, Veterans' Benefits: Pension Benefit Programs , by [author name scrubbed] and [author name scrubbed] Dependency and Indemnity Compensation : CRS Report R40757, Veterans' Benefits: Dependency and Indemnity Compensation (DIC) for Survivors , by [author name scrubbed] Veterans Educational Assistance : CRS Report R42785, GI Bills Enacted Prior to 2008 and Related Veterans' Educational Assistance Programs: A Primer , by [author name scrubbed] Veterans Educational Assistance : CRS Report R42755, The Post-9/11 Veterans Educational Assistance Act of 2008 (Post-9/11 GI Bill): Primer and Issues , by [author name scrubbed] Veterans Vocational Rehabilitation and Employment Program : CRS Report RL34627, Veterans' Benefits: The Vocational Rehabilitation and Employment Program , by [author name scrubbed] Railroad Retirement Board : CRS Report RS22350, Railroad Retirement Board: Retirement, Survivor, Disability, Unemployment, and Sickness Benefits , by [author name scrubbed]

In recent years, various proposals have been discussed in the context of ways to reduce federal budget deficits. One of these proposals calls for the use of a different measure of consumer price change to index various provisions of federal programs, including cost-of-living adjustments (COLAs). For example, under current law, the Social Security COLA is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Under the proposal, the Social Security COLA would be based instead on the Chained Consumer Price Index for All Urban Consumers (Chained CPI-U or C-CPI-U). Because the goal of the Chained CPI-U is to better reflect how consumers alter their buying habits in response to changes in prices, supporters of the proposal argue that it is a more accurate measure for computing COLAs and making other automatic program adjustments. Opponents, however, view the proposal as a backdoor way of reducing benefits because the Chained CPI-U typically has risen more slowly than either the CPI-W or the traditional CPI-U, the Consumer Price Index for All Urban Consumers. Some observers point out that the Chained CPI-U is published as a preliminary value that is subject to revision over a period of up to two years and that it may not accurately reflect the cost of living for certain groups, such as the elderly population. The current discussion of a potential change in the way the Social Security COLA is computed raises questions about indexing in other federal entitlement programs. The purpose of this report is to identify key indexing elements in major federal entitlement programs under current law and present the information in a summary table. As shown here, indexing affects more than benefit levels paid to individuals through COLAs. It also affects, for example, federal payments to providers and eligibility criteria for some programs. In addition, the report provides a brief description of the measures of consumer price change used to index various elements of these programs under current law, as well as the alternative measure of consumer price change (the Chained CPI-U) that has been proposed for computing Social Security COLAs and making inflation adjustments to other federal programs. This report does not evaluate the best measure of consumer price change for making automatic inflation adjustments in federal entitlement programs. In addition, broader issues, such as the technical aspects of different measures of consumer price change, potential implications of using an alternative measure of price change to index various elements of major federal entitlement programs, and the indexing of other items (for example, the federal poverty threshold and parameters of the tax code) are beyond the scope of this report. For technical information on how the Chained CPI-U is constructed and reported by the U.S. Bureau of Labor Statistics, see CRS Report RL32293, The Chained Consumer Price Index: What Is It and Would It Be Appropriate for Cost-of-Living Adjustments?, by [author name scrubbed]. For information on how Social Security benefits could be affected by using the Chained CPI-U to compute annual COLAs, see CRS Report R43363, Alternative Inflation Measures for the Social Security Cost-of-Living Adjustment (COLA), by Noah P. Meyerson.

The United States historically has led the global economic order that evolved after World War II. This economic order established multilateral economic institutions to advance rules-based commercial economic engagement, open markets, and transparent, nondiscriminatory treatment of all economic players. In turn, these efforts supported overall domestic and global economic growth and the nation's broader strategic interests. This agenda was broadly supported by successive Congresses and Administrations over seven decades. Congress plays a key role in U.S. trade policy by approving trade agreements, overseeing trade-oriented government agencies and adjustment assistance programs, and setting the terms for U.S. engagement with the global economy. Congress plays a major role in formulating and implementing U.S. trade policy through its legislative and oversight responsibilities. Under the U.S. Constitution, Congress has the authority to regulate foreign commerce, while the President has the authority to conduct foreign relations. In 2015, Congress reauthorized Trade Promotion Authority (TPA) through the Bipartisan Congressional Trade Priorities and Accountability Act of 2015 ( P.L. 114-26 ), which (1) sets trade policy objectives for the President to negotiate in trade agreements; (2) requires the President to engage with and keep Congress abreast of negotiations; and (3) provides for congressional consideration of implementing legislation on an expedited basis, e.g., guaranteed consideration, up-or-down vote, no amendments, limited time period. The United States concluded the Trans-Pacific Partnership (TPP) among the United States and 11 other countries and negotiated the U.S.-European Transatlantic Trade and Investment Partnership (T-TIP). The 12 TPP countries signed the agreement in February 2016, but it required ratification by each country before it could enter into force. In the United States, this requires implementing legislation by Congress. Upon taking office, President Trump withdrew the United States from the TPP and halted further negotiations on the T-TIP, but may reengage in the TPP under different terms. The remaining 11 partners to the TPP concluded, without U.S. participation, a revised TPP, now identified as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). The Trump Administration is also attempting to revise the two largest existing U.S. FTAs, through the ongoing renegotiation of the North American Free Trade Agreement (NAFTA), and modification talks regarding the U.S.-South Korea (KORUS) FTA. For Members of Congress and others, international trade and trade agreements offer the prospect of improving national economic welfare, while also raising questions about the potential cost to the economy. Congress plays an important role in shaping and considering legislation to implement U.S. trade agreements. Other countries also are participating in, or currently negotiating, a variety of FTAs. These proposed trade agreements raise questions and concerns over the role of trade in a country's economy and how increased trade, or globalization more generally, affects its employment, the distribution of income, and its standard of living. For some observers, these negotiations hold the potential to open markets further and establish new trade rules and disciplines, and they may reenergize the World Trade Organization (WTO), whose broad Doha Round negotiations have been stalled for over a decade. For Members of Congress and others, however, international trade and trade agreements offer not only the prospect of improved national economic welfare, but also the potential for lost jobs in some sectors. This report focuses on a number of major issues concerning the role of trade and trade agreements in the economy and issues that are particular to FTAs, including the role of trade in the economy and the macroeconomic forces that drive the trade deficit; the impact of trade on employment and the adjustment costs experienced by firms and workers; estimates of the number of jobs in the economy that are supported by trade and economic models used to estimate the impact of FTAs on employment; the impact of FTAs on foreign investment and employment; and the relationship between trade and the distribution of income. Discussions of trade broadly and trade agreements in particular often focus on potential effects on economic growth, the distribution of income, and employment gains or losses. Most economists argue that liberalized trade results in both economic costs and benefits, but that the long-run net effect on the economy as a whole is positive. They contend that the economy as a whole operates more efficiently as a result of competition through international trade and that consumers benefit by having available a wider variety of goods and services at varying levels of quality and price than would be possible in an economy closed to international trade. They also contend that trade may have a long-term positive dynamic effect on an economy and enhance production and employment. According to the World Bank, liberalizing trade and foreign investment have reduced the number of people in the world living in extreme poverty (under $1 per day) by half, or 600 million, over the past 25 years, transforming the global economy. The United States International Trade Commission (ITC) released a study in June 2016 on the economic impact of trade agreements on the United States, based on the 14 trade agreements the United States has signed with 20 countries. The report concluded that these trade agreements increased U.S. aggregate trade by about 3% and U.S. real GDP and U.S. employment by, respectively, less than 1%, or $32.2 billion, and 159.3 thousand fulltime equivalent employees. In response to the report, however, Representative Sander Levin indicated in a statement: ....the ITC fails to adequately and innovatively address the real economic impact of previous U.S. free trade agreements. The ITC claims a small increase in GDP based on traditional economic models. The ITC fails to address the costs associated with workers losing their jobs or factories leaving communities as a result of trade agreements. Those transition costs are largely ignored in this report. They focus on the long-term benefit of lower tariffs in other countries and cheap imports coming into the United States, failing to capture the impact – which they may call short term – which can have a dramatic impact on jobs in America. Most economists also argue that macroeconomic forces within an economy are the dominant factors that shape trade and foreign investment relationships. In particular, the prominent role of these macroeconomic forces complicates efforts to disentangle the distinct impact that trade has on the economy. According to standard economic theory, macroeconomic conditions within an economy determine capital flows, which in turn affect exchange rates and the overall size of the trade deficit. In addition, economic theory holds that trade agreements between countries alter trade relationships and thus the composition of the trade deficit, but have little impact on the trade deficit's overall size. Changes at the microeconomic level of the economy, such as new technologies, also can affect particular industries or sectors of the economy in ways that are unrelated to international trade. In addition, changes in currency exchange rates, productivity, economic policies, and the business cycle can affect the overall performance of the economy in ways that may outweigh the effects of trade agreements, given the already open nature of the U.S. economy. For instance, the decline in the value of the peso in late 1994, followed by a financial crisis in Mexico and severe economic recession, had a major impact on U.S.-Mexico trade, arguably greater than anything anticipated by the completion of the North American Free Trade Agreement (NAFTA). More open markets globally and other changes have subjected a larger portion of the domestic workforce to international competition. According to the International Monetary Fund (IMF), the effective global labor market quadrupled over the past two decades through the opening of China, India, and the former East European bloc countries. In particular, the entry of China into the global economy is an unprecedented development given the size of the Chinese economy and the speed with which it became a major participant in the global economy. The global economy experienced this transformation initially through a rapid increase in trade of goods and services that were produced through labor-intensive processes. It also occurred secondarily, through a major disruption in global commodity markets as China's economy experienced slower growth and it began shifting its economy away from dependence on exports to an economy focused more on domestic consumption. According to the IMF, the internationalization of labor contributed to rising labor compensation in the advanced economies by increasing productivity and output, while emerging market economies benefited from rising wages. Increased exports from labor-intensive developing economies would be expected to push down wages, adjusted for productivity, for relatively unskilled workers in developed economies, thereby reducing labor's share of income. At the same time, most economists argue that workers in developed economies are better off if the net effects of increased trade and productivity on the economy are positive. Rising employment and wages in developing economies would increase living standards in those economies and increase demand for imports from developed economies, which would place upward pressure on wages and employment. The IMF concludes that globalization is only one of several factors that have acted to reduce the share of income accruing to labor in advanced economies and that technological change likely has played a larger role in affecting the distribution of income in the economy, especially for workers in lower-skilled sectors. Another development that has upended global trade and capital and labor markets is the impact of the digital revolution. In particular, the digital revolution, as a form of technological advancement, is a new variant of the long-term trend of labor-saving technologies that improve productivity and provide opportunities for labor to shift from labor-intensive activities to more knowledge-intensive activities. According to one economist, the new technologies, termed labor-linking, are transforming the global job landscape by linking labor with demand in faraway places and creating opportunities for small and medium-sized firms to participate in the global economy. In describing this new technology, this economist writes: What this new technology has done is to make it possible for nations that are not yet rich and industrialized, such as the low-income economies and lower middle-income economies, to connect workers with corporations in industrialized nations. If these nations are moderately well-organized and have basic infrastructure such as power and digital connectivity, their workers can do well by working for companies and customers in rich and upper-middle-income nations. This in turn is creating new competition for workers in rich and some middle-income countries, dragging their salaries down and exacerbating unemployment. In brief, while the rise of labor-saving technology is tending to curb labor demand all over the world, some emerging economies and developing economies are able to offset the decline by taking advantage of labor-linking technologies. The effects that trade and trade agreements such as the TPP have on economic growth and employment are often among the most controversial issues. Economic theory concludes that the economy as a whole benefits over the long run from a more open trade environment and greater competition, because such an environment pushes an economy to use its resources more efficiently. Standard economic theory also recognizes that some workers and producers in the economy may experience a disproportionate share of the short-term adjustment costs that are associated with shifts in resources stemming from greater international competition. Although the attendant adjustment costs for businesses and labor are difficult to measure, some estimates suggest they may be significant over the short run and can entail dislocations for some segments of the labor force, for some companies, and for some communities. Closed plants can result in depressed commercial and residential property values and lost tax revenues, with effects on local schools, local public infrastructure, and local community viability. Many research organizations, academics, and others are analyzing the impact of trade on employment. A group of 10 international organizations, including the Asian Development Bank, the International Labor Organization, the World Bank, the Organization of American States (OAS), Organization for Economic Cooperation and Development (OECD), World Trade Organization (WTO), and the United Nations Conference on Trade And Development (UNCTAD), among others, joined together to form the International Collaborative Initiative on Trade and Employment (ICITE) to analyze the relationship between trade and employment. A study published by ICITE surveyed the economic literature on trade and employment and restated the general position that over the long run higher levels of international trade are associated with positive rates of economic growth, rising wages, and higher levels of employment. Similarly, higher levels of economic growth are associated with higher levels of international trade, which complicates efforts to disentangle cause and effect relationships between economic growth and trade. The study also concluded that countries that experienced greater trade liberalization also experienced higher levels of investment, higher levels of productivity, and improvements in both physical and human capital. In addition, the study indicated that the positive correlation between trade and economic growth seems to be predicated on companion policies that countries adopted, including policies to create a positive investment climate and labor market as well as social protection systems that support trade liberalization. The study concluded that forces within the economy that support trade competitiveness, primarily shifts in capital and labor to more internationally competitive sectors with higher productivity, also may result in frictional unemployment and income losses for displaced workers in the short run. According to the authors, for those countries that experience greater income inequality, factors other than trade are likely to be more important. The authors concluded that ....working conditions in developing countries, contrary to the assertions of some, have not deteriorated with trade openness. Indeed the positive effect of trade on investment and incomes carries with it important implications for reduced child labor, workplace injuries, and informality, while offering new opportunities for female entrepreneurs. However, trade, as with changes in technology, does entail reallocation of resources, so policies that help workers to move more quickly into new, higher productivity jobs can help attenuate human costs of normal job transitions and unemployment arising from economic shocks as well as lay the foundations for more rapid growth. In addition, the authors concluded ....trade liberalization may (sooner or later) be a necessary but not a sufficient condition for attaining more rapid growth. Whether countries realize the potential gains from trade liberalization depends heavily on companion policies and the general economic environment. These supportive policies—stable macroeconomic policies, adequate property rights, effective regulation, and well-designed public investments—can determine the difference between a trade reform that helps catapult trend growth to a higher level or one that produces little. Another factor that complicates efforts to equate gains or losses of jobs in the economy with trade or with a specific trade agreement is the constant turnover in jobs, referred to as "churn," that is continuously taking place in the U.S. economy. At the plant level, job openings may come from new businesses or from expansions at existing facilities, including those that support increased exports. Job losses may come from voluntary departures, involuntary discharges, or from business closures for any reason, including bankruptcy, personal choice, an inability to compete in the domestic market, import competition, or production shifts. In a dynamic economy like that of the United States, jobs are constantly being created and replaced as some economic activities expand, while others contract. As part of this process, various industries and sectors evolve at different speeds, reflecting differences in technological advancement, productivity, and efficiency. Those sectors that are the most successful in developing or incorporating new technological advancements generate greater economic rewards and are capable of attracting larger amounts of capital and labor. In contrast, those sectors or individual firms that lag behind attract less capital and labor and confront ever-increasing competitive challenges. Indeed, to avoid economic stagnation, some sectors may need to relinquish some capital and labor so that others sectors can grow. Also, advances in communications, transportation, and technology have facilitated a global transformation of economic production into sophisticated supply chains that span national borders and defy traditional concepts of trade. This expanded reach of trade means that economic activities potentially can involve a greater share of the labor force in trade-related activities. How firms respond to these challenges likely will determine their long-term viability in the marketplace. As indicated in Table 1 , there was an annual average of 144.4 million jobs in the U.S. economy in 2016, up from the 141.8 million jobs recorded in 2015. During this same period, jobs supported by exports were estimated at 10.7 million jobs, or about 7.4% of employment in 2016. The data also indicate that in 2016 there were 13.1 million gross jobs gained in the economy and 10.6 million gross jobs lost, accounting for 9.1% and 7.4%, respectively, of the number of jobs in the economy, or amounts that bracket the total number of jobs in the economy that were supported by exports. The combined share of 16.5% (the combined shares of gross jobs gained and lost) reflects the process of job turnover during the year, or the churning in the labor market. Job churning in the United States was more pronounced from 2008 to 2010, during the deepest part of the economic recession, when job turnover averaged over 18% of the jobs in the economy. High rates of job turnover also can occur during periods of strong economic growth, when demand for labor can prompt greater shifts in employment between growing and declining sectors of the economy. During 2008-2010, job turnover was more pronounced in the goods-producing sector of the economy, the sector most closely tied to international trade, where rates of job turnover ranged between 25% and 30%. Also, as the United States was experiencing a sharp decline in its trade deficit in 2009 and 2010, job turnover in the goods-producing sector recorded rates of 31.6% and 27.5%, respectively, rates that were much higher than the rate of job turnover in the overall economy. This likely reflected the sharp reduction in consumer spending during this period and a sharp drop in global trade due to the financial crisis and economic recession. Since 2011, job gains have been greater than job losses, helping to drive down the U.S. rate of unemployment. Also, since 2011, the share of jobs in the economy supported by exports has maintained a share of total employment between 10.7% and 11.2%, total goods-producing employment (6.3% and 6.7%), and services (4.1 and 4.8%). As previously discussed, trade can have different effects on workers in different occupations, which some economists have termed the occupational exposure to international trade. As a result, trade liberalization not only can have a different effect between sectors of the economy on workers and firms, but also within the same industry. Some estimates indicate that the short-run costs to workers who attempt to switch occupations or switch industries in search of new employment opportunities as a result of dislocations related to international trade agreements may be "substantial." In a study of the impact of trade liberalization on occupations, a number of economists concluded that trade liberalization has had a small effect on wages and jobs at the industry level, but that trade liberalization has provided an additional impetus within the economy for workers to shift their employment among sectors of the economy, particularly from the manufacturing sector to the services sector. The study also concluded that workers who switched jobs as a result of trade liberalization generally experienced a reduction in their wages, particularly in occupations where workers performed routine tasks. These negative income effects were especially pronounced in occupations exposed to imports from low-income countries. In contrast, occupations associated with exports experienced a positive relationship between rising incomes and growth in export shares. Changes in trade patterns can affect the types of goods that are traded and, therefore, the types of industries and workers that are directly exposed to trade. Some economists argue that U.S. and global trade patterns were altered by the approval of permanent normal trade relations (PNTR) for China in 2000 by the United States and by China's accession to the WTO in December 2001. In particular, these economists estimate that these developments increased U.S. imports from China at the expense of exporters in other Asian countries and had a major impact on U.S. manufacturing employment from 2001 to 2007. While the impact of increased Chinese imports on the U.S. economy is multifaceted and, in some cases, disruptive, the analysis also points to features and rigidities in U.S. labor markets, particularly at the local level, that hamper the adjustment process. Also, the U.S. manufacturing sector had been undergoing a fundamental restructuring for more than two decades prior to China joining the WTO and opening its economy. As Figure 1 indicates, U.S. manufacturing employment has slowly declined since at least 1980, falling by more than one-third between 1980 and 2014. During the same period, real output in the manufacturing sector nearly doubled, reflecting the increase in productivity in the U.S. manufacturing sector. During the economic recession of 2009, both employment and output in the manufacturing sector declined, along with most sectors of the U.S. economy. Between 2010 and 2017, U.S. manufacturing sector employment has increased by about 8% and output has increased by more than 11%. Some estimates indicate that imports from China have been concentrated in a relatively small number of product areas in ways that have magnified the economic impact of Chinese imports on certain U.S. economic sectors and localities. According to a recent widely cited study, the local impact of increased import competition from China was associated with increased unemployment in manufacturing, decreased labor force participation, and increased use of disability and other transfer payments in certain localities. In part, these effects on local labor markets may persist over time because noncollege-educated workers, who experience the lowest levels of mobility between geographical areas or sectors, are overrepresented in manufacturing. These economists argue that a combination of demand and supply factors accounts for the growth in Chinese exports, including reform-induced changes within China, rising productivity, greater movement in labor-intensive export sectors, and a lowering of trade barriers. According to this analysis, Chinese imports appear to have little effect on average U.S. manufacturing wages, in part because the most productive workers retained their manufacturing jobs and manufacturing plants accelerated technological and organizational innovations. The authors argue that wages in the U.S. nonmanufacturing sector fell because the decline in the number of workers employed in manufacturing reduced demand for local services while increasing the supply of workers. The authors also indicate that Chinese productivity grew at a faster rate than U.S. productivity from 1997 to 2007. Such a difference by itself is not unusual since Chinese productivity was growing from a lower level than that of the U.S. economy and China was importing technology and technical know-how. U.S. productivity, however, grew at a pace that was consistent with historical trends and at a faster rate than other similarly highly developed economies, which may have necessitated the shifting of some resources from import-competing manufacturing industries to other sectors of the economy, even in the absence of increased trade with China. The impact of increased U.S. imports from China on U.S. import-competing industries, however, represents only a partial accounting of the total economic impact of increased trade with China. Lower-priced goods from China would be expected to have a negative impact on import-competing industries, as consumers shifted their purchases toward the lower-priced imports and away from the relatively more expensive domestic products (the substitution effect). This substitution of imports for domestic products would negatively affect firms and workers in the import-competing industries, as indicated in the previous analysis. At the same time, lower-priced imports would increase the real incomes for all consumers in the economy (the income effect), improving consumer standards of living by increasing their purchasing power and allowing them to increase their consumption of additional goods and services. Lower prices also would be expected to spur increased production and employment in other sectors of the economy. In addition, increased exports by China would raise national income in China, which would increase Chinese consumption of both domestic and imported commodities, affording U.S. exporters more opportunities to increase their sales in China. The authors conclude their analysis by stating, "trade theory suggests that trade with China yields aggregate gains for the U.S. economy." Others experts argue that it was China's entry into the WTO, combined with extensive policy changes in China, that increased China's productivity and manufacturing capacity. China also removed barriers to investment by U.S. firms, which helped Chinese firms develop long-term trade and investment relationships with the United States. Other estimates indicate that increased trade with China has sped up technological innovation and the adoption of new technologies, both of which have contributed to productivity growth. As a result of the differing impact of trade liberalization on workers and firms, some governments have adopted special safeguards and worker retraining and other social safety net policies to mitigate the potential adverse effects of trade liberalization or address certain trade practices that may cause or threaten to cause injury. For example, the United States established the Trade Adjustment Assistance (TAA) program to assist workers and firms adversely affected by trade agreements. The primary benefits of the program are funding for retraining and weekly income support payments while affected workers are enrolled in retraining. In negotiating trade agreements, governments are mindful of potential adjustment costs and address them in different ways, including negotiating longer transitional periods to phase out tariffs. At times, governments are constrained in their ability to liberalize trade due to opposition by groups within the economy that may bear a disproportionate share of the adjustment costs from such liberalization. These costs can be especially acute for older workers who may have a difficult time transitioning to other jobs and for workers who may lack advanced education and other skills. The length and impact of this adjustment process may vary greatly, depending on circumstances. The United States and its trading partners use trade remedies to mitigate the injury (or threat thereof) of various trade practices to domestic industries and workers. The three most frequently applied U.S. trade remedies are (1) antidumping (AD), which provides relief to domestic industries that have experienced, or are threatened with, material injury caused by the adverse impact of imports sold in the U.S. market at prices determined to be less than fair market value; (2) countervailing duties (CVD), which provide relief to domestic industries that are threatened with material injury due to the adverse impact of imported goods that have been subsidized by a foreign government or public entity; and (3) safeguards (also referred to as escape clause), which provide temporary relief from imports of fairly traded goods that cause or threaten to cause serious injury. Identified as Section 201 of the Trade Act of 1974, the safeguards clause may provide domestic industries with temporary relief from import competition through a temporary import duty, import quota, or a combination of both, based on a presidential decision. Various measures are used to estimate the role and impact of trade in the economy and of trade on employment. One such measure developed by the Department of Commerce's International Trade Administration (ITA) provides a unique estimate of the number of jobs in the U.S. economy that currently are supported directly and indirectly, not created, by exports. These estimates use available historical U.S. input-output data and projections in years when the input-output data are not updated. The 2007 benchmark input-output table was substantially revised and updated in February 2014. The benchmark input-output tables are revised every five years. The ITA bases its approach on three economic relationships: (1) average relationships between the value of goods and services in the economy relative to the average number of jobs that are required to produce that output for each industry; (2) the value of inputs used in their production; and (3) the value of transportation and other marketing services required to bring goods and services to buyers. The agency does not develop a similar methodology to estimate the number of jobs related to imports, or any job gains or losses that may be due to imports. In its 2017 update, ITA estimated that U.S. exports of goods and services in 2016 supported 10.7 million jobs—6.3 million in the goods producing sector and 4.4 million in the services sector, as indicated in Figure 2 . ITA adjusted its methodology in 2011 to differentiate between changes in the prices of exports and changes in labor productivity. This methodology uses export price levels and a proxy estimator of U.S. export labor productivity to estimate the real value of U.S. exports (rather than the nominal value of exports reported in official sources) that support a given number of jobs as determined through input/output analysis and adjusted for changes in productivity. ITA projects that on average $1 billion of merchandise goods exports supported (not created) 5,223 jobs, and $1 billion of services exports supports 6,706 jobs, or an average of 5,744 jobs supported by goods and services exports combined. Expressed differently, $191,461 in merchandise goods exports, $149,120 in services exports, or an average of $174,095 in goods and services exports, supports one job in each respective sector. For the economy as a whole, the share of GDP associated with exports has increased since 1990. While the value of U.S. exports has grown, the number of jobs supported by exports is not significantly different from that estimated in 1990, suggesting that labor productivity in export sectors and export-supporting sectors has grown at a faster rate than that for the economy as a whole. According to ITA estimates, jobs associated with international trade, especially jobs in export-intensive manufacturing industries, earn 18% more on a weighted average basis (termed the export earnings premium) than comparable jobs in other manufacturing industries, as indicated in Figure 3 . ITA attributes this earning differential to several factors, including the observation that industries with greater access to international markets invest heavily in technology and capital in those areas where the United States has an international comparative advantage, which likely improves worker productivity. They also estimate that firms in export-oriented industries employ a more highly educated workforce on average, which also increases the average earnings of workers. Estimates indicate that U.S. labor productivity, particularly in the manufacturing sector, has been robust compared to other sectors in the U.S. economy. From 1993 to 2010, labor productivity in the U.S. manufacturing sector doubled, while U.S. nonfarm business labor productivity increased by about 50%. In addition, from 2002 to 2011, U.S. unit labor costs expressed in U.S. dollars fell by 15%, while unit labor costs rose in 18 other developed and developing countries. ITA concludes that its estimate of export earnings premiums for 2013 likely understates the actual export earnings differential. It estimates that the earnings differential for blue collar workers in export industries, at 20%, was higher than the average for white collar workers. In such industries as leather, computers, and machinery, the average weekly earnings of workers that supported exports were more than 30% higher than their counterparts in similar activities that were not involved in exporting. ITA also estimates that foreign tariffs may reduce the earnings of U.S. workers in manufacturing by 12% annually in the beverages and tobacco, food products, and apparel industries. Some economists conclude, however, that other factors, such as technological change, could account for the observed relationship between exporting and worker incomes, and they question the ability to estimate a direct cause and effect relationship between exporting, or trade more generally, and workers' earnings. Additional estimates by ITA address the potential distribution of jobs by industry that were supported by exports in 2013, as indicated in Figure 4 . Exports can support jobs directly and indirectly through industries that produce materials and services that serve as intermediate inputs to exports. According to ITA, jobs supported by exports in the manufacturing industry accounted for 32% of all jobs supported by exports. In addition, most of the jobs in the manufacturing sector that were supported by exports were in goods-producing activities. In contrast, jobs supported by exports in the services sector accounted for 59% of the total number of jobs that were supported by exports. Within the services sector, however, service-related jobs accounted for 40.5% of the jobs in the goods-producing sector that were supported by exports, reflecting the growing service component of merchandise exports. According to ITA, jobs supported by exports in the manufacturing sector have declined from 41.4% of the total number of jobs supported by exports in 1993 to 32.4% in 2010, also due to the relatively more rapid increase in labor productivity in the manufacturing sector. In addition to estimates of the total number of jobs in the United States that are supported by exports, ITA published estimates in 2015 of the number of jobs by state that are supported by the exports of goods, including manufactured goods, natural resources, and agricultural commodities, as indicated in Table 2 . Estimating exports by state and, therefore, estimating the number of jobs in each state that are supported by exports, however, is hampered by a lack of detailed export data. Such state-level data are based on the Census Bureau's origin of movement (OM) data, or trade data based on the state in which a good began its journey to the port of export, which may not always be the state where the good was manufactured or from which it originated. These data are especially problematic for agricultural commodities when those commodities are shipped on the Mississippi River to New Orleans and are credited to Louisiana, instead of to the state where the commodities were produced. To improve its estimates, the ITA used a combination of OM data and export data from the Department of Agriculture, which uses a measure of state-level farm cash receipts to estimate each state's export value based on a state's share of the total cash receipts. These shares are applied to U.S. national export values to create state export values. In using the data, the ITA cautioned that Given the data used to estimate jobs supported by state-level exports, care should be taken in the interpretation of the results. The figures should best be thought of as representing the number of jobs supported by the exports from a state as opposed to the number of jobs supported by exports within a state. As calculated, exports from a particular state are not necessarily produced in that state and, therefore, not all the labor embodied in the production of the export will be located in the state. According to the ITA estimates, 15 states accounted for over 70% of the total number of U.S. jobs that were supported by exports in 2014. Exports from Texas and California accounted for nearly one-fourth of the total number of U.S. jobs supported by exports, as indicated in Figure 5 . Both opponents and proponents of trade and trade agreements have used the numerical relationship developed by ITA on the number of jobs supported by exports in the economy to serve as a proxy for estimating the employment effects of FTAs. In some cases, various groups have used these data in reverse to argue that if a certain number of jobs were supported by $1 billion of exports, then that same number could be used to argue that a certain number of jobs would be "lost" by $1 billion of imports, represented by the trade deficit (the difference between exports of goods and services and imports of goods and services) so that any net increase in imports with countries that are associated with a trade agreement would necessarily result in a loss of employment for the economy. This approach also has been used by some to argue that the U.S. trade deficit implies a net loss of jobs in the economy; they contend that domestic production could be substituted for imports, which would boost both production and jobs in the U.S. economy. While some imports and exports are substitutable, other imports represent items that are not available or are more costly to produce domestically. Also, demands on labor and capital markets vary substantially between export and import sectors. While some job losses associated with imports can be highly concentrated, imports also support a broad range of widely-dispersed service-sector jobs, including transportation, sales, finance, marketing, insurance, legal, and accounting. Many economists argue that equating a trade deficit (whether on a bilateral basis or overall) with a specific amount of unemployment or job losses in the economy is questionable. According to standard economic theory, the overall size of the trade deficit arises from the imbalance of saving and investment in the economy as a whole, represented by the combined net savings or dissaving of households (individuals), firms, and the government sector relative to the amount of investment that takes place in the economy. This imbalance either increases capital inflows or outflows depending on whether the net amount of saving and investment is positive, which would tend to reduce domestic interest rates and increase capital outflows, or negative, which would tend to raise domestic interest rates and induce capital inflows. Such inflows and outflows affect the international exchange value of the dollar and, therefore, the prices of exports and imports. In contrast, trade agreements and other factors alter trading relationships by changing the composition of trade, or by changing the share of trade that is represented by different countries and a different mix of goods and services. As a result, most economists argue that, given the current composition of the U.S. economy, globalization, international trade, and trade agreements are not major determinants of the overall level of employment or wages in the U.S. economy, although trade can affect various sectors of the economy disproportionately. They assert that, for the U.S. economy, the total number of jobs and the overall level of production are determined by such macroeconomic factors as productivity growth, the growth rate of the population, and the pace of technological innovation. As indicated above, the methodology developed by ITA was unique to estimating a static number of jobs in the U.S. economy that were supported by exports, and ITA did not develop a similar methodology for linking imports or a trade deficit to jobs in the economy. The composition of U.S. imports is fundamentally different from that of U.S. exports. While some imports and exports represent clearly substitutable items, other imports represent inputs to further processing, or are items that either are not available or are not fully available in the economy. In addition, import-competing industries likely do not have the same mix of capital and labor in their production processes as do export-oriented industries, so that demands on capital and labor markets can vary substantially across industrial sectors. ITA has issued various statements indicating that using the data on jobs supported by exports to estimate any relationship between imports and jobs (as has been done by some) is a misuse of the data. As ITA has stated, the employment estimate is a static relationship, or it reflects a relationship at a point in time, and is not a multiplier and should not be used to estimate changes in jobs associated with changes in exports or imports in a multiplier fashion; nevertheless, this has been done by both opponents and proponents of trade liberalization to estimate the number of U.S. jobs that have been lost or created as a result of trade agreements. In addition, the ITA estimates relate to the average number of jobs supported by exports across a broad section of the economy, which is not the same as estimating the number of jobs that would be added or lost as a result of a trade agreement. Such an estimate would need to focus on estimating the change in the composition of employment that would be associated directly with a change in trade as a result of a trade agreement. Also, most trade agreements incorporate provisions governing trade in services, investment, nontariff barriers, and a broad range of other issues that are not reflected in ITA's estimates. ITA argues that its estimate of the number of jobs supported by exports should not be used with projected changes in trade to estimate potential employment effects from trade agreements. It says: Averages derived from IO [input-output] analysis should not be used as proxies for change. They should not be used to estimate the net change in employment that might be supported by increases or decreases in total exports, in the exports of selected products, or in the exports to selected countries or regions. The averages are not proxies because the number of jobs supported by exports usually does not change at the same rate as export value. The rate is not the same because other factors, such as prices, resource utilization, business practices, and productivity, do not usually change at the same rate. In addition, the material and service inputs and the labor and capital inputs differ significantly across types of exports. For example, the labor requirements for an exported aircraft are significantly different from those of an exported agricultural product or an educational service. Ideally, estimates of trade changes from tariff reductions would be multiplied by figures that reflect actual changes in employment (based on the mix of goods traded) that would occur at the margin as a result of changes in the volume of goods traded. According to ITA, though, such data do not exist. The only data that are available reflect the estimated average number of jobs supported across the U.S. economy by a given level of exports. Further, according to the ITA, "[a]s a result, multiplying trade estimates from the computable general equilibrium (CGE) models by employment averages would tend to overestimate the actual number of jobs potentially lost to trade changes." ITA also indicated that In addition, estimates of the average number of jobs associated with exports cannot be adjusted for fluctuations in manufacturing capacity over the course of the business cycle. As explained by the USITC, the more slack capacity there is in the U.S. economy, the more potential there would be for job creation. During periods of slack business activity, increased output, including from export-oriented sectors, would tend to increase employment, lower unemployment, and increase labor force participation. Conversely, during periods of strong business activity, when industry operates at or near full capacity and employment, increased output, including output for exports, tends to raise employment less—if at all—and instead mainly shifts employment to industries that pay higher wages. In contrast to ITA's estimates of the number of jobs in the economy currently supported by exports, some economists and others use various trade models to forecast the number of jobs that may be affected by FTAs. Most economists argue, however, that estimates of employment gains or losses represent a partial accounting of the total economic effects of FTAs and, therefore, are not representative of the overall impact of FTAs on the economy. In general, various economic models and approaches used to provide differing estimates of the magnitude of changes in U.S. employment that could arise from an FTA reflect different assumptions and conditions. Both proponents and opponents of FTAs cite results of these studies to support their respective positions. The various models and approaches have strengths and weaknesses, although not always in equal proportions, and they vary in the degree to which they reflect economic reality and are highly sensitive to the assumptions that are used. Trade models are different from macroeconomic models used to forecast GDP, employment, wages, taxes, and investment in the economy. Trade models are not structured to allow them to directly estimate changes in the number of job gains or losses in the economy that may arise from a trade agreement. Instead, trade models estimate changes in employment between sectors of the economy given certain baseline assumptions about changes in prices of traded goods and GDP. The models are hampered by data limitations and other theoretical and practical issues that make it difficult to derive precise estimates of the impact of a particular trade agreement on the economy. In response, some groups use various methods and proxy estimators to assess the potential impact of trade agreements on jobs, producing a wide range of estimates. Some groups argue that in certain cases FTAs negatively affect employment in the United States, worsen the nation's trade deficit, and reduce wages for U.S. workers. Most economists acknowledge that international trade and FTAs can entail some negative effects, particularly job losses and lower wages, with the effects falling more heavily on some workers and some firms, but they also argue that the overall net effect is positive. Generally, the costs and benefits associated with FTAs do not accrue to the economy at the same speed; costs to the economy in the form of job losses are felt in the initial stages of the agreement, while benefits to the economy accrue over time. In addition, while research is ongoing, many economists conclude that there is little evidence indicating that trade liberalization, or international trade more broadly, is a major factor affecting income distribution, whether in the United States or in other economies, developed or developing. (See the section on " International Trade and Income Inequality " in this report.) In comparison to the limited amount of data on nontariff barriers to trade in goods and services and the difficulties involved in translating nontariff barriers into tariff equivalents, the relative availability of data on trade in goods and tariff rates has tended to drive the policy dialogue concerning the impact that cuts in tariffs will have on employment, wages, and output in the economy. The rapid digitalization of the global economy, however, is reshaping global trade, as well as broader global value chains. As a result of these developments, global trade patterns arguably are being shaped more by nontariff activities than they are by traditional cuts in tariffs, due to successive rounds of trade negotiations that have lowered average tariff rates. Perhaps more importantly, the digital revolution is affecting the economy in unpredictable ways that are complicating efforts to collect data and to forecast the impact of the phenomenon in ways that capture their impact in trade models, thereby challenging the relevance of traditional trade models and some of the more common measures that often are used to assess the performance of trade agreements. As one study concluded, "globalization is being accelerated by flows of data that embody ideas, information, and innovation." Faced with pressure on jobs and wages from international trade, governments are tempted at times to protect domestic producers or vulnerable segments of the workforce. Such actions, however, have broader implications for the economy as a whole. Faced with these price pressures, firms can respond by upgrading their own production processes and improving their productivity. In lieu of making such structural changes, firms can also outsource production, fold, or attempt to alter the trade environment. Such attempts can include (1) negotiating with other producers to set a global price that is consistent with their own production costs, essentially creating a cartel price; (2) lobbying governments to raise the price of imported goods to match the domestic price through tariffs or nontariff measures, or some other form of a tax on imports; or (3) lobbying for subsidies to compensate domestic producers for the difference between the domestic and the international price. While the economic impact of these specific policies differs, they may impose costs on the economy as a whole by affecting the allocation of capital and labor. In almost all cases, efforts to protect a segment of the economy from international competition involve costs that are dispersed throughout the economy. While the ITA provides annual estimates of the number of jobs in the economy that currently are supported by exports, the U.S. International Trade Commission (USITC) is directed to provide the official U.S. Government estimate of the impact of proposed trade agreements on the future course of the economy. The ITC uses an economic model known as the Global Trade Atlas Project (GTAP), located at Purdue University, to estimate changes in trade (exports and imports) that arise from changes in tariff rates and tariff rate quotas. This model is a long-run microeconomic model that has been used widely and tested to provide estimates of the distribution of potential gains and losses expressed as proportional effects (percentage increases or decreases in trade) for various sectors, relative to certain baseline economic projections. Trade models used to analyze FTAs are part of a class of economic models referred to as computable general equilibrium models (CGE) that incorporate data on trade and a range of domestic economic variables from as many as 100 countries. These models generally operate with the assumption that the economy is operating at full employment and provide estimates of the distribution of potential gains and losses expressed as proportional effects (percentage increases or decreases in trade) for various sectors, relative to certain baseline economic projections. As a result of the large number of countries that often are included in trade models and the vast amounts of trade data that are used by the models, the models necessarily must sacrifice some level of precision in their estimating abilities. The models aim to provide insights into the mechanisms by which changes in tariffs or other parameters can affect changes in trade flows among a set of countries. Since such trade models originally were developed with the intent of analyzing the economic effects of such broad multilateral trade agreements as the Uruguay Round, this lack of precision was not considered to be an important drawback. However, this lack of precision may be an issue when the models are used to estimate the effects of bilateral trade agreements where the overall amount of trade, and therefore the impact of the agreement, is expected to be less than that of a comprehensive multilateral agreement. Since tariff reductions and other provisions in trade agreements are phased in over a number of years, trade models must incorporate a number of assumptions that invariably compromise their ability to make accurate estimates. Trade agreements also attempt to strike a balance between commitment to an implementation schedule and flexibility to allow governments to adjust their commitment schedules due to events that may affect the length of time it takes for the agreement to be fully implemented. Such models also reflect various assumptions and subjective analysis that is used to estimate the economic impact of removing nontariff barriers, increasing foreign investment, and reducing or removing other barriers to trade. Nontariff measures have become an increasingly important component of trade agreements and may offer the greatest long-term benefits. Successive rounds of multilateral trade agreements have instituted across-the-board cuts in tariffs that have stimulated global trade among developed and developing economies and increased global economic welfare. What largely remain are higher tariffs on products that are the most politically sensitive. Estimating the effect of trade agreements on employment is complicated further by two major economic forces. When import prices are lowered due to a trade agreement, the lower prices have two main effects: (1) they lower the prices of imported goods, which can stimulate a shift in domestic demand toward the comparably lower-priced imported goods (the substitution effect); and (2) they increase the real purchasing power of consumers and producers, which may increase demand for all goods and services (the income effect). For some goods, these two effects work in tandem to unambiguously increase demand, tending to increase production and employment. In some cases, however, the two effects work in opposite directions: the substitution effect has a negative impact on demand, while the income effect has a positive impact on demand. In these cases, the result of these two effects is ambiguous. Beyond external forces that affect the economy, multi-directional interactions within the economy complicate efforts to determine cause and effect between trade and trade agreements and the gains or losses of jobs. International trade is not the primary force that creates jobs in the U.S. economy; exports account for about 13% of total U.S. annual GDP, compared with 45% in Germany and 30% in Canada. The total number of jobs and the overall level of production in the United States are determined by such macroeconomic factors as productivity growth, the growth rate of the population, and the pace of technological innovation. Although trade agreements may have a limited impact on the U.S. economy as a whole, trade agreements with specific countries may have a concentrated impact on certain sectors of the economy due to the nature of the trade relationship. As indicated, it is difficult to determine beyond broad generalizations how a trade agreement will affect jobs in the economy, given the range of other factors that can affect job gains and losses in the U.S. economy, especially considering the extended phase-in period of most FTAs. Also, significant gaps in data, particularly relative to formal and informal barriers in the services sector, hinder the ability to model the effects of trade agreements that lower barriers to trade in services. These gaps are important for the United States, because the services sector accounts for 66% of output and 70% of full- and part-time employment in the U.S. economy, and increased trade in services offers the possibility of large gains for the U.S. economy. U.S. trade also is characterized by the extent of trade with developed economies that are similar to the United States. In 2015, for instance, 63% of U.S. exports and 57% of U.S. imports were from countries with similarly highly developed economies. In general, economists view trade agreements as a potential force in encouraging greater economic openness. Consequently, trade agreements potentially can serve as a driving force for economic change. This change, however, cannot always be quantified and, therefore, cannot always be represented in trade models. Comprehensive free trade agreements include a range of policy issues that have cross-border implications, including trade in goods and services, investment, regulatory and other nontariff trade barriers, government procurement, e-commerce, agricultural barriers, intellectual property rights, state-owned enterprises, worker rights, and the environment. As such, these trade agreements can serve as catalysts for economic growth and development that can have a significant impact on a nation's economy beyond what would be predicted from traditional trade models. This can be particularly important for developing countries; such countries may be trying to raise their own standards and see trade agreements as important tools for integrating themselves into regional and global economies, as well as for implementing domestic economic reforms. In addition, trade agreements may help standardize such matters as dispute resolution procedures and other governance issues. Beyond the general limitations discussed above, trade models incorporate a number of other, often unstated, assumptions that affect their forecasting accuracy. Despite these limitations, CGM trade models are widely used and have proven to be helpful in estimating the effects of trade liberalization in such sectors as agriculture and manufacturing where the barriers to trade are more easily identifiable and quantifiable. Barriers to trade in services and investment, however, have proven to be more difficult to identify and, therefore, to quantify in an economic model. In general, trade models attempt to estimate the impact on domestic economic activity as a result of changes in the volumes of exports and imports that would arise from changes in the prices of goods that, in turn, are affected by changes in tariff rates. These estimated changes in exports and imports are based on assumptions noted below. Trade models like the GTAP model noted above must aggregate vast amounts of data into a manageable size, for instance by reducing more than 17,000 individual commodities into about 50 categories. As a result, tariffs in the models represent weighted averages of tariffs for the commodities that are aggregated into these basic groups. This procedure tends to mask the importance of those products within the aggregate that have high tariff rates. This also means that products within a group may not be good substitutes for products in another country and imported products in a category may be quite dissimilar to a country's domestic product in that same category. Trade models also generally do not incorporate assumptions about the speed with which tariff changes affect the relevant economies, leaving it to the modelers to make assumptions about how quickly changes in tariff rates will be passed along in goods prices and about the timing of any adjustments that occur. Also, these models make no assumptions about the basic input-output structure of the economy, and they do not attempt to adjust this structure to account for economic or technical changes that lead an industry to substitute one factor for another. This assumption is particularly important, since the basic economic theories that relate changes in the prices of goods, whether from changes in tariff rates or from some other source, to changes in the demand for such factors as labor and capital assume that price changes drive changes in the basic input-output structure of the economy. Despite the attention that often is focused on the impact of trade agreements on jobs, trade models generally do not incorporate the types of labor market and other economic data that are necessary to estimate job gains or losses in specific industries. As a result, most model simulations assume that changes in aggregate demand that result from a trade agreement will lead to changes in prices (wages and exchange rates) instead of changes in quantities (employment and output). Most trade models also assume that the economies of the countries involved are operating at full employment and that the level of employment is fixed. These assumptions mean that any gains that are experienced as a result of trade liberalization appear as gains in income and changes in the composition of employment by industry, not as changes in the total amount of employment. While some analysts have questioned the assumption of full employment, other experts argue that it is not unreasonable considering the long-term time frame that generally is required for most trade agreements to become fully implemented. During this time, the economy would be expected to return to its long-term growth path at or near full employment. Over the estimating period, a persistent low level of unemployment is unlikely to have a significant impact on the results of the models, given the multitude of other assumptions that are involved in generating estimates. In addition, over the implementation period of the agreements, it does not seem reasonable to assume that the rate of unemployment would persist at levels that would be high enough to have a significant impact on the estimates. In such a case, either the economy would be expected to return to full employment solely through market forces, or the government would be expected to intervene by adopting Keynesian-style stimulative macroeconomic policies (changes in tax rates or government spending) to assist the economy in returning to full employment. It seems questionable, however, that populations in democratic societies would accept high levels of unemployment that would persist long enough to materially affect the economy and, therefore, the estimates of a trade agreement, without these same populations expecting the government to take action. Trade models also generally assume that consumers are indifferent to the quality of the goods they consume and whether they are produced domestically or imported. Academic research has indicated, however, that product variety and quality play important roles in consumer choices and, therefore, in determining trade flows between countries. Consumers may prefer imported goods not necessarily because they are cheaper, but because they are viewed as being of a different quality than goods produced domestically, or vice versa. This would mean that consumers would distinguish an automobile not only by the country of origin, but also by perceived differences in the quality of the automobile. According to this research, consumers base their buying decisions on more than the price of a good alone; they likely compare goods based on a combination of factors in a manner that is not reflected in traditional trade models. Trade models also generally assume that all firms in the economy operate at the same level of efficiency. However, research indicates that the productive efficiency of firms often varies by country and industry and also within an industry in the same country; some firms may operate at a very high level of efficiency, while others in the same industry may operate at a lower level of efficiency. As a result of these differences in productivity, not all firms will be affected to the same degree by a decline in import prices as a result of a reduction in tariff rates. Higher-efficiency firms may have the flexibility to match the lower import prices that arise from a change in tariff rates by lowering their domestic prices, especially if the changes in tariff rates are small in percentage terms. Similarly, other foreign firms, whose governments are not party to a trade agreement, may attempt to maintain their market shares by lowering their prices to match those of other competitors. Generally, only those firms that are operating at the margin of the domestic industry, or the less efficient firms, may not be able to match the lower import prices and may well be forced to close, with the attendant losses in jobs. Some recent trade models have taken an additional step by including assumptions that distinguish between firms that export, those that do not, and those that might export given certain conditions. These models generate a greater export response by firms to a trade agreement due to these assumptions about firms that may choose to participate in exporting as a result of a trade agreement. Similarly, trade models generally assume that the full change in tariff rates will be passed along to consumers and domestic producers and that other foreign competitors will not react to changes in their competitors' prices by adjusting their own prices, an assumption that seems unlikely given the emphasis that firms often place on maintaining their market shares. The impact on bilateral trade as a result of a change in tariff rates arising from a trade agreement, and therefore the impact on domestic employment and output, would be less than projected by trade models if the full change in tariff rates were not passed along to consumers in the form of lower domestic prices. Similarly, the negative impact on domestic employment and output that is estimated by trade models likely would be lower if domestic and other foreign producers move to match the changes in their competitors' prices to maintain their market shares. This would be especially probable in cases where the change in tariff rates is small in relative terms. Invariably, domestic consumers would benefit from these types of price reductions, but foreign suppliers would not necessarily experience an increase in their overall market shares and not all domestic producers would necessarily experience a decrease in their market shares as a result of a change in tariff rates in a trade agreement. In addition, economists identify other potential economic effects that arise specifically from trade agreements between two or more countries, often termed preferential trade agreements, in terms of trade creation and trade diversion. Trade creation stems from lower tariff rates and lower import prices for the participants of the trade agreement, which tends to create new trade opportunities. In contrast, trade diversion reflects a shift in trade patterns that could arise as a result of lower tariff rates among the participants to a trade agreement. In this case, trade is diverted away from the relatively higher-priced competitors who are not party to the agreement to competitors with relatively lower-priced goods as a result of the reduction in tariff rates. At times, countries are motivated to participate in trade agreements to forestall this type of trade diversion. For example, China, which initially criticized the TPP agreement and supports the ASEAN-initiated regional trade agreement (the Regional Comprehensive Economic Partnership), reportedly has grown increasingly interested in participating in the TPP to have a voice in the trade framework and to avoid being excluded from the anticipated increase in trade that may occur as a result of the agreement. In addition to these economic effects, trade agreements may also incorporate rules and disciplines for open, nondiscriminatory treatment for participants. This may reduce the ability of authorities to promote industrial policies that discriminate against foreign firms or provide special treatment for domestic firms in ways that distort market activity. As they currently are negotiated by the United States, trade agreements aim to be comprehensive and relatively high-standard agreements that address a broad range of issues that could have far-ranging effects on the rules and disciplines that govern trade between countries. As a result, the long-run impact of these agreements could outweigh the potential impact that traditional trade models estimate based solely on changes in tariff rates. For instance, the TPP has 30 chapters similar to other recent FTA agreements that deal with rules and disciplines in general areas and specific industries. Such chapters include various industrial sectors, government procurement, trade facilitation measures, investment, and nontariff barriers related to services, among other provisions. Trade models, however, currently are not capable of estimating precisely the potential impact of such changes on the economy. Trade models also treat exports and imports of goods and services as strictly domestic or foreign goods. However, the rapid growth of global value chains (GVCs) and intra-industry trade (importing and exporting goods in the same industry) has significantly increased trade in intermediate goods in ways that can blur the distinction between domestic and foreign firms and goods. Intermediate goods are products that are used as inputs into the production of final goods and services. Foreign value added in goods and services, or the share of the value of a good that was imported as an intermediary product, accounts for about 28% of the content on average of global exports, as indicated in Figure 6 . This share, however, can vary considerably by country and industry; foreign value added in the exports of developed countries on average accounts for about 31% of the content of their exports and about 11% of U.S. exports. The value for developed countries likely is inflated due to the highly integrated economies within the European Union (EU), which accounts for 70% of the exports from EU countries. In developing countries, the highest foreign-value-added shares in exports are found in East and South-East Asia and in Central America, where processing industries account for large shares of exports. As a result of the growth in GVCs, traditional methods of counting trade may obscure the actual sources of goods and services and the allocation of resources used in producing those goods and services. Trade in intermediate goods also means that imports may be essential for exports. As a result, countries that impose trade measures restricting imports may negatively affect their own exports. Trade in intermediate goods and services through value chains utilizes a broad range of services in ways that have expanded and redefined the role that services play in trade. It also has increased the number of jobs in the economy that are tied directly and indirectly to international trade. This expanded role of trade in goods and services through trade in intermediate goods often is not captured fully in trade data and, therefore, by trade models. Although some observers argue that international trade, and trade deficits in particular, tend to reduce the number of jobs and increase the unemployment rate for the economy as a whole, the data and economic theory offer a mixed assessment. As noted above, international competition may be one among a number of factors that affect the overall composition of employment in the economy and may result in job gains and losses. In general, the unemployment rate and the trade deficit are not directly related. Recent data indicate that high unemployment rates have occurred during periods when there were smaller deficits in the merchandise trade accounts as a result of the overall composition of the economy. For instance, in 2006, the U.S. unemployment rate had fallen to about 4.0%, with the economy growing at an annual rate of 2.7%. At the same time, the economy experienced a merchandise trade deficit of over $800 billion, as indicated in Figure 7 . In 2009, however, the rate of economic growth had fallen to a negative 3.0% and the rate of unemployment had risen to 9.9%, but the trade deficit had fallen to $510 billion. Since 2010, the rate of unemployment has fallen by more than half from about 10% to 4.1%, while the merchandise trade deficit has averaged around $750 billion. Given the current composition of the U.S. economy, foreign capital inflows play an important role by bridging the gap between domestic supplies of and demand for capital, or between the total amount of saving in the economy relative to the total amount of investment. Indeed, economists generally argue that it is this interplay between the demand for and the supply of credit in the economy, rather than the flow of manufactured goods and services, that drives the broad inflows and outflows of capital and serves as the major factor in determining the international exchange value of the dollar and, therefore, the overall size of the nation's trade deficit. Figure 8 shows the four major components of the savings-investment balance in the economy: households (individuals), business, government, and the foreign sector, represented here by the current account (CA). Generally, the household sector supplies the funds that are used by the government sector and by businesses to invest. When the combination of the three sectors—households, business, and government—creates a net savings deficit, interest rates rise and foreign capital flows into the economy. Capital inflows, in turn, place upward pressure on the dollar's exchange rate, pushing the exchange value of the dollar up relative to other currencies. As the dollar rises in value, the price of U.S. exports rises and the price of imports falls, which tends to increase the current account deficit. Trade agreements tend to alter the composition of the trade deficit among various trading partners and among a different mix of goods and services, but they do not alter the overall size of the trade deficit. Recent changes in the price of oil and its impact on the U.S. trade deficit demonstrate the macroeconomic origins of the trade deficit. Given the prominent role that energy imports play in the U.S. trade deficit, the U.S. trade deficit might be expected to decline along with the drop in the price of oil, but that has not been the case. From 2014 to 2015, the average price of an imported barrel of crude oil fell by nearly half from an average annual price of $91 per barrel to an average annual price of $47 per barrel, although the price of imported crude oil fell below $40 per barrel by the end of 2015. At the same time that the average price in imported crude oil dropped sharply, the quantity of imported crude oil fell by 1.4%. As a result of this drop in crude oil prices and relatively stable quantity of imports, crude oil imports fell from accounting for more than 40% on average of the annual U.S. merchandise trade deficit in 2012 to about 10% on average of the annual U.S. trade deficit in 2015. Despite the drop in the average annual price of imported crude oil and the decline in the role of imported crude oil in the value of the U.S. trade deficit, the U.S. merchandise deficit increased in 2015 over that recorded in 2014, as indicated in Figure 9 . Instead of seeing the overall trade deficit decline, the composition of the trade deficit changed, with non-petroleum products replacing petroleum products, seemingly affirming the proposition that the overall value of the trade deficit is determined by macroeconomic forces. As U.S. demand for capital outstrips domestic sources of funds, domestic interest rates rise relative to those abroad, which tends to draw capital away from other countries to the United States. These foreign funds have been available to the United States because foreign investors have remained willing to loan their excess saving to the United States in the form of acquiring U.S. assets. In turn, these capital inflows have accommodated the current account deficits. The large increase in the nation's current account deficit would not have been possible without the accommodating inflows of foreign capital. Capital inflows, in turn, help keep U.S. interest rates below the level they would reach without them, and they have allowed the nation to spend beyond its current output, including financing its trade deficit. Due to this savings-investment imbalance in the U.S. economy, as the economy approaches its potential full-employment level of output, the rate of unemployment falls, credit markets tighten, interest rates rise, the savings-investment imbalance worsens, and capital inflows increase. These developments tend to strengthen the value of the dollar relative to other currencies. As a result of the appreciation in the exchange value of the dollar, import prices fall relative to U.S. export prices, worsening the merchandise trade deficit. In addition, as the economy approaches full employment, national income rises, and consumers increase their purchases of all goods, including imports, which adds to the trade deficit. In contrast, when the U.S. economy is growing at a rate below its potential, demands on financial markets are reduced, interest rates fall, the savings-investment imbalance lessens, and capital inflows decline, which reduces pressure on the dollar, all other things being equal. As a result, the international exchange value of the dollar falls relative to other currencies and the price of U.S. exports falls, while the relative price of imports rises, which tends to make U.S. exports more competitive and reduce the trade deficit. In addition, when the economy underperforms, national income is below its potential and consumer spending falls. This drop in consumption reduces demand for domestic goods and for imports, which contributes to a decline in the trade deficit. In addition, the dollar often serves as a "safe haven" currency during periods of instability in the global economy and attracts foreign investors. The global foreign exchange market is vast and far surpasses the size of the U.S. trade account. For instance, a triennial survey of the world's leading central banks conducted by the Bank for International Settlements (BIS) in April 2013 indicates that the daily trading of foreign currencies through traditional foreign exchange markets totaled $5.3 trillion. In addition, the over-the-counter (OTC) foreign exchange derivatives market reported daily turnover of $2.3 trillion in April 2013. The combined amount of $7.7 trillion for daily foreign exchange trading in the traditional and OTC markets is more than three times the annual amount of U.S. exports of goods and services. The data also indicate that 87.0% of the global foreign exchange turnover in April 2013 was in U.S. dollars. Another important area where opponents and proponents of trade agreements disagree is over the impact that such agreements have on employment as a result of shifts in foreign investment. Some opponents of trade agreements contend that trade agreements have led directly to job losses in the United States by encouraging U.S. multinational companies to outsource jobs to other countries. They also argue that such agreements encourage some U.S. firms to close plants in the United States and shift production and jobs to their affiliates abroad. Indeed, selected anecdotal evidence suggests that there are instances in which some firms may have shifted part of their operations abroad, but the evidence to date suggests that these instances represent isolated activities more than a general pattern of behavior. Instead, some economists argue that the relationship between domestic production, foreign investment, and trade has become complicated through the growth of global value chains in which value is added through production activities in many different locations. This is sometimes referred to as "trade in tasks" as opposed to the traditional "trade in goods." As indicated in Figure 10 , in 2005 (the latest date for such data) all developed economies were engaging to various degrees in offshore manufacturing, according to the OECD. For the OECD countries as a whole, about 25% of total manufacturing activities on average were taking place through offshore production relationships. At 7% of manufacturing activity occurring offshore, the United States ranked fourth from last among the OECD countries, while Hungary, at a 36% share, ranked first. In cases where U.S. firms have increased their investment abroad, it is not possible to determine whether they shifted their operations from the United States to another location specifically to replace domestic U.S. production with production abroad to export back to the United States, or to serve the local or regional foreign market. Intra-firm trade, or exports and imports between U.S. parent companies and their foreign affiliates, accounted for 29% and 34% of total U.S. exports and imports, respectively, in 2012. Over the past decade, however, intra-firm trade, both exports and imports, has declined as a share of total U.S. trade, reflecting in part the growing share of trade between U.S. parent companies and firms with which they are affiliated through nonequity relationships, that is, global value chains. The Bureau of Economic Analysis (BEA) collects and publishes an extensive amount of data on U.S. parent companies and their foreign affiliates. These data, however, are not collected to capture the outsourcing phenomenon. Indeed, since the late 1990s, no U.S. government entity has collected comprehensive data specifically to capture the closing of a production facility in the United States and the offsetting opening of a facility abroad. In addition to the traditional equity-based direct investment, there is an increase in various types of nonequity investments through global value chains. These nonequity relationships reflect a new phase in economic globalization in which multinational corporations and workers build interdependent networks of operations. These nonequity forms of ownership include partial ownership, joint ventures, contract manufacturing, logistics management, franchising and licensing, and other forms of contractual relationships through which firms coordinate and control the activities of partner firms. Evidence to date suggests that such forms of control are shaping global trade patterns in such industries as automotive components, consumer electronics, apparel, hotels, and information technology and business process services. Some opponents of trade agreements contend that international trade, trade agreements, and globalization more broadly have been important factors contributing to the growing inequality in wealth and income within countries. They argue that international trade favors high-skilled activities and workers. Despite intense focus in the academic literature, there is no clear consensus on the direct impact of trade and trade agreements on income inequality. While trade and trade agreements may have a short-run impact on income inequality in some cases and in some sectors of the economy, over the long term, the distribution of income is determined by a range of other factors within the economy, with trade generally judged to be less important. Much of the current controversy in the academic literature over trade and income inequality is not a disagreement over the impact of trade agreements on income inequality in developed economies like the United States, where trade is less important than other factors, but in developing countries, where trade can have a greater effect on income distribution. Some economists emphasized the importance of other factors in affecting the distribution of income. For example, one study concludes that the effect of globalization on inequality depends on many factors, several of which are country- and time-specific, including: a country's trade protection pattern prior to liberalization; the particular form of liberalization and sectors it affected; the flexibility of domestic markets in adjusting to changes in the economic environment, in particular the degree of within-country labor and capital mobility; and the existence of other concurrent trends (e.g., skill-biased technological change) that may have interacted with or even partially been induced by globalization. Given that different countries experienced globalization in different ways and at different times, it is hardly surprising that the relevant mechanisms through which inequality was affected are case specific. Some opponents of trade agreements have used two concepts in the general theory of international trade to advance the argument that international trade has a disparate effect on workers' incomes and, therefore, that trade contributes to growing income inequality. These two concepts are the factor-price equalization theorem and the Stolper-Samuelson theorem. These theorems postulate that trade between countries will equalize the prices of traded goods, which will then tend to equalize the prices of such factors of production as labor and capital. The Stolper-Samuelson theorem, in particular, postulates that not all the factors of production will benefit equally from the shift in factor prices, but that those factors that are used more intensively in producing a nation's exports will benefit the most, leading to an increase in income inequality. This theorem implies that international trade would tend to increase income inequality in such capital-intensive economies as the United States, because the greater share of the rewards from trade would accrue to capital, while international trade would tend to create greater income equality over time in labor-intensive developing economies where the greater share of the benefits of trade would accrue to labor. Despite a general recognition by economists that these two theorems are important theoretical tools, empirical research and experience to date have provided little support for the impact of trade on the distribution of income in concert with the two theorems, especially in developed economies. Moreover, experience in developing countries has run counter to the conclusions of the theorems that trade liberalization will lead to greater income equality, since both developed and developing economies have experienced growing income inequality. Evidence from firm-level data also seems to indicate that (1) companies differ significantly within industrial sectors; (2) only a subset of companies within a given sector engage in exporting; and (3) those companies that export tend to pay higher wages. Some economists argue that the restrictive assumptions of both the factor-price equalization theorem and the Stolper-Samuelson theorem largely discount their usefulness in a practical sense. Consequently, some economists have questioned the applicability of the theorems outside a purely academic environment. For the United States, the implications of these two theorems for the distribution of income have been challenged on a number of grounds. Contrary to standard trade theory, the United States trades with countries that are at similar levels of economic development and that have similar wage rates and consumer preferences. As a result, this part of U.S. trade seemingly may have little impact on wages, prices, or the distribution of income within the economy. In addition, a large share of U.S. trade involves imports and exports of similar products, or inter-industry trade, and trade in intermediate goods through complex supply chains that requires a more nuanced interpretation of the traditional concepts of comparative advantage and may challenge the general conclusions of the two theorems. Also, the open nature of the U.S. economy and the relatively small share of trade in the economy mean that the marginal effects of trade agreements may have a limited effect on income distribution in the manner postulated by the Stolper-Samuelson theorem. For the U.S. economy, some economists argue that international trade has accounted for a small share of the shift in income inequality between high-skilled and low-skilled workers. Academic economists are actively researching the relationship between trade and income inequality, which some consider to pose the greatest challenge to policymakers in developed and developing economies. There is growing academic support, however, for the position that factors other than trade, particularly technology and foreign investment, have a more significant effect on income distribution. Economists with the World Bank, for instance, argue that, "[t]he dismantling of trade barriers in many developing countries over the past two decades has dramatically increased developing countries' exposure to foreign technologies" by increasing imports of capital and intermediate goods and by reducing restrictions on foreign direct investment. While this research is far from conclusive, evidence to date seems to indicate that factors other than trade liberalization are a main source behind the rising level of income inequality. Economists at the IMF conclude that Trade liberalization and export growth are found to be associated with lower income inequality, while increased financial openness—mainly through foreign direct investment (FDI)—is associated with higher inequality. However, their combined contribution to rising inequality has been much lower than that of technological change, both at a global level and especially markedly in developing countries. The spread of knowledge is, of course, related to increased globalization, but technological progress is nevertheless seen to have a separately identifiable effect on inequality. The disequalizing effect of financial openness ... and technological progress both appear to be working by increasing the premium on higher skills and possibly higher returns to capital, rather than limiting opportunities for economic advancement. The academic literature has not reached a consensus on the impact of trade between developed economies on jobs, wages, and the distribution of income. Growing income inequality is not unique to the United States, or even to developed countries, but is found in both developed and developing countries. After reviewing recent research on the possible links between trade liberalization and employment, the OECD concludes that while other factors appear to be the main drivers, at least 10% of the decline of the share of labor in national income is due to increasing globalization, and in particular to pressures from the relocation of parts of global value chains and from competition from imports from companies that produce in countries with low labor costs. Increased (international) competition not only reduces the size of the rent that employers and workers share, but also decreases workers' bargaining power. The evidence on the role of globalization in growing (income and wage) inequality in OECD countries is mixed, however. It is in fact very difficult to disentangle technological change from globalization patterns that also increase the value of skills. In a 2011 report on growing income inequality, the OECD surveyed 23 of its members for evidence of growing income inequality and for the possible sources of that inequality, as indicated in Table 3 . The report concluded that income inequality had increased over the previous two to three decades in nearly all OECD countries, whether the countries experienced a trade deficit or a trade surplus. Other studies similarly have concluded that wage inequality has increased over the recent past. According to these studies, this rise in income inequality coincided with a sharp increase in the growth of trade relative to GDP in most OECD countries, primarily due to growing trade with emerging market economies such as China and India. The emergence of India and China as global trade participants essentially increased the global supply of labor and may have resulted in downward pressure on wages globally; this may explain some of the increase in income inequality in both developed and developing economies. The OECD report also indicated that during the 2000s income inequality had increased in Israel, the United States, Germany, Denmark, and Sweden, and had fallen considerably in Chile, Mexico, Greece, and Turkey. The report concluded that although trade liberalization has been debated as the main cause of widening inequality, the empirical evidence is inconclusive. Other studies have indicated that the impact of trade on income inequality depends on the country in question, the relative importance of trade in its economy, the nature of trade liberalization, and the type of trade in which the country is engaged. The OECD reached a number of other conclusions concerning the rise in income inequality, including the following: Neither rising trade integration nor financial openness has a significant impact on either wage inequality or employment trends within the OECD countries. The wage inequality effect of trade appears neutral even when only the effects of increased import penetration from emerging economies are considered. Increased imports from low-income countries tend to heighten wage dispersion, although only in countries with weak employment protection legislation. Increased financial flows and technological change affect inequality primarily through increased flows of foreign direct investment and technological progress by increasing overall wage dispersion in the upper half of the wage distribution. Regulatory reforms to strengthen competition in the markets for goods and services and to make labor markets more adaptable affect the way globalization and technological change influence the distribution of income by making a positive impact on employment levels. In contrast, such institutional reforms as changes in household structure, increases in self-employment, increases in part-time employment, changes in income tax rates, and reductions in worker benefit programs and protections contribute to widening wage disparities. The increase in wage disparities between skilled and unskilled workers was driven by inequality within rather than between sectors. The combination of the two effects—higher employment levels and greater wage dispersion—on overall earnings inequality and household income inequality has been inconclusive. The rise in the supply of skilled workers offsets the increase in wage dispersion associated with technological progress, regulatory reforms, and institutional changes, highlighting the central role of education. The growth in average educational attainment appears to have been the single most important factor contributing not only to reducing wage dispersion among workers but also to higher employment rates. Congress faces a number of difficult issues as it considers the Trump Administration's approach to trade policy, including a possible reconsideration of its opposition to the TPP agreement, potential T-TIP, renegotiation of NAFTA and the U.S.-South Korea FTA, and the use of tariffs. Both the TPP and the T-TIP comprise, or could comprise, a set of measures that could open major markets to increased U.S. exports and establish new trade rules and disciplines. The agreements could lead to major reforms in the developing economies of the participating countries. Of particular concern is the number of jobs that could be affected—positively and negatively—by the two agreements. Various groups have used trade models to offer their predictions about the employment effects of the agreements with differing and, at times, conflicting results, arising primarily from the number and kinds of assumptions they make. The different estimates of the employment effects of trade agreements highlight the limitations of the models themselves and the data they use. Congress may decide to try to improve the predictive capability of current trade models; Congress could redirect or add resources to improve the forecasting ability of current models. Congress could also contract with private entities to develop new models. Congress may also consider conducting oversight of the current state of U.S. data on trade and trade-related employment to determine what actions, if any, may be taken to improve such data and the costs and benefits involved in doing so. Such efforts could provide (1) greater insights into the dynamic adjustments that would occur as the result of a given trade agreement; (2) improved estimates of the number of jobs currently related to international trade; (3) improved assessments of the impact of trade agreements on particular sectors in the economy; and (4) a more informed assessment of the potential long-run impact of a trade agreement on the economy as a whole and on particular sectors within the economy. Given the constant churning that occurs in U.S. labor markets, most economists likely would conclude that labor markets are sufficiently fluid to minimize the long-term impact of any adjustment costs that could arise from a trade agreement. Economists recognize, however, that the adjustment costs associated with trade agreements and other types of market transformations can be highly concentrated on some workers, firms, and communities. Recent research also indicates that impediments may inhibit the adjustment process in some local labor markets, resulting in prolonged periods of unemployment or underemployment for some workers. Congress may choose to consider reviewing the effectiveness of current efforts to assist workers and firms in adjusting to changes in product and labor markets and how best to address impediments in these markets. At times, Members of Congress are concerned about the impact a particular FTA could have on employment and production within their states. Trade data by state are often quoted, but admittedly are unreliable. Some trade data are especially difficult to allocate by state because they represent data attributed to the port from which the goods or materials were exported or they represent bulk items sent to a warehouse and repackaged. Given the increased attention that is being placed on global supply chains and international trade, Congress could explore and assess how trade data are allocated to individual states and determine the costs and benefits of improving the way trade data are collected to improve the reliability of state-level data.

During the Obama Administration, the United States negotiated two comprehensive and high-standard mega-regional free trade agreements: the Trans-Pacific Partnership (TPP) among the United States and 11 other countries, and the U.S.-European Transatlantic Trade and Investment Partnership (T-TIP). The 12 TPP countries signed the agreement in February 2016, but the agreement required ratification by each country before it could enter into force. In the United States this requires implementing legislation by Congress. Upon taking office, President Trump withdrew the United States from the TPP and halted further negotiations on the T-TIP, but may reengage in the TPP under different terms. The remaining 11 partners to the TPP concluded, without U.S. participation, a revised TPP, now identified as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). The Trump Administration is also attempting to revise the two largest existing U.S. FTAs, through the ongoing renegotiation of the North American Free Trade Agreement (NAFTA), and modification talks regarding the U.S.-South Korea (KORUS) FTA. For Members of Congress and others, international trade and trade agreements offer the prospect of improving national economic welfare, while also raising questions about the potential cost to the economy. Congress plays an important role in shaping and considering legislation to implement U.S. trade agreements. Discussions of trade and trade agreements often focus on a number of issues, including the role that trade plays in the U.S. economy, the impact of trade agreements on employment gains and losses, and the size of the U.S. trade deficit. This report focuses on some of the major issues associated with trade and trade agreements and the impact of trade on the U.S. economy. The key findings include the following: From the perspective of the U.S. economy as a whole, trade is one among a number of forces that drive changes in employment, wages, the distribution of income, and ultimately the standard of living. Most economists argue that broad macroeconomic forces, including technological advances, are generally considered to be more important than trade. Economists generally conclude that trade provides net overall positive benefits to economies. Changes in trading patterns associated with changes in trading partners and composition or with new trade agreements, however, may entail certain adjustment costs, including changes in employment, which can be highly concentrated with some workers, firms, and communities affected disproportionately. In discussions of trade agreements, both proponents and opponents use the results of a variety of trade models and underlying assumptions to estimate the impact on the U.S. economy. Such models have various strengths and weaknesses, although not always in equal proportion. Most economists argue that such estimates represent a partial accounting of the total economic effects and, therefore, are not representative of the overall impact of trade agreements on the U.S. economy. Some argue that trade, trade agreements, and globalization more broadly contributed to growing wealth and income equality within countries. Growing income inequality domestically is not unique to the United States, or even to developed countries, but is found in both developed and developing countries. Despite intense focus in the academic literature, there is no consensus on the direct impact that trade or trade agreements have on income inequality. Congress faces a number of challenging policy issues relative to trade and the impact of trade agreements on the U.S. economy. These challenges include assessing the quality of data on trade and what, if any, additional resources should be devoted to collecting trade data and analyzing the role of trade in the economy. Congress also has legislative and oversight responsibility over various government programs that assist workers and firms adjust to increased competition from trade.

The Unified Agenda of Federal Regulatory and Deregulatory Actions (Unified Agenda) is compiled and published twice each year by the Regulatory Information Service Center (RISC) within the General Services Administration (GSA), and provides the public with information about regulations that federal agencies are considering or reviewing. The Obama Administration has launched an initiative to make the policymaking process more transparent, participatory, and collaborative, and has specifically requested suggestions from the public regarding the rulemaking process. With entries designed to alert the public about upcoming proposed rules and commenting opportunities, the Unified Agenda appears uniquely suited to the Administration's effort. However, it is unclear how well the Unified Agenda currently performs this task—i.e., how often agencies' proposed rules are preceded by "proposed rule" entries in the Agenda (indicating that agencies are preparing a proposed rule). This report examines that issue and discusses options that Congress or the President can use to improve transparency and participation via the Unified Agenda or other means. First, however, the report discusses the Obama Administration's open government initiative, the rulemaking process, and the potential value of comments prior to the publication of a proposed rule. On January 21, 2009, his first full day in office, President Barack Obama issued a memorandum to the heads of executive departments and agencies in which he directed the Chief Technology Officer, in coordination with the Director of the Office of Management and Budget (OMB) and the Administrator of GSA, to coordinate recommendations for an "Open Government Directive." The memorandum said that the directive (which is to be issued by the Director of OMB) would require agencies to take specific actions to make the federal government more transparent, participatory, and collaborative. For example, with regard to transparency, the memorandum said that the agencies should "harness new technologies to put information about their operations and decisions online and readily available to the public." It also said that agencies should "offer Americans increased opportunities to participate in policymaking and to provide their Government with the benefits of their collective expertise and information," and "should solicit public feedback to assess and improve their level of collaboration and to identify new opportunities for cooperation." On May 21, 2009, the Director of the Office of Science and Technology Policy within the Executive Office of the President published a notice in the Federal Register inviting the public to offer comments and suggestions about how to increase openness and transparency in government. The notice said that, with "twenty-first century tools," the federal government can take advantage of information that is currently dispersed among the nation's citizens to improve the policy process, and said "Our goal is to use the principles of open government to obtain fresh ideas about open government itself." One area in which comments were specifically requested was rulemaking—the process by which federal agencies develop and promulgate regulations. Federal regulations implement statutes and establish specific requirements. One observer described rulemaking as "the single most important function performed by agencies of government," noting that it is "to rules, not statutes or other containers of the law, that we turn most often for an understanding of what is expected of us and what we can expect from government." Federal agencies issue 3,000 to 4,000 final rules each year on topics ranging from the timing of bridge openings to the permissible levels of arsenic and other contaminants in drinking water. The rulemaking process is governed by the Administrative Procedure Act (APA, 5 U.S.C. §551 et seq. ) and numerous other statutes and executive orders. Figure 1 below shows the process that most federal agencies are generally required to follow in developing or revising significant regulations. In brief, an agency develops a draft proposed rule based on congressional requirements or authority and, after review and approval within the agency, sends the draft rule to the Office of Information and Regulatory Affairs (OIRA) within OMB for review under Executive Order 12866. After OIRA review, the agency publishes a notice of proposed rulemaking (NPRM) in the Federal Register , obtains comments on the proposed rule, and responds to those comments in developing a draft final rule. The draft final rule is then reviewed in sequence by the agency and OIRA, and the final rule is published in the Federal Register . The APA generally requires that final rules take effect no less than 30 days after publication. The rulemaking process varies somewhat depending on the agency issuing the rule, its significance, and whether the rule must be issued quickly. For example, agencies sometimes issue final rules without a prior NPRM, and OIRA only reviews regulatory actions that are "significant" and from agencies other than independent regulatory agencies. In a 2006 congressional hearing commemorating the 60 th anniversary of the APA, Professor William F. West of Texas A&M University's George Bush School of Government and Public Service said that the part of the rulemaking process that precedes the publication of the NPRM frequently lasts for several years, and "is where the most critical decisions often occur." Similarly, a 2009 report by the Government Accountability Office (GAO) noted that "much of the resource investment in a rulemaking occurs prior to the publication of the proposed rule." GAO said that the rulemaking process officially commences no later than when a Regulation Identifier Number (RIN) is assigned (i.e., when the agency is either preparing its first Unified Agenda entry for a rule, or when it is preparing its submission to OIRA for review). GAO also said that during an "initiation" phase, agencies gather information to determine whether to issue a rule, identify needed resources, and may draft concept documents for agency management. During the development of proposed rules, agencies draft the rule and the preamble (which describes why the rule is being developed), and begin to address analytical and procedural requirements. GAO reported that for 10 of 12 rules that had been developed by the Department of Transportation (DOT), the Environmental Protection Agency (EPA), and the Food and Drug Administration (FDA), the agencies took at least two years to issue an NPRM. Two of the FDA rules that GAO examined were under development for at least six years before they were published as proposed rules, and four EPA rules each took more than three years. Although federal agencies sometimes make significant changes to their proposed rules as a result of public comments, some observers have concluded that such changes become less likely after the draft proposed rules have been reviewed and approved within the agencies and OIRA, and after they have been published for comment in the Federal Register . A December 2006 report prepared for CRS by the East West Research Group at Texas A&M University concluded that the changes to proposed rules in response to comments from the public "do not tend to be of a fundamental nature for at least two reasons." Perhaps the more obvious has to do with the sunk costs in organizational resources and psychological commitments. In addition, agencies may feel compelled to invite a second round of public comment on important changes in the interest of due process. This can be an unattractive option, especially given that rulemaking is already often a protracted process and given that agencies are often under pressure from Congress or the courts to issue rules in a timely fashion. One might add that the difficulty of changing proposals also increases the incentive to develop proposals that will not need to be changed, thus reinforcing sunk costs in proposal development. Given the number of important decisions that are made while proposed rules are under development at the agencies, and the understandable reluctance of agencies to make fundamental changes to those rules after the NPRMs are published, comments and suggestions from the public may arguably be most effective while proposed rules are still under development at the agencies. The importance and potential efficacy of pre-NPRM consultation with the public underlies current statutory requirements for advance notices of proposed rulemaking (ANPRMs), negotiated rulemaking, and advocacy review panels at the Environmental Protection Agency (EPA) and the Occupational Safety and Health Administration (OSHA). Agencies also sometimes hold public hearings in advance of the publication of a proposed rule, occasionally as a result of congressional requirements. The value of early involvement in the rule-development process also underlies efforts by OIRA to review certain rules before they are formally submitted pursuant to Executive Order 12866. John Graham, OIRA Administrator during most of the George W. Bush Administration, said that once a regulatory proposal is formally submitted to OMB, there is already powerful organizational momentum behind the proposal. Not only have agency staff devoted potentially years of work to data collection and analysis; policy officials at agencies may have managed delicate relationships among stakeholders. At this stage, any changes suggested during OMB review are destined to make waves and bruise egos, which means that they will be resisted, sometimes fiercely and effectively. Similarly, Sally Katzen, OIRA Administrator during most of the Clinton Administration, said that by the time an agency issues an NPRM, "the agency is invested. By that time, the agency has its own strongly held view of how it wants this thing to look. And OMB changes at that point are, I think, really at the margin rather than going to the heart of the matter." Both former administrators have said that OIRA often has its most significant effect on draft rules before they are formally submitted to OIRA for review. Pre-NPRM public participation in rulemaking has also been advocated as part of the Obama Administration's transparency and open government initiative. At a June 2009 conference sponsored by the American Bar Association, Beth Noveck, the White House's deputy chief technology officer, said that the Obama Administration planned to use blogs and other "social media" to generate public input regarding agencies' proposed rules, even before they are drafted. Ms. Noveck was quoted as saying that "Instead of starting with a finished draft of a rule, we're co-creating from the get-go and asking people what should be in such a rule before we write it." An editorial in Federal Times indicated that the potential benefits of this approach include expansion of the scope of government's engagement with its citizenry and better regulations. In order for the public to participate in rulemaking before proposed rules are published, the public must first know that agencies are developing such rules. For more than 30 years, federal agencies have been required to notify the public about upcoming regulatory actions. For example, Section 2 of Executive Order 12044, issued by President Jimmy Carter in March 1978, stated the following: To give the public adequate notice, agencies shall publish at least semiannually an agenda of significant regulations under development or review. On the first Monday in October, each agency shall publish in the Federal Register a schedule showing the times during the coming fiscal year when the agency's semiannual agenda will be published. Supplements to the agenda may be published at other times during the year if necessary, but the semiannual agendas shall be as complete as possible. The head of each agency shall approve the agenda before it is published. At a minimum, each published agenda shall describe the regulations being considered by the agency, the need for and the legal basis for the action being taken, and the status of regulations previously listed on the agenda. Each item on the agenda shall also include the name and telephone number of a knowledgeable agency official and, if possible, state whether or not a regulatory analysis will be required. The executive order went on to say that agencies should "give the public an early and meaningful opportunity to participate in the development of agency regulations. They shall consider a variety of ways to provide this opportunity, including (1) publishing an advance notice of proposed rulemaking; (2) holding open conferences or public hearings; (3) sending notices of proposed regulations to publications likely to be read by those affected; and (4) notifying interested parties directly." In a 1979 report on the implementation of this executive order, OMB said that the semiannual agendas "provide the first systematic look at an agency's regulatory activities," and "[a]rmed with this early warning, the public now has more time to prepare its views on upcoming regulations." However, the report also noted that some agencies had not published their agendas on schedule (making it difficult for the public to find them), and that some of the descriptions of the regulatory actions were not as helpful as others. Since 1983, the Regulatory Information Service Center (RISC) within GSA has published a semiannual Unified Agenda of Federal Regulatory and Deregulatory Actions that compiles the individual agencies' agendas. Although agencies can use a variety of other methods to alert the public about their upcoming rules, the Unified Agenda is the most systematic and widely-used vehicle to accomplish that purpose. RISC compiles the Unified Agenda for OIRA, and publication of entries in the Agenda helps agencies fulfill two current transparency requirements: The Regulatory Flexibility Act (5 U.S.C. § 602) requires that all agencies publish semiannual regulatory agendas in the Federal Register describing regulatory actions that they are developing that may have a significant economic impact on a substantial number of small entities. Section 4 of Executive Order 12866 on "Regulatory Planning and Review" requires that all executive branch agencies "prepare an agenda of all regulations under development or review." Each agenda entry is required to contain "a regulation identifier number [RIN], a brief summary of the action, the legal authority for the action, any legal deadline for the action, and the name and telephone number of a knowledgeable agency official." The stated purposes of this and other planning requirements in the order are (among other things) to "maximize consultation and the resolution of potential conflicts at an early stage" and to "involve the public and its State, local, and tribal officials in regulatory planning." Unified Agenda entries are organized by agency, and each entry is associated with one of five rulemaking stages: (1) prerule stage (indicating actions agencies will take to determine whether or how to initiate rulemaking); (2) proposed rule stage (indicating that the agency plans to issue an NPRM, or to close an existing comment period); (3) final rule stage (indicating that the agency plans to issue a final rule); (4) long-term actions (indicating items under development, but that are not expected to result in a regulatory action in the next 12 months); and (5) completed actions (e.g., reflecting the publication of a final rule, or the withdrawal of a rule). Therefore, a "proposed rule" entry in the Unified Agenda alerts the public that the agency is in the process of developing an NPRM. The RIN is assigned before the regulatory action first appears in the Agenda, and follows the rule throughout the rulemaking process. For example, the May 2009 edition of the Unified Agenda contained the following narrative regarding a forthcoming EPA proposed rule on "NPDES Program Management Information Rulemaking" (RIN 2020-AE47): The U.S. Environmental Protection Agency (EPA) has responsibility to ensure that the Clean Water Act's (CWA) National Pollutant Discharge Elimination System (NPDES) program is effectively and consistently implemented across the country. This regulation would identify the essential information that EPA needs to receive from NPDES agencies (NPDES-authorized states, territories and tribes) to manage the national NPDES permitting and enforcement program. Through this regulation, EPA seeks to ensure that such facility-specific information would be readily available, accurate, timely and nationally consistent on the facilities that are regulated by the NPDES program. In the past, EPA primarily obtained this information from the Permit Compliance System (PCS). However, the evolution of the NPDES program since the inception of PCS has created an increasing need to better reflect a more complete picture of the NPDES program and the diverse universe of regulated sources. In addition, information technology has advanced significantly so that PCS no longer meets EPA's national needs to manage the full scope of the NPDES program or the needs of individual states that use PCS to implement and enforce the NPDES program. This Unified Agenda entry also indicated that EPA intended to issue the proposed rule in November 2009, and that the rule's priority level was "other significant" (i.e., that it was significant enough to be reviewed by OIRA, but that it was not expected to have a $100 million impact on the economy). Although the Unified Agenda is a potentially valuable resource to allow the public to know about forthcoming proposed rules, it is not clear that many people outside of academia and established interest groups know of its existence. Also, CRS is unaware of any studies examining the extent to which federal agencies' proposed rules were, in fact, preceded by "proposed rule" entries in the Unified Agenda. In fact, the introduction to the Unified Agenda states the following: Agencies may withdraw some of the regulations now under development, and they may issue or propose other regulations not included in their agendas. Agency actions in the rulemaking process may occur before or after the dates they have listed. The Unified Agenda does not create a legal obligation on agencies to adhere to schedules in this publication or to confine their regulatory activities to those regulations that appear within it. To determine the extent to which agencies used the Unified Agenda to notify the public about their upcoming proposed rules, CRS examined all published proposed rules that had been reviewed by OIRA during calendar year 2008. Focusing on rules that had been reviewed by OIRA ensures that they are "significant" under Executive Order 12866, and are therefore likely to be of some consequence to the general public. Such rules are also more likely to have been under development for some time than non-significant rules, and therefore may be more likely to have been preceded by a Unified Agenda entry. However, this approach excludes rules issued by independent regulatory agencies like the Securities and Exchange Commission and the Federal Communications Commission (whose rules are not reviewed by OIRA), and also excludes rules that were issued without a prior NPRM. For each significant proposed rule that had been reviewed by OIRA during 2008, CRS determined whether the issuing agency or agencies had published a "proposed rule" entry in the Unified Agenda (indicating that the agency planned to issue an NPRM) (1) before the NPRM was published and (2) before the start of OIRA's review of the draft proposed rule. The NPRM date was used because, as indicated previously, once a rule is published in the Federal Register , both the issuing agency and OIRA have signed off on the rule as consistent with the President's priorities. Therefore, significant changes in the proposed rules are arguably less likely to occur than before they are published in the Federal Register . The OIRA submission date (which always occurs before the NPRM for significant rules) was also used because, by the time draft proposed rules are submitted to OIRA, they have been approved within the agencies and any parent cabinet departments, and are arguably less likely to change substantively than earlier in the rule development process. The results of this analysis are presented in Table 1 below. For about three-quarters of the proposed rules (176 of 231, or 76.2%), the agencies published Unified Agenda entries for their upcoming proposed rules before they published the related NPRMs. Two-thirds of the time (154 of 231 proposed rules, or 66.7%), those Agenda entries were published even earlier, before OIRA started its reviews of the draft NPRMs. Viewed another way, however, for about one-quarter of the proposed rules, the agencies did not use the Unified Agenda to alert the public of those NPRMs before they were published in the Federal Register , and one-third of the time there were no "proposed rule" Agenda entries published before OIRA started its reviews. The NPRMs that were published with no prior "proposed rule" Unified Agenda entries included the following: an August 2008 Department of Agriculture (USDA) rule on "Requirements for the Disposition of Cattle that Become Non-Ambulatory Disabled Following Ante-Mortem Inspection" a December 2008 Department of Commerce (DOC) rule on the "Steel Import Monitoring and Analysis System" a March 2008 Department of Defense (DOD) rule on the "Relationship Between the TRICARE Program and Employer-Sponsored Group Health Insurance" an April 2008 Department of Education (ED) rule on "Improving the Academic Achievement of the Disadvantaged" a January 2009 Department of Health and Human Services (HHS) rule on "Payments to Sponsors of Prescription Drug Plans" a March 2008 Department of Homeland Security (DHS) rule clarifying "Safe-Harbor Procedures for Employers Who Receive a No-Match Letter" an April 2008 Department of the Interior (DOI) rule on "Firearms in National Park Service Lands" an April 2008 Department of Justice (DOJ) rule on "Classification of Three Steroids as Schedule III Anabolic Steroids under the Controlled Substances Act" an August 2008 Department of Labor (DOL) rule on "Requirements for DOL Agencies' Assessment of Occupational Health Risks" a January 2008 DOT rule on "Passenger Car and Light Truck Corporate Average Fuel Economy, 2011-2015" an April 2008 Department of Veterans Affairs (VA) rule on "Grants for the Hiring and Retention of Nurses in the State Home Program" a November 2008 EPA rule on "Petroleum Refinery Residual Risk Standards" a December 2008 Office of Personnel Management (OPM) and DOD rule on the "National Security Personnel System" an August 2008 Social Security Administration (SSA) rule on "Authorization of Representative Fees" a January 2009 GSA rule on "Federal Supply Schedule Contracting" Table 1 also shows that the agencies differed in the extent to which they used the Unified Agenda to notify the public about upcoming proposed rules. For example, HHS published related "proposed rule" entries in the Unified Agenda before publishing 27 of the department's 30 NPRMs (90.0%), and EPA did so before publishing 25 of its 27 proposed rules (92.6%). On the other hand, DOD published "proposed rule" entries regarding 4 of its 12 NPRMs (33.3%), and OPM did so for 10 of its 20 proposed rules (50.0%). In many cases, the agencies published multiple "proposed rule" entries in the Unified Agenda before they published the related NPRM. For example, a December 1, 2008, DOT proposed rule on a "National Registry of Certified Medical Examiners" was preceded by "proposed rule" entries in the spring and fall editions of the Unified Agenda for 2006, 2007, and 2008. Likewise, HHS published "proposed rule" entries regarding its September 18, 2008, NPRM on "Label Requirement for Food That Has Been Refused Admission Into the United States" in at least four previous editions of the Agenda. USDA published "proposed rule entries regarding its March 27, 2008, NPRM on the "Child and Adult Food Program" in 14 consecutive semiannual editions of the Unified Agenda between 2001 and 2008. In these and other cases, the public was alerted well in advance that the agencies would be publishing the proposed rules. In some cases, even though the agencies had published "proposed rule" entries in the Unified Agenda before they published the related NPRMs, those entries were arguably too late to serve as useful notice to the public, and were sometimes significantly after the rule had been approved by the agencies and submitted to OIRA for review. See, for example, the following: EPA published a proposed rule on "Oil Pollution Prevention; Non-Transportation Related Onshore Facilities" on November 26, 2008. The first Unified Agenda entry for this NPRM was published two days earlier on November 24, 2008—but more than 40 days after OIRA began its review of the proposed rule. DHS published a proposed rule on "Changing the Period of Time for Admission or Extension of Stay from One Year to Three for TN Nonimmigrants" on May 9, 2008. The first Unified Agenda entry for this NPRM was published four days earlier on May 5, 2008—but 30 days after OIRA began its review of the proposed rule. DOL published a proposed rule on "Labor Organization Annual Financial Reports" on May 12, 2008. The first Unified Agenda entry for this NPRM was published seven days earlier on May 5, 2008—but more than 60 days after OIRA began its review of the proposed rule. DOD published a proposed rule on "Defense Support of Civil Authorities" on December 4, 2008. The first Unified Agenda entry for this NPRM was published 10 days earlier on November 24, 2008—but nearly two months after the rule was submitted to OIRA for review. In other cases, even though the agency published an entry in the Unified Agenda before OIRA's review and before the NPRM, the public still had little time to react. For example, OPM published a Unified Agenda entry regarding "Proposed NSPS Joint Regulations" on May 5, 2008, sent the rule to OIRA for review on May 12, 2008, OIRA completed its review four days later, and the NPRM was published on May 22, 2008. Therefore, the public was alerted to the upcoming proposed rule 7 days before OIRA's review, and 17 days before OPM and DOD published the NPRM. The Obama Administration has launched an initiative to make the policymaking process more open and transparent, and has asked for comments from the public on how the rulemaking process in particular can be improved in these respects. Some observers have concluded that the most critical part of that process occurs before the proposed rule is published in the Federal Register , and (for significant rules) possibly even earlier—before the rule is approved by the issuing agency and submitted to OIRA for review. Once a significant rule is submitted to OIRA, and certainly by the time the rule is published in the Federal Register as an NPRM, the issuing agency's position is arguably less likely to change than earlier in the rulemaking process. The White House's deputy chief technology officer has said that, as part of the Obama Administration's transparency and open government initiative, the public will be able to offer comments and suggestions while proposed rules are being developed. However, in order for the public to participate prior to the publication of a proposed rule, or even to begin preparing comments during sometimes brief public comment periods, the public must first become aware that the proposed rule is about to be issued. Although a variety of methods could be used to accomplish this goal, including blogs and other forms of new "social media," the Unified Agenda—which has been published twice each year since 1983, and online since 1995—arguably provides agencies with the most systematic, government-wide method to alert the public about their upcoming proposed rules. The data examined for this report indicate that federal agencies are frequently using the Agenda to accomplish this goal. About three-quarters of the significant proposed rules that were published after OIRA reviewed the rules in 2008 were preceded by a "proposed rule" Unified Agenda entry. Two-thirds of the rules had such entries even earlier, before the draft rules were submitted to OIRA for review under Executive Order 12866. Therefore, by reviewing the most recent edition of the Unified Agenda, particularly shortly after its semiannual publication, the public can often know in advance when a proposed rule is about to be published. On the other hand, there was no "proposed rule" Unified Agenda entry for about one-quarter of the proposed rules before they were published in the Federal Register , and there was no such entry before one-third of the rules were submitted to OIRA for review. In these cases, the issuing agencies may have notified the public about their upcoming proposed rules in some other manner (e.g., public meetings or direct notification of affected parties). Also, some proposed rules must be developed quickly, so it is understandable that a Unified Agenda that is published only once every six months would not reflect all upcoming published rules. See, for example, the following: USDA said it issued its August 2008 proposed rule on "Requirements for the Disposition of Cattle That Become Non-Ambulatory Disabled Following Ante-Mortem Inspection" in response to a petition for rulemaking that it received in April 2008. To have been included in the previous (May 2008) edition of the Unified Agenda, USDA would have had to submit the Agenda entry to RISC by late March 2008—before the department had received the petition for rulemaking. Therefore, the first Unified Agenda entry for this rule was a "final rule" entry in the fall edition of the Agenda (published in November 2008). DOI said that it issued its August 2008 proposed rule amending its regulations governing the viewing of the inaugural parade after a March 20, 2008, district court opinion concluding that the National Park Service's procedures violated its regulations. To have been included in the previous (May 2008) edition of the Unified Agenda, DOI would have had to submit the Agenda entry to RISC within a few days after the court decision. Therefore, the first Unified Agenda entry for this rule was a "final rule" entry in the fall edition of the Agenda (published in November 2008). In numerous other cases, however, it is unclear why the agencies did not use the Unified Agenda to alert the public about their upcoming rules. See, for example, the following: DOC said it was issuing its December 2008 proposed rule on steel import monitoring because a December 2005 final rule on this issue would expire in March 2009 unless it was extended. The first mention of this rule in the Unified Agenda was as a completed action in the spring 2009 edition (published on May 11, 2009)—five months after the NPRM was published, and nearly two months after the final rule was published in March 2009. HHS said it published its January 2009 proposed rule on payments to sponsors of retiree prescription drug plans based on a change in the agency's interpretation of a particular provision of the Social Security Act. The first Unified Agenda entry for this rule was in May 2009, after the NPRM was published. DOI said it published its April 2008 proposed rule related to firearms in national parks to update regulations previously issued in 1981 and 1983. The first Unified Agenda entry for this rule was in May 2008, after the NPRM was published. DOJ said it published its April 2008 proposed rule on the classification of three steroids pursuant to the Anabolic Steroid Control Act of 2004. The first mention of this proposed rule in the Unified Agenda was in May 2008, after the NPRM was published. VA said it published its April 2008 proposed rule on grants for the hiring and retention of nurses to implement provisions of the Veterans Health Programs Improvement Act of 2004. The only "proposed rule" entry for this rule was published in May 2008, after the NPRM was published. Also, federal agencies differed significantly in their use of the Unified Agenda for these rules. Some agencies (e.g., EPA and HHS) almost always published at least one "proposed rule" entry in the Unified Agenda before they published the related NPRMs, while other agencies (e.g., DOC, DOD, and OPM) did so about half of the time, or less. As noted earlier in this report, Congress and various Presidents have established a number of requirements and processes regarding how agencies are to develop and promulgate proposed rules, including various mechanisms to enable transparency and public participation. Therefore, Congress and the Obama Administration may conclude that those existing mechanisms are sufficient, and that no changes are needed in how the public learns about forthcoming proposed rules. However, should either Congress or the Obama Administration conclude that improvements are needed in the transparency of the rulemaking process, or in opportunities for the public to participate in that process prior to the publication of proposed rules, various policy options are available. Some of the available options have nothing to do with the Unified Agenda. For example, either Congress or the President could require or encourage agencies to engage in pre-NPRM communications with the general or affected public through public meetings, ANPRMs, advocacy panels, or other consultative devices. Other alternatives include newer methods of communication that have been suggested by the White House's deputy chief technology officer, including blogs and other forms of "social media." Also, GAO's 2009 report on federal rulemaking discussed tracking systems in place at DOT and other agencies that identified key milestones that the agencies needed to accomplish to produce a final rule. These tracking systems, or elements of these systems, could be made available to the public to disclose when proposed rules are expected to be issued. Finally, agencies could allow the public to sign up to receive notices about upcoming regulatory actions within particular areas. Another set of alternatives could build on an element of the rulemaking infrastructure that has existed for more than 25 years, and use the Unified Agenda to improve participation and transparency prior to notice and comment. If Congress or the President elected to do so, several options within this category are available, either individually or in combination. One such option is to improve the visibility of the Unified Agenda to the public. As noted earlier in this report, other than federal agencies, certain members of academia, and certain interest group representatives, it is unlikely that many members of the general public know that the Unified Agenda exists. Notably, when discussing options for improving pre-NPRM rulemaking transparency and participation at a June 2009 American Bar Association conference, the White House's deputy chief technology officer did not mention the Unified Agenda. To improve the visibility of the Unified Agenda to the public, (1) the OMB "open government" directive could identify the Agenda as a way to improve rulemaking transparency and participation, (2) agency websites could provide the public with links to the agency's Agenda entries, and (3) agencies could use press releases to publicize Agenda entries describing upcoming proposed rules. Improvements in the visibility of the Unified Agenda to the general public could help "level the playing field" between the public and specialized interest groups who often know well in advance of agencies' forthcoming proposed rules, and are sometimes consulted as part of the rule development process. Another option is to improve federal agencies' use of the Unified Agenda as a transparency mechanism. Although publication of a notice in the Unified Agenda is not always possible before the publication of an NPRM (e.g., when rules must be issued quickly after a precipitating event), the differences in the performances of the agencies and the reasons given for the issuance of some of the rules examined in this report suggest that improvements in this area are possible. In some cases, the agencies appeared to have been developing their proposed rules for years, but still did not use the Unified Agenda to alert the public about the forthcoming rule. To remedy this situation, either Congress or the President could require agencies to publish "proposed rule" entries in the Unified Agenda before submitting significant draft rules to OIRA, or to explain why such entries were not possible. This requirement could be enforced by OIRA as part of its review process under Executive Order 12866. While such a requirement could improve transparency and opportunities for participation, it could also have other, more negative effects (e.g., lengthening the rulemaking process, or driving agencies to issue more rules without an NPRM). A third option is for Congress or the President to increase the frequency with which the Unified Agenda is published. As noted earlier in this report, the Agenda is currently published twice each year, usually in either April or May, and again in October, November, or December. In order for an agency's entries to appear in the Agenda, they must be submitted to RISC at least one month prior to the date of publication, although a limited number of updates are sometimes possible. As a result of the infrequency of publication and lead times, agencies sometimes publish "proposed rule" entries in the Unified Agenda either after or just slightly before the NPRM is published, or publish no entry at all, thereby eliminating or diminishing the Agenda's value as transparency mechanism for the public. If the Unified Agenda was published more frequently (e.g., every quarter), or if the Agenda could be maintained as more of an ongoing, "real-time" database, the public could have a better sense of what rules are under development within the agencies. Finally, even if all of the above-mentioned options were implemented and the Unified Agenda was made more visible, useful, and timely, the public would often still be unable to file pre-NPRM comments on the Unified Agenda entries. A regulatory "docket" serves as the repository for documents or information related to an agency's rulemaking and other activities, and typically contains legal or economic analyses that the agency has prepared and the comments submitted by the public. In the past, paper rulemaking dockets were kept at the agencies. In recent years, however, agencies have been required to use the electronic docketing system at the Regulations.gov website. In that system, agencies are not allowed to establish a rulemaking docket before an NPRM is published in the Federal Register . If agencies could be allowed to establish those dockets when the first Unified Agenda entry is published (and when RIN numbers are assigned), then comments from the public on forthcoming proposed rules could be part of the rulemaking docket. Unified Agenda entries on forthcoming proposed rules are necessarily less specific and detailed than the NPRMs. Therefore, any comments on those Agenda entries may also be less specific, and less useful to the issuing agencies, than comments on proposed rules. Nevertheless, the commenting public may have information or perspectives that the issuing agencies would find useful, particularly before the agencies have signed off on the rule or published the NPRM. Even if pre-NPRM comments from the public are not permitted, advance notice of a forthcoming proposed rule can give the public more time to gather information and prepare their comments for submission after the proposed rule is published. This can be particularly important when agencies provide the public with relatively short comment periods (e.g., 30 days, or less). Finally, a revitalized Unified Agenda could serve as a government-wide mechanism for inter-agency coordination, allowing agencies to avoid duplication of effort and conflicting regulatory requirements.

The Obama Administration has launched an initiative to make the policymaking process more open and transparent, and has asked for comments from the public on how the rulemaking process in particular can be improved in these respects. Some observers have concluded that the most critical part of that process occurs before a proposed rule is published in the Federal Register, and (for significant rules) possibly even earlier—before the rule is approved by the issuing agency and submitted to the Office of Information and Regulatory Affairs (OIRA) within the Office of Management and Budget for review pursuant to Executive Order 12866. A representative of the Obama Administration has said that the public will be allowed to participate in the development of proposed rules. However, in order for the public to do so, or to allow more time to prepare comments during sometimes brief comment periods, the public must first know that the proposed rule is being developed. The Unified Agenda of Federal Regulatory and Deregulatory Actions (Unified Agenda), which has been published twice each year since 1983, arguably provides federal agencies with the most systematic, government-wide method to alert the public about their upcoming proposed rules. To determine how frequently agencies are using the Unified Agenda to perform this task, CRS examined all 231 significant proposed rules that were issued after having been reviewed by OIRA in 2008. About three-quarters of those rules were preceded by a "proposed rule" Unified Agenda entry (indicating that the agency was developing a proposed rule), and two-thirds of the rules had such entries even earlier, before the rules were submitted to OIRA for review. Viewed another way, however, there were no "proposed rule" Unified Agenda entries for about one-quarter of the proposed rules before they were published in the Federal Register, and there were no such entries before one-third of the rules were submitted to OIRA for review. Some agencies almost always used the Unified Agenda to notify the public about their upcoming proposed rules, while others did so less frequently. If Congress or the Obama Administration conclude that improvements are needed in the transparency of the rulemaking process, or in the ability of the public to participate in that process prior to the publication of proposed rules, various policy options are available. Some of the options do not involve the Unified Agenda (e.g., greater use of public meetings, blogs, or making agencies' internal rulemaking tracking systems available to the public). Also, or alternatively, either Congress or the Obama Administration could take one or more of the following actions: (1) improve the visibility of the Unified Agenda to the public; (2) require agencies to publish "proposed rule" entries in the Unified Agenda before submitting their significant draft rules to OIRA, or to explain why such entries were not possible; (3) increase the frequency with which the Unified Agenda is published; and (4) require agencies to establish a rulemaking docket where comments could be placed when the public is notified of an upcoming proposed rule. This report will be updated to reflect changes in factual information or policy developments.

Eligible veterans are entitled to receive certain military honors at their funerals. In general, these honors are provided by the Department of Defense (DOD) to eligible veterans who are interred or inurned at Department of Veterans Affairs (VA) national cemeteries, state veterans cemeteries, and private cemeteries. There is no cost to the family of a veteran for military honors. The current authorization and requirements for the provision of military honors at veterans' funerals are provided in statute at 10 U.S.C. Section 1491, and were established by Section 567 of Division A of the Strom Thurmond National Defense Authorization Act for Fiscal Year 1999, P.L. 105-261 ; and amended by the National Defense Authorization Act for Fiscal Year 2000, P.L. 106-65 . In the conference report accompanying P.L. 105-261 , the conferees provided the following justification for the authorization of military honors for veterans' funerals: The conferees agree that men and women have unselfishly answered the call to arms at tremendous personal sacrifice. The conferees agree that men and women, who have served honorably, whether in war or peace, deserve commemoration for their military service at the time of their death by an appropriate tribute. Burial honors are an important means of reminding Americans of the sacrifices endured to keep the Nation free. Prior to the enactment of P.L. 105-261 , there was no formal statutory requirement that the DOD provide military honors at veterans' funerals. However, such honors were customarily provided in accordance with the statutory requirement that a U.S. flag be presented to the next of kin of eligible veterans; military custom; and DOD Directive 1300.15, issued in 1985, which directed the military branches to provide to deceased veterans "appropriate tribute within the constraints of available resources." Active duty servicemembers and members of the Selected Reserve (which generally includes members of the National Guard) who die while in service are eligible for military funeral honors. In addition, federal law provides that veterans who served on active duty and former members of the Selected Reserve may be eligible for military funeral honors. A veteran who served on active duty is eligible if he or she meets one of the following requirements: served on active duty in the Army, Navy, Marine Corps, Air Force, Coast Guard, National Oceanic and Atmospheric Administration (NOAA) Commissioned Corps, or Public Health Service, or a civilian group granted veterans status pursuant to the GI Bill Improvement Act of 1977, P.L. 95-202 , and was discharged or released for reasons other than dishonorable; or served on active duty in the Army, Navy, Marine Corps, Air Force, Coast Guard, NOAA Commissioned Corps, or Public Health Service, or a civilian group granted veterans status pursuant to the GI Bill Improvement Act of 1977, P.L. 95-202 , and was disabled or died from a disease or injury incurred or aggravated in the line of duty (either active duty or inactive duty for training). A former member of the Selected Reserve is eligible if he or she meets one of the following requirements: completed at least one enlistment or, if an officer, the period of initial obligated service, in the Selected Reserve; or was discharged before completing an initial enlistment or, if an officer, the period of initial obligated service, in the Selected Reserve for a disability incurred or aggravated in the line of duty. A person may be ineligible for military funeral honors based on his or her type of discharge from the Armed Forces or involvement in a capital crime. In addition, a person may be ineligible for military funeral honors if the circumstances surrounding the person's death or other circumstances specified by the Secretary of Defense are such that military funeral honors would bring discredit upon the person's service or former service. A person who was discharged from active duty or the Selected Reserve under dishonorable conditions is ineligible for military funeral honors. Current DOD instruction provides that the following specific types of discharges make a person ineligible for military funeral honors: dishonorable discharge; bad conduct discharge; dismissal from service awarded by courts-martial; an under other than honorable conditions discharge; and an officer resignation for the good of the service in lieu of courts-martial, which results in a discharge characterization of under other than honorable conditions. A person is ineligible for military funeral honors if he or she is convicted of a federal capital crime, the conviction is final, and the sentence has not been commuted by the President; convicted of a state capital crime, the conviction is final, and the sentence has not been commuted by a governor of a state; found by the Secretary of Veterans Affairs or, in the case of a burial or inurnment at Arlington National Cemetery, the Secretary of the Army by clear and convincing evidence and after the opportunity for a hearing, to have committed a federal or state capital crime but has not been convicted of this crime due to death or flight to avoid prosecution. For the purposes of determining eligibility for military funeral honors, a federal capital crime is any crime under federal law for which a sentence of life imprisonment or death may be imposed. A state capital crime is the willful, deliberate, or premeditated unlawful killing of another human being for which a sentence of life imprisonment or death may be imposed under state law. A person ineligible for military funeral honors based on involvement in a capital crime is also ineligible for interment or inurnment in a VA national cemetery, Arlington National Cemetery, or any military cemetery. The denial of eligibility for military funeral honors for persons involved in capital crimes began in 1997 with the enactment of P.L. 105-116 , which denied eligibility for interment or inurnment in a VA national cemetery or Arlington National Cemetery to those involved in such offenses. In addition, this legislation made the prohibition of such interments in state veterans' cemeteries a condition of receiving grants from the VA to establish, expand, or approve such cemeteries. Under the provisions of P.L. 105-116 , a person convicted of a federal capital crime was denied eligibility for interment or inurnment in VA national cemetery or Arlington National Cemetery only if he or she was sentenced to death or life imprisonment and for a state capital crime only if sentenced to death or life imprisonment without the possibility of parole. This permitted persons convicted of state capital crimes but given the opportunity for parole to be interred or inurned in national cemeteries. Among the reasons cited for the passage of P.L. 105-116 was to prevent Timothy McVeigh, an Army veteran convicted of federal offenses in the 1995 bombing of the Alfred P. Murrah Federal Building in Oklahoma City, OK, from being buried in a national cemetery. Speaking in support of the legislation, which unanimously passed the Senate and passed the House of Representatives by unanimous consent, Representative Joe Knollenberg stated, As pictures of the Oklahoma City bombing were brought into the lives of everyone across this great country, no one watched with more horror than I did. It will always remain ingrained in our hearts, our minds, and our souls. Like the rest of the Nation, I was saddened more by the fact the person responsible for killing 168 people in the most heinous domestic terrorist act ever committed could receive a hero's burial with taps, a 21-gun salute, and a flag-draped coffin. The denial of eligibility based on involvement in a capital crime was extended to military funeral honors in 2006 with the enactment of Section 662 of the National Defense Authorization Act for 2006, P.L. 109-163 . This legislation also replaced the requirement that a person be sentenced to death or life imprisonment for a federal capital crime or death or life imprisonment without parole for a state capital crime with the requirement that a federal or state capital crime conviction be final, thus eliminating the possibility of a person sentenced to life imprisonment with parole from being interred or inurned in a national cemetery or given military funeral honors. Russell Wayne Wagner was an honorably discharged Army veteran of the Vietnam War who in 1994 was convicted of killing a married couple in Maryland and sentenced to two life sentences with the possibility of parole. Wagner died in prison in 2005, before enactment of P.L. 109-163 , which would have affected his case in two ways. First, because prior to the enactment of P.L. 109-163 , a sentence of life imprisonment without parole was required to deny interment or inurnment at a national cemetery, Wagner, whose sentence included the possibility of parole, was inurned at Arlington National Cemetery. Second, because the law prior to the enactment of P.L. 109-163 did not prohibit the provision of military honors to persons involved in capital crimes, Wagner's funeral at Arlington National Cemetery included such honors. Concerns raised by the family of Wagner's victims were cited as a reason for enactment of P.L. 109-163 . This law would have prevented Wagner from his inurnment with military funeral honors at Arlington National Cemetery. The victims' son testified at a Senate hearing in support of the legislation. Although P.L. 109-163 ensured that in the future a person involved in a capital crime, regardless of parole status, would be denied interment or inurnment in a national cemetery and military funeral honors, it did not affect the physical placement of the cremated remains of Wagner, which remained at Arlington National Cemetery. Section 404 of the Veterans Benefits, Health Care, and Information Technology Act of 2006, P.L. 109-461 , enacted in 2006, ordered the Secretary of the Army to remove Wagner's cremated remains from Arlington National Cemetery and return them to his family. Federal law prescribes the minimum elements required for military funeral honors. These include a funeral honors detail of at least two non-retired uniformed members of the Armed Forces, the folding and presentation of a U.S. flag to the family of the deceased, and the playing of Taps. Each branch of the Armed Forces is free to augment these minimum components with additional elements such as firing parties, color guards, or additional participating military personnel. The funeral honors detail must consist of at least two non-retired members of the Armed Forces in uniform, with at least one member being from the deceased's branch of service. The funeral honors detail may consist of active duty members of the Armed Forces or members of the Ready Reserve, including the National Guard. Members of the funeral honors detail are generally drawn from local military units. Federal law allows the funeral honors detail to be augmented by retired members of the Armed Forces and members of veterans and other organizations approved by the Secretary of Defense. The DOD established the Authorized Provider Partnership Program (AP3) to authorize volunteers to augment funeral honors details. AP3 participants are commonly members of Veterans Service Organizations (VSOs) recognized by the VA pursuant to federal law or regulations, other veterans groups, and Reserve Officer Training Corps (ROTC) detachments. AP3 participants may augment the funeral honors detail by serving as members of color guards, firing parties, pallbearers, or buglers. AP3 members are selected and trained by local military base commanders. Members of the Ready Reserve, including the National Guard, who serve on a funeral honors details are entitled to a daily stipend of $50 as set in law. AP3 members are entitled to either reimbursement for travel and other expenses related to their participation in funeral honors details or a $50 daily stipend which is set by the DOD. AP3 members may also be provided with assistance in obtaining required equipment or uniforms, such as access to military uniform supply stores. Taps is a bugle call that has been used by the U.S. Armed Forces since the Civil War. It has been used at military funeral ceremonies since at least 1891 and the playing of Taps is a required component of military funeral honors. Taps may be played by a live bugler from the military or AP3 program, or a recorded version may be played via music player or a ceremonial bugle. A ceremonial bugle has an electronic device in the bell of the bugle that plays a recording of Taps while a member of the funeral honors detail holds the bugle in playing position. Persons entitled to military funeral honors are also entitled by law to a U.S. flag, referred to as a burial flag, to be used during their funeral. The burial flag is provided at no cost to the family of the deceased by the VA and is distributed through local VA offices and post offices. Regardless of how many funeral or memorial services are held for the veteran, the law authorizes only one burial flag per veteran. The flag is commonly draped over the casket of the deceased as follows in accordance with federal law: When the flag is used to cover a casket, it should be so placed that the union is at the head and over the left shoulder. The flag should not be lowered into the grave or allowed to touch the ground. After the playing of Taps, two members of the funeral honors detail fold the flag into a traditional tri-corned shape with only the union, or blue field, visible. The flag is then presented to the next-of-kin or other family member by an honors detail member in accordance with the following protocol: 1. Stand facing the flag recipient and hold the folded flag waist high with the straight edge facing the recipient. 2. Lean toward the flag recipient and solemnly present the flag to the recipient. 3. Recite the following statement, inserting the appropriate branch of service: On behalf of the President of the United States, (the United States Army; the United States Marine Corps; the United States Navy; or the United States Air Force), and a grateful nation, please accept this flag as a symbol of our appreciation for your loved one's honorable and faithful service. If there is no funeral honors detail, a funeral director may present the folded flag to the family. A number of Internet postings have suggested that the statement accompanying the flag presentation was changed to remove the reference to the President. No such change has been made. Rather, prior to 2012, there was no standard language for the presentation of the burial flag. However, effective August 17, 2012, the DOD standardized the flag presentation statement to its current form and invited the Coast Guard to use the same statement for its veterans. The eligibility requirements for interment or inurnment at Arlington National Cemetery, which is administered by the Department of the Army and not the VA, differ from, and are generally more stringent than, the requirements for eligibility at VA national cemeteries and general eligibility for military funeral honors. There are different eligibility requirements for ground burial and inurnment in the Columbarium and Niche Wall at Arlington National Cemetery. Once eligibility for ground burial or inurnment at Arlington National Cemetery is determined, honors are afforded according to rank and provided by the veteran's branch of service. Pursuant to legislation enacted on May 20, 2016 ( P.L. 114-158 ), civilians determined by law or the Secretary of Defense under the GI Bill Improvement Act of 1977 ( P.L. 95-202 ) to have performed active duty military service and been granted veterans status, such as Women's Air Force Service Pilots, are eligible for inurnment in the Columbarium or Niche Wall at Arlington Cemetery but not ground burial. Enlisted personnel at pay grades E-8 or below are entitled to Standard Military Honors, which consist of a casket team of body bearers, a firing party, and a bugler. Senior enlisted personnel at pay grade E-9, warrant officers, and commissioned officers entitled to Full Military Honors, which include Standard Military Honors and an escort platoon with size determined by rank; a military band; and the use of the caisson, if available. Colonels in the Army and Marine Corps are also entitled to the caparisoned (decorated) riderless horse, if available. General and flag officers, other high state officials, and the President are entitled to cannon or minute gun salutes of varying sizes depending upon rank. Effective January 2, 2009, all servicemembers who die from wounds received as a result of enemy action and are being interred, inurned, or memorialized at Arlington National Cemetery are eligible to receive Full Military Honors regardless of rank. Spouses and eligible dependents of persons eligible for interment or inurnment at Arlington Cemetery are entitled to a casket team of body bearers from the veteran's branch of service. Pursuant to Supreme Court's decision in United States v. Windsor , declaring Section 3 of the Defense of Marriage Act unconstitutional, same-sex spouses are eligible for interment or inurnment at Arlington National Cemetery and any VA national cemetery effective June 26, 2013.

Eligible veterans are entitled to receive military honors at their funerals. Federal law, enacted in 1999 (P.L. 105-261) and amended in 2000 (P.L. 106-65) provides that each eligible veteran shall be provided, at minimum, a two-person funeral honors detail, the playing of taps, and the folding and presentation of a U.S. flag to the family. The Department of Veterans Affairs (VA) issues these honors at no cost to the veteran's family. These honors can be augmented to include color guards, pallbearers, and firing parties provided either by the military or civilians in approved veterans or other organizations. Funeral honors at Arlington National Cemetery include additional elements according to the rank of the deceased. Persons involved in capital crimes are ineligible for military funeral honors. In 1997, Congress began prohibiting interment and inurnment in national cemeteries and military funeral honors for persons involved in federal or state capital crimes. In 2006, Congress passed a law (P.L. 109-461) ordering the cremated remains of a veteran who had been convicted of two counts of murder be removed from Arlington National Cemetery. In 2013, pursuant to the Supreme Court's decision in United States v. Windsor, same-sex spouses of eligible veterans became eligible for interment and inurnment in national cemeteries. Legislation enacted in 2016 (P.L. 114-158) permits civilians granted veterans status under federal law, such as Women's Air Force Service Pilots (WASPs), to be inurned in the Columbarium or Niche Wall at Arlington National Cemetery.

The House Appropriations Committee introduced its Military Construction Appropriations Billfor Fiscal Year (FY) 2004 ( H.R. 2559 , H.Rept. 108-173 ) on June 23, 2003. The Houseconsidered and passed the bill on June 26, 2003. The Senate Appropriations Committee introduced its companion bill ( S. 1357 , S.Rept. 108-82 ) on June 26. On July 10, the Senate amended H.R. 2559 by striking thetext and substituting that of S. 1357 . The Senate passed the amended bill on July 11(91-0) and requested a conference with the House. On September 16, the House disagreed with theSenate amendment (motion to do so was carried without objection) and appointed conferees. Theconference report was completed on November 4, 2003, and was passed by the House on November5 (417-5). The message on House action is being held at the desk in the Senate. In late September, the President submitted an emergency supplemental appropriations request. While the Senate considered its version of the bill ( S. 1689 ), the House passed its bill( H.R. 3289 ) on October 17, 2003 (303-125). The Senate substituted the text of S.1689 for that of H.R. 3289, passed the amended bill by unanimous consent, andsent notice of its action to the House. The conference report ( H.Rept. 108-337 ) was filed on October30. The House approved the report on October 31 (298-121, Roll No. 601), and the Senate approvedby voice vote on November 3. The bill was presented to the President on November 5. Conference action on the National Defense Authorization Act for FY2004 ( H.R. 1588 ) began on July 22 and has not yet concluded. The House voted to instruct its conferees onSeptember 10 (406-0). The Department of Defense (DOD) manages the world's largest dedicated infrastructure, covering more than 40,000 square miles of land and a physical plant worth more than $500 billion. The military construction appropriations bill provides a large part of the funding to enhance andmaintain this infrastructure. The bill funds construction projects and some of the facilitysustainment, restoration and modernization of the active Army, Navy and Marine Corps, Air Force,and their reserve components; (1) additionaldefense-wide construction; U.S. contributions to theNATO Security Investment Program (formerly known as the NATO Infrastructure Program); (2) andmilitary family housing operations and construction. The bill also provides funding for the BaseRealignment and Closure (BRAC) account, which finances most base realignment and closure costs,including construction of new facilities for transferred personnel and functions and environmentalcleanup at closing sites. (3) The military construction appropriations bill is one of several annual pieces of legislation that provide funding for national defense. Other major appropriation legislation includes the defenseappropriations bill, which provides funds for all non-construction military activities of theDepartment of Defense and constitutes more than 90% of national security-related spending, and theenergy and water development appropriations bill, which provides funding for atomic energy defenseactivities of the Department of Energy and for civil projects carried out by the U.S. Army Corps ofEngineers. Two other appropriations bills, VA-HUD-Independent Agencies andCommerce-Justice-State, also include small amounts for national defense. (4) No funds may be expended by any agency of the federal government before they are appropriated. (5) In addition, for nearly half a centuryCongress has forbidden the Department ofDefense to obligate funds for any project or program until specific authorization is granted. (6) Thisexplains why, for defense funds, both authorization and appropriations bills are required. Twoseparate defense appropriations bills are written annually, a "Military Construction AppropriationsAct" dedicated to military construction, and a "National Defense Appropriations Act" covering allother defense appropriations. (7) Normally only one"National Defense Authorization Act" is passedeach year to authorize both of these appropriations. (8) Therefore, major debates over defense policyand funding issues, including military construction, can be associated with any of these bills.Because issues in the defense authorization and appropriations bills intertwine, this report includessalient parts of the authorization bill in its discussion of the military construction appropriationprocess. The separate military construction appropriations bill dates to the late 1950s. Traditionally, military construction was funded through annual defense or supplemental appropriations bills. However, the Korean War prompted a surge of military construction, followed by a steady increasein military construction appropriations. Given the strong and enduring security threat posed by theSoviet Union, a relatively high level of spending on military infrastructure appeared likely tocontinue. The appropriations committees established military construction subcommittees andcreated a separate military construction bill. The first stand-alone military construction bill waswritten for FY1959 (P.L. 85-852). Military construction appropriations are not the sole source of funds available to defense agencies for facility investment. The defense appropriations bill funds so-called minor constructionand property maintenance within its operations and maintenance accounts. In addition, constructionand maintenance of Morale, Welfare, and Recreation-related facilities are partially funded throughproceeds of commissaries, recreation user fees, and other non-appropriated income. Several special accounts are included within the military construction appropriation. Among these are the Homeowners Assistance Fund (Defense), (9) and the Department of Defense FamilyHousing Improvement Fund, (10) both of whichperform functions ancillary to the direct building ofmilitary infrastructure. Most funds appropriated by Congress each year must be obligated in that fiscal year. Military construction appropriations, though, are an exception. Because of the long-term nature ofconstruction projects, these funds can generally be obligated for up to five fiscal years. Consideration of the military construction budget begins when the President's budget is delivered to Congress each year, usually in early February. This year, the President submitted hisFY2004 budget request to the Congress on February 3, 2003. Table 1 shows the key legislative steps necessary for the enactment of the FY2004 militaryconstruction appropriations. It will be updated as the appropriation process moves forward. Table 1. Status of Military Construction Appropriations, FY2004 Notes: Dashes indicate no action yet taken. House Appropriations Action. Following a series of hearings by the House Subcommittee on MilitaryAppropriations, the full Committee marked up its bill on June 17. H.R. 2559 ( H.Rept. 108-173 ) was introduced to the House on June 23, 2003, and placedon the Union Calendar (Calendar No. 88). The House considered the bill under theprovisions of a Special Rule ( H.Res. 298 ) on June 26, 2003( Congressional Record, H5979-5990). The measure passed by the Yeas and Nays:428-0 (Roll no. 325). The bill was received in the Senate the same day and placed on the Legislative Calendar under General Orders (Calendar No. 177). Senate Appropriations Action. The Senate Committee on Appropriations Subcommittee on Military Constructionheld hearings on its bill during March and April of 2003. The full Committeereported legislation ( S. 1357 , S.Rept. 108-82 ) to the Senate on June 26.The bill was placed on the Legislative Calendar under General Orders (Calendar No.176). On July 10, the Senate began consideration of H.R. 2559 , striking all after the enacting clause and substituting the text of S. 1357 . TheSenate passed the bill on July 11 (91-0), insisted on its amendment, and requested aconference with the House. Conference Action. On September 16, 2003, the House disagreed with the Senate amendment, agreed to a conference,and appointed conferees ( Congressional Record , H8228). By the end of their meetingon October 22, the conferees had not agreed on a final report. Difference betweenHouse and Senate managers appeared to center on allocations of funding forconstruction projects in Europe and in the Republic of Korea, where the Presidenthad requested $292 million, but where the future of many installations remains indoubt (See Realignment of Overseas Bases , below). The conferees agreed on theirbill on November 4. The House approved the report on November 5 (417-5, Roll No.606), and the message on House action is being held at the desk in the Senate. The President's original budget submission for military construction totaled $9,036,721,000. This was amended upward by the House Appropriations Committee to $9,237,096,000 because of transfers from the defense appropriations bill (11) to themilitary construction appropriations bill and calculations performed by theCongressional Budget Office (CBO) pursuant to an Administration request for ageneral provision of funding related to the "Foreign Currency Fluctuations,Construction, Defense" account. The funding transfers included $25,500,000 for thepurpose of constructing a Special Operations Forces facility and $119,815,000 forchemical demilitarization construction. The CBO calculation resulted in are-appropriation of $55 million. The Senate Appropriations Committee similarly amended the President's budget submission, including the transfer of funds for the Special Operations Forces facilityand the CBO calculation. It did not include the transfer of chemical demilitarizationconstruction funds from the defense appropriations bill, as had been done in theHouse version of the bill. (12) Therefore, the Senateversion of the budget submissionis quoted as $9,117,281,000. (13) On September 21, 2003, the President forwarded to Congress his request for an emergency, non-offset supplemental appropriations for FY2004. (14) The House andSenate versions of the bill are H.R. 3289 and S. 1689. The Department of Defense requested $65.6 billion of the overall supplemental appropriations. Its stated purpose is to support three ongoing military operations:Operation Iraqi Freedom ($51.5 million), Operation Enduring Freedom ($10.5million), and Operation Noble Eagle ($2.2 million). Also, $1.4 million was identifiedas supporting coalition forces. Of this total, $412.5 million is designated for domestic and overseas construction supporting Operation Iraqi Freedom and Operation Enduring Freedom.About $119.9 million is to be committed to the Army, and $292.6 million is destinedfor the Air Force. The anticipated use of these funds is laid out in Table 2 . Notincluded in the military construction portion of the request is additional funding forbeddown facilities for approximately 25,000 soldiers. Consisting of trailers andcontainers equipped with housing and shower facilities, these accommodations areto be drawn from the Army Operation and Maintenance ($21.2 billion total) andOther Procurement ($930.7 million) supplemental appropriations requests. Table 3 compares presidential account requests with recommendations made by the Houseand Senate Committees on Appropriations. The request also includes authorization to transfer significant funding into construction from other accounts. Iraqi Freedom Fund. The Operations and Maintenance section requests $1.99 billion for an Iraqi FreedomFund (IFF). The IFF is a transfer account, or an account that is not dedicated to anyspecific purpose. Rather, it can be considered a "holding pot" for funds that may betransferred to other accounts at the discretion of the Secretary of Defense. Therequest justifies the creation of a transfer account by noting "the unpredictable scope,duration, and intensity" of ongoing military operations in Iraq and Afghanistan. Thisprovision is contained in the enacted law. According to the language of the legislation, authority to transfer the funds in the IFF is to be granted to the Secretary of Defense and is in addition to any otherexisting transfer authority. Funds may be transferred from the IFF to militarypersonnel, operation and maintenance, Overseas Humanitarian, Disaster Assistanceand Civic Aid, procurement, military construction, Defense Health Program, andworking capital appropriations accounts. Any funds deemed to be in excess aftertransfer to a regular appropriations account may be returned to the IFF for subsequentretransfer. The request specifies that the Secretary of Defense will notify thecongressional defense committees not less than five (5) days in advance of anytransfer and will summarize the details of IFF transfers not later than 30 days afterthe end of each fiscal quarter. Contingency Construction. Under Chapter 8 (General Provisions), the Secretary of Defense asked for the authority totransfer up to $500 million of the supplemental appropriations into a contingencyconstruction account. This proposal did not survive, but Section 1301 of the enactedbill provided temporary authority for the use of up to $150 million of operations andmaintenance funds for similar purposes (see below). Contingency construction, as established by 10 USC 2804, permits the Secretary of Defense (or the Secretaries of the Army, Navy, or Air Force) to carry out anymilitary construction project not otherwise authorized if the Secretary determines thatits deferral to the next Military Construction Appropriations Act would beinconsistent with national security or the national interest. Existing law specifies that when the Secretary decides that contingency construction is appropriate, he must report this to the appropriate congressionalcommittees. The report must explain why the project is necessary (its justification),and why it must be a contingency (instead of a regular) construction project. It mustalso include an estimate of the project's cost. Section 2804 also bars the Secretaryfrom carrying out the project until after the end of a 21-day period that begins on thedate his notification is received by the committees. The Supplemental Appropriations request would have permitted the transfer of DOD funds into the contingency construction account seven (7) days afternotification was sent to the appropriate congressional committees by the Secretaryof Defense. This notification would have certified "that the transfer is necessary torespond to, or protect against, acts or threatened acts of terrorism or to supportDepartment of Defense operations in Iraq, and [specify] the amounts and purposesof the transfer, including a list of proposed projects and their estimated costs." The recommendation further specified that, notwithstanding the 21-day waiting period required under Title 10, the Secretary of Defense "shall notify the appropriatecommittees of Congress no later than 15 days after the obligation of the funds for theproject, specifying the estimated cost of the project" and including the standard DODForm 1391 (Military Construction Program). (15) This would have eliminated therequirement to explain the need for a contingency, vice regular, construction project. Normally, military construction is carried out only on a military installation, which is defined as real property (land, building, or structure) under the operationalcontrol of the Secretary of a military department or the Secretary of Defense. For thepurposes of this contingency construction account, the recommended languageexpands this definition to also include "any building, structure, or other improvementto real property to be used by the Armed Forces, regardless of whether such use isanticipated to be temporary or of longer duration." Section 1301 of the enacted legislation authorized the Secretary of Defense to obligate operations and maintenance funds during Fiscal Year 2004 for constructionprojects outside the United States when they: are necessary to meet urgent militaryoperational requirements of a temporary nature; on a military installation where theUnited States will not have a long-term presence; where the United States has nointention of using the construction after the operational requirement has beensatisfied; and the level of construction is the minimum necessary to meet thetemporary requirement. The Act requires the Secretary to notify the congressional defense committees within 15 days of the obligation of funds for any project, and to submit a report onall projects within 30 days of the end of each fiscal-year quarter. The section specifiesthat only this temporary authority and the limited authority of 10 USC 2805(c)(Unspecified Minor Construction) permit the Secretary of Defense to useappropriated operations and maintenance funds for construction. Senate Emergency Supplemental Appropriation (S. 1689). Senator Stevens introduced S. 1689 to the Senate without report on September 30, 2003, and the bill was placed on theLegislative Calendar under General Orders (Calendar No. 296). It was laid before theSenate on October 1 ( Congressional Record , S12220-12270). After debate andamendment, it was again taken up on October 2 ( Congressional Record ,S12311-12346, S12350-12360) and on October 3 ( Congressional Record ,S12424-12432). The Committee on Appropriations filed its report on the bill ( S.Rept.108-160 ) on October 2. The Committee recommended emergency military construction appropriations equal to the President's request, totaling $119.9 million to the Military Construction,Army (emergency) account and $292.6 million to the Military Construction, AirForce (emergency) account, for a total of $412.5 million. Section 315 of the Senate bill authorizes the Secretary of Defense to transfer up to $150 million into a contingency construction fund, instead of the $500 millionrequested. It retains the requested expedited 21-day waiting period between initialnotification and obligation of funds. On October 17, the Senate substituted the language of S. 1689 into H.R. 3289 . Further discussion of the bill proceeds under that number. House Emergency Supplemental Appropriation (H.R. 3289). The House Committee on Appropriationsmarked up its version of the Emergency Supplemental Appropriation on October 9,2003, recommending $544.6 million for military construction and family housingaccounts. The Senate and House recommendations differ primarily in fundingdedicated to the reconstruction of military facilities and housing due to damageincurred in North Carolina and Virginia by Hurricane Isabel during mid-September2003. Section 1201 of the House bill allows the Secretary of Defense to use up to $500 million in operations and maintenance funds during FY2004 for construction projectsoutside the United States and levies a quarterly reporting requirement on theobligation and expenditure of these funds. This authority is not tied to thecontingency construction provisions of 10 USC 2804, but rather characterizes the useof these funds as "unspecified minor construction" as authorized under 10 USC 2805.Statute places cost caps on unspecified minor construction projects that do not existfor contingency construction. The House passed H.R. 3289 (303-125, Roll No. 562), as amended in floor debate, and sent the measure to the Senate on October 17. That same day, theSenate struck all after the Enacting Clause, substituted the language of S. 1689 amended, and passed the bill by Unanimous Consent (CRS12822-12832; bill text, October 20 CR S12892-12905). The Senate insisted on itsamendment and appointed conferees. On October 21, the House disagreed with the Senate amendment by unanimous consent and agreed to a conference, designating and instructing the conferees (CRH9770-9775; text, CR H9770). Conference Action. The conference was held on October 28, 2003. The conference report was filed onOctober 30 ( H.Rept. 108-337 ). The House considered the report on October 30( Congressional Record , H10139-10157) and October 31 ( Congressional Record ,H10215-10231). The bill passed on October 31 (298 - 121, Roll No. 601). TheSenate considered the report on November 3 ( Congressional Record ,S13751-13784), agreeing by a voice vote. The bill was presented to the President onNovember 5. Table 2. Emergency Supplemental Appropriations for FY2004 Sources: S.Rept. 108-160 ; H.Rept. 108-312 ; H.Rept. 108-337 . Several issues regarding military construction have gained visibility during thelegislative deliberations of the current session of Congress. Among these are overall funding levels, realignment of overseas bases, base realignment and closure (BRAC),and perchlorate ground water contamination remediation. Overall Funding Levels. The FY2004 budget submitted by the President on February 3, 2003, as subsequentlyamended, requested $9.24 billion in new budget authority, an amount $1.46 billionbelow the 2003 enactment. The Emergency Supplemental Appropriations requestsubmitted in late September would increase the total request by $412 million andwould authorize the transfer of unspecified additional funds as they are needed. Realignment of Overseas Bases. The Department of Defense has initiated efforts in Germany and in the Republic ofKorea to reduce the number and shift the locations of its permanent installations.Known in Europe as Efficient Basing-East and in Korea as the Land PartnershipPlan, they are part of a worldwide DOD effort to transform itself into a lighter andmore agile military establishment. As part of this endeavor, the Secretary of Defense has tasked his combatant commanders to review military construction projects in order that they might supportchanging military objectives overseas. These commanders are required to submit abasing plan that enhances their abilities to project power, to support operations, andto conduct activities based upon the Secretary's views of a military structuretransformed to meet the challenges of the 21st century. Based on the DOD study ofoverseas basic requirements, the Administration in its amendment asked for thedeletion of 16 construction projects totaling $269 million that had been requested forGermany and Turkey in its original FY2004 submission. This DOD study is not yet complete, however, and the House Appropriations Committee, in its report, expressed concerns that current and projected militaryconstruction at overseas sites may not reflect a well-considered strategy. Thecommittee, noting that DOD has announced the retrenchment of some garrisons inthe Republic of Korea, recommended rescinding $107 million from prior yearappropriations at sites slated to be closed and re-appropriating them to installationsexpected to remain in service. The Senate Appropriations Committee strongly supported the DOD effort to reevaluate its overseas basing requirements, though both appropriations committeesnoted that a DOD overseas basing master plan, due on April 1, 2002, had not yetbeen submitted. The Senate committee recognized that the DOD study of rebasinghad not progressed beyond its embryonic stage. In observing public statementsindicating that DOD would likely reduce the number of troops stationed in Germanyand would reconfigure its installations in Korea, it did not find much of the newconstruction in Europe and Korea that had been requested in the May 1, 2003, budgetamendment. The Senate Committee recommended that an eight-member Commission on the Review of the Overseas Military Facility Structure of the United States be formed toassess whether current overseas basing is adequate and assess the feasibility ofvarious new configurations. Appointed by congressional leadership, the Commissionwould provide an independent view of overseas basing requirements and wouldsubmit its report, including findings, conclusions, recommendations for legislationand administrative action, and a proposed overseas basing strategy, to the Presidentand Congress by August 30, 2004. The Committee also directed the Department ofDefense to submit master plans for changing the military infrastructure requirementswithin each overseas regional command and report annually, through FY2008, on theplans' implementation. Notwithstanding congressional direction, the press has reported that the Department of Defense and the military services have begun taking action to realignforce levels and the basing "footprint" at overseas locations. On July 23, the Pacific Stars and Stripes , a newspaper written for military members stationed throughout the Pacific area, announced that U.S. and Japaneseofficials had entered into an agreement to return to Japanese control more than 700acres of land near Yokosuka used by the American military. (16) In return, the Japanesegovernment agreed to build 800 new residential housing units near the mainYokosuka naval base. In Europe, the press has reported that the U.S. European Command is considering the closure of many of the military installations in Germany and thereturn to the United States of many of the combat units now stationed there. New,more austere, bases could be constructed to house lighter, smaller combat units sentmore to train than to garrison. Countries where these "bare-bones" bases might belocated include Poland, Bulgaria, Romania, Algeria, and Morocco. (17) A more recentreport in the press indicated that two of the Army divisions currently engaged inoperations in Iraq, the First Armored and the First Infantry Divisions, currently basedin Wiesbaden and Würzburg, Germany, could be permanently redeployed to theUnited States when they are relieved of their present assignments. (18) In the Republic of Korea during early June 2003, officials announced that U.S. forces there would be realigned, with elements of the Second Infantry Divisioncurrently based near the Demilitarized Zone between the Republic of Korea and theDemocratic Peoples Republic of Korea moving south, and the garrison at theYongsan Garrison in the capital city of Seoul beginning its relocation "as soon aspossible." (19) The conference report retained provisions for the establishment of a Commission on Review of Overseas Military Facility Structure of the United States.The Commission's structure and duties remained much as the Senate committee hadspecified, though the Commission's report deadline was established as December 31,2004. The conferees also directed the Department of Defense to prepare comprehensive master plans for overseas military bases that are to be submitted withthe Fiscal Year 2006 budget submission (the Senate had proposed submission withthe Fiscal Year 2005 budget), and specified that a status report on the comprehensiveplans and their implementation are to be submitted each year through Fiscal Year2009, along with the military construction budget request. The conferees suggestedthat they may extend this reporting requirement to include installations located withinthe continental United States. The conferees noted that movement of US military forces from their established garrisons near the Demilitarized Zone in Korea to bases further south in the countryhas been planned by the Department of Defense. Nevertheless, they noted that nomaster plan exists for the consolidation of these troops within Camp Humphreys, theDepartment's stated goal. The conferees agreed to allow planning for construction atCamp Humphreys to proceed, but construction itself may not commence until amaster facilities plan is developed and cost-sharing arrangements for the relocationof US forces has been agreed with the government of the Republic of Korea. Base Realignment and Closure (BRAC). Four BRAC rounds have been completed since the firstin 1989. A fifth round, expected to affect as many installations as the previous fourrounds combined, is scheduled to take effect in FY2005. Under statutory language included in the National Defense Authorization Act for FY2002, the Secretary of Defense is required to publish by December 31, 2003,an initial list of the criteria he will use to recommend base closure and realignmentactions. The Secretary's force structure plan, a comprehensive base inventory, andcertification that the BRAC round is needed are to be included with the presidentialsubmission of his FY2005 budget in early February 2004. Congress will have theopportunity to disapprove the Secretary's selection criteria during early 2004. Thefinal presidential list of BRAC actions is due to the Congress on November 7, 2005. (20) The Efficient Facilities Initiative (EFI). Some press reports have referred to the FY2005 BRACround as the "Efficient Facilities Initiative." This substitution is inaccurate and hasled to some confusion. In fact, BRAC and Efficient Facilities Initiative are definedin statute and refer to two different processes. The original Efficient Facilities Initiative (EFI) was a new approach to reducing and managing DOD real property holdings and was intended to substitute for a repeatBRAC round. The EFI was intended to encompass all military installations, bothdomestic and overseas, and would have instituted a different method of administeringmany of the surviving bases. The EFI was publicly announced by the Department of Defense on August 2, 2001, and the Department's General Counsel submitted proposed legislation toCongress on August 3. It included three major actions: the potential realignment andclosure of U.S. military installations overseas; the potential realignment and closureof installations within the United States during FY2003; and the permanentauthorization of the Brooks Air Force Base Development Demonstration Project,expanded to include all military services. The language as proposed was not adoptedby Congress. Instead, Congress incorporated some aspects of the EFI into the National Defense Authorization Act for FY2002. (21) Because military bases on foreign territoryare established by agreement between governments, no legislation was needed tobegin the process of overseas bases. Congress ignored that portion of the EFI.Instead of approving the Secretary's suggested process for review of domestic basesand establishment of a permanent Department-wide Brooks-like base managementsystem, Congress created the FY2005 BRAC round in Title XXX of the Act andauthorized DOD to carry out a "Pilot Efficient Facilities Initiative" for a maximumof four years at up to two military installations of each military department (Army,Navy, and Air Force). These pilot initiatives were to be modeled on the Brooks AirForce Base Development Demonstration Project in San Antonio, Texas. The Brooks Air Force Base Development Demonstration Project. The Brooks Air Force Base DevelopmentDemonstration Project (also known as the "Base Efficiency Project" or the "BrooksCity-Base Project") is a partnership between the Secretary of the Air Force and theCity of San Antonio, Texas, and represents an alternative to traditional base closingsor realignments. Usually, military reservations are federal land jurisdictionally independent of the surrounding communities and governed by the base commander. Congress authorizedthe Secretary to "convert any military or civil service appropriated ornon-appropriated fund activity at Brooks Air Force Base, Texas, into a contractedactivity or an exchange of services compensated for by the lease, sale, conveyance,or transfer of real or private property." (22) Thisempowered the Secretary to transfertitle, in exchange for appropriate compensation, of the whole of federal real propertyat Brooks to the city and to lease back for military use those parts that directlysupport the base's military mission. (23) The baseis then no longer federal property.The cost of maintaining and operating the facility's physical plant, including fire andpolice protection, upkeep, and the like, is effectively transferred along withownership from the Department of Defense to the local community. Funds generatedfrom the lease or sale of property, reimbursements, and so on, is placed in a specialProject Fund, which the Secretary of the Air Force may employ for operations,leaseback, maintenance and repair of Department facilities, and other uses. (24) This has taken place at Brooks, and one aim of the EFI was to make the same management tools available permanently to all service secretaries for use where theyconsidered appropriate. But Congress granted this authority only as a pilot project oflimited scope and duration. To date, the Department of Defense has not selectedcandidate sites. Perchlorate Groundwater Contamination Remediation. The Senate Appropriations Committee includedlanguage in its report requiring the Department of Defense to report not later thanMarch 30, 2004, on the activities of the Interagency Perchlorate Steering Committeeof the Department of Defense. The Steering Committee was established in January1998 to facilitate the flow of information between defense agencies on technologicalissues related to perchlorate contamination of drinking water supplies and irrigationwater supplies. The report of the House Appropriations Committee on the defense appropriations bill ( H.R. 2658 , H.Rept. 108-187 ) also addressedperchlorate groundwater contamination. That Committee directed the Department ofDefense to conduct a joint study with the Environmental Protection Agency onperchlorate contamination of water supplies in southern California, Arizona, andNevada. This report would be completed within 180 days of the enactment of thedefense appropriations bill and would recommend national groundwatercontamination standards, indicate the military and defense industry contaminationsources, and outline mitigation steps for which the federal government would beresponsible. The conferees directed the Department of Defense to submit a report identifying sources of perchlorate contamination on Base Realignment and Closure (BRAC)properties along with plans to remediate this contamination. The conferees movedthe deadline for the submission of this report from the Senate-recommended March30, 2004, to April 30, 2004. Between FY1985 and FY1998, funding devoted to military constructiondeclined steadily as DOD and Congress struggled with a changing strategicenvironment, a shrinking military force, and the uncertainties associated with severalrounds of base realignments and closures. Appropriations began to rise with FY1998as Congress sought to replace outdated facilities and improve the quality of life formilitary personnel at home and in the workplace. Administration requests for militaryconstruction funding (not including BRAC and family housing) continued to declineuntil FY2000, but have risen for FY2001 and FY2002. The request for FY2004 risesabove the level requested for FY2003, and DOD projects that its annual constructionrequests will approximately triple between FY2003 and FY2007 (see Figure 1 ). Table 4 breaks down the FY2004 request by appropriations account and compares it to FY2003 levels. Table 5 shows congressional action on currentmilitary construction appropriations by account. Table 6 compares Administrationmilitary construction requests and enactments for Guard and Reserve projects fromFY1994-FY2004. H.R. 2559 (Knollenberg). Making appropriations for military construction, family housing, and base realignment and closure for the Departmentof Defense for the fiscal year ending September 30, 2004, and for other purposes. H.R. 2559 was reported out of committee on June 17, 2003, andintroduced to the House on June 23. The bill passed the House on June 26, 2003(428-0), and was sent to the Senate. The Senate began consideration of H.R. 2559 on July 10, amending it by striking all text after the enacting clause and substituting the text of S. 1357 . On July 11, the Senate passed the bill (91-0), insisted upon itsamendment, and requested a conference with the House. The House disagreed to theSenate amendment on a motion passed without objection on September 16. TheHouse then requested a conference and appointed conferees. Conferees agreed on thefinal bill on November 4, and the House approved their report on November 5(417-5, Roll No. 606). The message on House action is being held at the desk in theSenate. S. 1357 (Hutchinson). An original bill making appropriations for military construction, family housing, and base realignment and closure for theDepartment of Defense for the fiscal year ending September 30, 2004, and for otherpurposes. S. 1357 was reported as an original measure on June 26, 2003.The Senate began consideration of H.R. 2559 on July 10, amending it bystriking all text after the enacting clause and substituting the text of S.1357. All subsequent action is listed under H.R. 2559 . H.R. 1588 (Hunter, by request). (25) To authorize appropriationsfor FY2004 for military activities of the Department of Defense, and for militaryconstruction, to prescribe military personnel strengths for FY2004, and for otherpurposes. Introduced on April 23, 2003, and referred to the Committee on ArmedServices, it was further referred to the Subcommittees on Projection Forces, TotalForce, Readiness, Tactical Air and Land Forces, Terrorism, Unconventional Threatsand Capabilities, and Strategic Forces. The subcommittees completed markup andreturned the bill to the full committee on May 9. The Subcommittee on Readiness,which exercises jurisdiction over the military construction portion of theauthorization bill, recommended increasing the requested funding for constructionand adopted (16-5) an amendment sponsored by Representative Gene Taylor(Miss.-04) that would repeal the FY2005 round of base realignments and closures.The measure was passed out by voice vote. The bill was reported out on May 16,2003 ( H.Rept. 108-106 ), and placed on the Union Calendar (Calendar No. 53). Thecommittee filed a supplemental report ( H.Rept 108-106 , Part II) on May 21. Broughtto the floor on May 21, 2003, subject to a rule ( H.Res. 245 ). H.R. 1588 was debated, amended, and passed by recorded vote (361-68,Roll no. 221) on May 21 and 22. The bill was received in the Senate on June 2, 2003, and on June 4 was laid before the Senate by unanimous consent. The Senate struck all after the EnactingClause and substituted the language of S. 1050 . The bill passed with anamendment by voice vote the same day ( Congressional Record , S7297-7364).TheSenate then insisted on its amendment and appointed conferees. The Senate sent amessage to the House informing it of its action on June 5, 2003. Conferees met for the first time on July 22. The House voted on September 10 to instruct its conferees regarding Sections 606 and 619 of the Senate amendment(relating to the rates of pay for the family separation allowance and imminent dangerpay) (406-0, Roll No. 500, Congressional Record , H8167, et seq. ). On September 17,the House debated whether to instruct its conferees on Subtitle F of Title VI of theSenate amendment (relating to naturalization and family protection for militarymembers) ( Congressional Record , H8366-H8369). The vote on whether to accept themotion occurred on September 23 (298-118, 18 not voting, Roll No. 511, Congressional Record , H8466). Table 4. Military Construction Appropriations by Account: FY2003-FY2004 (new budget authority inthousands of dollars) Source: Data for FY2003 Enacted from H.Rept. 108-173 ; H.Rept. 108-342 . Table 5. Military Construction FY2004 Appropriations by Account; Congressional Action (inthousands of dollars) Sources: H.Rept. 108-173 ., S.Rept. 108-82 , H.Rept. 108-342 . Note: Does not include Emergency Supplemental Appropriations for FY2004. * Data taken from H.Rept. 108-342 . Table 6. Congressional Additions to Annual DOD Budget Requests for National Guard and Reserve Military Construction,FY1994-FY2004 (current year dollars in thousands) Source: Department of Defense, Financial Summary Tables, successive years, H.Rept. 108-342 . CRS Report RL31310 . Appropriations for FY2003: Military Construction , by Daniel Else. CRS Report RL31805 . Authorization and Appropriations for FY2004: Defense , by [author name scrubbed] and [author name scrubbed]. CRS Report RL32090 , FY2004 Supplemental Appropriations for Iraq, Afghanistan, and the Global War on Terrorism: Military Operations & ReconstructionAssistance , by [author name scrubbed], [author name scrubbed], [author name scrubbed], and RhodaMargesson. CRS Report RL31349(pdf) . Defense Budget for FY2003: Data Summary , by [author name scrubbed] and [author name scrubbed]. CRS Report RL31187(pdf) . Combating Terrorism: 2001 Congressional Debate on Emergency Supplemental Allocations , by [author name scrubbed] and Larry Q. Nowels, CRS Report RL31305 . Appropriations and Authorization for FY2003: Defense , coordinated by [author name scrubbed] and [author name scrubbed]. CRS Report RL30002(pdf) . A Defense Budget Primer , by [author name scrubbed] and [author name scrubbed]. CRS Report RL30440 . Military Base Closures: Estimates of Costs and Savings , by [author name scrubbed]. CRS Report RL30051 . Military Base Closures: Agreement on a 2005 Round , by [author name scrubbed]. Legislative Branch Sites House Committee on Appropriations http://www.house.gov/appropriations/ Senate Committee on Appropriations http://www.senate.gov/~appropriations/ CRS Appropriations Products Guide http://www.crs.gov/products/appropriations/apppage.shtml Congressional Budget Office http://www.cbo.gov/ General Accounting Office http://www.gao.gov/ U.S. Department of Defense Sites U.S. Department of Defense, Office of the Under Secretary of Defense (Comptroller), FY2004 Budget Materials http://www.dod.mil/comptroller/defbudget/fy2004/index.html U.S. Department of Defense, Installations & Environment Home Page http://www.acq.osd.mil/ie/ White House Sites Executive Office of the President, Office of Management and Budget, Budget Materials http://www.whitehouse.gov/omb/budget/fy2004/ Office of Management & Budget http://www.whitehouse.gov/omb/

The military construction (MilCon) appropriations bill provides funding for (1) military construction projects in the United States and overseas; (2) military family housing operations andconstruction; (3) U.S. contributions to the NATO Security Investment Program; and (4) the bulk ofbase realignment and closure (BRAC)costs. The President forwarded his fiscal year 2004 budget request to the Congress on February 3, 2003. The original military construction request of $9.0 billion was later increased to $9.2 billiondue to reprogramming from the defense appropriations bill ( H.R. 2658 ) and anAdministration request related to foreign currency fluctuations as calculated by the CongressionalBudget Office. On June 17, 2003, the House Appropriations Committee reported a bill ( H.R. 2559 ) that recommends $9.2 billion in military construction appropriations. This is $41 millionbelow the President's revised request and $1.5 billion below the FY2003 appropriation. The Housepassed the bill on June 26. The Senate Appropriations Committee marked up an original version ofthe bill ( S. 1357 ) and reported it to the Senate on June 26. On July 10, the Senate beganconsideration of H.R. 2559 , substituting the text of S. 1357 , and passedthe amended bill on July 11. The conference committee reported its bill on November 4, 2003. Authorization of military construction is included within the defense authorization bill. The House passed its version of the bill ( H.R. 1588 ) on May 22. The Senate substituted thetext of S. 1050 for that of H.R. 1588 and passed the amended bill on June4, 2003. The conference committee began meeting on July 22 and had not reported its bill as of thiswriting. For a comprehensive report on defense authorization legislation, see CRS Report RL31805 , Authorization and Appropriations for FY2004: Defense , by [author name scrubbed] and [author name scrubbed]. In late September, the President submitted to Congress an emergency supplemental appropriations request for Fiscal Year 2004 (H.R. 3289) that included $412 million in fundingspecific to military construction and unlimited authority to transfer unspecified additional funds fromthe Iraqi Freedom Fund ($1.99 billion) to military construction and up to $500 million from otherDepartment of Defense funds into a contingency construction account. The bill was passed by bothchambers and was presented to the President on November 5. For more information on thesupplemental, see CRS Report RL32090 , FY2004 Supplemental Appropriations for Iraq,Afghanistan, and the Global War on Terrorism: Military Operations & Reconstruction Assistance ,by [author name scrubbed], [author name scrubbed], [author name scrubbed], and [author name scrubbed]. Key Policy Staff * FDT = Foreign Affairs, Defense, and Trade Division of the Congressional Research Service.

Since the early 1970s, federal law has required state and local governments to designate metropolitan planning organizations (MPOs) in urbanized areas with a population of 50,000 or more to help plan surface transportation infrastructure and services. There are currently 381 MPOs nationwide, of which 43 represent areas of 1 million residents or more (large MPOs), 139 represent areas of between 200,000 and 1 million (medium MPOs), and 199 represent areas of between 50,000 and 200,000 (small MPOs). The foremost rationale for MPOs and metropolitan transportation planning is that the metropolitan scale is the level at which most economic activities, including commuting and, therefore, local highway and transit systems, are organized. These "metropolitan economies" transcend local government and sometimes state boundaries, and, as some observers have argued, are often too far removed from state capitals for state governments to successfully oversee them. This is particularly an issue in places where a metropolitan area is spread over more than one state. Despite some strengthening of their authority over the years, MPOs have generally remained subordinate to state departments of transportation (DOTs) in the planning and selecting ("programming") of projects using federal surface transportation funds. Moreover, it can be argued that at the metropolitan level MPOs are subordinate to local governments that own and operate many elements of the transportation system, and also control land use planning and zoning. Because of this perceived weakness, some in the transportation community have argued that MPOs ought to be given much more power over the planning and programming of projects using federal surface transportation funds. Some even go so far as to suggest that federal policies and programs in a number of areas, including transportation, housing, and the environment, need to be coordinated at the metropolitan scale, and that MPOs are the organizational venue where this should occur. Others argue that the relationship between state government, local government, and MPOs is well-balanced and should not be changed. A third view is that metropolitan transportation planning is controlled by planners who often harbor anti-car views, and, consequently, MPOs can be actually detrimental to well-functioning metropolitan transportation systems. In this view, MPOs should be abolished or, at the very least, have their functions significantly curtailed. For the period FY2005 though FY2009, surface transportation programs were authorized by the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU or SAFETEA; P.L. 109-59 ). In lieu of a new multi-year reauthorization that is still being considered, Congress has extended these programs and their funding several times. Reauthorization of the surface transportation programs provides an opportunity for Congress to reexamine policies related to MPOs and the metropolitan planning process. Changes are also being considered as part of climate change legislation. This report discusses several issues that Congress may want to consider: the authority of MPOs to plan and program funds; representation and participation in MPOs; MPO technical capacity; and implementation of livability/sustainability initiatives. It also considers a number of other planning issues including the requirements for a long-range plan, the proper scale of planning, and the incorporation of freight transportation needs. These issues are discussed in detail below after a brief description of the metropolitan transportation planning process. The federal requirement for transportation planning in urban areas, although not MPOs, dates to the Federal-Aid Highway Act of 1962 (P.L. 87-866), which called for "a continuing comprehensive transportation planning process carried on cooperatively by states and local communities." MPOs themselves have been required as part of the transportation planning process in urbanized areas since the enactment of the Federal-Aid Highway Act of 1973 ( P.L. 93-87 ) (23 U.S.C. §134; 49 U.S.C. §5303). In general, the designation of the MPO, the design of its organizational structure, and voting representation within the MPO are to be agreed upon by the governor of the state and the general-purpose local governments of the area. In urbanized areas of 200,000 residents or more, designated as transportation management areas (TMAs), federal law requires that the MPO must consist of local elected officials, officials from public agencies that operate major modes of transportation (transit agencies, port authorities, etc.), and appropriate state officials (23 U.S.C. §134(d)(2); 49 U.S.C. §5303(d)(2)). Typically, these officials form a policy board in which some members have voting rights and others do not. Day-to-day operations of an MPO are usually managed by an executive director appointed by the board, and a staff composed largely of professional planners. The number of staff supporting the work of the MPO is typically very small. The Government Accountability Office (GAO) recently found the average (mean) number of full-time and part-time staff working for small MPOs was 3.2 and 1.4, respectively. For medium MPOs the averages were 8.2 full time and 1.5 part time staff, and for large MPOs the averages were 49.3 full time and 3.9 part time. With few permanent staff, smaller MPOs often hire consultants to do technical work, rely on help from the state DOT, or both. The two major requirements of every MPO are the preparation of a long-range, multi-modal Metropolitan Transportation Plan (MTP) covering a minimum period of 20 years, and a Transportation Improvement Program (TIP) covering four years. The MTP must be updated at least every five years, or four years in areas with air quality problems, and the TIP must be updated at least every four years. The MTP is required to include an assessment of transportation supply and demand in the metropolitan area; operational and infrastructure investment strategies to improve the condition and performance of the system; estimates of transportation's effects on environmental quality and how these effects can be mitigated; and a financial plan that shows how the MTP can be implemented. Two important components of developing the long-range plan are preparation of travel demand forecasts and estimates of other inputs and outputs such as future land use patterns and pollutant emissions. The four-year TIP is a priority list of proposed federally supported highway and transit projects and strategies. Federal law requires that the list of projects and strategies must be "fiscally constrained" in that the program must be supported by reasonable estimates of available funding. To put it another way, the TIP must include a priority list of projects and strategies over the coming four years that have a reasonable chance of being accomplished with available funding. The TIP must be approved by both the MPO and the governor (although the actual approval is often delegated to the state DOT), and be consistent with the MTP. Federally supported projects must be selected from the approved TIP. Large and medium MPOs, those in urbanized areas of 200,000 residents or more, have the authority to select projects from the TIP in consultation with the state and public transit operators, except projects carried out on the National Highway System (NHS), or under the Bridge Program and Interstate Maintenance (IM) Program. In those cases, the state DOT has the authority to select projects from the TIP in cooperation with the MPO. MPOs in small urban areas, however, have less authority than those in larger areas. This is because power to select highway projects from the TIP is given to the state and power to select transit projects is given to the designated recipients of public transit funding. Project selection by the state or transit system, however, must be done in cooperation with the MPO, a stronger requirement than consultation. The transportation plans of a metropolitan area must be consistent with transportation plans that are required at the state level. Moreover, in metropolitan areas that are in nonattainment or maintenance status for air quality, transportation plans must be in conformity with the state implementation plan (SIP) required to bring the area into compliance with air pollution standards. The local MPO policy board is responsible for making a conformity determination between the regional transportation plan and regional air quality plan. This determination must be made at least every four years, when a MTP or TIP is updated or amended, or within 24 months after a SIP or SIP revision is approved by the Environmental Protection Agency. Some argue that development of the TIP, also known as project "programming," is the most important activity of an MPO because it provides the potential for setting budgetary priorities. Prior to enactment of the Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA; P.L. 102-240 ), a TIP did not need to be fiscally constrained, thus, a common complaint was that such documents were long "wish lists" from which the state could choose the projects to fund. By contrast, since ISTEA, MPOs, particularly those in areas designated as TMAs, have had a say in developing the TIP and in selecting projects from the TIP to be implemented. Moreover, ISTEA is also said to have empowered MPOs by giving them primary authority over Surface Transportation Program (STP) funds designated for projects in specific urban areas, so-called "suballocated" funds, and, to a lesser extent, authority over Congestion Mitigation and Air Quality Improvement Program (CMAQ) funds. The planning area for which the MPO is generally responsible is the urbanized area and the area likely to become urbanized over the next 20 years, and may, therefore, encompass the entire metropolitan statistical area. The planning process is required to be multi-modal, and is to include consideration of a range of factors: economic competitiveness; safety; security; accessibility and mobility of people and freight; environmental quality, energy conservation, quality of life, and consistency with growth and economic development patterns; intermodal connectivity; efficient management and operation of the system; and preservation of the existing system (23 U.S.C. §134(h)(1); 49 U.S.C. §5303(h)(1)). In areas designated as TMAs, planning must include a congestion management process that encompasses travel demand reduction and operational management strategies (23 U.S.C. §134(k)(3); 49 U.S.C. §5303(k)(3)). In nonattainment areas "federal funds may not be advanced ... for any highway project that will result in a significant increase in the carrying capacity for single-occupant vehicles unless the project is addressed through a congestion management process" (23 U.S.C. §134(m)(1); 49 U.S.C. §5303(m)(1)). The metropolitan planning process, in areas designated as TMAs, must be certified by the Secretary of Transportation as being carried out according to federal law. Working together, FHWA and FTA perform certification reviews. Certification is required not less often than once every four years. Certification is based on the way in which the planning is carried out, not the success or failure of the projects and strategies ultimately employed. Among other things, a certification review will examine the participation of interested parties in the planning process. Federal law requires that at a minimum, stakeholders, including freight shippers, public transit operators, and the general public, be given reasonable opportunity to comment on the transportation plan. To that end, MPOs are required to develop a public participation plan. If federal certification is not granted, the Secretary may withhold 20% of highway and transit project funds attributable to the area. In addition to the activities prescribed by federal law, some MPOs carry out other activities that may be given to them by state or local government. These include land-use planning, project implementation, transit operations, and environmental planning in addition to air quality emissions analysis. According to GAO, 70% of MPOs have some land use planning responsibilities, 37% implement projects, 21% do additional environmental planning such as water quality planning, and 16% operate transit service. Although metropolitan transportation planning and MPOs are supported with resources from federal, state, and local government, federal funding typically provides a majority of that support. About 80% of MPOs get a majority of planning funds from the federal government. Federal funding for metropolitan transportation planning is predominantly provided through a 1.25% deduction of federal highway funding authorized for five highway programs: IM, NHS, Bridge, STP, and CMAQ. These deducted funds are apportioned to each state as metropolitan planning funds based primarily on the ratio of urbanized population in a state to the total urbanized population, although every state receives at least 0.5% of the total nationwide apportionment. Federal metropolitan planning funds apportioned to a state are distributed to individual MPOs based on a formula developed by the state in consultation with the MPOs and approved by FHWA. In addition to planning funds apportioned in this way, NHS, STP, and Equity Bonus (EB) funds may be used for planning activities. Federal transit funds are also available for metropolitan planning (Section 5303 funds). MPOs are required to match federal funds with 20% of funds from state and local sources. For FY2009, nearly $400 million in federal funds were apportioned for metropolitan planning, with about $304 million from federal highway funds and $94 million from federal transit funds. Federal funds apportioned for metropolitan transportation planning since 2000 can be seen in Figure 1 . Since the first federal requirements for urban transportation planning in the early 1960s and for MPOs in the early 1970s, Congress has modified and generally strengthened the metropolitan transportation planning process and the role of MPOs. Arguably, the biggest changes date to the enactment of the ISTEA and the requirements of the Clean Air Act Amendments of 1990 (CAAA; P.L. 101-549 ). Among other changes, ISTEA brought in the requirements for a fiscally constrained TIP, suballocated funds to urbanized areas, funding to air quality non-attainment and maintenance areas through CMAQ, and, in concert with the CAAA, made air quality an important goal of metropolitan planning. ISTEA also increased the amount of federal planning funds provided to MPOs. Subsequent surface transportation reauthorization legislation, the Transportation Equity Act for the 21 st Century, as amended, enacted in 1998 (TEA-21; P.L. 105-178 ; P.L. 105-206 ) and SAFETEA, enacted in 2005, reaffirmed these changes with some modifications. With the initial expiration of SAFETEA at the end of FY2009, the role of MPOs is once again being debated in Congress in the context of reauthorizing the federal surface transportation programs. There appear to be five major issues that Congress may consider in this debate: (1) the authority of MPOs relative to state DOTs to plan and program funds; (2) representation and participation in MPOs; (3) MPO funding and technical capacity; (4) MPOs and the implementation of livability/sustainability initiatives; and (5) other issues with transportation planning requirements. Possibly the most important issue for Congress with respect to metropolitan transportation planning is the decision-making authority of MPOs, particularly with respect to the authority of state DOTs, and the effect this has on the geography of infrastructure funding. One prominent view on this issue is that under current law MPOs are relatively powerless because most federal highway funding is controlled by the states. Because many state legislatures and state DOTs have historically been dominated by rural areas, it has been argued that, consequently, urban regions have generally fared relatively poorly in highway funding. As one transportation coalition has asserted, a "reason to increase the decisionmaking authority and ability of MPOs is that many states continue to penalize metropolitan areas in the distribution of transportation funds. " Moreover, adherents to this view suggest that even with money that is directed to urban areas, the authority of MPOs is weak because project selection by MPOs must be done in cooperation or consultation with the state DOT and local governments. Indeed, when local control exists it still tends to rest with local jurisdictions that are often more interested in receiving their "fair share" of project money than on solving regional transportation problems. Another effect of state DOTs being largely in control of highway funding, these observers argue, is a bias towards highway construction projects of a type that is more suited to rural environments. Adherents to this view contend that highway improvements tend to be of the larger kind that accommodate faster speeds, and, thus, are not built with non-vehicular traffic in mind. Consequently, it is said, there has been much less emphasis on transportation improvements that might be better suited to urban environments, including roads with slower design speeds that accommodate bicyclists and pedestrians, operations and management improvements such as signal timing, and the use of "highway" funds on other modes such as transit. This alleged spending bias has implications for urban development because, as one think tank put it, "state DOTs' traditional focus on highway maintenance and construction fosters metropolitan decentralization that negatively impacts cities and older suburbs." According to this view, more federal funding needs to be directed to urbanized areas, and greater power to make infrastructure funding decisions needs to be placed in the hands of MPOs. Providing this greater authority is often linked to requiring greater accountability for transportation outcomes. One coalition of transportation groups argues for "empowering regions to shape their future by giving them more direct funding and decision-making authority, while holding them accountable for results." Some of these ideas are contained in the proposed Surface Transportation Assistance Act of 2009 (STAA), a bill that has not been formally introduced and, hence, is unnumbered, but nonetheless has been subject to markup by the House Committee on Transportation and Infrastructure, Subcommittee on Highways and Transit. Although the bill is incomplete, lacking funding data and other details on several of what might be the most significant features in the bill, there are a number of legislative proposals pertaining to MPOs. STAA creates the Metropolitan Mobility and Access (MMA) Program which would provide funding and financing authority directly to MPOs in areas of 500,000 or more. According to the draft bill, [t]he purpose of the metropolitan mobility and access program shall be to provide multi-modal transportation funding and financing authority directly to metropolitan planning organizations, thereby allowing MPOs broad multi-modal flexibility in planning and implementing programs of surface transportation projects to reduce vehicular congestion, to maximize mobility and access of people and goods, and to improve safety, environmental sustainability, and livability in large urbanized areas. To be eligible to receive funding, an MPO will have to develop a metropolitan mobility plan that is approved by DOT. The MMA requires an MPO to have an approved metropolitan mobility plan, supported by performance-based goals and metrics, to receive funds. Beginning in FY2012, continued funding is contingent on providing an annual report which documents progress toward the goals, reasons for failing to meet any of the goals, and a new plan by which the goals will be met going forward. Providing federal highway funding directly to MPOs would be a major change in the way the Federal-Aid Highway Program operates, and could be a major shift in authority from the states to the MPOs. Apart from the question of the relative power of MPOs and state DOTs, there are some in the transportation community who worry about the ability of some MPOs, particularly those in small and medium size urbanized areas, to administer federal funds efficiently. Another concern, at least in some states, is that MPOs may not have the legal authority to receive federal funds directly. Although most MPOs are not officially units of government, but instead cooperative, intergovernmental organizations, the creation and organization of MPOs is, by and large, dictated by state law. Consequently, changes to funding mechanisms and the authority of MPOs at the federal level may require states and local governments to reevaluate MPO governance structures. Putting the intergovernmental question aside, the case can be made that unless federal funding is very substantial and comes with much stronger authority over project implementation and other matters, such as land use, MPOs are likely to remain relatively weak. This is because real power will still be centered within state/local government, including single-mode entities such as transit agencies, and local officials that typically make up the governing board of an MPO will find it hard to make decisions that while good for the region may be detrimental to the interests of their home jurisdiction. For example, a commission established by the State of Washington to examine transportation issues in the Puget Sound region found that there were 128 agencies managing some aspect of transportation in the four-county area. The commission noted that formal and informal discussions with over 100 individuals and more than 50 agencies reveal the difficulties that these individuals and agencies face when attempting to prioritize regional interests in transportation infrastructure. These officials bring hard work, intelligence and insight to their roles. However, they are charged with advancing the interests of an individual agency, district, city, county or the state as a whole, or with protecting the interests of a particular mode of transportation, such as roads or transit. It recommended, therefore, that the [Washington State] Legislature create a new 15-member Puget Sound Regional Transportation Commission (PSRTC) that has authority and responsibility for planning, prioritizing and funding all modes of regional transportation for the four-county area.... Our recommendations suggest that the agency should have responsibility for land use, roads and transit, including the three current regional entities. We believe the agency should have taxing, tolling and borrowing authority. Although this recommendation, at least in terms of transportation planning, was repeated by the Washington State Auditor in a study of highway traffic congestion in the Puget Sound region—with the additional thought that this single control could be given to either the Washington State DOT or a new regional entity—it is perhaps not surprising that such a powerful regional entity has not been established to date. An opposing view is that Congress should abolish federal involvement in metropolitan planning which deals with mostly local or regional concerns. In this view, metropolitan transportation planning and MPOs have largely failed, not because they are too weak, but because they are beholden to a special-interest coalition of government planners, private consultants, and others who favor behavioral "smart growth" strategies to deal with regional transportation problems such as highway congestion, air pollution, and greenhouse gas (GHG) emissions. Smart growth strategies, it is argued, rely on making urban areas more dense through land use regulation, and by placing greater funding emphasis on alternatives to cars and trucks such as transit, bicycling, and walking. According to this view, these behavioral tools failed in dealing with urban air quality problems, and they will fail to reduce GHG emissions, particularly if cost effectiveness is used as a criterion. As a corollary to this view, the case can be made that while urban regions do relatively poorly in terms of highway funding, they more than make up for it in terms of transit funding that is typically provided directly to transit operators and is supported by highway user fees. Additionally, it might be argued that highway funding tends to be directed to more rural parts of the state because there are great needs for intercity connectivity, even for urban residents, and it is at the rural fringes of urban regions where population growth tends to be fastest, and, hence, where infrastructure needs are greatest. A third view is that Congress should make little or no change to the current authority of MPOs nor to the relationship between MPOs and state DOTs. This is the view of the American Association of State Highway and Transportation Officials (AASHTO), the association of state DOTs. In its view, the current process properly assigns authority to the owner of each element in the hierarchy of the highway system and requires a proper level of cooperation between different levels of government through the MPO. It argues that changes to this relationship risk a loss of state control over state-owned roads, including Interstate highways and National Highway System facilities, potentially allowing local concerns to dominate broader state and national transportation and economic needs such as freight movement through and around these urban areas. As noted earlier, the organizational structure of an MPO, including the make-up of the governing board and voting rights, and its decision-making processes (e.g., majority vote or consensus) are largely at the discretion of state and local lawmakers. Despite variation in the way MPOs are organized around the country, MPOs are typically governed by a board of voting members made up of local elected representatives selected from member jurisdictions. Other voting and non-voting members may be appointed ex officio, such as the head of the local transit agency, or by gubernatorial appointment, such as a representative from the state DOT. Many MPOs have advisory committees that support the policy board, such as those dedicated to technical, freight, air quality, and bicycle/pedestrian issues, and many have a citizens advisory committee. Voting representation on MPO policy boards varies widely, but voting weighted by the population of member jurisdictions is relatively uncommon. Because the resident population of member jurisdictions is often vastly different, a common criticism is that this creates a serious problem of unequal representation, or malapportionment, on the MPO policy board. A number of studies have found that this malapportionment tends to over-represent suburban residents at the expense of central city residents, and that this geographical disparity also tends to result in an under-representation of racial and ethnic minorities in the decision-making of MPOs. One study of MPOs in the 50 largest urbanized areas found that only 16 provided for voting weighted by population. In five of the 16, the weighting is proportional to population, but in the remaining 11 the weighting provides additional votes to the more populous jurisdictions, but not in proportion to population size. The study found that, on average, while central city populations make up 59% of residents overseen by MPOs, they only receive 29% of votes on MPOs' boards. In contrast, suburban residents make-up 26% of the population, but receive 55% of the votes. The remaining 15% of votes go to non-local entities such as transit agencies and state DOTs. The study also showed that racial and ethnic minorities also tended to be underrepresented among MPO voting board members in part because of the geographical bias. While non-Hispanic white residents of the 50 urbanized areas studied were 61% of the population, 88% of the voting members on MPO boards were non-Hispanic white. Correspondingly, other groups were underrepresented: black 15% population, 7% voting board members; Hispanic 17% population, 3% voting board members; Asian 6% population, 1% voting board members. The effects of underrepresentation of central cities and racial and ethnic minorities in the composition of MPO voting boards are still not fully clear, but one research study has found a link between representation and the share of funding directed to transit. This study of 20 large MPOs found that for every extra vote suburban areas receive on an MPO board between 1% and 7% less funds were directed to transit in the MPO budget. Although malapportionment exists in many MPOs, an alternative view is that it does not have as much of an effect on decision-making as the research would seem to suggest. This is because a large number of MPOs work on a consensus basis, and, in MPOs where voting in proportion to population size is provided for, in practice it is rarely used. The case can be made that less than proportional representation prevents the most populous jurisdiction(s) in a metropolitan area from dominating the MPO. Less populous jurisdictions also can be geographically large or rapidly growing and, thus, it might also be argued, deserve more say than population alone would indicate. Furthermore, it might be argued that MPO decisions with respect to minority and low-income populations are constrained by other federal laws and regulations including Title VI of the Civil Rights Act and Executive Order 12898 (Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations). Based on Title VI requirements, an MPO must develop a public participation plan for "seeking out and considering the needs of those traditionally underserved by existing transportation systems, such as low-income and minority households, who face challenges accessing employment and other services" (23 CFR 450.318). As noted earlier, the metropolitan planning process, in areas designated as TMAs, must be certified by the Secretary of Transportation as being carried out according to federal law, and, thus, an MPO certification review is when compliance with these requirements can be enforced. But critics contend that withholding or providing conditional certification is a relatively weak way of enforcing participation requirements, and one rarely used. Also, these public participation requirements do not directly address the question of representation on the local MPO policy board. On the other hand it might be argued that many MPOs have made a legitimate attempt with limited resources to involve traditionally underserved communities, and that often it is difficult to generate involvement with seemingly arcane deliberations, far removed from the usual topics of interest to such communities. If Congress believes it is desirable to alter local representation and participation in MPOs, there are a number of possible avenues that it might take. Congress could require that voting on MPO boards be in proportion to the population of the member jurisdictions. This approach is taken in the STAA. Another possibility is to strengthen the federal certification requirements for MPOs, especially those in TMAs, to take greater account of public participation, and to more formally consider voting and non-voting board membership, advisory committee membership, and voting mechanisms as possible sources of bias. A third suggestion is for MPOs to place greater emphasis on public participation, recruitment of minorities to serve on advisory committees, and the diversity of policy boards, including non-voting members. Congress might support this essentially state and local initiative by providing DOT with more funding to develop and share techniques, including leadership training, for achieving such ends. Another concern with MPOs is that most do not have the technical capacity, or the funding, to successfully fulfill federal planning requirements, including developing the long-range plan, the TIP, and conducting public meetings. As noted earlier, apart from a handful of MPOs in the largest areas, MPOs tend to have small executive and technical staffs, and many rely on staff time and expertise from other agencies, typically state DOTs. One specific problem is conducting the modeling that is required as the basis of forecasting future travel growth, capacity needs, and, in air quality non-attainment and maintenance areas, conformity with air quality plans. As the modeling requirements have become increasingly complex over time, many MPOs have had trouble keeping up. Additionally, many MPOs have difficulties acquiring the data they need support their modeling efforts. According to a report of the Transportation Research Board (TRB), a part of the National Academies, while federal requirements for modeling have increased, federal funding for model development has been "greatly reduced." One possible option for congressional action would be to provide more federal funding for planning activities, including more funding for model development and data collection. This might be done by increasing the overall funding for transportation programs, or by taking funds from other transportation programs. One possibility would be raising the 1.25% deduction from highway programs to 1.5% or more. Some MPOs also argue that providing more flexibility in the use of federal planning funds, particularly those overseen by FHWA, would help them fulfill their planning requirements. Another complaint is that MPOs cannot use all their apportioned federal planning funds because they cannot raise the local matching share due to state and local funding constraints. An option, therefore, might be to increase the federal share from the current 80%. The downside of this approach is that it may not increase the amount of funds going to metropolitan planning, because raising the federal share might result in less support from state and local government. Another approach might be to increase FHWA and FTA technical support to MPOs by helping with the challenges of modeling including acquiring the necessary data. A different approach to the issue of MPO funding and technical capacity is to reduce the federal requirements for metropolitan planning. This could be done in a number of different ways. One approach would be to increase the population threshold for the creation of an MPO from 50,000 residents. The STAA, for instance, has proposed increasing the threshold to 100,000 residents, although existing MPOs in areas currently between 50,000 and 100,000 would be maintained as required by current law. The threshold for designating a TMA, with the added requirements for MPOs, might also be increased from the current population of 200,000. Another option might be to drop the requirements for developing long-range plans. Some have suggested that such planning is a waste of time and money because, among other things, conditions 20 years in the future are impossible to predict. Nevertheless, highways, transit systems, and other significant infrastructure projects typically last much longer than 20 years, so it might be argued that it is worth thinking through as much as possible the longer-term ramifications of such decisions. An often heard criticism of federal surface transportation policy is that, over the years, it has largely ignored the effects of transportation investment on urban land use development. Among the transportation policies said to have contributed to these problems are the division of funding into inflexible highway and transit "silos," giving state DOTs almost complete control over the large pot of highway funding, and ignoring the linkages with other federal policy areas such as housing and the environment, particularly at the scale of the metropolitan region. Consequently, federal support, as previously mentioned, is thought to be biased toward road building in rural and newly urbanizing areas on the urban fringe, which begets more low-density residential and commercial development that is difficult to serve with transit, and, therefore, contributes to more car dependency and motor vehicle emissions. The remedy, according to this argument, is to focus flexible transportation funding much more on solving problems in metropolitan regions and to leverage the synergies between transportation, housing, and environmental policies. Thus, for instance, federal policies could encourage states and localities to provide for housing, densely formed with commercial development around transit stations and stops. This would, according to its proponents, allow people to choose among a number of ways of traveling—including automobile, transit, bicycling, and walking—to access work, shopping, and other amenities. Such transit-oriented development (TOD) could also provide new customers for transit agencies, reduce vehicle-miles traveled and the associated environmental problems, and lower household transportation expenditures. Proponents of this approach often include a greater scope for metropolitan transportation planning and greater power for MPOs. The Obama Administration has announced an Interagency Partnership for Sustainable Communities to be entered into by DOT, the Department of Housing and Urban Development (HUD), and the Environmental Protection Agency (EPA). The Partnership is designed "to help improve access to affordable housing, more transportation options, and lower transportation costs while protecting the environment in communities nationwide." To "enhance integrated planning and investment ... HUD, EPA and DOT propose to make planning grants available to metropolitan areas, and create mechanisms to ensure those plans are carried through to localities." Presumably, MPOs would be well placed to receive those grants to enhance integrated planning. From the brief descriptions available, the planning grants announced by the Obama Administration do not appear to be much different than the intent of those available under a program established in TEA-21 and continued in SAFETEA—the Transportation, Community, and System Preservation (TCSP) Program. As enacted, the TCSP program provides relatively small discretionary grants for research and planning to states, MPOs, and local governments to establish "a comprehensive program to address the relationships among transportation, community, and system preservation plans and practices and identify private sector-based initiatives to improve such relationships" (SAFETEA, Section 1117). Although FHWA administers the program in cooperation with other DOT modal administrations and EPA, over the life of the program, TCSP grants in most years have been awarded by congressional designation (earmarks) in appropriations legislation. The exceptions to this were FY1999, FY2000, and FY2007 when some or all of the program's funds were allocated by the Secretary of Transportation. Partly due to the way the program was originally conceived and partly because most of the funds have been earmarked, the TCSP program has generally served as a pot of funding to be used for almost any surface transportation purpose. Without a clear purpose, it is difficult to evaluate the success of the projects being supported and the success of the program as a whole. Similarly, it could be argued that without a clear understanding of what is meant by "sustainability" and "livability," the new planning grants might go for almost any purpose, and the success or failure of funded projects difficult to judge. Congress might also be concerned with the basis on which these new planning grants are to be distributed. Despite the creation of this Interagency Partnership, moreover, it is not entirely clear without legislation what mechanisms and funding these agencies have at their disposal to follow through with sustainability/livability initiatives. FTA recently announced that it would use unallocated New Starts/Small Starts Program funds ($130 million) and Bus and Bus-Related Facilities Program funds ($150 million) to support its livability initiative, but again these program funds are often earmarked by Congress. These relatively modest amounts of funds, moreover, are already designated for transit. Surface transportation reauthorization, climate change legislation, or both, therefore seem more likely sources of new authority and resources. In the reauthorization of surface transportation programs, one transportation coalition is proposing that metropolitan areas of 1 million or more, with smaller areas given the chance to opt-in, should be required to develop what it calls 20-year Regional Blueprint plans which "demonstrate how proposed transportation investments and system operations and management will coordinate with land use strategies to achieve timely and reasonable progress towards meeting National Transportation Performance Targets." An aspect of developing the plans is land-use scenario planning. If enacted as proposed, these plans would have to be approved by the state, DOT and EPA, and reviewed by HUD and the Department of Health and Human Services. Once approved, an MPO would be granted federal transportation funds and project selection authority. As noted earlier, STAA proposes to provide MPOs with federal funding directly. Moreover, the bill adds some factors that an MPO would be required to consider in the planning process such as enhancing sustainability and livability, reducing GHG emissions and dependence on foreign oil, improving public health, and the relationship between transportation and land use development patterns. In many cases, STAA would require an MPO to develop performance measures and strategies to meet the targets that are set. Similar requirements are also included in various versions of climate change legislation that are working their way through Congress. The House passed H.R. 2454 (Waxman/Markey) on June 26, 2009. A Senate version of the legislation, S. 1733 , was introduced September 30, 2009. A more limited bill, the Clean, Low Emission, Affordable, New Transportation Efficiency Act ( S. 575 / H.R. 1329 ), sometimes referred to as CLEANTEA, that supporters hope might be included in a larger climate change bill proposes some transportation-related aspects of climate change mitigation. Three common characteristics of the bills are a new fund that will receive money from the auction of GHG emission allowances; requirements for states and MPOs responsible for TMAs to develop GHG reduction plans; and the use of funds from the new fund to do the planning and to implement projects in the plan. H.R. 2454 provides 1% of auctioned funds to be used for transportation purposes, whereas S. 575 / H.R. 1329 proposes 10% of these new funds. One point of controversy has been whether the GHG emission reduction plans required as part of the planning process must be submitted to and approved by the Environmental Protection Agency instead of or in addition to the Department of Transportation. This provision was included in the version of H.R. 2454 passed by the House Energy and Commerce Committee, but was subsequently dropped in the version passed on the floor of the House. Environmentalists generally favor EPA oversight with the view that this is most likely to result in stricter limits and enforcement. In contrast, the transportation community generally opposes EPA oversight with the view that EPA is likely to favor the environmental over the transportation goals of a plan, and that the added oversight would result in longer approval time for projects. A different view on livability/sustainability initiatives, and the role that MPOs might play, is that promoting denser, transit-oriented development through more transit funding and planning regulations will result in smaller, less affordable housing and will actually inhibit mobility through increased reliance on transit and more highway congestion. Trips by transit, analysts propounding this view contend, are almost always slower than those in private vehicles, and transit usage does not typically confer significant environmental benefits. Just as the greatest success in battling urban air pollution has been through technical improvements, particularly the catalytic converter, these analysts argue that reducing GHG emissions will not be done by getting people out of their cars, but by getting them into plug-in hybrids and employing other "green" technologies. Changing travel behavior, they argue, is an expensive way to reduce GHG emissions and may potentially damage the economy by reducing the efficiency of regional economies. The arguments for and against more compact urban development and related policies, such as greater transit funding, have taken on new urgency in the past few years because of the concern with GHG emissions and climate change. As a whole, EPA says transportation was responsible for 28% of all GHG emissions in the United States in 2007. Highway vehicles alone were responsible for 23% of the U.S. total. Some analysts have argued that advances in vehicle energy efficiency that reduce fuel consumption and fuel carbon content have been overwhelmed by the growth in vehicle miles traveled. They argue that to reduce the amount of GHG from the transportation sector it will be necessary to reduce vehicle miles traveled (VMT). To do that, one school of thought argues "compact development will reduce the need to drive between 20 and 40 percent, as compared with development at the outer suburban edge with isolated homes, workplaces, and other destinations." A review of the evidence by a special study committee of TRB agreed that denser urban development could reduce VMT. As it noted in the study report, the literature suggests that doubling residential density across a metropolitan area might lower household VMT by about 5 to 12 percent, and perhaps by as much as 25 percent, if coupled with higher employment concentrations, significant public transit improvements, mixed uses, and other supportive demand management measures. Even though substantial building of residential and commercial property will presumably take place between now and 2050, doubling residential densities would be very challenging because land use is controlled mostly by local jurisdictions, where existing residents are often very concerned about new development causing congestion, higher property taxes, and the like. Thus, the committee believes that reductions in VMT, energy use, and CO2 emissions resulting from compact, mixed-use development would be in the range of less than 1 percent to 11 percent by 2050, although the committee disagreed about whether the changes in development patterns and public policies necessary to achieve the high end of these findings are plausible. There are three other issues having to do with transportation planning requirements that Congress may want to consider. The first of these is whether or not MPOs should be required to develop long-range plans. Critics argue that for two main reasons Congress should not require long-range plans, and should have MPOs focus on the short-term TIP instead. They contend that the metropolitan planning process in most places is flawed because it does not follow a rational planning model where alternative projects are weighed one against another with as many of the benefits and costs measured as possible. Thus, the long-range planning process is dominated by professional planners who often seek to change travel behavior by pursuing smart growth solutions of compact development and by heavily subsidizing non-automobile modes of transportation. The second main reason given for abandoning federal requirements for long-range planning is that it "requires information about the future that is essentially unknowable." This includes things like the price of oil, the state of vehicle technology, job and housing location, and the prevalence of telecommuting. Because much of the information necessary for long-term planning is unknowable and because many of the costs and benefits are not quantified, this critique insists that project decisions are typically made on political grounds rather than on rational grounds. Instead, it is argued, metropolitan planning "should focus on the short term, give transportation agencies incentives to improve transportation outcomes, and encourage regions and agencies to rely more on user-fee-based funding mechanisms." A second issue is the incorporation of freight transportation needs and concerns into the planning process. One study has noted that there is no clear mandate for freight planning in federal law, although it is included in Titles 23 and 49 as something that should be considered. Moreover, the same study also notes that while the planning process is required to include public outreach and participation, in many areas the freight community is not involved in the process in any meaningful way. In places where there is involvement, often through freight advisory committees, the concern is that this is not clearly linked to the development and prioritization of projects. For these reasons, some suggest that freight plans be a required component of statewide and metropolitan transportation plans. Another option is for the federal government to provide extra funds to states and MPOs to hire staff freight experts. The freight problem is a good example of a third planning issue that could be of concern to Congress, the geographic scale at which planning is undertaken and the integration of metropolitan planning with planning being done at different scales. At the moment, metropolitan transportation plans must be integrated with statewide transportation plans. Because travel, particularly freight, often exceeds the jurisdiction of a single MPO or state, there have been calls for developing a national transportation plan and multi-state freight corridor plans. The National Surface Transportation Policy and Revenue Study Commission, for example, recommended the creation of a national strategic plan, and AASHTO has suggested that Congress provide funding for multi-state corridor planning and investment organizations, such as the I-95 Corridor Coalition. Heeding these concerns, there have been legislative proposals for adding new transportation planning requirements at the national, state, and regional levels. The STAA, for example, proposes to create new requirements for the development of a National Transportation Strategic Plan, state freight plans, metropolitan mobility plans, and freight corridor plans. The draft bill allows funding to be provided to a maximum of ten freight corridor coalitions to develop the freight corridor plans. A coalition would be comprised of representatives from state DOTs, MPOs, port authorities, freight carriers, and shippers. Under the proposed legislation, the freight corridor plan would be required to be consistent with the long-range statewide transportation plan, the statewide improvement plan, the metropolitan long-range transportation plan, the transportation improvement program, and the metropolitan mobility plan. Alternatively, it could be argued that requiring these many different layers of planning could consume an enormous amount of effort, time, and thus money, not only on each individual plan but also on coordinating and making the different plans consistent. Moreover, in the case of disagreements it might be difficult to determine which organization and which plan takes precedence. The result, therefore, could be a stalemate that inhibits rather than promotes transportation system improvements. Since the end of the Second World War, America has experienced what one historian calls a "metropolitan revolution," in which the economy and culture of tightly drawn regions of urban and suburban development each focused on a central core "was replaced by an amorphous sprawl without a unifying hub or culture." According to this view, an important dimension of change has been the increasing fragmentation of metropolitan governance, as urban regions have decentralized over larger and larger areas. For example, the metropolitan area of Pittsburgh, one of the most fragmented, was estimated to have over 400 general-purpose local governments in the late 1990s. Even the Phoenix metropolitan area, one of the least fragmented, was estimated to have 34 local governments. Despite the amorphousness of contemporary urban development, research suggests that there is a significant interdependence between places in a metropolitan area that bears on a region's economic efficiency and, thus, competitiveness in a national and international context. Governmental fragmentation can make it particularly difficult to deal with problems of a regional nature, such as transportation congestion, that affect metropolitan productivity. This is because, it is argued, "planners and politicians are torn between mitigating the localized effects of regional problems and addressing the common concerns and long-range interests of their larger metropolitan areas." Over the years there have been three main ways that regional governance in metropolitan areas has been enhanced. The first way is through the state-granted power of annexation by which cities are able to expand into bordering developed or undeveloped unincorporated areas. For example, between 1960 and 1990, Houston added 212 square miles to its jurisdiction, an increase of 65%. A second way of reducing governmental fragmentation is through multijurisdictional consolidation. This is typically done when a city consolidates with a county and the cities within it. An example is the consolidation of the City of Indianapolis and Marion County that took place in 1970. Although there has been some reduction in governmental fragmentation due to annexation of territory and consolidation of local governments, in many states, particularly in the older and more developed Northeast and Midwest, powers to annex and consolidate are weak. The third main way that regional governance has been enhanced is the development of special-purpose regional bodies, the most widespread of which are MPOs. Although regional authorities sit uncomfortably in the long established intergovernmental system of federal, state, and local government, strengthened MPOs might offer the most likely current means of reducing the fragmentation of metropolitan governance. This may be a primary reason why some would like to see Congress significantly enhance and broaden the authority and resources of MPOs now and in the future.

Federal law requires state and local governments to designate a metropolitan planning organization (MPO) in each urbanized area with a population of 50,000 or more to help plan surface transportation infrastructure and services. There are currently 381 MPOs nationwide. Despite some strengthening of their authority over the years, MPOs have generally remained subordinate to state departments of transportation (DOTs) in the planning and selecting ("programming") of projects using federal surface transportation funds. Moreover, it can be argued that at the metropolitan level MPOs are subordinate to local governments that own and operate many elements of the transportation system, and also control land use planning and zoning. Because of the perceived weakness of MPOs, some in the transportation community have argued that they ought to be given much more power over the planning and programming of projects using federal surface transportation funds. Some of these observers go so far as to suggest that federal policies and programs in a number of areas, including transportation, housing, and the environment, need to be coordinated on a metropolitan scale, and that MPOs are the organizational venue where this should occur. Others argue that the relationship between state government, local government, and MPOs is well-balanced and should not be changed. A third view is that metropolitan transportation planning is controlled by planners who often harbor anti-car views, and consequently, MPOs can be actually detrimental to well-functioning metropolitan transportation systems. In this view, MPOs should be abolished or, at the very least, have their functions significantly curtailed. Surface transportation programs were authorized under the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU or SAFETEA; P.L. 109-59) covering the period FY2005 through FY2009. In lieu of a new multi-year reauthorization that is still being considered, Congress has extended these programs and their funding several times. Reauthorization of the surface transportation programs provides an opportunity for Congress to reexamine policies related to MPOs and the metropolitan planning process. This report discusses several issues that Congress may want to consider: the authority of MPOs to plan and program funds; representation and participation in MPOs; MPO funding and technical capacity; and implementation of livability initiatives. It may also want to consider a number of issues having to do with planning requirements such as the need for a long-range plan, the proper scale of planning, and the incorporation of freight transportation interests. The report begins with a brief description of the metropolitan transportation planning process.

America's borders and ports are busy places, with tens of millions of cargo containers and hundreds of millions of lawful travelers entering the country each year, while tens of thousands of illegal cargo entries and hundreds of thousands of unauthorized migrants are seized, arrested, or turned away. At the same time, hundreds of thousands of unauthorized migrants evade detection to enter the United States illegally; thousands of kilograms of illegal drugs and other contraband are smuggled into the country; and tens of thousands of migrants may be victims of human trafficking. The breadth and variety of these statistics are reflected in the Department of Homeland Security's (DHS's) complex border security mission, which calls on the agency to "prevent the illegal flow of people and goods across U.S. air, land, and sea borders while expediting the safe flow of lawful travel and commerce; ensure security and resilience of global movement systems; [and] disrupt and dismantle transnational organizations that engage in smuggling and trafficking across the U.S. border." To execute this mission successfully, DHS and Congress must balance a number of competing priorities and allocate resources accordingly. For example, how should enforcement programs weigh the facilitation of legal trade and travel against the competing goal of preventing illegal entries? How should the allocation of border security resources be divided among programs designed to counter differing threats? Is it more efficient to invest enforcement dollars at ports of entry or on fencing and surveillance between the ports? Should additional personnel be added to the Southwest border or at Northern or coastal borders? How do intelligence operations and cooperation with enforcement agencies away from the border enhance border security? The answers to these questions depend on the variety of threats America confronts at its international borders. DHS and its congressional supporters may have had the luxury of adopting an "all of the above" approach in the years following the September 11, 2001 (9/11), terrorist attacks; but at a time of fiscal scarcity the department faces increasing pressure to invest prudently, and to ensure that effective enforcement strategy shapes agency budgets rather than the other way around. In addition, because many threat actors are strategic (i.e., they may change their tactics in response to enforcement efforts), questions about the effectiveness of U.S. border security policy and the costs and benefits of competing approaches should be revisited on a regular basis. In general, DHS's border enforcement strategy, like its overall approach to homeland security, is based on risk management, which DHS defines as "the process for identifying, analyzing, and communicating risk and accepting, avoiding, transferring, or controlling it to an acceptable level considering associated costs and benefits of any actions taken." In short, the goal of risk management is to target enforcement resources to specific threats in proportion (1) to the gravity of the associated risk, and (2) to the cost-effectiveness of the enforcement response. This report focuses on the first major step in managing border-related risks: assessing the risk posed by different types of threats at U.S. borders. Risk assessment in the border security context presents particular challenges, as discussed below (see " A Framework for Assessing Border Threats "). But understanding these challenges and systematically assessing border threats provide a critical foundation for DHS's planning process, as well as for Members of Congress charged with making border security policy, overseeing enforcement efforts, and allocating agency resources. This report begins with a discussion of the types of threats the United States confronts at its international borders (see " Types of Border Threats "), followed by an overview of DHS's risk management methodologies, including in the context of border security (see " DHS and Risk Management "). The following sections show how the principles of risk management may be used to describe and analyze threats to U.S. border security. First, how can Members of Congress and others assess the risks associated with each of these threats (see " A Framework for Assessing Border Threats ")? Second, for selected border threats, what conclusions may be drawn about current risk levels (see " Assessment of Selected Border Threats ")? The report concludes by placing threat assessment within the broader context of border security policymaking. America's concern for national security at the border long predates the post-9/11 focus on "homeland security," though the nature of border threats has changed over time. The first federal immigration laws, passed in 1798, authorized the President to arrest or deport any alien deemed to be dangerous to the United States and any adult male alien from a country at war with the United States. Over the course of the 20 th century, laws were passed to exclude security threats such as anarchists (in 1903), aliens considered a threat to public safety during times of war (1918), communists (1950), and terrorists (1996). The mission and focus of U.S. border enforcement has also changed over time. The U.S. Border Patrol (USBP) was established in 1924 and focused initially on preventing the entry of inadmissible Chinese migrants and on preventing alcohol inflows during Prohibition, with the majority of agents stationed on the Northern border. Unauthorized migration from and through Mexico first emerged as a major policy concern beginning in the late 1960s and early 1970s, and 1971 marked the beginning of tightening border controls as part of America's "war on drugs." Thus, beginning in the 1970s, the United States engaged in sustained and intertwined efforts to combat illegal migration and drug flows at the Southwest border. Border patrol staffing (focused primarily on immigration control) climbed eleven-fold between 1975 and 2011, and spending by the Drug Enforcement Administration (DEA, focused primarily on counter-narcotics) increased about five-fold during the same period. With the first World Trade Center bombing in 1993 and the interception of the so-called millennium bomber at Port Angeles, WA, in 1999, counterterrorism became a third important focus of U.S. border security (i.e., in addition to immigration control and counter-narcotics) during the 1990s—and the top concern after 9/11. Thus, DHS's border security responsibilities were defined by the Homeland Security Act (HSA, P.L. 107-296 ) to include, among other responsibilities, preventing the entry of terrorists and terrorist weapons; securing U.S. borders, territorial waters, ports, and transportation systems; immigration enforcement; and customs enforcement (including preventing the entry of illegal drugs). As Figure 1 illustrates, DHS's border security mission includes its efforts to prevent the entry of unauthorized migrants, combat criminal networks that smuggle drugs and other contraband, and identify and interdict potential terrorists at America's borders. The figure also illustrates several observations about the broader context in which these enforcement efforts occur. First, while migration, drugs, and terrorism are DHS's highest-profile concerns at U.S. borders, border security encompasses a number of additional goals, including efforts to facilitate lawful travel and trade and to prevent the entry of persons with serious communicable diseases. These additional aspects of border security are mainly beyond the scope of this report. Second, while DHS combats illegal migration, criminal networks, and potential terrorists at U.S. borders, its work on all three of these issues also extends beyond the border, both within the United States and through international partnerships. Third, DHS's efforts at U.S. borders and its efforts to combat unauthorized migration, drugs and criminal networks, and terrorism represent a subset of the department's overall homeland security mission space, as illustrated by the larger rectangle in Figure 1 . A final observation illustrated by Figure 1 is that while the different elements of DHS's border security mission overlap, they also include distinct regions. For example, the "criminal networks" circle in Figure 1 includes characteristics of this threat that are unique to it. Trafficking organizations that specialize in specific crimes fall in this region of the diagram. The circle intersects with "unauthorized migrants," describing possible ways in which these two threats relate, such as drug trafficking organizations that expand into migrant smuggling. At the core of the diagram all three circles overlap and highlight arenas in which the threats converge—drug smugglers, unauthorized aliens, and terrorists may use the same smuggling routes or techniques, for example. While one may be drawn to the core of Figure 1 , the peripheral areas of each circle are important because threats encompass distinct features, and certain policy responses may be more appropriate to combat particular threats. For example, while there likely is some degree of overlap among unauthorized migrants, drug smugglers, and potential terrorists as threat issues, the great majority of unauthorized migrants do not fall into the other categories. None of the 9/11 hijackers or known post-9/11 terrorist threats (e.g., Richard Reid, the "shoe bomber"; Umar Farouk Abdulmutallab, the "underwear bomber"; and Faisal Shahzad, the "Times Square bomber") entered the United States illegally. Likewise, while most unauthorized migrants enter the country between ports of entry or by overstaying nonimmigrant visas, many illicit drugs are smuggled into the United States hidden within cargo containers, private vehicles, or in other non-commercial vehicles. As a result, the enforcement tools targeting illegal migration—personnel and infrastructure between ports of entry, worksite enforcement, and visa overstay analysis—likely do little to reduce narcotic smuggling, and vice versa. Another set of enforcement measures may be ideally designed to combat terrorism, and yet another to prevent other border threats, such as fraudulent goods. In general, border threats may be divided into actors and goods . Threat actors include potential terrorists, transnational criminals, and unauthorized migrants (see text box), among other types of people whose entry into the United States may produce harmful consequences. Threatening goods include weapons of mass destruction (WMD) and certain other weapons, illegal drugs and other contraband, counterfeit products, and products brought into the United States illegally and/or with potentially harmful effect. While risk management methodologies may be used to analyze a wide variety of threats, this report focuses exclusively on physical threats at U.S. borders, including the inflow of dangerous and/or illegal people and goods. Any person who intends to harm the United States, or whose presence may lead to harmful consequences, may be considered a threat and a potential target for border enforcement policies. At least three distinct types of threat actors may be described: transnational terrorists, transnational criminals, and unauthorized migrants. Although certain actors fall into more than one category (e.g., transnational criminals who migrate illegally; transnational terrorists who commit crimes), from an analytic standpoint—and for purposes of designing countermeasures—these actors may be distinguished and categorized by their motives and their behavior. The Immigration and Nationality Act (INA) prohibits the admission of any alien who has engaged in a terrorist activity, is considered likely to engage in terrorist activity, has incited terrorist activity, or is a representative of a terrorist organization or a group that endorses or espouses terrorist activity. A defining feature of terrorists, as distinct from transnational criminals (see " Transnational Criminals "), is that terrorists are motivated by particular grievances about aspects of the societies that surround them, and they articulate their views "on moral grounds." To help explain or contextualize their grievances, terrorists adopt extremist ideologies or narratives. Based on their grievances and ideologies, terrorists generally have goals other than personal monetary gain, which may include both immediate goals that "can be met without overthrowing the political system" and "transformational" goals, such as the destruction of an entire political or economic system. The INA describes a variety of specific terrorist activities, including the hijacking or sabotage of any conveyance, the seizure or threatened violence against another individual in order to compel a third person or governmental organization to do or abstain from an activity, violence against an internationally protected person, assassination, and the use of a weapon of mass destruction or other dangerous device other than for personal monetary gain. Terrorists often seek to instill fear among a targeted population to "destroy the collective confidence individuals invest in social institutions and … national leadership." Terrorists use violent tactics to direct public attention toward their grievances, gain recruits, or coerce people. Terrorists also promote their causes by fashioning propaganda. The INA also prohibits the admission of certain criminals, including aliens who have committed crimes of moral turpitude, aliens with multiple serious criminal convictions, controlled substance traffickers, aliens engaged in prostitution or commercialized vice, significant traffickers in persons, and money launderers, among others. In contrast with terrorists, criminals generally are non-ideological, and fundamentally motivated by the pursuit of profit. People also participate in criminal organizations for reasons that involve other sorts of personal gain. They may believe, for example, that being a gangster confers a positive social image, or they may desire the "sensation of belonging to a powerful and even prestigious entity." Criminal gangs like MS-13 (Mara Salvatrucha) attract youth by glorifying gang life and by offering a sense of belonging, and the gang also provides membership incentives such as drugs, alcohol, and sex. Additionally, kinship, ethnic ties, or friendship can also play a role in the formation of criminal groups. Profit incentives drive criminals to "provide goods and services that are either illegal, regulated, or in short supply." They devote resources to enhancing their market-related activities, which can involve carving out and defending turf, devising novel smuggling techniques, running and protecting supply chains, eliminating rivals, laundering money, and shielding their secrets from "competitors" (such as rival gangs and law enforcement). Thus, criminal earnings depend on defying the rule of law, but not necessarily affecting it via revolution. Violence—or its threatened use—plays a key role in the efforts of organized criminals to generate profits. This violence can send a specific message to rivals or enemies—for example about control of markets and supply routes or questions of reputation and status—but it is rarely ideologically driven. In addition, criminals may secure access to illegal markets by corrupting or intimidating public officials, gaining influence over state activity, or even having states co-opt criminals, themselves. In addition to terrorists and certain criminals, the INA defines as inadmissible, among others, aliens with certain health-related concerns, aliens who raise certain foreign policy concerns, aliens considered likely to become a public charge, certain employment-based immigrants who have not received a labor certification, and aliens arriving at an illegal time or place or not in possession of a valid unexpired visa or other valid entry document. Unauthorized migrants—like legal migrants—may be motivated by some combination of employment opportunities, a general desire to improve their economic circumstances, family connections, and dangerous or difficult conditions in their home countries, among other factors. Apart from immigration-related offenses such as illegal entry or the use of fraudulent documents to obtain employment, many unauthorized aliens never commit a criminal offense, though some unauthorized migrants become involved with transnational criminals during the course of their migration or while obtaining employment. Thus, while a terrorist may be unauthorized, "regular" unauthorized aliens are distinguished from terrorists in that they are not motivated by extremist ideologies and do not engage in terrorist activities. And, unlike criminals (who also may be unauthorized), "regular" unauthorized aliens do not seek to profit by exploiting illegal markets or providing illegal services, and they do not use violence or the threat of violence to generate profits. (For analytic purposes, this report classifies a terrorist or transnational criminal who migrates illegally to the United States as a terrorist or criminal, respectively, reserving the label of "unauthorized aliens/migrants" for people who have no terrorist or criminal intent.) The key differences among terrorists, transnational criminals, and unauthorized migrants are summarized in Figure 2 ; the threats associated with these different types of border flows are discussed below (see " Evaluating Potential Consequences of Border Threats "). Any good that is smuggled into or out of the United States is illegal and may pose security risks. Illegal goods fall into two broad categories distinguished by their inherent illegitimacy : certain weapons, illegal drugs, and counterfeit goods are always illegal and categorically prohibited, while other goods are generally legal, but become illegitimate because they are smuggled to avoid the enforcement of specific laws, taxes, or regulations. U.S. law enforcement seeks to prevent a variety of illegal goods from entering the United States. DHS, for instance, has identified "high-consequence weapons of mass destruction (WMD)" as one of the primary threats to homeland security. WMD may come in many forms, and the term often covers chemical, biological, radiological, nuclear, and explosive (CBRNE) weapons. Concerns over WMD or their component materials crossing the border into the United States generally emphasize terrorists' use of these weapons, yet some have raised concerns that criminal networks may—for the right price—attempt to smuggle WMD or related materials. In addition to the smuggling of weapons into the United States, there are also border security and national security concerns over the smuggling of weapons out of the United States. One such concern involves Mexican drug trafficking organizations purchasing firearms in the United States and smuggling these weapons to Mexico, where their possession by civilians is largely prohibited. Firearms smuggled from the United States into Mexico have been cited as helping to fuel the drug trafficking-related violence in Mexico. Illegal drugs comprise another set of illicit goods that challenges U.S. border security. The United States, through the Controlled Substances Act (CSA, 21 U.S.C. §801 et. seq.), prohibits the possession, production, distribution, and trafficking of a number of drugs and substances. Nonetheless, drug demand in the United States fuels a multi-billion dollar illicit industry, and many of the drugs consumed in the United States are produced internationally and smuggled into the country. As such, illegal drugs are among the top categories of seizures by border security officials. Customs and Border Protection seized an average of 13,717 pounds of drugs each day in FY2011. The smuggling of counterfeit and pirated goods into the United States—particularly by transnational criminal organizations—has also been identified as a threat to border security. This smuggling violates intellectual property rights (IPR) and "threaten[s] America's economic vitality and national security, and the American people's health and safety." In FY2011, Immigration and Customs Enforcement and CBP had 24,792 seizures of counterfeit goods—25% more than in FY2010. The domestic value of these seizures was more than $178 million. Products originating from China—both Mainland China and Hong Kong—accounted for 80% of the products seized. Goods that are not categorically prohibited are illegal if they are smuggled into or out of the United States. These otherwise-legitimate goods can pose a variety of threats when they are moved through illicit channels and means. For instance, alcohol, while generally legal and regulated in the United States and other countries, is smuggled to circumvent taxes or to evade laws prohibiting alcohol. One snapshot of alcohol-linked financial losses comes from Michigan, where illegal alcohol imports are estimated to cost the state at least $14 million per year in lost taxes, not including sales tax or business income tax. Cigarettes and other tobacco products are similarly smuggled to circumvent taxes and regulations. Cigarettes, which comprise about 80% of the value of tobacco product shipments in the United States, are smuggled internationally, including to and from the United States, as well as across state lines. Proceeds from the smuggling of cigarettes have been linked to the financing of terrorist operations abroad. Federal authorities have noted the threats from the movement of illicit proceeds across U.S. borders. Cross-border movement of money is not inherently illegal, but certain practices are. For instance, bulk cash smuggling is one of the primary means by which criminals move their illicit proceeds out of the United States. Estimates are that between $20 billion and $25 billion in bank notes may be smuggled across the Southwest border into Mexico each year. In FY2011, CBP seized an average of $345,687 in undeclared or illicit currency each day—over $126 million total. The diversity of border threats and the complexity of DHS's border security and border management mission create challenges for border security policymaking and planning. These challenges are amplified by the uncertainty and fear surrounding many border threats. Rather than attempting specific predictions about where, when, and how border threats will be realized, DHS and other analysts often rely on risk management as an approach to border security, and on probabilistic risk models as a framework for analyzing and describing different types of potential threats. Risk management and risk assessment procedures are rooted in economic theories of consumer behavior and formal models of decision-making that are used in a wide range of industrial, environmental, business, legal, and other settings. "Risk management" refers to a variety of methodologies for choosing the optimal response to a potentially hazardous situation by comparing the costs and benefits of possible interventions with the expected value of projected outcomes. A specialized school of decision theory known as "probabilistic risk assessment" (PRA) was developed during the 1960s and 1970s to focus on high-consequence, low-probability risks associated with nuclear power plants and other dangerous industrial processes; PRA has influenced some of DHS's thinking on how to respond to the risk of terrorism. Within a few years of the 9/11 attacks and the establishment of DHS, the department began to adopt a "risk-based" approach for certain planning and resource allocation purposes. One of the first DHS programs to employ the vocabulary of risk management was the Homeland Security Grant Program (HSGP), managed by the Federal Emergency Management Agency (FEMA). Pursuant to the USA PATRIOT Act of 2001 ( P.L. 107-56 ) and the Homeland Security Act of 2002 (HSA, P.L. 107-296 ), as amended, DHS is charged with developing a risk assessment formula that is used to distribute a portion of HSGP funds. For FY2012, the HSGP State Homeland Security Program and Urban Areas Security Initiative target funds to states and metropolitan areas, respectively, based on DHS's determination of the risk to these geographic areas and of the anticipated effectiveness of proposed responses. Another long-standing DHS program relying on risk management is CBP's Automated Targeting System (ATS), which is founded on rules-based cargo screening systems originally deployed by the legacy U.S. Customs Service. Under the system, electronic cargo and passenger manifests, vehicle crossing records, nonimmigrant entry records, and other information are checked against CBP's National Targeting Center (NTC) and other intelligence and law enforcement databases. Every traveler, vehicle, and cargo container is assigned a risk score based on a variety of threat scenarios to identify potential terrorist and criminal threats. Travelers with risk scores above a certain threshold are automatically targeted for secondary inspection at a port of entry. Pursuant to the Project BioShield Act of 2004 ( P.L. 108-276 ) and a set of White House directives, DHS also has worked with the intelligence community, other federal agencies, and academia to develop formal, quantitative models to assess the risks of possible terrorist attacks using chemical, biological, radiological, or nuclear (CBRN) weapons. These models, known as the Bioterrorism Risk Assessment (BTRA), the Chemical Terrorism Risk Assessment (CTRA), the Radiological and Nuclear Terrorism Risk Assessment (RNTRA), and the Integrated Terrorism Risk Assessment (ITRA), use PRA "event trees" to estimate the likelihood and potential consequences of millions of different attack scenarios. The current versions of the four threat assessments were published in 2010-2011, and DHS plans to publish updates every four years, with the next BTRA, CTRA, and NRTRA due in 2014, and the next ITRA due in 2015. DHS also led the 2011 Strategic National Risk Assessment (SNRA), executed in support of a White House directive to develop an all-hazards national preparedness system. The SNRA drew on data from existing government assessments, historical records, and judgments from experts in a variety of disciplines to evaluate the risk of various national-level events, including certain natural disasters, technological/accidental hazards, and adversarial/human-caused attacks. The assessment was limited to "events that have a distinct beginning and end," and therefore excluded, among other threats, "chronic societal concerns, such as immigration and border violations." Pursuant to the Implementing Recommendations of the 9/11 Commission Act of 2007 (9/11 Act, P.L. 110-53 ), DHS published its first Quadrennial Homeland Security Review Report (QHSR) in 2010, outlining a homeland security strategy and priority mission areas for DHS and the entire national homeland security enterprise. The QHSR identifies a wide range of threats, hazards, and other challenges that homeland security policy seeks to address, including WMD, terrorist networks, smuggling, and other illegal flows of people and goods, among others. CBP and the U.S. Border Patrol (USBP), located within CBP, incorporate principles of risk management in key border security planning documents. CBP's 2009-2014 strategic plan identifies a broad set of potential border risks, including "criminal and terrorist exploitation of international passenger and commercial cargo transportation systems…. [and] the illegal flow of people and contraband" between ports of entry. CBP's specific objectives, or policy strategies, include "risk management" to secure the nation's borders and using a "risk-based approach" to ensure the efficient flow of lawful trade and travel. Similarly, while earlier U.S. Border Patrol strategic plans had focused on the acquisition of additional border enforcement resources, the USBP's 2012-2016 strategic plan places greater emphasis on the agency's use of risk management principles to shift existing resources among different border sectors in response to evolving threat landscapes. The most comprehensive statements of DHS's approach to risk management are its Risk Lexicon (also see text box, below) and its Risk Management Fundamentals . The Risk Lexicon was produced by the DHS Risk Steering Committee, which was formed with membership from across the department "to leverage the risk management capabilities of the DHS Components and to advance Departmental efforts toward integrated risk management." The lexicon provides "a set of official terms and definitions to ease and improve the communication of risk-related issues for DHS and its partners." Risk Management Fundamentals is intended to "promote a common understanding of, and approach to, risk management; to establish organizational practices that should be followed by DHS components; [and] to provide a foundation for conducting risk assessments and evaluating risk management options," among other purposes. To this end, the document describes a six-step DHS risk management process: (1) define the decision-making context; (2) identify potential risks; (3) assess and analyze risks; (4) develop alternatives; (5) decide upon and implement risk management strategies; and (6) evaluate and monitor outcomes. Risk management—like almost any process for responding to external threats—involves developing a model of risk assessment. The standard components of many risk models include estimates of the likelihood of a threat (or other adverse event) and the potential consequence of the threat. Risk models based on likelihood and consequences describe risk as a positive function of these two components, so that risk increases with the likelihood and potential consequences associated with a given threat (see Figure 3 ). Put another way, this model of risk may be understood as "the statistical expect[ed] value of an unwanted event that may or may not occur." Thus, as Figure 3 illustrates, events that are unlikely to occur, and that would have low consequences if they did occur, are low-risk threats. Conversely, an event that is likely to occur, and whose occurrence would have severe consequences, would be an especially high-risk threat. Many threats exist between these two extremes, and many threats may be located at other points in Figure 3 , including at points near the upper-left corner (i.e., high-likelihood, low-consequence threats) and lower-right corner (i.e., low-likelihood, high-consequence threats). Several DHS risk assessments adopt some form of this likelihood-times-consequences framework for estimating risk. The HSGP has used several different formulas to calculate the risk to different geographic areas and assets, initially defining risk in terms of population; then by the sum of threat, critical infrastructure, and population density; then by the product of the threat to a target or area, the vulnerability of the target/area, and the consequence of an attack on that target/area. The BTRA, CTRA, NRTRA, and ITRA calculate the risk of various scenarios by multiplying the product of each event tree branch's combined probability by the estimated consequences associated with that branch. And the SNRA, similarly, assessed risk by asking "with what function is it estimated that an event will occur, and what are the consequences of the incident(s) if it does occur?" DHS has led or conducted risk assessments for a variety of homeland security threats, but existing DHS and CBP strategic documents do not describe and analyze the full range of threats at U.S. borders. The absence of such overarching planning documents may contribute to disagreements about border security priorities: How should CBP and other enforcement agencies prioritize the often conflicting goals of preventing illegal flows versus facilitating lawful trade and travel? How should scarce resources be divided among ports of entry versus the areas between the ports, and among the different border zones? Should the United States use its scarce resources to build additional miles of border fencing, install more surveillance equipment, or hire additional border patrol agents? Is the border really more secure in 2013 than at any time in the past several decades, and what metrics should Congress and DHS use to measure border security? Some Members of Congress have expressed frustration about the absence of clear border metrics, and some have called for DHS to develop an explicit border staffing model and a comprehensive strategy to secure the border. Risk management offers a possible framework for answering these questions and meeting these planning requirements. Understanding border threats can be a logical starting point for this process. This report does not intend to suggest that these are the only ways to examine these issues, however. The likelihood-times-consequences framework is a standard way to evaluate risk, but the use of such a framework to understand border threats presents unique challenges and therefore remains somewhat controversial. Even where such models are well developed, as in industrial engineering and the insurance and finance industries for example, risk projections are probabilistic and may have a high degree of uncertainty. Predicting the likelihood of border threats may be far more difficult. Moreover, traditional risk management approaches were designed as unilateral decision systems. Yet when it comes to border security, risk models must accommodate strategic adversaries: threat actors like terrorists, criminals, and unauthorized migrants, who may change their behavior in response to U.S. defenses, making likelihood even more difficult to predict. In addition, whereas traditional risk models are designed primarily to measure economic and physical consequences of certain events, the consequences of border threats may affect American society in much more complex ways; and the evaluation of such consequences is likewise more complex. The remainder of this report explores these challenges, and then uses the likelihood-times-consequences approach to assess selected border threats. DHS defines likelihood as the "chance of something happening, whether defined, measured or estimated objectively or subjectively, or in terms of general descriptors (such as rare, unlikely, likely, almost certain), frequencies, or probabilities." In general, there are two main approaches to estimating likelihood: based on observations of historical trends (past frequency), which may be used to calculate the probability that an event will occur, or based on analytic predictions about expected frequencies. Both approaches confront certain limits, however. How often a particular threat event has actually occurred within a given time period can be defined as its frequency. Over the long run, the frequency with which an event occurs may be used to estimate its probability, as scientists do, for example, in describing (based on previous observation) the probability that a category 5 hurricane will occur in a given year. For certain types of border threats, analysts may have historical data that allow them to describe such frequencies. In the case of unauthorized migration, for example, CBP and the legacy Immigration and Naturalization Service (INS) have used apprehensions of unauthorized migrants by the border patrol as a proxy to estimate unauthorized inflows. Analysts also use U.S. Census data to estimate the stock of unauthorized migrants within the United States. Apprehensions and survey data also may offer insight into illegal drug flows, in this case by analyzing drug seizures and data on the availability of illegal drugs within the United States. Yet deriving probabilities from historical observations is problematic. On a basic level, how exactly should illegal flows be counted? Historical frequencies may focus on illegal incidents—the number of illegal crossings—or on quantities, such as the number of individual migrants, or pounds (or tons) of illegal drugs or contraband. A given threat such as drug smuggling or illegal migration does not occur with equal frequency along all parts of the border, but varies between the Southwest versus the Northern and coastal borders, as well as among different portions of the Southwest border and by mode of entry (air, land, or sea). More importantly, measures of past frequencies are only of known frequencies and not actual flows. For instance, while data from the National Seizure System indicate that over 1.7 million kilograms of illegal drugs were seized along the Southwest border in 2010, this is not indicative of the total amount of illicit drugs smuggled across the Southwest border and into the United States for that time period. Estimates of successful illegal inflows—whether of illegal drugs, unauthorized migrants, or some other illicit flow—are just that: estimates. Learning from past history is even more problematic when it comes to rare events like attempted terrorist attacks. Probability models based on historical frequencies are poorly equipped to describe one-in-a-million chances, or to distinguish between, say, chances that are one-in-a-million versus one-in-a-billion or one-in-one-hundred-thousand. Especially when combined with the fact that the stakes may be high, as in the case of terrorism, rare event probability models may not be sufficiently accurate to generate quantitative predictions about the probability of a future incident. Partly for this reason, the intelligence community often describes likelihood in terms of qualitative ranges, such as "remote," "unlikely," "probable," etc. More generally, historical analysis is limited because "past performance is no guarantee of future results." Changes to the underlying model may invalidate long-term probabilities. Scientists use long-term frequencies to calculate the probability of severe weather, for example; but some people believe that rising temperatures and sea level may have altered climate dynamics so that probability models describing "500-year" floods and "100-year" storms may no longer be accurate. Similarly, some social scientists believe labor market and demographic changes in the United States and migration countries of origin, along with the decades-long escalation in U.S. enforcement, may have fundamentally altered regional immigration dynamics. An argument can be made that historical frequency—how many terrorists traversed the U.S. border in 2010, for example—fails to capture the likelihood of certain border threats. Frequency only attempts to measure events that have occurred in the past. But how can the likelihood of a dreaded event such as the smuggling of WMD into the United States be evaluated if it has few precedents or is unprecedented? And even where a track record exists, as with unauthorized migration and illegal drugs and other contraband, what can be done to increase the accuracy of estimated probabilities? The observations of past frequencies may be supplemented with analysis by subject field experts to make more informed predictions about the expected frequency of future events. With respect to the threat of terrorism, for example, federal law enforcement and intelligence analysts help estimate the likelihood of a terrorist attack. This involves many factors aside from historical frequency, such as probing and evaluating the motives of threat actors, their organizational structures, and their capabilities, as well as estimating the impact of broad social, political, or economic forces on these actors. Intelligence analysts and others may look at similar data to estimate the future likelihood of illegal drug flows and other contraband, and social scientists (as well as analysts) may examine market and social forces to model future migration flows. A key component in these processes is the development of indicators or milestones to warn of increased likelihood. For example, indicators may be used to evaluate whether a specific terrorist group is coming closer to realizing its plans to smuggle operatives into the United States. In such a scenario, milestones may include evidence of the group's efforts to recruit document forgers or specialists with experience smuggling people into the United States. One scholar has suggested that "Warning seeks to turn a mystery—'Are they going to attack?'—into a puzzle by identifying indicators along the path to war and then monitoring them." Ideally, as indicators are met (or not), the chances of an attack are reevaluated and updated. Analysts use established analytical processes to gauge likelihood as new information rolls in about the targets they study. Yet models of illegal flows also are characterized by uncertainty, meaning that analysts never know precisely what data to look for. To be useful as a threat indicator, information must be valid relative to the threat being analyzed—that is, it must relate to the actual evolution of the threat. Indicators also should be reliably and consistently observable, and the earlier they are visible in the evolution of a threat, the more valuable they are to decision makers. Likewise, an indicator's persistence over time allows for its repeated measurement and reevaluation. Finally, the more visible and the more unique indicators are, the easier it is to use them. For example, the actual attainment of a particular milestone by a terrorist group—such as the successful recruitment of a document forger—may not be especially observable or visible to U.S. intelligence agencies. This makes it a poor indicator. In other words, effectively identifying a terrorist group's achievement of an indicator requires the capacity to witness it or obtain evidence of it. The more unique an indicator is, the easier it is to identify upon achievement. An indicator may be consistent with a number of activities, not just the one of interest to intelligence analysts. The recruitment of document forgers may not be a unique indication that a terrorist group will cross the U.S. border, for example. The forger may have been recruited to produce unrelated documents. Beyond these definitional and measurement problems, an additional obstacle to estimating the likelihood of particular border threats is that threat actors like unauthorized migrants, transnational criminal organizations, and potential terrorists are strategic and may adapt their behavior in response to U.S. border enforcement efforts. In this regard, risk models for border security differ in important ways from risk models for natural disasters, industrial failures, or financial investments, for example. The intelligent actor problem means that any effort to describe the likelihood of a given threat must account for given security conditions. Any particular risk assessment can only represent a "snapshot" at a single point in time within a constantly evolving dynamic system. Some have suggested that intelligent actors cast doubt on the entire decision-theoretic risk assessment approach, and that DHS instead should rely on game theory, an approach which places greater emphasis on the preferences and strategic goals of terrorists and other threat actors. Any given border threat may result in a range of potential consequences, and policymakers may disagree about how to evaluate them. The process of evaluating consequences includes at least three discrete tasks: defining the scope of a threat (i.e., the types of consequences), measuring the potential impact, and attaching value to the impact. Members of Congress may reach different conclusions about potential consequences at each stage of this evaluation process. DHS defines consequence as "the effect of an incident, event, or occurrence, whether discreet or indirect." The first step in evaluating the potential consequences of a given threat is to define its scope: what type of impact may occur? Many traditional risk assessment methodologies limit their analysis to concrete criteria, including in particular direct economic costs and loss of life . An advantage to defining consequences narrowly in this way is that both of these criteria are relatively easy to quantify (i.e., in dollars and in the absolute number of lost lives), and analysts may make specific predictions about these potential impacts. An alternative approach considers a wider scope of consequences. In its Strategic National Risk Assessment, for example, DHS identifies six broad categories of potential consequences: loss of life , injuries and illness , direct economic costs , social displacement , psychological distress , and environmental impact . An advantage to adopting this more expansive definition is that, for certain types of threats, these additional consequences may be at least as important as the economic and mortality effects. On the other hand, psychological and sociological effects such as the impact of illegal migration on the rule of law, or the ways illegal drugs affect the families and communities of users, also may be far more difficult to define and quantify in a bounded or concrete fashion. Once the scope of consequences has been defined, a second challenge is how to measure the potential impact of a given threat. One aspect of the measurement challenge concerns how close in time a given consequence must be to be attributed to a particular security incident. Even when focused on the relatively narrow category of loss of life, for example, consider the following two scenarios: A terrorist is smuggled into the United States, creates and detonates a car bomb; an individual is killed in the blast. A drug trafficker smuggles cocaine into the United States; over several months, a client continually uses cocaine supplied by this trafficker and eventually overdoses and dies. Some may argue that because the ultimate impact of both scenarios is the loss of a single life, they should be deemed to have the same consequence. Others may see that the consequences should be defined differently based on the immediacy of the outcome. (Both of these scenarios also may have other types of consequences, including economic impacts, injuries and illnesses, psychological effects, etc.) Similar measurement questions exist with respect to geographic bounds (how wide an area should be considered) and whether and how to estimate second- and third-degree effects of a given threat versus restricting the analysis to immediate impacts. For example, what are the economic consequences of a transnational retail crime network? Members of this network enter the United States and operate in a number of criminal capacities including as boosters and fences. Retailers incur direct economic costs from the loss of the pilfered goods, and also may incur second-degree costs from security spending to prevent merchandise loss; and federal and state governments may suffer lost tax revenues. There may be third-degree costs if the criminal network sells the stolen products and uses the proceeds to further additional criminal operations. For instance, federal law enforcement has reputedly traced the illicit proceeds from the theft and resale of infant formula to terrorist organizations and insurgent groups, including Hamas and Hezbollah. Are economic costs limited to the duped retailer, or do they also include the associated costs to public and private security agencies charged with investigating the crimes and related criminal activities? Partly for these reasons, analysts disagree—often by wide margins—about the potential consequences of different types of threats. In the case of unauthorized migration, for example, even when the analysis is limited to the narrowest economic question of fiscal impact, estimates of net effects vary by wide margins. The measurement challenge may be substantially greater when it comes to the potential consequences of unknown future threats, which may affect a range of different categories, and for which some of the effects are far more difficult to quantify. Indeed, for certain issues, reasonable people may fundamentally disagree about the very nature of the consequences: should the growing prominence of Spanish and other languages in American schools be celebrated as a sign of increasing diversity, or feared as a threat to the primacy of English as a national language? How one evaluates potential consequences also depends on who is making the judgment. For example, a smuggler bringing counterfeit medication into the United States impacts a range of individuals from law enforcement officers charged with detecting and preventing the entry of illegal goods, to individuals consuming the counterfeit drugs, to the legitimate manufacturer. Consumers may place the greatest value on the potential health consequences of consuming the counterfeit product. Legitimate manufacturers may perceive the issue primarily in terms of the economic consequences of their lost sales revenues and reputational costs. The border-related security challenges the United States faces can be framed, in part, in terms of motive: some threats arise directly from individuals who wish us ill; others do not. Terrorists targeting the United States seek to cause us harm, while drug traffickers exist primarily to derive profit. What is more "threatening": terrorists who intend to harm U.S. interests, or drug traffickers who intend to earn illicit profits but cause mayhem in the process? In the end, should motive enter into any calculation of consequence among border threats? Are the consequences of an incident greater when they represent the culmination of a concerted effort to attack the United States? Ultimately, how one defines the scope of a given threat (i.e., what categories of consequences are considered) and how one weights the various categories under consideration are inherently subjective considerations. There is no "correct" way to value the loss of a human life, for example, or the destruction of a particular ecological habitat, or disregard for the rule of law. This section illustrates how a framework relying upon the interplay of likelihood and potential consequences may be used to conceptualize the risks associated with selected border threats. For any given threat, there is incomplete and often-subjective information regarding likelihood and possible impacts. Take, for example, criminal networks smuggling illegal drugs into the United States: What is the likelihood that illegal drugs will be smuggled into the United States? Within the universe of illegal drugs available in the United States, some are domestically produced, and some are smuggled over the international borders. Of the subset of smuggled drugs, only an unknown proportion is identified and seized by U.S. officials; and attributing a particular smuggling incident to a criminal network involves additional uncertainty. As such, the known frequency of criminal networks smuggling drugs into the United States is an unknown portion of total smuggling incidents—itself a subset of all illegal drug flows. These data may be supplemented with additional model-based data and intelligence analysis to estimate expected frequency, but these methods involve further uncertainty and subjectivity. What are the consequences of illegal drugs being smuggled into the United States? Should the analysis focus exclusively on the loss of life related to criminal networks smuggling drugs into the United States, or also consider economic, social, psychological, and other consequences? Even if the analysis is limited to loss of life, does it account for indirect deaths, such as those resulting from an addict's criminal activities to support his habit? Is the death of a smuggler who dies of dehydration in the desert evaluated differently than a user's death from an overdose, or the death of a bystander caught in the crossfire between rival drug gangs? Despite these challenges, Table 1 presents broad conclusions about several generic border threats. While the likelihood of a given threat may be measured based on known or expected frequency, the table presents data only on known (historic) frequencies related to given threats. Similarly, though the range of potential consequences is vast, the table outlines available information only on financial costs and loss of life directly associated with certain threats. As such, this table does not provide comprehensive information for policy makers to utilize in evaluating the risk of threats, but rather illustrates how policymakers may make such an assessment. Understanding the nuanced security issues posed by the flow of people and goods across U.S. borders is fundamental to shaping effective policy in this area. This report describes a possible framework for describing the risks posed by specific hazards at the border based on their likelihood and their potential consequences. While such an analysis may seem simple, its execution is complex, as described above, and there is no objectively correct way to evaluate the relative importance of any particular threat at U.S. borders . Nonetheless, the complexity and subjectivity of threat assessment does not diminish the importance of some form of threat assessment—explicit or otherwise—as a logical starting point for the policymaking process. Beyond the challenges of threat assessment, how border threats shape border security policies also depends on a pair of mediating issues, as illustrated in Figure 4 . First, while the border is a critical nexus for transnational flows, the strategic breadth of border threats and of policy responses extends well beyond the border region. At the very least, this suggests the importance of understanding how border-specific policy proposals may impact other government initiatives or interests, and how other law enforcement activities may supplement efforts at the border. For example, lawmakers concerned about illegal drug flows through the ports of entry may favor increased investments in specific DHS equities such as port of entry infrastructure, more CBP officers, non-intrusive inspection scanners, and drug sniffing dogs. For Members focused on counterterrorism, priorities might include continued investments in DHS information systems, such as the CBP Automated Targeting System, the U.S. Visitor and Immigrant Status Indicator Technology (US-VISIT) system, and the Automated Commercial Environment, along with investments in intelligence collection programs to ensure that the right data are being analyzed. Yet such investments compete with other border priorities, such as fencing and surveillance equipment between ports. Border investments also complement and interact with law enforcement activities beyond the border, such as—in the case of illegal drugs—programs to combat traffickers' money laundering schemes and to detect and prevent southbound flows of money and guns. Some of the most important work with respect to counterterrorism and counternarcotics efforts may involve bilateral and multilateral partnerships with allies abroad. And the U.S. government has vital competing interests in facilitating effective commercial flows and the efficient movement of legal travelers. Inevitably, decisions about "border security" must grapple with the full universe of threats and policies that intersect at U.S. borders. Second, the availability of resources also plays a role in framing border security policy . Immediately after the 9/11 attacks, the convergence of immigration control, the war on drugs, and the urgency attached to combating terrorism meant that DHS took more of an "all of the above" approach to border security. Yet even when budgets are expanding, Congress and DHS face trade-offs among the different elements of DHS's border security mission. As budgeting has grown tighter in the current fiscal climate, policymakers face increasingly difficult questions about how to set priorities and where to allocate scarce resources. The answers, in turn, depend on a third set of questions concerning how to measure and evaluate the effectiveness of border security policies. What does a secure border mean in real terms? How do we measure progress toward this goal? The Secure Fence Act ( P.L. 109-367 ) defines operational control of the border to mean zero illegal inflows , yet many analysts doubt that an open country in a globalized economy can ever achieve a 100% interdiction rate—and some question whether such a standard is even worth aspiring to. Clearly articulated and attainable policy goals help in the development of effective metrics and appropriate benchmarks. How to measure the success of policies designed to curb unauthorized migration may be especially important—and challenging—during a period experiencing net unauthorized migration flows at around zero. Two key measurement-related questions are how recent DHS policies like increased border personnel, CBP's consequence delivery system, and ICE's Secure Communities program have contributed to the recent trend of falling illegal inflows; and the degree to which unauthorized flows will increase as the U.S. economy recovers and new hiring resumes. Surveying the border policymaking context as described in Figure 1 , Members of Congress may ask whether the U.S. approach to particular threats is too narrow or perhaps too broad. For example, should policy be designed to prevent all forms of unauthorized migration and illegal movement of goods, or should policies be tailored to target specific threats such as terrorists, transnational gangs, or illegal drugs? If the answer lies somewhere between—involving both sweeping and targeted programs—how should mediating issues such as resource allocation and the prioritization of one effort over another be weighed? Finally, in addition to setting overall priorities, Members of Congress may evaluate policies by asking where DHS may get the most effective return on its enforcement investments. In addition to terrorism prevention, some Members may emphasize investments in resiliency, or the ability to survive and manage a terrorist attack. Members concerned with preventing the inflow of illegal drugs may question whether the enforcement component of overall U.S. drug policy is properly balanced with non-enforcement investments. Members focused on countering the movement of bulk cash, counterfeit goods, and other smuggled items across the U.S. borders may weigh the value of investing in enforcement personnel at the border, versus focusing on international cooperation and domestic intelligence collection and information.

The United States confronts a wide array of threats at U.S. borders, ranging from terrorists who may have weapons of mass destruction, to transnational criminals smuggling drugs or counterfeit goods, to unauthorized migrants intending to live and work in the United States. Given this diversity of threats, how may Congress and the Department of Homeland Security (DHS) set border security priorities and allocate scarce enforcement resources? In general, DHS's answer to this question is organized around risk management, a process that involves risk assessment and the allocation of resources based on a cost-benefit analysis. This report focuses on the first part of this process by identifying border threats and describing a framework for understanding risks at U.S. borders. DHS employs models to classify threats as relatively high- or low-risk for certain planning and budgeting exercises and to implement certain border security programs. Members of Congress may wish to use similar models to evaluate the costs and benefits of potential border security policies and to allocate border enforcement resources. This report discusses some of the issues involved in modeling border-related threats. Understanding border risks begins with identifying key threats. At their roots, border-related threats are closely linked to the flow of people (travelers) and goods (cargo) from one country to another. Any smuggled item or individual hidden among the legitimate flows potentially constitutes a threat to U.S. security or interests. The intentions and actions of unauthorized travelers separate them into different threat categories, including terrorists, transnational criminals, and other illegal migrants. Illegal goods are distinguished by their inherent legitimacy or illegitimacy. Certain weapons, illegal drugs, and counterfeit goods are always illegal and categorically prohibited, while other goods are legal under most circumstances, but become illegitimate if they are smuggled to avoid enforcement of specific laws, taxes, or regulations. The risks associated with these diverse types of threats may be modeled as a function of (1) the likelihood that the threat will be realized, and (2) the potential consequences of a given threat. In practice, however, estimating likelihood and evaluating potential consequences are challenging tasks, particularly when it comes to the diversity and complexity of border threats. Assessing border threats is also difficult because terrorists, criminals, and migrants are strategic actors who may adapt to border defenses. This report describes some of these challenges, and suggests questions policymakers may ask to develop their own "maps" of border risks. Several potential border threats are described, and the report summarizes what is known about their likelihood and consequences. The report concludes by discussing how risk assessment may interact with border security policymaking. Given the uncertainty and the subjective judgments involved in modeling risk, policymakers may struggle to reach a consensus on border priorities. Nonetheless, a systematic approach to studying border threats may help clarify the types of policy tradeoffs lawmakers confront at the border.

U.S. trade with the People's Republic of China (PRC) has raised several policy concerns. The trade is highly unbalanced in China's favor with a U.S. deficit of $201 billion in 2005. Year-to-date (January-October 2006), the U.S. deficit reached $190 billion. Many associate this deficit with the concomitant loss of American jobs in industries competing with rapidly rising imports from China. Some policymakers as well as leaders of industry and labor blame China for unfair trade practices, including deliberately undervaluing its currency, which they claim create an uneven playing field for U.S. companies when competing against imports from the PRC. U.S.-China trade issues are often driven by larger policy objectives. U.S. trade with China is but one aspect of the overall U.S. policy of engagement with the PRC, a policy that serves broader U.S. interests. Trade also underpins Beijing's development strategy and contributes to domestic support for the PRC government. This report presents data and analysis of China's trade that shed light on various policy issues, provides an overview of recent U.S. legislative initiatives, and examines the goals and constraints of U.S. trade policy toward the PRC. Some of the specific questions addressed are how the U.S. trade balance with China compares with those of the European Union and Japan, whether imports from China are merely replacing imports from other Pacific Rim nations, and how imports from China by industry compare with imports from other countries. Allowing trade with China to develop is part of the overall U.S. strategy of engagement with the PRC. The rationale behind engagement is that working with China through economic, diplomatic, informational, and military interchanges helps the United States to achieve important national security goals such as preventing nuclear proliferation, defeating global terrorism, defusing regional conflicts, fostering global economic growth, and championing aspirations for human dignity. These goals are aimed at achieving U.S. national interests of security and prosperity for all Americans and projecting U.S. values abroad. U.S. trade policy toward China is based upon the assumption that trade between the two countries has both economic and political benefits: (1) in general, trade with China benefits both sides and allows for a more efficient allocation of available resources; (2) the rapidly developing Chinese economy affords a rare opportunity for U.S. businesses to become part of a huge and rapidly expanding market; (3) China's membership in the World Trade Organization (WTO) compels the PRC to comply with international trading rules and spurs the development of market forces in the country; and (4) foreign trade and investment create a dependency on exports, imports, and foreign investment and other interaction with the outside world in China, which in turn strengthen its relations with the Western world, create centers of power outside the Chinese Communist Party, and foster economic and social pressures for democracy; (5) a country as significant as China—accounting for a quarter of the world's population, armed with nuclear weapons, and a member of the U.N. Security Council—cannot be ignored or isolated. According to some experts, globalization and economic interests may be exerting a moderating influence on Beijing's policies toward protecting China's national security interests. However, the Chinese Communist Party's determination to maintain political legitimacy through economic growth also creates tensions with other countries and with emerging non-Party political actors. The possible problems or challenges raised by the U.S. strategy of economic engagement with China include adjusting to economic competition in sectors where China has a comparative advantage, responding to PRC unfair trade practices, and the rise of an economically powerful China that is becoming more assertive in global affairs: (1) Imports from China may be entering in such increased quantities that they are a substantial cause of serious injury, or threat thereof, to competing U.S. industries; (2) Imports from China may be dumped, subsidized, or unfairly aided by government entities in China, which still wield considerable influence in the economy; (3) According to some economists and many policymakers, the U.S. trade deficit with the PRC stems in large part from Beijing's policy of maintaining an undervalued currency; (4) China has a poor record of adopting or enforcing internationally recognized standards for working conditions and environmental regulation which, in addition to violating human rights and harming the environment, may provide PRC businesses with unfair competitive advantages; and (5) U.S. economic engagement with China arguably contributes to the legitimacy of the socialist government and the strengthening of China's military by facilitating general economic development. U.S. trade law and WTO regulations can deal with injury from imports and unfair trade practices. Trade disputes with China would normally be first discussed bilaterally before taking the case to the WTO for dispute resolution. China's alleged violations of international labor and environmental standards, as well as its own laws and government regulations, have fewer institutional remedies for the United States. Policy options include working to improve China's compliance through bilateral consultations and technical assistance, international organizations (such as the International Labor Organization), non-governmental organizations, and multilateral treaties (such as the U.N. Framework Convention on Climate Change and Kyoto Protocol), and the threat of trade sanctions. In the past few years, the United States has taken numerous actions in response to PRC trade practices that is has deemed unfair while China taken some incremental steps to heed U.S. demands. In December 2006, China hosted the first China-U.S. Strategic Economic Dialogue led by U.S. Treasury Secretary Henry Paulson and PRC Vice-Premier Wu Yi. Talks focused on the following issues: China's exchange rate flexibility, the bilateral trade imbalance, PRC intellectual property rights violations, energy, and the environment. The U.S. Treasury Department released a report on December 19, 2006, that did not refer to China as engaging in currency manipulation for the purpose of gaining a trade advantage. On January 13, 2006, the Bush Administration announced that it would apply the so-called military catch-all rule to items on the Commodity Control List which could require licenses for the export of items to China that could be used to strengthen China's military power. On November 8, 2005, the United States Trade Representative (USTR) announced that the United States and China had, after three months of intense negotiations, reached a broad agreement on textile trade. The Agreement lasts through the life of the China WTO Textile Safeguard (through 2008), covers more than 30 individual products, and contains quotas that begin at low levels. On July 21, 2005, the PRC government announced that its currency, the yuan, would be revalued upward (from 8.3 yuan to 8.11 yuan to the U.S. dollar) and that its future value would be "referenced" to a basket of currencies. However, according to most experts, China's central bank continues to intervene in the currency market in order to maintain a stable exchange rate. In May 2005, the Bush Administration imposed "safeguard" quotas on 16 categories of Chinese apparel in response to a surge in such imports following the lifting of textiles and apparel quotas worldwide in January 2005. In December 2004, the U.S. government imposed anti-dumping duties on imported Chinese bedroom furniture. This case, the largest anti-dumping action against China, reportedly has both supporters and opponents in the U.S. furniture industry. In September 2004, the U.S. government rejected a Section 301 (Trade Act of 1974) complaint filed by the China Currency Coalition alleging that China's fixed exchange rate constituted currency manipulation. In November 2004, the Administration rejected a similar petition filed by Members of Congress, while continuing to press and advise China on revaluing or floating its currency. In April 2004, the Bush Administration rejected a Section 301 petition filed by the AFL-CIO alleging unfair trade practices based upon exploitation of labor in the PRC and calling for a tariff of up to 77% on goods imported from China. In July 2006, the USTR rejected another, similar Section 301 petition filed by the AFL-CIO. In March 2004, the Bush Administration filed the United States' first complaint against China under the WTO's dispute settlement mechanism, charging that the PRC unfairly taxed imported semiconductors. In July 2004, China eliminated the tax breaks for domestically-produced semi-conductors. On December 15, 2006, Representative Sander Levin, who is to chair the House Ways and Means Trade Subcommittee in the 110 th Congress, declared that he would support policies that would address what many regard as China's unfair trade advantage, gained largely through the PRC government's manipulation of the value of its currency. These measures include legislation that would impose countervailing duties against non-market economies such as China's and the filing of a Section 301 petition requesting the Administration to file a WTO case against China. Senator Max Baucus, incoming Chairman of the Senate Finance Committee, stated that "greater flexibility for China's currency is long overdue." In the 109 th Congress, several bills aimed at reducing the U.S. trade imbalance with the PRC were introduced. These bills addressed issues such as China's currency practices, other alleged unfair trade practices (including dumping and export subsidies), violation of intellectual property rights, and non-compliance with WTO regulations. The following are selected bills from the 109 th Congress related to U.S.-China trade: H.R. 4808 (Jones: Introduced February 28, 2006) To prohibit the importation of motor vehicles of the PRC until the tariff rates that China imposes on motor vehicles of the United States are equal to the rates of duty applicable to motor vehicles of the PRC. S. 2267 (Dorgan/Graham: Introduced February 9, 2006) To withdraw normal trade relations treatment from, and apply certain provisions of Title IV of the Trade Act of 1974 to, the products of the People's Republic of China. Related bill: H.R. 728 (Sanders). H.R. 3283 (English: Introduced July 14, 2005) Amends the Tariff Act of 1930 to impose countervailing duties on certain merchandise from nonmarket economy countries. Passed in the House on July 27, 2005. Related bill: S. 1421 (Collins). H.R. 1498 (Ryan: Introduced April 6, 2006) To clarify that exchange-rate manipulation by the People's Republic of China is actionable under the countervailing duty provisions and the product-specific safeguard mechanisms of the trade laws of the United States. S. 377 (Lieberman: Introduced February 15, 2005) To require negotiation and appropriate action with respect to certain countries that engage in currency manipulation. S. 295 (Schumer/Graham: Introduced February 3, 2005) To authorize the imposition of a 27.5% tariff on goods imported from China unless the President certifies that China has made a good faith effort to revalue its currency to reflect its fair market value. Related bills: S. 14 (Stabenow), H.R. 1575 (Myrick), S.Amdt. 309 (Schumer) to S. 600 . H.Con.Res. 33 (Ryan: Introduced January 26, 2005) Urging the President to take immediate steps to establish a plan to adopt the recommendations of the United States-China Economic and Security Review Commission in its 2004 Report to the Congress in order to correct the current imbalance in the bilateral trade and economic relationship between the United States and China. What light do the trade data shed on the controversy over economic relations with China? First, China has burst onto the U.S. trading scene in recent years. In 2003, the PRC surpassed Japan to become America's third largest trading partner, after Canada and Mexico, while the United States is the PRC's second largest trading partner, after the expanded European Union (25 nations). In 2005, according to PRC data, EU-China trade was valued at $217.3 billion compared to U.S.-China trade of $211.6 billion. China's largest export market is the United States followed by the EU-25 and Japan. Although China is a new player in international trade, it is taking major shares of markets once dominated either by other countries and U.S. domestic industries. China is the second largest source of U.S. imports of merchandise ($243 billion in 2005) after Canada ($287 billion). PRC imports surpassed those of Mexico in 2003 and of Japan in 2002. China now accounts for over 14% of U.S. imports (2005), up from 12% in 2003, 8% in 1999, and 3% in 1990, although this share still falls short of Japan's 18% in the early 1990s. Second, the data show that while U.S. trade with China is unbalanced, the same is also true for Europe and Japan, although to a lesser extent. China runs a trade surplus with the world's three major economic centers. The U.S. bilateral deficit in 2005 ($201 billion), however, was 1.6 times larger than that of the EU-15 ($121.8 billion; the EU-25 deficit was $133 billion) and seven times that of Japan ($28.5 billion). (As reported by the United States, EU, and Japan.) Third, the data show that the U.S. trade deficit with China is rising with the overall U.S. trade deficit or growing at a slightly faster rate. Between 1996 and 1998, China's share of the overall U.S. merchandise trade deficit averaged 24%; between 1999 and 2001, China's share was 18%, and between 2002 and 2004, 22%. In 2005, the United States trade deficit with China constituted 26% of its global trade deficit. Over the same period, the shares of the U.S. deficit in goods trade accounted for by Japan, the Association of Southeast Asian Nations (ASEAN), and the East Asian newly industrialized countries (NICs) have decreased while the European Union's share has increased. Fourth, the data show that U.S. exports to China are growing faster than U.S. exports to other nations. U.S. exports to China (up 157% between 2000 and 2005) have grown faster than U.S. exports to Canada (up 19.8% over the same period), Mexico (7.5%), and Japan (-15%), although exports to China have grown from a low base. In 2004, China replaced Germany and the United Kingdom to become the 4 th largest market for U.S. goods, moving up from 11 th place in 1999. The United States exported somewhat more to China ($41.8 billion) than it did to the United Kingdom ($38.6 billion) in 2005. According to Japanese, European, and Korean data, in 2005, Japan was the largest overseas supplier of products to China with $79.9 billion in exports. South Korea and the EU-15 and were the second and third largest exporters to China in 2005 with $69.8 billion and $61.9 billion in exports, respectively. Fifth, the U.S. industrial sectors most at risk from import competition from China are generally labor intensive, but China is moving quickly up the technology ladder. The sectors in which the United States runs the largest trade deficits are generally those that depend on abundant and low-cost labor, while the United States accrues surpluses with China in some advanced technology items, such as aircraft, as well as in some agricultural products. In China's trade with the developed countries, over two-thirds of its exports are "low-end manufactures"—appliances, toys, furniture, footwear, apparel, and plastic goods—while 85% of its imports are capital-intensive machinery and equipment, electronic goods, and natural resource-related products. The United States has incurred large trade deficits with China in some high value-added sectors as well. These sectors include office and data processing machines, telecommunications and sound equipment, and electrical machinery and appliances. In 2003, China became the third largest car market and the fourth largest maker of automobiles with an output of 4.4 million vehicles. Production of cars reached an estimated 5.5 million units in 2005, putting the PRC on par with Germany in automobile production. However, China is not a major global importer or exporter of cars and it remains heavily reliant upon foreign technology in this sector. Sixth, PRC data show much smaller bilateral trade deficits than those claimed by its trading partners. PRC trade data differ from U.S. data primarily because of the treatment of products from or to China (mainland) that pass through the Hong Kong Special Administrative Region (SAR). Other reasons include different accounting systems and a lack of transparency in China's data reporting. China counts Hong Kong as the destination of its exports sent there, even goods that are then transshipped to other markets. By contrast, the United States and many of China's other trading partners count Chinese exports that are transshipped through Hong Kong as products from China, not Hong Kong, including goods that contain Hong Kong components or involve final assembly or processing in Hong Kong. Furthermore, the United States counts Hong Kong as the destination of U.S. products sent there, even those that are then re-exported to China. However, the PRC counts many of such re-exported goods as U.S. exports to China. Some analysts argue that the U.S. Department of Commerce overstates the U.S. trade deficit with China by as much as 21% because of the way that it calculates entrepot trade through Hong Kong. According to PRC data, China's trade surplus with the United States in 2005 was $114 billion—not $201 billion as reported by the United States government. In Japan's case, both countries claim to be running trade deficits with each other. According to PRC data, in 2005, China ran deficits with many of its major trading partners, including Taiwan ($57.9 billion), South Korea ($41.7 billion), Japan ($16.3 billion), Malaysia ($9.5 billion), Saudi Arabia ($8.4 billion), Philippines ($8 billion), Thailand ($6 billion), Australia ($5 billion), Brazil ($5 billion) Iran ($3.5 billion). Seventh, some trade specialists suggest that the surge of U.S. imports from China do not pose an additional threat to U.S. industries and workers because it merely represents a shift of investment and production from other Pacific Rim countries. China's share of U.S. imports has been rising while those of other Pacific Rim nations have been falling or holding steady. In terms of absolute values, until recently, U.S. imports from all major Pacific Rim countries continued to rise, although at slower rates than imports from China. In 2005, U.S. imports from the East Asian NICS—South Korea, Taiwan, Hong Kong, and Singapore—fell or barely rose from the previous year. Eighth, the rapid growth of the Chinese economy is adding to world demand for basic commodities that is causing upward pressure on world prices. Particularly significant are Chinese net imports of crude oil, copper, and soybeans. As shown in Figure 1 and Appendix Table A-1 , according to PRC data, with the exception of 1993, China has run a global trade surplus in goods each year since 1990. That surplus emerged at the beginning of the 1990s, entered into a deficit of $11 billion in 1993 (when the government temporarily loosened controls on imports), and reached a peak of $43.3 billion in 1998 before declining to $22.6 billion in 2001. In 2005, China's global trade surplus leapt to $102 billion (PRC data). Between 1995 and 2001, China's current account surplus (includes trade in goods, services, and unilateral transfers such as remittances and government to government payments) was smaller than its surplus in merchandise trade because of a deficit in its services trade. Since 2002, the current account surplus has exceeded the merchandise trade surplus due to large increases in services exports and remittances. In 2005, the current account surplus was $160.8 billion compared to the merchandise trade surplus of $102 billion. According to one projection, China's global current account balance will remain in surplus "for some years to come," due to continued high rates of foreign investment, strong exports, and excessive savings in the non-state sector. As mentioned in the previous section, PRC data show much smaller bilateral trade deficits than those claimed by its trading partners. In 2005, the United States claimed it had incurred a $201 billion trade deficit with China, while China reported a trade surplus of only $114 billion with the United States. Japan reported a $28.5 billion merchandise trade deficit with China, while China likewise claimed a $16.3 billion trade deficit with Japan. In 2005, the European Union's trade deficit with China ($121.8 billion) was only $63 billion according to Chinese data. In 2005, the 156 countries categorized as the "world" by the International Monetary Fund reported an aggregate trade deficit with China of $342 billion. This is approximately 3.3 times the $102 billion global merchandise trade deficit reported by China for that year. (See Appendix Tables A1-A5 .) Not only have the surge in imports from China affected U.S. markets, but China has become a major importer of world commodities or primary goods. Table 1 shows China's imports by major commodity. Imports of machinery (including electrical) have soared from a total of $63.1 billion in 1999 to $271.3 billion in 2005. Such an increase in demand for machinery, however, has only a moderate effect on overall prices. China's imports of mineral fuel, organic chemicals, iron and steel, ores, copper, cotton, and wood, however, can affect world prices, particularly when combined with rising world demand or tightening supplies. In 2004-2005, Chinese demand for mineral fuel, in particular, including crude petroleum added to upward world price pressures. While China is gaining manufacturing prowess and its trade surplus with the United States is spiraling, the country is purchasing heavily from neighboring trading partners. In 2004, China's imports rose by 35%, including machinery, raw materials, and components for manufacturing, although this growth in imports slowed to 17% in 2005. In addition, the bulk of China's exports are manufactured under foreign brand names, and over half of China's exports are produced by foreign-owned companies. According to PRC official estimates, 70% of PRC exports to the United States contain foreign components, particularly from Taiwan, South Korea, and Singapore. China (not including Hong Kong) has become the largest trading partner of Taiwan and the second largest trading partner of Japan. The PRC has become South Korea's largest foreign investment destination and largest export market. According to Taiwanese and Korean data, in 2005, Taiwan's estimated trade surplus with China was $31.9 billion, while South Korea's surplus was $31.2 billion. China has become a huge buyer of raw materials, agricultural commodities, industrial machinery, and electronic components from Southeast Asia, as well as an important source of foreign investment and second largest source of foreign tourists in the region. China's top exports to Southeast Asia include machinery, electronic goods, iron and steel, mineral fuels, textiles and apparel, and optical, photographic, and medical equipment. Despite worries about economic competition, in 2004, ASEAN, which ran a trade surplus of $20 billion with China that year (PRC data), agreed to establish a free trade zone with China which would be implemented gradually over five years. In the view of many of its major trading partners in Asia, China's economic growth and open trade policies have presented both competitive challenges and economic opportunities. However, according to some analysts, China's appetite for imports is slowing, while its export production shows little sign of abating. Although ASEAN accumulated a trade surplus with China again in 2005 ($19.5 billion, according to PRC data), China's exports to ASEAN grew 50% faster than its imports from Southeast Asia. Some trade specialists suggest that the surge of U.S. imports from China do not pose an additional threat to U.S. industries and workers because it merely represents a shift of investment and production from other Pacific Rim countries. In other words, expanding imports from China have been offset by declining imports from other East Asian or Pacific Rim countries. These countries include those at a similar level of development which are competing directly with China, such as Malaysia and Thailand, and more industrialized countries or special administrative regions that have moved their lower-end production to the PRC, such as Macao, Hong Kong, South Korea, and Taiwan. In sectors such as footwear, handbags, apparel, furniture, and building and lighting fixtures, U.S. imports from China have been displacing those from Hong Kong, South Korea, Taiwan, and Mexico and reducing imports those from other developing Asian nations. As shown in Figure 2 , China's share of U.S. imports grew from 3% in 1990 to 14% in 2005 (out of total U.S. imports of $491 billion and $1.66 trillion, respectively), while the rest of East Asia's share (Japan, NICS, and ASEAN) fell from 36% to 19%. Mexico's share of U.S. imports grew from 6% in 1990 to 11.6% in 2002. It fell to 10.6% in 2004 and further to 10.1% in 2005. As shown in Figure 3 and Appendix Table A-2 , by either Chinese or U.S. data, China runs a trade surplus with the United States. Although Chinese figures show it at only $114 billion in 2005, the United States reports it to be $201 billion. According to PRC data, China has run a trade surplus with the United States since 1993. According to U.S. data, the United States has incurred trade deficits with China since 1983. As is the case with the United States, Japan has run a trade deficit with China since the 1980s (according to Japanese data). As shown in Figure 4 and in Appendix Table A-3 , Japan's balance of trade with China dropped from a surplus of $6 billion in 1985 to a deficit of nearly $6 billion in 1990. Japan's trade deficit with China reached a peak of $26.5 billion in 2001, which was surpassed in 2005 ($28.5 billion). Japan's exports to China have grown dramatically in the past few years, its largest exports to the PRC being electronics, general machinery, iron and steel, optical, photographic, and medical equipment, and organic chemicals. As shown in Figure 5 and Appendix Table A-4 , according to EU data, the European Union incurred a trade deficit with China of $947 million in 1988, which grew to $121.8 billion in 2005. According to Chinese figures, however, the EU trade deficit with China began in the late 1990s and grew to $63 billion in 2005. Compared to the world's two other major economic centers, the U.S. trade deficit with China at $201 billion in 2005 was the largest, followed by the EU-15 deficit with China at $121.8 billion and Japan at $28.5 billion. Within the EU, according to trading partner 2005 data, Germany's trade deficit with China was $23 billion, the U.K.'s was $18.8 billion, and France's was $9.9 billion. As shown in Appendix Table A-5 , however, China's trade statistics indicate smaller European trade deficits or even surpluses. The U.S. trade deficit with China is notable for not only its size but also the large imbalance between imports from and exports to China. In 2005, Japan exported 2.5 times more to the United States than it imported, while Canada and Mexico exported 1.3 times and 1.4 times more, respectively, than they imported. China, by comparison, exported 5.8 times more to the U.S. market in 2005 than it imported from the United States. This indicates that the Chinese market has been vastly underdeveloped as a destination for U.S. exports. As shown in Table 2 , among the top twenty U.S. exports to China in 2005, the top five by dollar value were electrical machinery, transport equipment, metalliferous ores, oil seeds and fruits, and general industrial machinery. Exports of metalliferous ores and oil seeds and fruits have grown by over 12 times and 6 times, respectively, since 1999, suggesting that China's appetite for raw materials and agricultural commodities has grown relative to that for general industrial machinery and office machines. Among the top 20 U.S. export items to China, textile fibers have experienced the largest growth in the past five years (969%). China's top ten imports from the world in 2005 were: electrical machinery, machinery, mineral fuels, optical and medical instruments, plastics, organic chemicals, iron and steel, iron ores, copper articles, and vehicles. As shown in Figure 7 and Table 3 , among the top twenty U.S. imports from China in 2005 by dollar amount, the top six were office machines and automatic data processing machines, telecommunications and sound equipment, miscellaneous manufactured articles, apparel and accessories, electrical machinery, and furniture and bedding. The value of U.S.-imports of PRC office and data processing machines alone ($42.2 billion) exceeded total U.S. exports to China in 2005 ($41.8 billion). While U.S. imports in all these categories have increased, the most dramatic percentage changes have been not in traditional labor-intensive industries but in sectors that encompass advanced technology, such as office and data processing machines (up 284% between 2000 and 2005), telecommunications and sound equipment (245%), and general industrial machinery (234%). In modern economies, trade by sector generally follows two patterns. The first is based on traditional comparative advantage in which one country trades with another in those products in which it has an abundance of resources or in which it is comparatively productive. The United States economy is characterized by high technology, extensive farmland with high agricultural yields, expensive labor, and deep capital. As such, the United States would be expected to be strong in exports of high-technology goods, food and grains, and capital intensive products. The Chinese economy, on the other hand, is characterized by abundant and cheap labor, low capital intensity, and a mix of low, medium and high technology both in manufacturing and agriculture. As such, China would be expected to be strong in exports of not only labor-intensive manufactures, such as textiles and apparel, shoes, toys, and light manufactures, but also items produced under the tutelage of foreign companies that have invested in Chinese factories. These could include household appliances, electronics, tools, or automobile parts. One would expect trade that is conducted on the basis of comparative advantage to be unbalanced on a sector-by-sector basis. The United States, for example, would run a surplus with China in aircraft but a deficit in apparel. The second trade pattern occurs among industrialized countries and is called intra-industry or trade within industrial sectors. This is typical of trade among North America, the European Union, and industrialized nations of Asia (e.g., Japan, South Korea, and Taiwan). The products traded usually carry brand names, are differentiated, and may be protected by intellectual property rights. For example, the United States both imports and exports items such as automobiles, machinery, electronic devices, prepared food, and pharmaceuticals. A considerable share of U.S. intra-industry trade is carried out within a multinational corporation (e.g., between Ford Motors and one of its related companies, such as Mazda in Japan, Jaguar in the United Kingdom, or with other subsidiaries abroad). A large deficit in an intra-industry trading sector in which the United States is competitive may indicate that the trading partner country is using import barriers to tip the trade balance in its favor. Table 4 shows the U.S. balance of trade with China by major sector. Most of the sectors in which the United States runs the largest trade deficits with China are, as expected, those that depend on mostly abundant and low-cost labor. These include toys and sports equipment, furniture and bedding, footwear, textiles and apparel, and leather goods. Among the large deficit sectors, however, are machinery and mechanical appliances and electrical machinery, which reflect China's foreign investment and growing technological sophistication. In plastic articles, optical and medical instruments, books and magazines (indicated by shading in the table), the United States runs a surplus in its balance of trade with the world but a deficit with China. The sectors in which the United States runs a trade surplus with China mirror U.S. competitive advantages and include aircraft, agricultural products, and cotton fabrics. In 2005, U.S. trade surpluses with China in aircraft, copper, iron ores, and iron and steel rose dramatically. This section presents charts and data on U.S. imports from China by selected industrial sectors. The charts show imports from China as compared with imports from other major exporting countries or groups of countries. These include the European Union (fifteen original countries), the Association of Southeast Asian Nations (ASEAN, which includes, Indonesia, Malaysia, Singapore, Thailand, the Philippines, Brunei, Vietnam, Laos, and Myanmar [Burma]), Taiwan, Mexico, South Korea, Japan, Hong Kong, and Canada. The data in this section are presented according to two-digit standard international trade classification (SITC) codes as reported by the U.S. Department of Commerce. The industries selected are those in which the share of imports from China has risen to a significant level or trade policy has played a significant role (e.g. iron and steel and automobiles) even though U.S. imports from China in those industries might be relatively small. In iron and steel products, China is becoming a major exporter to the United States. In 2005, China was the fourth largest foreign supplier of iron and steel products to the United States (surpassing Russia, South Korea, Germany, and Japan), up from seventh place in 2003. In 2005, China also bought $445 million worth of iron and steel products from the United States, making it the third largest market for U.S. exports of iron and steel. In 2005, the United States incurred a trade deficit with China in the SITC 67 category (iron and steel), which includes semi-finished products, tubes and pipes, iron and steel rods, and ferroalloys. However, the United States attained a trade surplus with China in the HTS 72 category (iron and steel), which includes more items in "primary form." China is becoming an important supplier of specialized industrial machinery, which includes machine tools and sewing machines, but lags behind the European Union, Japan, and Canada and competes with other newly industrialized countries such as Mexico, South Korea, and Taiwan. China accounted for only 4.5% of U.S. imports in this category in 2005. In U.S. imports of office machines and automatic data processing machines (including television sets, computers and computer hardware), China has quickly become the largest supplier, surpassing ASEAN. Imports of such products from China rose by over 75% between 2003 and 2005 and now account for 42% of U.S. imports in this category. Office machines and computers from other East Asian countries—Japan, Taiwan, and South Korea—have been leveling off or decreasing, although many of their high tech manufacturers have built plants in China and export from there. The top exporters of office machines and data processing machines to the United States in 2005 were China, Malaysia, Japan, Mexico, and Singapore. China's share of U.S. imports of telecommunications and sound equipment has risen to 33%. Such imports from China rose from $1.1 billion in 1990 to $34 billion in 2005. Imports of these products from elsewhere in Asia, particularly from ASEAN countries, have also been rising rapidly. The largest suppliers of telecommunications and sound equipment to the United States in 2005 were China, Mexico, Malaysia, Japan, and South Korea. U.S. imports of electrical machinery and parts (including semi-conductors) have been growing dramatically from nearly all major suppliers. At 18% of such imports in 2005, China has become a significant supplier—surpassing the EU, Japan, and ASEAN. Mexico remains the leading foreign supplier. China is the world's third largest auto market and fourth largest auto producer. China's automobile sector has absorbed heavy foreign investment—roughly 70% of the country's car market is held by Chinese-foreign joint ventures such as Shanghai General Motors (GM), Shanghai Volkswagen, and First Auto Works-Toyota—and is aimed primarily at Chinese buyers. China became a net exporter of vehicles for the first time in 2005, with exports of 172,800 vehicles and imports of 161,900 units. Most of China's vehicle exports are sold in Middle Eastern, North African, and South American countries. In addition, China has become a major supplier of motorcycles to Southeast Asia. Chinese auto makers Geely and Chery reportedly have plans to begin exporting passenger cars to the United States in 2007 or 2008. Currently, China is not a significant player in the U.S. car market. U.S. road vehicle and related imports from China mainly consist of auto parts, bicycles and motorcycles, and specialty vehicles such as golf carts and beach go-carts. China has become an important supplier of auto parts to the United States, with $2 billion in selected auto parts in 2005, but trails Canada ($11.8 billion), Japan ($8.8 billion), Mexico ($7.7 billion), and Germany ($2.3 billion). China exported $290 million worth of motorcycles to the United States in 2005, accounting for 8% of U.S. motorcycle imports compared to Japan's 73%. China is expected to continue to lower tariffs on imported automobiles, to 25% in 2006, pursuant to China's WTO accession agreement, although many non-tariff barriers reportedly remain. In U.S. imports of prefabricated buildings, sanitary, plumbing, heating and lighting fixtures and fittings, China has surged to become a main factor. The PRC accounted for over half such imports in 2005, although total imports of such products from China amounted to only $4 billion, making it the 13 th largest U.S. import from China. In U.S. imports of furniture and related parts, China has become a dominant supplier. The PRC accounted for over 43% of U.S. furniture imports in 2005. U.S. imports of furniture from China now exceed the combined U.S. imports from Canada and Mexico, which were the leading foreign suppliers of furniture until the late 1990s. In 2004, the Bush Administration imposed anti-dumping penalties on approximately 500 furniture manufacturers in China. China has become the principal supplier of imported travel goods, handbags, and similar items, accounting for nearly 75% of U.S. imports of such merchandise in 2005. The EU has become an important supplier while China appears to have taken market shares from South Korea, Taiwan, and, more recently, ASEAN. This U.S. import category is ranked only 42 nd in total customs value. U.S. imports of apparel and clothing accessories from China have been rising, reaching 26% of U.S. imports in 2005. According to some estimates, more than 80% of Chinese apparel exports are produced by joint ventures, many of them involving East Asian investment. Global quotas on imported textiles and apparel expired on January 1, 2005, pursuant to the Multi-Fiber Agreement, resulting in a surge in U.S. garment imports from China, which increased by 46% in 2005. Other nations with large gains in the U.S. apparel market were India (up 33%), Indonesia (20%) Bangladesh (20%), and Cambodia (20%). Although wages for low skill labor in China reportedly are rising relative to other developing countries, China's clothing manufacturers retain competitive advantages such as high labor productivity, "vertical integration"—the ability to produce all manufacturing inputs domestically—and developed infrastructure. In November 2005, the United States and the PRC signed a three-year agreement on textiles trade which imposes quotas on 21 types of Chinese textiles and clothing but which allows for a progressive increase in U.S. imports of apparel products from China through 2008. U.S. imports of footwear from China surged during the 1990s. From $1.5 billion in 1990, they rose to over $10 billion in 2002 or two-thirds of all such imports. China has largely replaced South Korea and Taiwan as the main source of Asian-produced footwear in the United States. Other large suppliers are Italy, Brazil, and Vietnam. China is a minor supplier of U.S. imports of professional, scientific and controlling instruments, supplying 8% of U.S. imports in this category in 2005. Over two-thirds of such imports originate in the European Union, Mexico, and Japan. China is a rising supplier of photographic apparatus, equipment and supplies and optical goods as well as watches and clocks. In 2005, China accounted for 17.5% of U.S. imports of such products. Japan and the European Union still dominate U.S. imports. By country, the top three suppliers of such imports for the United States are Japan, China, and Switzerland. Fueling China's export boom is an unprecedented infusion of foreign capital in the manufacturing sector. Foreign direct investment (FDI) is directed toward investments in companies in which the foreign investor has a controlling interest. It is primarily for physical plant and equipment and for the costs of establishing enterprises in China. It is not for portfolio investment on China's stock exchanges. In 2002, China overtook the United States as the world's largest recipient of foreign direct investment. In 2005, China remained in that position, despite a slight decrease from a year earlier, with $60 billion in utilized FDI. The United States is one of the largest sources of utilized FDI in China, investing $3.1 billion in 2005. (See Table 18 .) China relies heavily upon investment from Hong Kong and other East Asian countries and regions. A significant amount of FDI from Hong Kong comes from Taiwan or from mainland Chinese companies via their subsidiaries in Hong Kong. Annual or utilized FDI from Japan and South Korea surpassed that of the United States in 2003. In 2004, South Korea surpassed Japan to be the third largest source of FDI in China. The United States remains the second largest source of cumulative FDI after Hong Kong. China's WTO commitments include allowing more foreign investment in sectors such as telecommunications, energy, banking, and insurance.

As imports from the People's Republic of China (PRC) have surged in recent years, posing a threat to some U.S. industries and manufacturing employment, Congress has begun to focus on not only access to the Chinese market and intellectual property rights (IPO) protection, but also the mounting U.S. trade deficit with China as well as allegations that China is selling its products on the international market at below cost (dumping), engaging in "currency manipulation," and exploiting its workers for economic gain. Members of the 109th Congress introduced several bills that would impose trade sanctions on China for intervening in the currency market or for engaging in other acts of unfair trade, while the Bush Administration has imposed anti-dumping duties and safeguards against some PRC products and pressured China to further revalue its currency and remove non-tariff trade barriers. China runs a trade surplus with the world's three major economic centers—the United States, the European Union, and Japan. Since 2000, the United States has incurred its largest bilateral trade deficit with China ($201 billion in 2005, a 25% rise over 2004). In 2003, China replaced Mexico as the second largest source of imports for the United States. China's share of U.S. imports was 14.6% in 2005, although this proportion still falls short of Japan's 18% of the early 1990s. The United States is China's largest overseas market and second largest source of foreign direct investment on a cumulative basis. U.S. exports to China have been growing rapidly as well, although from a low base. In 2004, China replaced Germany and the United Kingdom to become the fourth largest market for U.S. goods and remains the fastest growing major U.S. export market. China is purchasing heavily from its Asian trading partners—particularly precision machinery, electronic components, and raw materials for manufacturing. China is running trade deficits with Taiwan and South Korea and has become a major buyer of goods from Japan and Southeast Asia. In the past decade, the most dramatic increases in U.S. imports from China have been not in labor-intensive sectors but in some advanced technology sectors, such as office and data processing machines, telecommunications and sound equipment, and electrical machinery and appliances. China's exports to the United States are taking market share from other Pacific Rim countries, particularly the East Asian newly industrialized countries (NICS), which have moved most of their low-end production facilities to China. This report provides a quantitative framework for policy considerations dealing with U.S. trade with China. It provides basic data and analysis of China's international trade with the United States and other countries. Since Chinese data differ considerably from those of its trading partners (because of how entrepot trade through Hong Kong is counted), data from both PRC sources and those of its trading partners are presented. Charts showing import trends by sector for the United States highlight China's growing market shares in many industries and also show import shares for Japan, Canada, Mexico, the European Union, and the Association for Southeast Asian Nations (ASEAN). This report will be updated bi-annually.

1. Why do countries trade? Economic theory states that trade occurs because it is mutually enriching . It is asserted that it has a positive economic effect like that caused by technological change, whereby economic efficiency is increased, allowing greater output from the same amount of scarce productive resources. By allowing each participant to specialize in producing what it is relatively more efficient at and trading for what it is relatively less efficient at, trade (according to economic theory) can increase economic well-being above what would be possible without trade. The benefit of trade is attached to the product received (the import), not in the product given (the export). Hence, countries export in order to pay for imports. There is a broad consensus among economists that trade expansion has a favorable effect on overall economic well-being, but the gains will not necessarily be distributed equitably. Although most economists hold that the benefits to the overall economy exceed the costs incurred by workers who lose their jobs to increased trade, others argue that the benefits are often overestimated and the costs are often underestimated. Some goods that are imported into the United States, such as bananas, cannot be produced economically in sufficient quantities to satisfy domestic demand. Many other products (including intermediate goods) and services are imported because they can be produced less expensively or more efficiently by firms in other countries. Many imports into the United States contain U.S.-made components (such as semiconductors inside a computer) or U.S.-grown raw materials (such as cotton used to make t-shirts). Consumers can benefit through access to a wider variety of goods at lower costs. This raises consumer welfare (i.e., consumers have more money to spend on other goods and services) and helps control the rate of U.S. inflation. Producers can benefit through access to lower priced components or inputs that can be utilized in the production process. Longer term, import competition can also pressure companies to reduce costs through innovation, research, and development, leading to growth in economic output and productivity. 2. What is comparative advantage? The idea of comparative advantage was developed by David Ricardo early in the 19 th century and its insight remains relevant today. Ricardo argued that specialization and trade are mutually beneficial even if a country finds that it is more efficient at producing everything than its trading partners. If one country produces a given good at a lower resource cost than another country, it has an absolute advantage in its production. (The other country has an absolute disadvantage in its production.) If all productive resources were highly mobile between countries, absolute advantage would be the criterion governing what a country produces and the pattern of any trade between countries. But Ricardo demonstrated that because resources, particularly labor and the skills and knowledge it embodies, are highly immobile, a comparison of a good's absolute cost of production in each country is not relevant for determining whether specialization and trade should occur. Rather, the critical comparison within each country is the opportunity cost of producing any good— how much output of good Y must be forgone to produce one more unit of good X . If the opportunity costs of producing X and Y are different in each economy, then each country has a comparative advantage in the production of one of the goods. In this circumstance, Ricardo predicts that each country can realize gains from trade by specializing in producing what it does relatively well and in which it has a comparative advantage and trading for what it does relatively less well and in which it has a comparative disadvantage. 3. What determines comparative advantage? Most often, differences in comparative advantage between countries occur because of differences in the relative abundance of the factors of production: land, labor, physical capital (plant and equipment), human capital (skills and knowledge including entrepreneurial talent), and technology. Standard economic theory predicts that comparative advantage will be in activities that make intensive use of the country's relatively abundant factor(s) of production. For example, the United States has a relative abundance of high-skilled labor and a relative scarcity of low-skilled labor. Therefore, the United States' comparative advantage will be in goods produced using high-skilled labor intensively, such as aircraft, and comparative disadvantage will be in goods produced using low-skilled labor intensively, such as apparel. In addition to differences in factor endowments, differences in productive technology among countries create differences in relative efficiency and may be a basis for comparative advantage. Nevertheless, some high-skilled services jobs, such as computer programming and graphic design, can today be easily done in a country such as India because of the revolution in telecommunications. 4. Can governments shape or distort comparative advantage? Government actions to influence comparative advantage can be grouped in two broad categories: policies that indirectly nurture comparative advantage, most often by compensating for some form of market failure, but not targeted at any specific industry or activity; and policies that aim to directly create and nurture comparative advantage in particular industries. Indirect influence on comparative advantage can emanate from government policies that eliminate corruption, enforce property rights, remove unnecessary impediments to domestic market transactions, liberalize trade and foreign investment barriers, assure macroeconomic stability, build transport and communication infrastructure, support mass education, and assist technological advance. Policies that try to exert a direct influence on comparative advantage may include policies to promote and protect certain industries (such as through subsidies or trade protection) that are thought to have significant economic potential. In this view, realizing that potential requires initial government support to help a country obtain its economic targets. Some economists contend that direct government policies may often distort a country's trade and investment flows, reduce economic efficiency, undermine more economically competitive industries that do not receive government help, and diminish potential economic growth. 5. What is the terms of trade ? A nation's terms of trade— the ratio of an index of export prices to an index of import prices—is a measure of the export cost of acquiring desired imports. Increases and decreases in its terms of trade indicate whether a nation's gains from trade are rising or falling. A sustained improvement in the terms of trade expands what a nation's income will buy on the world market and can make a significant contribution to the long-term growth of its economic welfare. When that occurs, a nation's economy as a whole is often said to have become more globally competitive. Similarly, a falling terms of trade raises the export cost of acquiring imports, which reduces real income and the domestic living standard. Although trade is considered a process of mutual benefit, each trading partner's share of those benefits can change over time, and movement of the terms of trade is an indicator of that changing share. 6. What are the costs of trade expansion? Like technological change and other market forces, international trade creates wealth by inducing a reallocation of the economy's scarce resources (capital and labor) into relatively more efficient industries that have a comparative advantage and away from less efficient activities that have a comparative disadvantage. This reallocation of economic resources is often characterized as a process of "creative destruction," generating a net economic gain to the overall economy, but also being disruptive and costly to workers in adversely affected industries that compete with imports. Many of these displaced workers bear significant adjustment costs and may find work only at a lower wage. Although economic analysis almost always indicates that the economy-wide gains from trade exceed the costs, the perennially tough policy issue is how or whether to secure those gains for the wider community while dealing equitably with those who are hurt by the process. Economists generally argue that facilitating the adjustment and compensating for the losses of those harmed by market forces, including trade, is economically less costly than policies to protect workers and industries from the negative impacts of trade. While it is debatable how well existing worker assistance policies have worked, funding is also a long-standing issue. A 2008 study by the Peterson Institute for International Economics, for example, estimated the lifetime costs of worker displacement that were triggered by expanded trade in 2003 to be as high as $54 billion, but calculated that the United States spent less than $2 billion that year to address the costs for workers connected to that displacement. 7. Does trade " destroy " jobs? Trade "creates" and "destroys" jobs in the economy just as other market forces do. Economy-wide, trade creates jobs in industries that have a growing comparative advantage and destroys jobs in industries that have a growing comparative disadvantage. In the process, the economy's composition of employment changes, but there may not be a net loss of jobs due to trade. Consider that over the course of the rapid economic expansion that occurred from 1992 to 2000, U.S. imports increased nearly 240%, but total employment grew by 22 million jobs and the unemployment rate fell from 7.5% to 4.0% (the lowest unemployment rate in more than 30 years). From 2001 to 2007 (before the global financial crisis), U.S. employment grew by 7.1 million jobs and the unemployment rate dropped from 4.7% to 4.6%, while U.S. imports over the period increased by 70.8%. From 2007 to 2010, the U.S. unemployment rate rose to 9.6% and employment fell by 7 million, but U.S. imports declined by 2.0%. In times of economic hardship, when unemployment is high, governments will sometimes try to stimulate some domestic industries by protecting them from foreign competition. However, such measures are unlikely to increase total employment and could be costly. The near-term cost can be an exacerbation of weakness in the economy as foreign governments may retaliate with their own protective measures, causing a decline in exports. In the long run, trade protection may tend to reallocate employment from unprotected domestic industries toward protected domestic industries, but not increase total employment. However, more than just a transfer of well-being between sectors occurs, as there will be a permanent cost to the whole economy arising from the less efficient allocation of these resources. 8. Does trade reduce the wages of U.S. workers? International trade can have strong effects, good and bad, on the wages of American workers. Concurrent with the large expansion of trade over the past 25 years, real wages (i.e., inflation adjusted wages) of American workers grew more slowly than in the earlier post-war period, and inequality of wages between the skilled and less skilled worker rose sharply. Trade based on comparative advantage tends to increase the return to the abundant factors of production—capital and high-skilled workers in the United States—and decrease the return to the less-abundant factor—low-skilled labor in the United States. Therefore, it is reasonable to expect that, other factors constant, a large increase in imports, particularly from economies with vast supplies of low-skilled labor (such as China), could negatively affect the wages of low-skilled U.S. workers in import-sensitive industries. U.S. low-skilled workers have increasingly faced competition from lower-cost producers, largely in developing countries. In many instances, economic globalization (discussed below) has led U.S. multinational firms to source a significant share of their labor-intensive production to lower-wage countries, which, to some extent, has put downward pressure on the wages of U.S. workers in some import-sensitive industries. On the other hand, U.S. workers in export-oriented industries on average are estimated to earn more than workers in non-exporting industries. Overall, the evidence on whether or not trade has contributed to growing income inequality in the United States is mixed and inconclusive. This is due in part because a number of other factors, such as advancing technology (where the jobs that are generated may require more advanced skills and higher education than was required in the past), may have had a significantly larger impact on relative wages than foreign trade. For this reason, many economists contend that the United States should implement policies that seek to enhance U.S. education and skill levels to better enable U.S. workers to respond more effectively to the rapidly changing nature of the global economy as well as technological advancements. 9. What is intra-industry trade? A sizable portion of world trade sees countries exporting and importing goods from the same industry to each other. This phenomenon is called intra-industry trade. This type of trade is particularly characteristic of the large flows of products between advanced economies, which have very similar resource endowments. This suggests that there is another basis for trade than comparative advantage behind intra-industry trade: the use of economies of scale. Economies of scale exist when a production process is more efficient (i.e., has lower unit costs) the larger the scale at which it takes place. This scale economy becomes a basis for trade because while the United States and Germany, for example, could be equally proficient at producing any of a wide array of goods such as automobiles and pharmaceuticals that consumers want, neither has the productive capacity to produce the full range of goods at the optimal scale. Therefore, a pattern of specialization tends to occur with countries producing and trading some sub-set of these goods at the optimal scale. 1 0 . What is economic globalization? Globalization has come to represent many things. In general, economic globalization refers specifically to the increasing integration of national economies into a worldwide trading system. Economic globalization involves trade in goods and services, and trade in assets (i.e., currency, stocks, bonds, and real property), as well as the transfer of technology, and the international flows (migration) of labor. Since 1950, global trade has consistently grown faster than world production. For example, from 1980 to 2014, global exports of goods and services grew at an average annual rate of 5.4% compared to average annual global GDP growth of about 3.5%. In addition, global exports as a percent of world GDP over this period rose from 20.9% to 31.3%. These data indicate that trade has been a driving force in the global economy. Global integration in the United States (discussed in more detail in the next section) has advanced quickly, with imports of goods and services as a share of GDP rising from 4.3% in 1950 to about 16.5% in 2014. More recent but far more dramatic has been the growth of international trade in assets. From 1990 to 2007 (before the 2008 global financial crisis hit), gross capital flows to and from the United States leaped by 1,495% as compared to a 248% advance of U.S. trade in goods and services. The rising economic integration of the world economy has been facilitated by two types of events: the myriad of technical advances in transport and communication, which have reduced the natural barriers of time and space that separate national economies, and national and multi-national policy actions that have steadily lowered various man-made barriers (i.e., tariffs, quotas, subsidies, and capital controls) to international exchange. 1 1 . What are global supply chain s and how do they relate to economic globalization? A supply chain is the interrelated organizations, resources, and processes that create and deliver a product to the final consumer. A global supply chain organized mostly by multinational corporations (MNCs) means that products that were once produced in one country may now be produced by assembling components fabricated in several countries. To illustrate, the WTO estimates that in 2011, intermediate manufactured products accounted for 55% of global non-fuel trade, and that on average about 26% of the value of national exports in 2008 included foreign content in the form of imported inputs used to produce these exports. Not only does such geographically fragmented production raise the level of trade associated with a particular final product, it also tends to raise the level of trade with both developing countries and developed countries. The expansion of global supply chains (in both value terms and as a percent of total global trade) has facilitated lower trade barriers and technological advances that have increased the speed and lowered the cost of international transport and, perhaps most importantly, accelerated the international flow of information that allows firms to coordinate geographically fragmented production with relative ease. (The effect of globalization on U.S. trade flows are discussed in the section on U.S. trade performance.) Global supply chains present both challenges and opportunities for U.S. small- and medium-sized enterprises (SMEs). On the one hand, SMEs face increased foreign competition because of globalization. At the same time, SMEs have gained business opportunities by the increase in outsourcing by U.S. and foreign MNCs. According to one study, U.S. SMEs accounted for 28% of U.S. direct exports in 2007. However, this figure rises to 41% when the value of U.S. SME sales to large U.S. exporting firms is included. 1 2 . How does globalization affect job security? A greater degree of international economic integration and specialization can add to disruptive forces in the marketplace, including concerns that over time high-wage and high-skilled U.S. service sector jobs may now be vulnerable to "outsourcing" (i.e., shifting business functions from the United States to countries with lower labor costs). Although most economists maintain that globalization is unlikely to have a negative effect on overall U.S. employment rate or the average U.S. worker wage, greater volatility of U.S. worker incomes and employment in some sectors is a possible effect. For example, some U.S. MNCs have focused on performing high-end activities associated with innovating products such as research and development (R&D), while outsourcing component production and final product assembly to numerous overseas suppliers. Such activities may reduce the number of U.S. manufacturing jobs in some industries, but boost the number of service-related jobs in other industries. Some contend that globalization has increased volatility in employment and earnings for many U.S. workers and argue that trade adjustment assistance programs should be expanded to assist individuals negatively impacted by imports in order to help them more rapidly obtain employment in other sectors. Others contend that a broader challenge for the United States is to implement policies that promote a highly educated and skilled work force and boost domestic innovation in order to help the U.S. labor force to respond more quickly to the challenges and opportunities presents by the globalization process. 1 3 . Wh ich are the largest global trading economies? The largest trading economies for total trade in goods and services in 2014 were the United States, China, Germany, Japan, the United Kingdom, and France. China was the largest exporter of goods and services, while the United States was the largest importer (see Table 1 ). In terms of the largest merchandise trading economies in 2014, the top five were China, the United States, Germany, Japan, France, and the Netherlands. The United States was the largest merchandise importer and the second-largest merchandise exporter. While the United States is a major global trader, the size of that trade relative to the size of the U.S. economy is much smaller than that of other major trading economies. U.S. exports and imports of goods and services as a percent of GDP in 2015 were 28.1%. This compares with 37.2% for Japan, 39.3% for China, 56.39% for the United Kingdom, and 83.5% for Germany. The U.S. share of global merchandise exports has changed significantly over the past five decades or so, due largely to the rapid increase of global trade, especially among developing countries. The U.S. share of global merchandise exports over this period was as follows: 15.1% in 1960, 13.6% in 1970, 11.1% in 1980, 11.3% in 1990, 12.1% in 2000, 8.4% in 2010, and 8.8% in 2014. Various organizations have developed indexes to assess the "openness" or "competitiveness" of the U.S. economy relative to other global economies. For example, the Heritage Foundation publishes an "Index of Economic Freedom." Its 2014 report ranked the United States as the 12 th "freest" economy out of 186 economies (Hong Kong, Singapore, New Zealand, Australia, and Switzerland ranked as the top 5). Similarly, the World Economic Forum (WEF) produces an annual "Global Competitiveness Index." The WEF's 2014-2015 report ranked the United States third (up from fifth from the 2013-2014 report) after Switzerland and Singapore. 14 . What is meant by the trade deficit? A trade deficit occurs when a country's imports are greater than its exports. There are various measurements of the U.S. trade deficit. In general, most media reports on the U.S. trade deficit refer to the balance of U.S. trade in goods (merchandise). In 2015, the U.S. merchandise trade deficit was $759.3 billion, down from a peak of $816 billion in 2006. However, a large and growing level of U.S. trade is in services, where the United States usually runs large annual surpluses. In 2015, that surplus was $219.6 billion. By adding net exports of services to the calculation, the U.S. trade deficit on goods and services was $464 billion in 2014. Further adding in net transfer payments (such as investment income and dividends) and net transfer payments (such as foreign aid) gives the broadest measure of a nation's trade balance—the current account balance. In 2015, the United States recorded a $484.1 billion current account deficit, down from its historic peak of $807 billion in 2006 (see Table 2 ). The decline in the U.S. trade deficit was largely caused by two major factors: the global economic crisis (which, for example, significantly reduced U.S. demand for imports) and a decline in U.S. oil imports. 15 . Wh y does the United States run a trade deficit? The most significant cause of the U.S. trade deficit is the low rate of U.S. domestic savings relative to its investment needs. In order to make up for that shortfall, Americans must borrow from countries abroad (such as China) with excess savings. Such borrowing enables Americans to enjoy a higher rate of economic growth than would be obtained if the United States had to rely solely on domestic savings. This in turn boosts U.S. consumption and the demand for imports, producing a trade deficit. The U.S. trade deficit is an indicator that Americans consume more than they produce. As long as foreigners (both governments and private entities) are willing to loan the United States the funds to finance the lack of savings in the U.S. economy (such as by buying U.S. Treasury securities), the trade deficit can continue. The United States, however, accumulates more debt. As of March 2014, the U.S. public debt was $18.2 trillion, up from $7.1 trillion in March 2004. 16 . How significant is the size of the U.S. trade deficit and how does it compare with other major economies ? Economists often look at the size of the U.S. trade deficit relative to the size of the U.S. economy (gross domestic product, or GDP). This measurement is particularly useful in examining trends over time or comparing U.S. data with those of other countries. As can be seen in Figure 1 , the U.S. balance on the current account relative to GDP deteriorated sharply from 1991 to 2006; it reached a record high 5.8% of GDP in 2006. Since that time, the U.S. current deficit as a percent of GDP has generally declined, due in large part to the effects of the global economic slowdown that began around 2008. Table 3 lists current account balances as a percent of GDP for the top 10 largest global economies in 2014 (based on GDP on a purchasing power parity basis), along with data on the ratio of domestic savings to total investment for each country. The countries with the largest current account surpluses as a percent of GDP included Germany (8.0%), Russia (5.4%), and China (2.7%). The largest economies with the biggest current account deficits as a percent of GDP included the United Kingdom (4.7%), Brazil (3.3%) and the United States (2.5%). 17 . What role do foreign trade barriers play in causing bilateral trade deficits? Some policymakers view the size of the U.S. trade deficit with certain countries (such as China, where the U.S. merchandise trade deficit totaled $343 billion in 2014—by far the largest U.S. bilateral trade imbalance) as an indicator that the trade relationship is "unfair" and the result of distortive policies, such as subsidies, trade barriers, currency intervention, discriminatory regulations, investment restrictions, and failure to establish an effective mechanism for protecting intellectual property rights (IPR)—to name a few. Such policies tend to affect bilateral trade in specific products and with particular countries and can negatively affect the profitability of U.S. exporters and overseas investors. To some extent, such policies may also affect bilateral trade balances, but do not necessarily affect the size of the overall (global) U.S. trade deficit, which, as noted earlier, is largely a reflection of the level of U.S. savings. If distortive measures were reduced in certain countries, U.S. exporters would sell more of their products to them. But if U.S. consumption/savings behavior did not change, an increase in U.S. exports would likely result in an increased demand for imports, and the overall U.S. trade deficit would likely remain relatively unchanged (all things being equal). Similarly, the reduction of distortive trade policies in one country might raise manufacturing costs to such an extent as to cause firms to move production to another country. As a result, U.S. imports from the first country would fall, while imports from the second country would rise. This would lower the U.S. trade deficit with the first country and increase it with the other, and the overall U.S. trade deficit would be relatively unchanged. 18 . How does the trade deficit affect the exchange value of the dollar? Without sufficient inflows of capital, a trade deficit causes other parts of the economy to adjust, particularly the country's exchange rate—for the United States, this is the value of the dollar relative to that of the Japanese yen, Canadian dollar, British pound, or European euro. The way the adjustment mechanism works is that the excess of U.S. imports causes a surplus of U.S. dollars to flow abroad. If these dollars are then converted to other national currencies, the dollar's excess supply tends to lower the price of the dollar relative to other currencies (exchange rate), and the value of the dollar depreciates. This causes imports to be more expensive for American consumers and U.S. exports to be cheaper for foreign buyers. This process will gradually cause U.S. imports to decrease and exports to increase, thereby decreasing the trade deficit. Foreign holders of U.S. dollars may not always exchange them for other currencies because the dollar holds a special status in global financial markets and because the U.S. economy is viewed both as a safe haven for storing wealth and as an attractive destination for investments. In some countries, the dollar is used as a medium of exchange, and in most countries it is used as a reserve currency by central banks. Foreign governments can intervene to keep the value of their currency from appreciating relative to the dollar by buying dollars and essentially sending them back to the United States through purchasing U.S. Treasury securities or other U.S. assets. China, for example, has been doing this since 1994, and, as a result, it has become the largest foreign holder of U.S. Treasury securities (at nearly $1.3 trillion as of March 2015) and the largest holder of foreign exchange reserves (at $37.3 trillion as of July 2014). Efforts by Japan in recent years to boost economic growth by expanding its money supply have led some critics to charge that such policies are largely aimed at depreciating the yen in order to boost Japanese exports. Some analysts contend that several countries have intervened in currency markets to hold down the value of their currencies and that this has hampered, to some extent, the realignment of global trade balances, which in turn has negatively affected the U.S. economy. For example, a July 2012 study by the Peterson Institute for International Economics contends that "currency manipulation," based on "excessive" levels of foreign exchange reserves (FERs), is widespread, especially in developing and newly industrialized countries. The study identified 22 economies that "manipulate their currency" based on the size of their FERs as a percent of GDP and the cumulative increase in FERs as a percent of GDP in 2012, the most significant of which were China, Denmark, Hong Kong, South Korea, Malaysia, Singapore, Switzerland, and Taiwan. The Peterson Institute estimated that currency intervention by the 22 economies increased the U.S. current account trade deficit by $200 billion to $500 billion and caused the loss of 1 million to 5 million U.S. jobs. 19 . How is the trade deficit financed? The U.S. trade deficit is financed by borrowing from abroad. This takes the form of net financial inflows into the United States (which is reflected in the U.S. current account data). In 2013, U.S. net financial inflows amounted to $93 billion. Foreigners acquired $906 billion in assets in the United States (excluding financial derivatives), while Americans acquired $553 billion in assets abroad. Within these totals, foreigners purchased an additional $141.8 billion in Treasury securities and $44 billion in other government securities. Foreigners also invested $193 billion in their companies located in the United States. 20 . Is the trade deficit a problem for the U.S. economy? Many economists view the U.S. trade deficit as a dual problem for the economy. In the long term, it generates debt that must be repaid by future generations. Meanwhile, the current generation must pay interest on that debt. Whether the current borrowing to finance imports is worthwhile for Americans depends on whether those funds are used for investment that raises future standards of living or whether they are used for current consumption. If American consumers, business, and government are borrowing to finance new technology, equipment, or other productivity-enhancing products, the borrowing results in a deficit and can be paid off because such investments will boost the level of economic growth in the long run. If the borrowing is to finance consumer purchases of clothes, household electronics, or luxury items, it pushes the repayment of funds for current consumption on to future generations without investments to raise their ability to finance those repayments, which implies that in the future, consumption levels will have to fall in order to pay for the debt, which lowers future economic growth. Some economists warn that, under certain circumstances, a continually rising U.S. trade deficit could spark a large and sudden fall in the value of the dollar and financial turmoil in both the United States and abroad. The U.S. current account deficit as a percent of GDP reached a peak of 5.8% in 2006 and has fallen significantly since, declining to 2.4% in 2014, although much of that decline was the result of the effects of the global economic slowdown. Although the U.S. economy has not yet fully recovered to pre-crisis levels, foreign investors continue to look to the United States as a safe haven for their money. As a result, the U.S. Treasury has had no problem selling securities to fund the U.S. budget deficit. Eventually, however, if foreign investors stop offsetting the trade deficit by buying dollar-denominated assets, U.S. interest rates would have to rise to attract more foreign funds into U.S. investments. Rising interest rates could cause a crisis in financial markets and may also raise inflationary pressures. Since global financial markets are now so closely intertwined, turmoil in one market can quickly spread to other markets in the world. 21 . How long can the United States keep running trade deficits? U.S. deficits in trade can continue for as long as foreign investors are willing to buy and hold U.S. assets, particularly government securities and other financial assets. Their willingness depends on a complicated array of factors, including the perception of the United States as a safe haven for capital, relative rates of return on investments, interest rates on U.S. financial assets, actions by foreign central banks, and the savings and investment decisions of businesses, governments, and households. The policy levers that influence these factors that affect the trade deficit are held by the Federal Reserve (interest rates) as well as both Congress and the Administration (government budget deficits and trade policy), and their counterpart institutions abroad. 22 . How can the trade deficit be further reduced? In reducing the U.S. trade deficit, the policy tool kit includes direct measures (trade policy) that are aimed at imports, exports, and the exchange rate, and indirect measures (monetary and fiscal policies) aimed at U.S. interest rates, saving rates, budget deficits, and capital flows. Monetary and fiscal policies, however, usually address conditions in the U.S. macro-economy and generally consider the trade deficit only as a secondary target. 23 . How important is trade to the U.S. economy? As indicated in Figure 2 , the level of U.S. trade in goods in services relative to GDP has risen markedly over the past three decades. U.S. exports of goods and services as a percent of GDP rose from 9.8% in 1980 to 12.6% in 2015, while imports of goods and services increased from 10.3% to 15.5%. According to the U.S. Department of Commerce, in 2014, U.S. exports "supported" 11.7 million jobs in the United States, which was 53.9% higher than 1993 levels. 24 . Who are the leading U.S. trade partners? As shown in Table 4 , in 2015, China was America's largest merchandise trading partner, followed by Canada, Mexico, and Japan. China was the largest source of U.S. imports, followed by Canada, Mexico, and Japan. Canada was the largest destination of U.S. exports, followed by Mexico, China, and Japan. 25 . How does economic globalization " complicate " interpretation of U.S. trade data? Trade is becoming increasingly complex. In the past, companies tended to source most or all of their production in one country, using inputs that were largely made domestically. Today, MNCs produce worldwide, often using inputs that are sourced from the United States and worldwide. China is a good example of this phenomenon. Since initiating free market reforms in 1979 and opening up its economy to global trade and investment, China has emerged as a major center for global supply chains. Because of China's large pool of low-cost labor, many export-oriented multinational corporations have moved production from other countries (primarily in Asia) to China. In many cases, products that are "made in China" are actually products that are "assembled in China," using imported inputs (such as components) that are designed and produced globally. The value added that occurs in China is often quite small relative to the total value of the finished product when it is imported into the United States and elsewhere, and a significant level of the profits from the sale of the product is estimated to accrue to the multinational company that owns the brand. The rapidly changing nature of global supply chains has made it increasingly difficult to understand and interpret the implications of trade data for the U.S. economy. To illustrate, when the United States imports such products as iPhones and iPads, it attributes the full value of those imports as occurring in China, even though the value added that occurred there is quite small. Apple Inc., (the U.S. firm that developed these products) is the largest beneficiary in terms of the profits generated by the sale of its products, and most of its product design, software development, product management, marketing, and other high-wage functions and employment occur in the United States. In other words, U.S. trade data may show where products are being imported from, but they often fail to reflect who ultimately benefits from that trade. In many instances, U.S. imports from China are really imports from many countries. Yet, the full value of the final imported product is attributed to China, which results in what one might consider to be an inflated trade deficit figure. A joint study by the Organization for Economic Cooperation and Development (OECD) and the WTO estimated that the U.S trade deficit with China would be reduced by 25% in 2009 if bilateral trade flows were measured according to the value-added that occurred in each country before it was exported. Additionally, one study estimated that 24.7% of U.S. imports from Canada, and 39.8% of U.S. final merchandise imports from Mexico, consist of value added from the United States. 26 . Is the U.S. manufacturing sector shrinking? Media reports of factory closings and worker layoffs, and the plethora of labels indicating that merchandise was made in China, Mexico, or any of a number of foreign countries, often reinforce the perception that the U.S. manufacturing sector is shrinking. Two ways of examining this issue are to look at U.S. manufacturing output and manufacturing employment. Such data paint a mixed picture. To illustrate: From 1987 to 2015, the value of real output by U.S. manufacturing increased by 83.1% ( Figure 3 ). From 1980 to 2014, the value-added of U.S. manufacturing as a percent of GDP fell from 20.5% to 12.0%, while services grew from 56.0% to 68.5% of GDP ( Figure 4 ). From 1987 to 2014, U.S. manufacturing became more efficient as labor productivity (measured by output per hour) increased by 152.4% ( Figure 3 ). U.S. employment in manufacturing peaked at 19.4 million in 1979, but fell to 12.3 million by 2015, while jobs in private services during this time increased from 48.9 million to 100.3 million. In addition, U.S. employment in manufacturing as a percent of total non-agricultural employment fell from 21.6% in 1979 to 8.8% in 2014, while the level for private services grew from 54.3% to 70.5%. Business services employment within U.S. manufacturing has increased in recent years, growing from 29.8% in 2002 to 32.6% of total U.S. manufacturing jobs in 2012; computer and electronic products had the largest increase, with business services accounting for 67.2% of those manufacturing jobs in 2012. These data indicate that, while U.S. manufacturing output has increased, its importance relative to the economy has declined. U.S. employment in manufacturing has declined in both the number of workers and as a percent of non-agricultural employment. The decline in U.S. manufacturing employment was likely partly caused by the increase in labor productivity (such as the introduction of new technologies) as fewer workers are now needed for a given level of production than were needed in the past. In addition, the jobs in the service sector increased sharply, both in numbers and as a percent of non-agricultural employment. As noted earlier, globalization may have impacted the U.S. manufacturing in some industries. Apple Inc. designs its products in the United States but outsources most of its production to firms in China. Apple's main source of its profits stems from its ability to innovate new products and intellectual property and engineering, not from the production of these products. In addition, many U.S. manufacturing firms use imported inputs (such as parts) from low-wage countries in their production to lower costs as part of global supply chain production. Also, from a statistical standpoint, some of the "decline" in manufacturing may have resulted from reclassification of jobs in U.S. employment data, that is, jobs that used to be classified under manufacturing are now classified under services. Manufacturing remains an important component of the U.S. economy. U.S. manufacturers are estimated to perform 70% of all private-sector R&D and account for 60% of U.S. exports. According to the United Nations, in 2012, the United States ranked second after China in terms of gross value added of manufacturing (i.e., the actual value of manufacturing that occurred in the country, excluding inputs and raw materials used in production). The value for manufacturing in China was $2.6 trillion versus $2.0 trillion for the United States. 27. What is trade in services , and how is it different from goods trade? The term "services" refers to an expanding range of economic activities, such as audiovisual, construction, computer and related services, energy, express delivery, e-commerce, financial, professional, retail and wholesaling, transportation, tourism, and telecommunications. Services account for a majority of U.S. economic activity—68% of U.S. gross domestic product (GDP) and 80% of U.S. civilian employment. Services are 30% of U.S. exports but, unlike trade in goods, every year the United States exports more services than it imports. Surpluses in services trade have partially offset U.S. trade deficits in goods trade. Services not only function as end-use products, but also act as the "lifeblood" of the rest of the economy. For example, transportation services move intermediate products along global supply chains and final products to consumers; telecommunications services open e-commerce channels; and financial services provide credits for the manufacture and consumption of goods. Intermediate services embedded within a global value chain can include services such as research and development, design and engineering, and business services, such as legal and accounting. As with trade in goods, foreign government barriers may prevent U.S. trade in services from expanding to their full potential, but services barriers are often different from those faced by goods suppliers. Many impediments in goods trade—tariffs and quotas, for example—are at the border. By contrast, restrictions on services trade occur largely within the importing country and serve as "behind the border" barriers. Some of these restrictions are in the form of government regulations. One concern in international trade is ensuring that partner countries' regulations are applied in a nondiscriminatory and transparent manner that does not that favor domestic over foreign service providers. Because services transactions more often require direct contact between the consumer and provider than is the case with goods trade, many of the "trade barriers" that foreign companies face pertain to the ability to establish a commercial presence in the consumers' country in the form of direct investment or to the temporary movement of providers and consumers across borders. 28. How is digital trade different from other trade in goods and services? Non-tariff barriers related to digital trade establish restrictions that may impact what a firm offers in a market or how it operates. Because digital trade is intangible and does not require direct interaction between individuals, the trade barriers confronted are often in the form of localization requirements that restrict the flow of commercial data. For example, data transfer regulations that restrict cross-border data flows ("forced" localization barriers to trade), or require use of locally based servers or infrastructure, may limit the type of financial transactions and services that a firm can sell in a given country. Restrictions on cross-border data flow may prohibit the ability of a provider that offers or relies on cloud-computing to enter a market. Similarly, country-specific data regulations may create a disincentive for U.S. firms to invest in certain markets if a firm is hindered in its ability to export its own data from a foreign affiliate to a U.S.-based headquarters in order to aggregate and analyze information from across its global operations or to transfer customer or human resources records. The proponents of data localization seek to ensure privacy of citizens, security, and domestic control. However, others point out that maintaining data within a country does not necessarily guarantee security or protect a country from exposure to foreign attacks. Opponents of localization restrictions on digital trade also point to lost efficiencies and increased costs of not allowing a free flow of information across borders, and they support policies that protect privacy without creating trade barriers. Other non-tariff barriers to digital trade may come in the form of regulations that require the use of national standards or certification in order to operate. 29 . What role does Congress play in the making of trade policy? The role of Congress in formulating international economic policy and regulating international trade is based on express powers set out in Article 1, Section 8, of the U.S. Constitution, "To lay and collect Taxes, Duties, Imposts and Excises" and "To regulate Commerce with foreign Nations, and among the several States," as well as the general provision "To make all Laws which shall be necessary and proper" to carry out these specific authorities. Congress exercises this power in many ways, such as through the enactment of tariff schedules and trade remedy laws, and the approval and implementation of reciprocal trade agreements. 30 . What committees take the lead in exercising congressional authority over trade? Because of the revenue implications inherent in most trade agreements and policy changes, the House Ways and Means Committee and Senate Finance Committee have primary responsibility for trade matters. Each committee has a subcommittee dedicated exclusively to trade issues. Other committees may have a role should trade agreements, policies, and other trade issues include matters under their jurisdiction. 31 . In w hat explicit ways does Congress make trade policy? U.S. trade policy is founded on statutory authorities, as passed by Congress. These include laws authorizing trade programs and governing trade policy generally in areas such as tariffs, non-tariff barriers, trade remedies, import and export policies, political and economic security, and trade policy functions of the federal government. Congress also sets trade negotiating objectives in law; requires formal consultation from, and opportunity to provide advice on trade negotiations with the executive branch; and conducts oversight hearings on trade programs and agreements to assess their conformity to U.S. law and congressional intent. 32 . How can individual Member s affect trade policy decisions? Individual Members affect trade policy first as voting representatives who determine collectively the statutes governing trade matters. They may also exercise influence as sitting members on relevant committees, in testimony before those committees, whether as members of them or not, and in exercising informal influence over other Members through the exercise of the political authority and power invested in them by the electorate. 33 . What is meant by fast track or Trade Promotion Authority (TPA)? TPA (formerly known as fast track) refers to a statutory mechanism under which Congress (1) defines trade negotiating objectives, (2) authorizes the President to enter into reciprocal trade agreements governing tariff and non-tariff barriers, and (3) allows implementing bills to be considered under expedited legislative procedures, provided the President observes certain statutory obligations in negotiating trade agreements, including notifying and consulting Congress. The purpose of TPA is to preserve the constitutional role of Congress with respect to consideration of implementing legislation for trade agreements that require changes in domestic law, while also bolstering the negotiating credibility of the executive branch by assuring that the trade implementing bill will receive expedited and unamended consideration. The last TPA expired in 2007. Legislation to renew TPA—the "Bipartisan Congressional Trade Priorities and Accountability Act of 2015 (TPA-2015)—was introduced by Senators Hatch and Wyden and Representative Ryan on April 16, 2015. The legislation, as reported by the Senate Finance Committee, was joined with legislation extending Trade Adjustment Assistance (TAA) into a substitute amendment to H.R. 1314 (an unrelated revenue measure), and the legislation passed on May 22 by a vote of 62-37. In the House, the measure was voted on under a procedure known as "division of the question," which requires separate votes on each component, but approval of both for the bill to pass. Voting on June 12, TPA (Title I) passed by a vote of 219-211, but TAA (Title II) was defeated 126-302. On June 18, the House again voted on identical TPA language as an amendment attached to H.R. 2146 , an unrelated House bill. This amendment did not include TAA. This legislation passed the House 218-206, and by the Senate 60-38. The President signed the legislation ( P.L. 114-26 ) on June 29, 2015. Current negotiations on the proposed Trans-Pacific Partnership (TPP), the Transatlantic Trade and Investment Partnership (T-TIP), the Trade in Services (TISA), and the World Trade Organization (WTO) Doha Round agreements may require TPA in order to pass implementing legislation. 34 . Who is in charge of U.S. trade policy ? The President directs overall trade policy in the executive branch and performs specific trade functions granted to him by statute. The chief adviser to the President on trade matters is the United States Trade Representative (USTR), a Cabinet-level appointment that has primary responsibility for developing, coordinating, and implementing U.S. trade policy, as well as negotiating trade agreements and enforcing U.S. trade laws (see 19 U.S.C. 2171). 35 . Why was the USTR created? Congress created the USTR in 1962 (originally as the Office of the Special Representative for Trade Negotiations) to heighten the profile of trade and provide better balance between competing domestic and international interests in the formulation and implementation of U.S. trade policy and negotiations, which were previously managed by the U.S. Department of State. 36 . How are trade decisions made? The USTR has primary responsibility for trade negotiation and trade policy decisions within the executive branch. However, such decisions often involve areas of responsibility that fall under other Cabinet-level departments, at times requiring a multi-department interagency process. To implement this process, Congress established the Trade Policy Committee, chaired by the USTR and consisting of the Secretaries of the Treasury, Commerce, State, Agriculture, Labor, and other department heads as the USTR deems appropriate. The USTR subsequently established two sub-Cabinet groups—the Trade Policy Review Group (TPRG) and the Trade Policy Staff Committee (TPSC). The executive branch also solicits advice from a three-tiered congressionally established trade advisory committee system that consists of private sector and non-federal government representatives. 37 . What are the functions of the executive branch in U.S. trade? The executive branch executes trade policy in a variety of ways. It negotiates, implements, and monitors trade agreements, and has responsibility for customs enforcement, collection of duties, implementation of trading remedy laws, budget proposals for trade programs and agencies, export and import policies, and agricultural trade, among others. 38 . When does the President get involved in trade decisions? The President is responsible for influencing the direction of trade legislation, signing trade legislation into law, and making other specific decisions on U.S. trade policies and programs where he deems the national interest or political environment requires his direct participation. This can take place in many areas of trade policy, such as requesting TPA/fast track authority, initiating critical trade remedy cases, meeting or communicating with foreign heads of state or government, and other areas subject to or requiring high political visibility. 39 . What is the formal role of the private sector? The formal role of the private sector in the formulation of U.S. trade policy is embodied in a three-tiered committee system that Congress has provided in Section 135 of the Trade Act of 1974, as amended. Currently there are 28 committees (with about 700 citizen advisors), which are administered by the USTR's Office of Intergovernmental Affairs & Public Engagement (IAPE) in cooperation with a number of other federal agencies. The three-tier system consists of (1) the President's Advisory Committee for Trade Policy and Negotiations (ACTPN); (2) five general policy advisory committees dealing with environment, labor, agriculture, Africa, and intergovernmental issues; and (3) 22 technical advisory committees in the areas of industry and agriculture. These committees have been set up in order to ensure that private sector views are known and considered in the formulation and implementation of U.S. trade policies and programs. 40 . What is the informal role that the private sector plays in the formulation of U.S. trade policy? The private sector helps shape U.S. trade policy in a number of informal ways. For example, representatives from industry and non-government organizations may be invited to testify before congressional committees on trade matters. Private sector representatives are also invited or requested to testify before the United States International Trade Commission (USITC), the U.S. Department of Commerce, or other government bodies to provide assessments of the potential impact of pending trade actions, such as an antidumping or countervailing duty order, on their industries and sectors. Private sector organizations also lobby Congress and the executive branch to promote their interests in U.S. trade policy actions and agreements. 41 . Why do groups attempt to lobby on trade decisions? Trade is becoming a larger and increasingly integral part of the U.S. economy. Virtually all kinds of agricultural and manufactured goods are tradeable—they can be exported and imported. In addition, a growing number of services—once considered non-tradeable because of their intangibility—can be bought and sold across borders because of technology advancements, such as the Internet. As a result, how U.S. trade policy is shaped and implemented can affect a broad spectrum of people in the United States. For some industries, firms, and workers, congressional decisions to support a particular trade agreement or Department of Commerce rulings on antidumping cases, subsidies, and other cases could affect both employment and growth. Those decisions could also influence product choices of U.S. consumers. Such groups are also concerned with obtaining greater market access in various countries. Consequently, groups representing businesses, farmers, workers, consumers, and other segments of the economy strive to make sure that their views on trade policy decisions are represented. 42 . How do federal courts get involved in trade? Legal challenges may be brought in federal court by importers, exporters, domestic manufacturers, and other parties affected by governmental actions and decisions concerning trade. Cases may involve, for example, customs classification decisions, agency determinations in antidumping and countervailing duty (CVD) proceedings, presidential decisions to (or not to) restrict imports under trade remedy statutes, or the constitutionality of state economic sanctions. The federal government may also initiate legal proceedings against individuals and firms to enforce customs laws or statutory restrictions on particular imports and exports. Some trade statutes may preclude judicial review. For example, most preliminary determinations in antidumping and CVD proceedings and governmental actions involving the implementation of WTO and free trade agreements may not be challenged in federal court. While most federal cases involving trade laws are heard in the U.S. Court of International Trade (see below), cases may also be filed in other federal courts depending on the cause of action or proceeding involved. Court decisions may significantly affect U.S. trade policy when they examine whether an agency has properly interpreted its statutory mandate, determine whether an agency has acted outside the scope of its statutory authority, decide how much deference should be granted the executive branch under a particular statute, or rule on whether a trade statute violates the U.S. Constitution. 43 . What is the U.S. Court of International Trade? The U.S. Court of International Trade (USCIT) is an Article III federal court located in New York City with exclusive jurisdiction over a number of trade-related matters, including customs decisions, antidumping and countervailing duty determinations, import embargoes imposed for reasons other than health and safety, and the recovery of customs duties and penalties. Formerly known as the Customs Court, the USCIT was renamed in the Customs Court Act of 1980, which also significantly enlarged its jurisdiction. The court consists of nine judges, no more than five of whom may be from the same political party. Judges are appointed by the President with the consent of the Senate. USCIT decisions are appealable to the U.S. Court of Appeals for the Federal Circuit and to the U.S. Supreme Court. Statutory provisions related to the USCIT may be found at 28 U.S.C. Sections 251-258 (establishment) and 28 U.S.C. Sections 1581-1585 (jurisdiction). 44 . Why does the United States negotiate trade liberalizing agreements? The United States negotiates trade liberalizing agreements for economic and commercial reasons, including to encourage foreign trade partners to reduce or eliminate tariffs and non-tariff barriers and, in so doing, increase market access for U.S. exporters; gain an advantage for U.S. exporters over foreign competitors in a third-country market; increase access to lower cost imports that help to control inflation and offer domestic and industrial consumers a wider choice of products; and encourage trading partners, especially developing countries, to rationalize their trade regimes, and thereby improve the efficiency of their economies. The United States also negotiates trade liberalizing agreements for foreign policy/national security reasons, including to strengthen established alliances; forge new strategic relationships; and establish a presence in a geographic region. 45 . What are the various types of trade liberalizing agreements? In general, reciprocal trade agreements can be categorized by the number of countries involved: bilateral agreements , such as free trade agreements (FTAs), are between two countries; regional agreements , such as the North American Free Trade Agreement (NAFTA) and the proposed Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (T-TIP), involve three or more countries in a geographic region; plurilateral agreements involve a number of countries (not always from the same region) that often negotiate to liberalize trade in a specific sector, such as the proposed Trade in Services Agreement (TISA); and multilateral agreements , such as those negotiated in the World Trade Organization (WTO), cover a significant share of global trade. Among major trade agreements, the TPP is currently a major focus, in that it is a proposed comprehensive and high-standard free trade agreement (FTA) among 12 countries to liberalize trade and investment through enhanced rules and disciplines and greater market access. It may become a vehicle to advance a wider Asia-Pacific free trade area as well as a U.S. policy response to the rapidly increasing economic and strategic linkages among Asian-Pacific states. It is portrayed by the Administration as the key economic component of the "rebalance" to the Asia-Pacific. The TPP has slowly evolved from a more limited agreement among four countries concluded in 2006 into the current 12-country FTA negotiations, with the United States joining the negotiations in 2008. Japan, the most recent country to participate, joined the negotiations in 2013. The United States has existing FTAs with 6 of the 11 countries participating—Australia, Canada, Chile, Mexico, Peru, and Singapore. The five TPP countries without existing FTAs with the United States are Brunei, Japan, Malaysia, New Zealand, and Vietnam. Views on the agreement vary widely. Proponents argue that the TPP has the opportunity to expand trade and investment opportunities with negotiating partners that make up 37% of total U.S. goods and services trade, and establish trade and investment disciplines on new issues such as supply chain management, state-owned enterprises (SOEs), regulatory coherence, and digital trade barriers, in a region of strategic economic and geopolitical importance. Proponents argue that the TPP has the opportunity to expand trade and investment opportunities with negotiating partners that make up 37% of total U.S. goods and services trade, and establish trade and investment disciplines on new issues such as supply chain management, state-owned enterprises (SOEs), regulatory coherence, and digital trade barriers, in a region of strategic economic and geopolitical importance. Opponents voice concerns over greater competition in import sensitive industries, and how the potential TPP agreement might impact U.S. sovereignty in establishing future U.S. regulations in areas such as health, food safety, and environment. Ambassador Froman signed the concluded TPP on February 4, 2016, but Congress must pass implementing legislation for the agreement to enter into force in the United States. Recently signed Trade Promotion Authority (TPA) legislation guarantees certain legislative procedures for congressional consideration of TPP implementing legislation, including an up or down vote by Congress. Such procedures, however, are contingent on Congress's determination that the Administration has made sufficient progress in advancing congressional negotiating objectives established in TPA and has followed TPA notification and consultation requirements. 46 . Who benefits from trade liberalizing agreements? Who loses? Economic theory suggests and empirical studies have generally concluded that economies as a whole benefit when trade barriers are removed because economic resources (land, labor, and capital) are employed more efficiently. However, economic theory and studies also point out that the benefits of trade liberalization are not distributed evenly within an economy and not even among economies. Some industries, firms, and workers "lose" if they cannot adjust to the increased foreign competition resulting from the trade agreement or if particular provisions of the trade agreement disadvantage their interests. Other industries, firms, and workers "win" if they can take advantage of new market opening opportunities presented by the trade agreement or if particular provisions of the trade agreement favor or promote their interests. 47 . What is the World Trade Organization ( WTO ) ? The WTO is a 160-member body that establishes through negotiations and implements the multilateral system of rules on trade in goods, services, agriculture, IPR, trade remedies, and on other trade-related matters and adjudicates disputes under the rules. Fundamental principles of the WTO include non-discrimination and national treatment in trade among the members. The WTO was established in January 1995 as a part of the agreements reached by the signatories to the General Agreement on Tariffs and Trade (GATT). The WTO administers the roughly 60 agreements and separate commitments made by its members as part of the GATT (for trade in goods), the General Agreement on Trade in Services (GATS—for trade in services), and the agreement on trade-related aspects of intellectual property rights (TRIPS). It also oversees multilateral and plurilateral negotiations among its members. 48 . How are disputes resolved under WTO agreements? If a WTO member believes that another member has adopted a law, regulation, or practice that violates a WTO agreement, the member may initiate dispute settlement proceedings under the WTO Dispute Settlement Understanding. The process begins with consultations and, if these fail to resolve the dispute, the member may request that the WTO establish a dispute panel. A panel report may be appealed to the WTO Appellate Body by either disputing party. If the defending member is found to have violated a WTO obligation, the member will be expected to remove the challenged measure. If this is not done by the end of the established compliance period, the prevailing member may request authorization from the WTO to take temporary retaliatory action. In most cases, retaliation consists of tariff increases on selected products from the defending member. From January 1995 to June 2014, 496 dispute settlement complaints have been filed in the WTO, with the majority of disputes resolved through consultations and negotiations rather than through a ruling by a WTO dispute settlement panel (or the WTO's Appellate Body). WTO members have an obligation to comply with WTO dispute resolution rulings, and if such compliance is not forthcoming, the WTO member that filed the complaint can request authorization to impose trade sanctions against, or seek compensation from, the defending WTO member. WTO decisions do not have direct effect in U.S. law. Thus, in the event a U.S. statute is found to be inconsistent with U.S. obligations in the WTO, the dispute findings may not be implemented except through U.S. legislative action. Where an administrative action is successfully challenged, the USTR decides what, if any, compliance action will be taken. If sufficient statutory authority exists to amend or modify a regulation or practice or to issue a new determination in a challenged administrative proceeding, the USTR may direct the agency involved to make the change, provided that certain statutory procedures for such actions are followed. As a matter of policy, the United States generally seeks to comply with WTO dispute settlement rulings that go against it, as doing so helps ensure that other WTO members comply with rulings that have gone against them, including those brought by the United States. 49 . What is the Doha Round? Since the GATT was signed in 1947, its signatories (member countries) have revised and expanded the trade rules in various rounds of negotiations to liberalize global trade. The Doha Development Agenda (DDA) is the ninth round and the first under the WTO. It is named after the city where it was launched in November 2001—Doha, Qatar. The WTO members included "development" in the title to reflect their intention to include issues of importance to developing countries. The negotiations have primarily focused on three areas—agriculture, non-agricultural goods, and services, although members have conducted negotiations in other areas as well, such as rules. As of this writing, negotiators have not been able to reach agreement and conclude the round. In December 2013, WTO members reached consensus on a Trade Facilitation Agreement (TFA) to remove customs obstacles at the border. However, beginning in July 2014, implementation of the agreement has been held up by India because of its concerns over food security issues. On November 13, 2014, the USTR announced that the United States and India had resolved their differences. As of March 2015, WTO members have reported on new efforts made to formally accept the new TFA, with delegations outlining target dates for securing approval seeing that the agreement enter the WTO's 10 th Ministerial Conference in Nairobi next December. 50 . What are free trade agreements (FTAs)? At a minimum, FTAs are agreements between/among two or more countries under which they agree to eliminate tariffs and non-tariff barriers on trade in goods and services among them, but each country maintains its own trade policies and regulations, including tariffs, on trade outside the FTA. FTA partner countries may also agree to reduce barriers or otherwise establish rules of behavior in other economic activities—investment, IPR, government procurement, worker rights, and environmental protection. 51 . How do FTAs that the United States negotiate s generally differ from those negotiated among other countries? The United States currently has 14 FTAs in force that include 20 countries. The FTAs that the United States negotiates are often more comprehensive and high standard than those that are negotiated among other countries, particularly developing countries. The standard U.S. FTA model includes not only the elimination of tariffs on trade in goods among the FTA partners, but also reduction of barriers on trade in services, rules on foreign investment, requirements for IPR protection, government procurement, and provisions on labor and environment, and several other issues. The United States is currently negotiating a number of FTAs, including the TPP, involving the United States and 11 other countries in the Asia-Pacific region; and the Transatlantic Trade and Investment Partnership (T-TIP) between the United States and the European Union. The United States has sought to make the TPP a comprehensive high standard free trade agreement that can serve as template for future FTA negotiations, especially through addressing issues that have not traditionally been address in other trade agreements, such as the development of new rules on state-owned enterprises (SOEs) and digital trade. 52 . What are Trade and Investment Framework Agreements (TIFAs)? A TIFA is an agreement between the United States and another country (for example Egypt) or group of countries (for example, ASEAN) to consult on issues of mutual interest in order to promote trade and investment among the participants. Most U.S. TIFAs are with developing countries. The United States and its TIFA partner(s) agree to establish a joint ministerial-level council as the overall mechanism for consultation with the possibility of establishing issue-oriented working groups. A TIFA is a non-binding agreement and does not involve changes in U.S. law; therefore, TIFAs do not require congressional approval. In some cases, TIFAs have led to FTA negotiations. As noted earlier, countries export in order to obtain imports, which benefit various parts of the economy. Lower-priced imports generally benefit the U.S. economy as a whole. However, in some instances, imports may harm certain import-sensitive U.S. firms, in particular when foreign firms or governments seek to employ trade-distorting measures. The federal government seeks to use a number of trade tools to combat unfair foreign trade policies and assist those injured by foreign trade. In some cases, such policies are intended to help create a "level playing field" for U.S. producers and workers, induce foreign countries to eliminate trade-distortive policies, or to help import-sensitive firms adjust to the changing nature of global competitive through the use of Trade Adjustment Assistance (TAA). 53 . What are other benefits of imports? Consumers can benefit through access to a wider variety of goods at lower costs. This raises consumer welfare (which means consumers have more money to spend on other goods and services) and helps control the rate of U.S. inflation. Producers can benefit through access to lower priced components or inputs that can be utilized in the production process. Longer term, import competition can also pressure companies to reduce costs through innovation, research, and development, leading to growth in economic output and productivity. 54 . What are the costs of imports? By affording increased competition to U.S. companies producing similar products, imports can contribute to U.S. job losses and business failures. In some cases, import competition can cause job losses and company failures that are concentrated in a region or sector, which can cause considerable economic distress in a community. The use of unfair trade policies (such as export subsidies) to boost sales in the United States can result in trade tensions. 55 . What are the main U.S. trade remedy laws? Two primary trade remedy laws aimed at unfair trade practices are the antidumping (AD) and countervailing duty (CVD) statutes. Other trade remedy laws include Section 201 (see below), Section 301 (focuses on violations of trade agreements or other foreign practices that are unjustifiable and restrict U.S. commerce), and Section 337 (focuses on unfair practices in import trade such as patent and copyright infringement). 56 . What is the purpose of the countervailing duty law? The purpose of the CVD law is to offset any unfair and injurious competitive advantage that foreign manufacturers or exporters might enjoy over U.S. producers as a result of receiving a government subsidy. As defined by the WTO, a subsidy is a financial contribution, such as a loan, grant, or tax credit, provided by a government or other public entity that confers a specific benefit to manufacturers or exporters of a product. Countervailing duties, if imposed, are designed to equal the net amount of the foreign subsidy and are levied upon importation of the subsidized goods into the United States. 57 . What is the purpose of the antidumping law? Dumping generally refers to an unfair trade practice in which an exporter sells goods in one export market at lower prices than comparable goods sold in the home market or in other export markets. Companies may dump products to gain market share or deter competition. U.S. law provides for the assessment and collection of antidumping duties when an administrative determination is made that foreign goods are being dumped or sold at less than fair value in the United States, and that such imports cause or threaten to cause material injury to a U.S. industry. 58 . What is the import relief (safeguards) law? Chapters 1 and 2 of the Trade Act of 1974, as amended, provide the President with the authority to apply safeguard measures temporarily (increased tariffs or quotas) to restrict imports if they threaten or cause serious injury to a domestic industry. Safeguard measures apply to products that are not necessarily traded unfairly. This provision recognizes that liberalization of trade barriers can change competitive conditions and that in certain cases domestic industries should be provided a temporary period of relief to allow time for adjustment. The U.S. International Trade Commission investigates and recommends on import relief cases, and the President takes final action. Safeguard measures are permitted under WTO rules. 59 . What is the Trade Adjustment Assistance (TAA) Program? Congress passed the first trade adjustment assistance program as part of the Trade Expansion Act of 1962 (P.L. 87-794) and it has extended and changed the TAA provisions over time. TAA was developed to provide certain types of temporary assistance to workers, firms, farmers, and communities that may be negatively impacted by foreign trade. Funding for TAA was $797 million in FY2013, down from $1.8 billion in FY2010. Recent legislation in regards to TAA was introduced March 4, 2015, the Trade Preferences Extension Act of 2015 ( H.R. 1295 ) reauthorizes TAA through June 30, 2021, and restores some benefits under the program that had been allowed to expire by extending the termination provisions of the Trade Act of 1974; authorizing $450 million in funding; extending the reemployment trade adjustment assistance; and authorizing appropriations for trade adjustment assistance for workers, firms, and farmers. It was signed into law June 29, 2015 ( P.L. 114-27 ). 60 . What is the rationale for TAA? In proposing the program, supporters in Congress argued that those injured by increased trade competition as a result of public policy should not be required to bear the full cost of the impact. Justification rested on arguments for (1) economic efficiency, by speeding the adjustment process and returning idle resources to work more quickly, (2) equity, by compensating the losers of free trade while spreading the cost of freer trade to society as a whole, and (3) as a way to defuse domestic opposition to trade liberalizing agreements and measures. TAA skeptics argue that such assistance is costly and economically inefficient, reduces worker and firm incentives to relocate and adjust, and may not be equitable given that many economic groups hurt by changing economic circumstances caused by factors other than trade policies are not afforded special economic assistance. Despite disagreement, Congress has consistently found compromise positions to maintain the program over the past five decades. The federal government maintains a number of programs and policies to promote certain U.S. exports. Some programs provide direct assistance to U.S. exporters, such as financing or trade counselling. Other U.S. policies attempt to promote exports by negotiating trade liberalization measures, such as through FTAs, or agreements to enhance trade rules and disciplines. In some instances, the federal government seeks to restrict certain exports. 61 . What are the benefits of exports? From the perspective of individual companies, export markets provide opportunities to expand production and increase efficiency by taking advantage of economies of scale and access to growing markets overseas. Companies may also be able to sell goods and services at higher prices than they can obtain at home. From the perspective of individual workers, jobs in export-oriented industries often provide higher than average wages. 62 . What are some costs of exporting? From an economic perspective that views higher levels of consumption as being the goal of economic activity, countries export goods and services in order to earn the foreign currency with which they can buy imports. Exports, according to this view, are foregone production that could have been consumed domestically (and instead are used to acquire and consume imports). 63 . What factors most determine U.S. export levels? Economists maintain that the overall level of U.S. exports is determined primarily by the same macroeconomic conditions that generate the U.S. trade deficit. These include the level of savings and investment, the foreign exchange rate, and willingness of foreigners to invest in U.S. assets. U.S. exports also depend on economic growth rates in major markets. The higher the rate of economic growth in Asia (particularly Japan and China), Europe (particularly Germany, the UK, and France), Canada, and Latin America, the more people in those markets are likely to buy U.S. exports, other things being equal. 64 . What factors determine the exporting success of specific sectors? The level of American exports in specific sectors depends both on the overall level of exports and on an interplay of factors such as the relative competitiveness of the American industry, trade barriers abroad, and sometimes the degree of U.S. export promotion. The higher the overall level of exports, the more individual sectors are likely to sell abroad, but given the impact of macroeconomic factors, export surges by a particular sector often are offset by a decline in exports by other sectors. In a world of (mostly) floating exchange rates, a large export surge will cause foreigners to buy more dollars to pay for those exports. This raises the demand for dollars and increases its price relative to other currencies. Since the United States does not intervene in currency markets to fix its exchange rate, the higher value of the dollar makes U.S. exports more expensive and may reduce their sales. 65 . How does the U.S. government promote exports? There are at least 20 federal agencies involved in promoting U.S. exports and supporting U.S. investment. For example, the Export-Import Bank (Ex-Im Bank), the Department of Agriculture, and the Overseas Private Investment Corporation (OPIC) administer various finance programs aimed at helping U.S. firms export and invest in certain developing countries, including through fee-based services. These agencies have mandates that vary in their direct emphasis on U.S. commercial interests and U.S. foreign policy, but their activities can have both U.S. commercial and/or foreign policy implications. In some cases, U.S. trade financing is provided to help U.S. firms obtain a "level playing field" against certain foreign firms that may be receiving subsidized financing from their respective governments. In addition, the Department of Commerce, through the International Trade Administration (ITA), acts to promote U.S. exports of goods and services (particularly by small and medium-sized companies) by providing a number of support services, such as export counselling. Boosting U.S. exports was elevated as a priority issue with the Obama Administration's introduction of the National Export Initiative (NEI) in the 2010 State of the Union Address. The NEI set a strategy to double U.S. exports by 2015 in an effort to boost the economy and generate employment growth. The next phase of NEI is NEI/NEXT, which has five objectives: to connect more American businesses to more global customers; to make the exporting process easier and less expensive; to expand access for businesses to export financing and insurance; to promote exports and the attraction and retention of investment as a priority for American communities; and to create, foster, and ensure more exporting opportunities. NEI/NEXT, among other things, also has a cross-cutting objective to improve government data to support companies' exporting decisions across all five specific objectives. As the official U.S. export credit agency (ECA), Ex-Im Bank finances and insures U.S. exports of goods and services with the goal of supporting U.S. jobs. On a demand-driven basis, it seeks to support exports that the private sector is unwilling or unable to finance alone at commercially viable terms for exporting; and/or to counter government-backed financing offered by foreign countries through their ECAs. The rationales behind Ex-Im Bank's activities remain subject to congressional debate. Ex-Im Bank operates under a renewable general statutory charter (Export-Import Bank Act of 1945, as amended), extended through the end of FY2109 by the Export-Import Bank Reform and Reauthorization Act of 2015 (Division E, P.L. 114-94 ). This act lowered the Bank's statutory lending authority ("exposure cap" for outstanding portfolio) to $135 billion for each of FY2015-FY2019 subject to certain conditions, and made reforms including to its policies or operations in risk management, fraud controls, and ethics, as well as the U.S. approach to international negotiations on disciplines on government-backed export credit financing. 6 6 . Are U.S. export promotion programs beneficial to the U.S. economy? This is a hotly debated question. A number of economic justifications have been given for supporting or opposing government export promotion programs and policies. Economic theory generally holds that free markets should determine the most efficient allocation of scarce resources, based on supply and demand factors. However, market failures may prevent the market from operating at its "optimal" or most efficient level, causing the market to either over-allocate or under-allocate resources to various economic activities and leading to economic waste. Thus, in order to remove such market failures and promote economic efficiency, some form of government intervention may be warranted. The existence of imperfect information in the market, spillovers, and imperfect competition are examples of market failures that often are cited as justifying government export promotion programs, the presumption being that either the composition or level of U.S. exports is below that which would maximize U.S. living standards. From an economic perspective, much of the debate over export promotion involves whether some market failure actually has occurred, and whether government intervention can produce net benefits for the economy as a whole. Supporters of export promotion programs assume that market failures have occurred and have led to significant misallocation of resources in the economy. Some view export promotion as a corrective tool to ensure that resources are directed to their most efficient use. Proponents argue that these policies can boost exports substantially, improve national living standards, and (during periods of less than full employment) increase output and employment. An additional justification used involves instances when U.S. firms find themselves unable to compete in certain overseas markets because their foreign competitors have received significant levels of government support, including subsidized export financing. U.S. policies to counter or offset such subsidies, it is argued, will create a level playing field for U.S. firms and possibly induce other countries to discontinue providing export subsidies. Opponents of export promotion programs dispute that significant market failures have occurred, and warn that government intervention may interfere with the efficient operation of the market. Such critics argue that export promotion policies are little more than distortive subsidies that favor some firms over others, reduce efficiency within the economy, result in terms-of-trade losses, and diminish national living standards. In addition, while critics concede that trade promotion programs may help boost employment and production during periods of less than full employment, they question why exporting firms should be favored for assistance over other U.S. firms. Some argue that broad monetary and fiscal policies aimed at stimulating domestic demand may provide a more effective means of boosting the economy. Many economists would argue that addressing market failures could boost U.S. economic efficiency. However, various factors, such as global macroeconomic policies and the economic growth rates of the United States and its major U.S. trading partners, trends in global trade policies (such as expansion of trade liberalization policies or, conversely, increased trade protectionism), and international exchange rates will likely be among the most significant forces determining the level and composition of U.S. exports in the long run. 67 . What does the U.S. government do to restrict exports and why ? Congress has authorized the President to control the export of various items for national security, foreign policy, and economic reasons. Separate programs and statutes for controlling different types of exports exist for nuclear materials and technology, defense articles and services, and dual-use goods and technology. Under each program, licenses of various types are required before an export can be undertaken. The U.S. Departments of Commerce, State, Energy, and the Treasury administer these programs. 68 . What are the main kinds of capital flows? Generally, the two main kinds of capital flows are foreign direct investment (FDI) and foreign portfolio investment (FPI). FDI involves the acquisition of real assets such as real estate, a manufacturing plant, or controlling interest in an ongoing enterprise by a person or entity from another country. Foreign portfolio investment involves the purchase of foreign equities or bonds, loans to foreign residents, or the opening of foreign bank accounts. FDI often involves a long-term commitment and can have direct employment stimulation advantages for the host country, while portfolio investments are extremely liquid and can be withdrawn oftentimes at the click of a computer mouse. In addition, there are official capital flows generated by governments for various purposes, such as humanitarian assistance and other foreign aid. 69 . Which is larger—trade or capital flows? It depends. Recent data indicate that from 1985 to 2012, global trade in goods and services, as measured by exports, tripled from $6 trillion a year to $19 trillion a year. During the same period, capital flows, as measured in the balance of payments accounts (direct, portfolio, and other official investments), more than quadrupled from $1.1 trillion a year to $7.0 trillion a year. But during this time period, there also has been an explosion in growth in other types of capital flows, known as foreign exchange and over-the-counter derivatives markets. These markets facilitate trade in foreign exchange and other types of assets. While the capital flows associated with these markets do not directly relate to transactions in the balance of payments, they do affect the international exchange value of the dollar, which in turn affects the prices of goods and services and the cost of securities. A survey of the world's leading central banks indicated that the total daily trading of foreign currencies was more than $5.3 trillion in April 2013. 70 . Why do companies invest abroad? For the most part, firms invest abroad to increase their profits. Economists and other experts generally conclude, however, that a broad range of factors influences a firm's decision to invest abroad. The major determinants of FDI are the presence of ownership-specific competitive advantages in a transnational corporation; the presence of locational advantages, such as resource endowments or low-cost labor in a host country; and the presence of superior commercial benefits in an intra-firm relationship as opposed to an arm's-length relationship between investor and host country. Multinational firms apparently are motivated by more than a single factor, and likely invest abroad not only to gain access to a low-cost resource, but also to improve their efficiency or their market share. In addition, many firms often find it advantageous to operate close to their customers in foreign countries, where tastes and preferences may differ from those in the home market. Foreign markets may also enable multinational firms to access various resources, such as a well-educated work force, which might contribute to the firm's R&D activities. Some FDI activities involve mergers and acquisitions that may help a firm become more globally competitive. 71 . Why has foreign investment increased so dramatically in recent decades? From 1990 to 2012, the stock, or the cumulative amount, of foreign direct investment in the world grew by more than tenfold from $1.8 trillion to $23 trillion. This rapid growth arises from a number of factors. One of the most important factors has been a change in public policies toward foreign direct investment among most countries. Foreign direct investment (FDI) has come to be viewed favorably not only by the economically advanced countries, but also by developing economies, which now often compete to bring in much-needed capital, technology, and technical expertise. Currently, about three-fourths of all direct investment is placed among the highly developed economies where consumer tastes and workers' wages are comparable. 72 . What are the levels of U.S. FDI outflows and inflows? FDI flows to and from the United States have increased rapidly over the past few decades. From 1990 to 2014, the stock of U.S. FDI abroad rose from $431 billion to nearly $4.9 trillion, while the stock of FDI in the United States increased from $395 billion to nearly $2.9 trillion (see Figure 5 ). The largest destination for total (or the stock of) U.S. FDI outflows through 2013 included the Netherlands, Luxembourg, Canada, Ireland, and the United Kingdom, while the largest sources of total FDI inflows included the United Kingdom, Japan, the Netherlands, Canada, and Luxembourg. 73 . What are some of the benefits of FDI ? Generally, economists argue in favor of unimpeded international flows of capital, such as direct investment, because they estimate that such flows positively affect both the domestic (home) and foreign (host) economies. For the home country, direct investment benefits the individual firms that invest abroad, because they are better able to exploit their existing competitive advantages and to acquire additional skills and advantages. Direct investment also seems to be associated with a strengthened competitive position, a higher level of skills of the employees, and higher incomes of firms that invest abroad. Host countries benefit from inward FDI because the investment adds permanently to the capital stock and often to the skill set of the nation. Direct investment also brings technological advances, since firms that invest abroad generally possess advanced technology, processes, and other advantages. Such investment also boosts capital formation and contributes to a growth in a competitive business environment and productivity. In addition, direct investment contributes to international trade and integration into the global trading community, since most firms that invest abroad are established multinational firms. 74 . Are there costs associated with FDI ? Concerned observers argue that U.S. FDI in production facilities abroad supplants U.S. exports, thereby reducing employment and wages in the U.S. economy. While it appears unlikely that the overall U.S. employment level is affected by direct investment flows, jobs in particular companies and sectors can be adversely affected when a company decides to produce similar products abroad. For example, if a U.S. auto company closed an assembly line in the United States and opened one in Mexico assembling the same product line, U.S. auto assembly jobs are lost. Similarly, while inward flows of foreign direct investment tend to create new jobs, there sometimes is concern that the new foreign owners may not serve as stable and dependable community partners, as did the previous nationally based ownership. 75 . What are Bilateral Investment Treaties ( BITs ) ? BITs are agreements between two countries for the reciprocal encouragement, promotion, and protection of investments in each other's territories. Most treaties contain basic provisions that cover the following areas: scope and definition of investment, admission and establishment, national (or non-discriminatory) treatment (often referred to as most-favored-nation treatment), compensation in the event of expropriation or damage to the investment, guarantees of free transfers of funds, and dispute settlement mechanisms, both state-state and investor-state. U.S. BITs have to be ratified by the Senate. 76 . What is the Committee on Foreign Investment in the United States ( CFIUS ) and what does it do ? CFIUS is an interagency committee that serves the President in overseeing foreign investment transactions that could affect the national security of the country. CFIUS was established initially by an executive order of President Ford in 1975 with broad responsibilities and few powers. The authority to review foreign investments, known as the Exon-Florio provision, was formally established in 1988 with the passage of P.L. 100-418 . In 2007, the Foreign Investment and National Security Act ( P.L. 110-49 ) established CFIUS itself in statute and expanded the role of the committee in reviewing foreign investment transactions that could affect "homeland security" and "critical industries." Some foreign investors and foreign governments have objected to the expanded role of CFIUS as being counter to the long-standing U.S. position of an open investment climate. The authority granted to the President to block foreign investment transactions, however, has been invoked only twice since 1988, although in a few instances, issues and concerns raised by CFIUS have led foreign investors to cancel a planned purchase or to divest itself of the purchase if the deal had had already been completed. CRS Report R43841, International Trade and Finance: Key Policy Issues for the 114th Congress, 2nd Session , coordinated by [author name scrubbed] and [author name scrubbed]. 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CRS Report R41929, Boosting U.S. Exports: Selected Issues for Congress , by [author name scrubbed] et al. CRS Report R43581, Export-Import Bank: Overview and Reauthorization Issues , by [author name scrubbed]. CRS Report R42844, IMF Reforms: Issues for Congress , by [author name scrubbed] and [author name scrubbed]. CRS Report R43671, Export-Import Bank Reauthorization: Frequently Asked Questions , coordinated by [author name scrubbed]. CRS Report R43387, Transatlantic Trade and Investment Partnership (T-TIP) Negotiations , by [author name scrubbed], [author name scrubbed], and [author name scrubbed]. CRS Report RL33867, Miscellaneous Tariff Bills: Overview and Issues for Congress , by [author name scrubbed]. CRS Report RS22204, U.S. Trade Deficit and the Impact of Changing Oil Prices , by [author name scrubbed]. CRS Report R44044, U.S. Trade with Free Trade Agreement (FTA) Partners , by [author name scrubbed]. 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Office of the United States Trade Representative, 2014 National Trade Estimate Report on Foreign Trade Barriers , March 2014, at http://www.ustr.gov . Office of the United States Trade Representative, 2014 Special 301 Report , April 2014, at http://www.ustr.gov . U.S. Congress, House Ways and Means Committee, Overview and Compilation of U.S. Trade Statutes, 2013 Edition, January 2013, at http://waysandmeans.house.gov/uploadedfiles/2013_blue_book_.pdf . The White House, Council of Economic Advisers, 2014 Economic Report of the President, at http://www.whitehouse.gov/administration/eop/cea/economic-report-of-the-President/2014 . 1. Why do countries trade? 2. What is comparative advantage? 3. What determines comparative advantage? 4. Can governments shape or distort comparative advantage? 5. What is the terms of trade? 6. What are the costs of trade expansion? 7. Does trade destroy jobs? 8. Does trade reduce the wages of U.S. workers? 9. What is intra-industry trade? 10. What is economic globalization? 11. What are global supply chains and how do they relate to economic globalization? 12. How does globalization affect job security? 13. Which are the largest global trading economies? 14. What is meant by the trade deficit? 15. Why does the United States run a trade deficit? 16. How significant is the size of the U.S. trade deficit and how does it compare with other major economies? 17. What role do foreign trade barriers play in causing bilateral trade deficits? 18. How does the trade deficit affect the exchange value of the dollar? 19. How is the trade deficit financed? 20. Is the trade deficit a problem for the U.S. economy? 21. How long can the United States keep running trade deficits? 22. How can the trade deficit be further reduced? 23. How important is trade to the U.S. economy? 24. Who are the leading U.S. trade partners? 25. How does "economic globalization" complicate interpretation of U.S. trade data? 26. Is the U.S. manufacturing sector shrinking? 27. What is trade in services and how is it different from goods trade? 28. How is digital trade different from other trade in goods and services? 29. What role does Congress play in the making of trade policy? 30. What committees take the lead in exercising congressional authority over trade? 31. In what explicit ways does Congress make trade policy? 32. How can individual Members affect trade policy decisions? 33. What is meant by fast track or Trade Promotion Authority (TPA)? 34. Who is in charge of U.S. trade policy? 35. Why was the USTR created? 36. How are trade decisions made? 37. What are the functions of the executive branch in U.S. trade? 38. When does the President get involved in trade decisions? 39. What is the formal role of the private sector? 40. What is the informal role that the private sector plays in the formulation of U.S. trade policy? 41. Why do groups attempt to lobby on trade decisions? 42. How do federal courts get involved in trade? 43. What is the U.S. Court of International Trade? 44. Why does the United States negotiate trade liberalizing agreements? 45. What are the various types of trade liberalizing agreements? 46. Who benefits from trade liberalizing agreements? Who loses? 47. What is the World Trade Organization (WTO)? 48. How are disputes resolved under WTO agreements? 49. What is the Doha Round? 50. What are free trade agreements (FTAs)? 51. How do FTAs that the United States has negotiated generally differ from those negotiated among other countries? 52. What are Trade and Investment Framework Agreements (TIFAs)? 53. What are other benefits of imports? 54. What are the costs of imports? 55. What are the main U.S. trade remedy laws? 56. What is the purpose of the countervailing duty law? 57. What is the purpose of the antidumping law? 58. What is the import relief (safeguards) law? 59. What is the Trade Adjustment Assistance (TAA) Program? 60. What is the rationale for TAA? 61. What are the benefits of exports? 62. What are some costs of exporting? 63. What factors most determine U.S. levels? 64. What factors determine the exporting success of specific sectors? 65. How does the U.S. government promote exports? 66. Are U.S. export promotion programs beneficial to the U.S. economy? 67. What does the U.S. government do to restrict exports and why? 68. What are the main kinds of capital flows? 69. Which is larger—trade or capital flows? 70. Why do companies invest abroad? 71. Why has foreign investment increased so dramatically in recent decades? 72. What are the levels of U.S. FDI outflows and inflows? 73. What are some of the benefits of FDI? 74. Are there costs associated with FDI? 75. What are Bilateral Investment Treaties (BITs)? 76. What is the Committee on Foreign Investment in the United States (CFIUS) and what does it do? This appendix provides a list of acronyms used throughout the report.

Congress plays a major role in U.S. trade policy through its legislative and oversight authority. There are a number of major trade issues that are currently the focus of Congress. For example, bills were introduced in the 113th Congress to reauthorize Trade Promotion Authority (TPA), the U.S. Generalized System of Preferences (GSP), and the U.S. Export-Import Bank, and legislative action on these issues could be forthcoming in the 114th Congress. Additionally, Congress has been involved with proposed free trade agreements (FTAs), including the Trans-Pacific Partnership (TPP) involving the United States and 11 other countries and the Transatlantic Trade and Investment Partnership (TTIP) between the United States and the European Union (EU). Also of interest to Congress are current plurilateral negotiations for a Trade in Services Agreement (TISA) and an updated multilateral Information Technology Agreement (ITA) in the World Trade Organization (WTO). Trade and investment policies of major U.S. trading partners (such as China), especially when they are deemed harmful to U.S. economic interests, are also of continued concern to Congress. Recent improved U.S. relations with Cuba have resulted in the introduction of several bills to boost bilateral commercial ties. The costs and benefits of trade to the U.S. economy, firms, workers, and constituents, and the future direction of U.S. trade policy, are the subject of ongoing debates in Congress. This report provides information and context for these and many other trade topics. It is intended to assist Members and staff who may be new to trade issues. The report is divided into four sections in a question-and-answer format: trade concepts; U.S. trade performance; formulation of U.S. trade policy; and trade and investment issues. Additional suggested readings are provided in an appendix. The first section, "Trade Concepts," deals with why countries trade, the consequences of trade expansion, and the relationship between globalization and trade. Key questions address the benefits of specialization in production and trade, efforts by governments to influence a country's comparative advantage, how trade expansion can be costly and disruptive to workers in some industries, and some unique characteristics of trade between developed countries. The second section, "U.S. Trade Performance," lists data on U.S. trade flows and focuses on the U.S. trade deficit, including its implications for the U.S. economy. Questions address the causes of trade deficits, the role of foreign trade barriers, and how the trade deficit might be reduced. The third section, "Formulation of U.S. Trade Policy," deals with the roles played by the executive branch, Congress, the private sector, and the judiciary in the formulation of U.S. trade policy. Information on how trade policy functions are organized in Congress and the executive branch, as well as the respective roles of individual Members and the President, is provided. The roles of the private sector and the judiciary are also discussed. The fourth section, "U.S. Trade and Investment Policy Issues," lists questions related to trade negotiations and agreements and to imports, exports, and investments. The justification, types, and consequences of trade liberalization agreements, along with the role of the WTO, are treated in this section. The costs and benefits of imports, exports, and investments are also discussed, including how the government deals with disruption and injury to workers and companies caused by imports and its efforts to both restrict and promote exports. The motivations and consequences of foreign direct investment flows are also discussed.

Real Estate Investment Trusts (REITs) are mutual funds made up of real estate and mortgageassets. In recent years, their performance has been stronger than broader market indicators, leadingto calls for inclusion of a REIT alternative in the Thrift Savings Plan (TSP) for federal workers. H.R. 1578 , the Real Estate Investment Thrift Savings Act, was introduced April12, 2005, to provide for an REIT option in the TSP. Hearings were held on the legislation April 19,2005, by the House Government Reform Subcommittee on the Federal Workforce and AgencyOrganization. Further hearings are scheduled for April 26, 2006. A companion bill, S. 2490 , was introduced in the Senate on April 13, 2006. This report summarizes the legal and economic history of REITs and the factors that havecontributed to recent strong performances of REITs as investment vehicles. It then addresses thearguments behind their possible inclusion as an investment alternative in the TSP. Introduced in the 1960s, Real Estate Investment Trusts (REITs) applied the mutual fundconcept to real estate. By buying an interest in a REIT, an investor could own a share of a numberof real estate assets, reducing the risks and transaction costs that accompany investment in a singlepiece of real estate. Congress made the REIT concept financially viable by enacting the Real EstateInvestment Trust Act of 1960, which exempted REITs from double taxation of shareholderdividends. That is, REIT income is not taxed at the trust level, but only after it has been distributedto shareholders. (Stock and bond mutual funds receive similar tax treatment.) To qualify for thistax exemption, REITs are required to distribute at least 90% of their income in the form ofdividends. A second piece of legislation critical to the development of the REIT market was the TaxReform Act of 1986, which permitted REITs to operate and manage property themselves. (Previously, they were permitted to be only passive investors.) The Tax Reform Act also channeledinvestment funds into REITs by restricting the use of limited real estate partnerships as tax shelters. Individual REITs tend to specialize in certain kinds of real estate, but taken as a whole, theREIT industry invests in the broad range of commercial and residential (primarily multi-family)properties. Figure1 shows the distribution of REIT assets at the end of 2005. Figure 1. REIT Assets by Type, December 31, 2005 Source: National Association of REITs. There are two basic types of REITs: equity and mortgage. Equity REITs develop, own, andoperate income-producing real estate and provide tenant services, whereas mortgage REITs lendmoney to real estate owners and operators or acquire loans or mortgage-backed securities. A few hybrid REITs operate in both modes. The investment characteristics of the two typesdiffer: mortgage REITs are highly sensitive to interest rates because their profits depend on thespread between the income from their loans and other debt assets and their own cost of funds. Asinterest rates have risen since 2004, the returns on investment in (and share prices of) mortgageREITs have fallen sharply. Equity REITs, on the other hand, are affected by a range of economic fundamentals besidesinterest rates. For example, REITs that invest in hotels are sensitive to corporate profits and otherfactors that affect business travel. Similarly, returns on investment in hospitals, office buildings, andshopping malls depend on a host of sector-specific, uncorrelated trends. REITs may be either private or publicly held companies. (2) Shares of publicly held REITsare traded on the stock markets like shares of any other corporation. As of the end of February 2006,there were 202 REITs listed on the stock exchanges, with a total market value of $368 billion. (Ofthe 202, 156 were equity REITs, 40 were mortgage REITs, and the remaining 6 were hybrids. Market capitalization of the classes was $335 billion, $27 billion, and $5 billion, respectively.) (3) Table 1 summarizes thegrowth of the publicly traded REIT market since 1975. Table 1. Number and Market Capitalization of Publicly TradedREITs, 1975-2005 Source: National Association of REITs. Figure 2. Standard & Poor's 500 vs. REIT Stock Index Indices of REIT stocks have outperformed broad market indicators such as the Standard &Poor's 500 since 2000. Figure 2 compares the two indices since 1997. What accounts for the recent performance of REIT stocks? First, the economic fundamentalshave been favorable. Following the stock market crash in 2000 and the September 11, 2001 attacks,the Federal Reserve lowered short-term interest rates to the lowest levels since the 1950s, greatlyreducing the cost of borrowed funds. Longer term rates, partly in response to the Fed moves andpartly because of a fall in post-9/11 investment demand, continued their decade-long decline,lowering the cost of funds most important to real estate funding considerably. Long rates, inparticular, have remained low by historical standards in 2006. In addition, consumer spending hasbeen strong since the end of the last recession in November 2001, which is good news for REITs thatinvest in resorts and retail structures, including shopping malls. Economic growth has been goodfor the industrial real estate sector, and improving business conditions have buoyed the hotel andlodging sectors, and are beginning to drive down the office vacancy rate in many parts of the country. A second factor has been a wave of mergers and going-private transactions in the industry. When a publicly traded REIT is acquired by another or taken private, shareholders receive apremium above the current market price for their stock. The prospect of a merger or buyout usuallyadds to the attraction of REIT shares, and drives prices up. A third -- and perhaps the most important -- factor behind rising REIT share prices has beenthe relatively poor performance of other investments. Since the market peak in 2000, stock yieldshave been much lower than during the 1990s. At the same time, low interest rates have meant thatreturns to fixed-income investments like corporate bonds, bank certificates of deposit, and U.S.Treasury notes have been meager by historical standards. The combination, according to a Standard& Poor's analysis, "has sent investor dollars surging into U.S. REITs in recent years." (4) Thus, performance of REIT shares is affected not only by the fundamentals of the real estatebusiness, but also by the quality of other investment opportunities. Figure 2 shows that the REITindex was negative during several periods in the late 1990s, not just because of problems in realestate markets and earnings, (5) but also because investors shifted funds to Nasdaq technologystocks and other "hot" sectors, where returns of 30% per year were considered sluggish. Future returns on any stock market investment are, of course, uncertain. Several factors makepredictions about REITs even more uncertain than most. As Table 1 shows, the market value ofREIT stocks has grown explosively since 1990. Since 2000 alone, market capitalization has morethan doubled. This suggests two things: (1) that publicly traded REITs have become much larger, though mergers, external debt andequity financings, as well as internally-generated growth, and (2) that investor perceptions of REITs have changed. The first point means that an investment fund that attempted to capture the aggregate returnof the full range of publicly traded REITs, as a TSP fund would presumably do, would in fact beinvesting in a shifting pool of firms and assets. As public REITs buy private funds or assets, or asthey are taken private, the volume and composition of the real estate assets that generate REITincome will not be constant, which implies that past behavior of REIT stocks may not be a reliableguide to future performance. On the second point, if investors move in and out of REITs in response to factors unrelatedto the state of the underlying commercial real estate market, the behavior of REIT stocks under anygiven set of market conditions can be expected to change. In 2000, a Wall Street Journal (6) article noted that"[h]istorically, REITs have behaved like stocks. But in the last two years, they have seemed morelike bonds, diving as interest rates rose." A recent Ibbotson Associates study found that the historicalcorrelation between REITs and small-capitalization stocks has broken down: Early in the 1990s, however, the market's perceptionof these securities began to shift as the REIT market grew along with investor understanding of thesector. In turn, shifts in the market began to alter the behavior patterns of this asset class. Since 1992the REIT market has more than quadrupled, and investors have begun to view these investmentsmore as real estate investments and less as simply domestic equity investments. Over the last 10years, correlations between REITs and more traditional asset classes have been declining, makingthem a significant source of portfolio diversification. (7) Together, these trends suggest that the investment characteristics of the present set of publiclytraded REITs may not hold constant over the years to come. In the short-term, the fact that REITs have outperformed the S&P 500 for several yearsrunning suggests that REIT stocks may be overvalued and due for a correction. Standard & Poor'sanalysis notes that the "cap rate," a measure of commercial property returns, was low in early 2006,suggesting that stock prices were higher than the fundamentals of the commercial real estate marketwould support. (8) Nevertheless, REIT stocks have risen by 13% since the beginning of 2006, seemingly in "defianceof common sense," according to the Wall Street Journal . (9) The Thrift Savings Plan (TSP) is a tax-deferred retirement savings vehicle for federalworkers, akin to "401(k)" plans for private sector employees. Although available to all federalemployees, it is particularly important to those covered by the Federal Employees Retirement System(FERS), whose contributions are partially matched by their federal agency. At present, the TSP hasfive investment vehicles, three of which are broad stock indexes. One of the stock funds tracks theS&P 500 index of major U.S.-listed companies (the C fund). The I fund tracks international stocksand the S fund invests in stocks not included in the S&P 500, including shares of small and mid-sizecompanies. The remaining two funds invest in bonds (the F fund) and government securities (theG fund). In addition, the TSP has five automatic "lifecycle" arrangements of investing among the fivevehicles, each geared toward a projected time frame over which accounts will remain in the TSP. At this time, the TSP does not allow for investment in individual stocks, nor in funds made up ofparticular economic sectors or industries (such as biotech, or aeronautics). The TSP hasapproximately 3.5 million participants and more than $180 billion in assets. On April 12, 2005, Chairman Jon Porter of the House Government Reform Subcommitteeon the Federal Workforce and Agency Organization introduced H.R. 1578 , the RealEstate Investment Thrift Savings Act, which would provide for a real estate stock index investmentoption under the TSP. The subcommittee held a hearing on April 19, 2005. Chairman Porter madethe case for the legislation as follows: What we are talking about today is a simple concept:DIVERSIFICATION. Basic economic principles dictate that investors should not place all of theireggs in one basket, but must spread their money and risk among different types of assets. A fewyears ago -- during the tech bubble collapse -- many Federal employees experienced setbacks in theirinvestment portfolio and did not have the option to invest substantially in REITs. Federal employeesshould not be left out in the cold. Adding a REIT fund option to the TSP is the next logical step.With its resilient earnings and lower volatility, real estate provides a sound investment over the longhaul. Such an investment is a valuable diversification tool, providing the possibility of strong returnsand risk reduction. (10) Chairman Porter also noted that the TSP offered five investment options, versus 16 for theaverage corporate 401(k) plan. Investment diversification is the cornerstone of modern portfoliotheory, which holds that the inclusion of highly risky assets in a portfolio can enhance overall returnsand does not imply a high level of risk to the portfolio, as long as the risks are not positivelycorrelated. If the correlation between REITs and the stock market has declined, as the Ibbotson studycited above finds, a REIT fund would offer TSP participants a way to hedge their investments instock funds: if the stock funds fell, the REITs would rise (or at least not fall as far), easing the painof stock market episodes such as the bear market of 2000-2002. At the same time, based on theirexpectations of future REIT performance, participants could move funds into REITs in search ofhigher yields. Thus, as Chairman Porter stated, a REIT fund may offer both "the possibility of strongreturns and risk reduction." (11) The TSP governing board and CEO, however, have recommended against the addition of aREIT fund. Their arguments, as set out at the 2005 hearing mentioned above, (12) may be summarized asfollows. The view of REITs as a hedge against stock market declines is complicated by the fact thatREIT stocks are already included in both the large and small stock funds currently offered by theTSP. (For example, nine REIT stocks are included in the S&P 500, which the TSP's C fund tracks.) Gary Amelio, the TSP executive director, noted in his 2005 testimony that the C and S stock fundsheld over a billion dollars in REIT shares, making TSP the thirteenth-largest holder of REITs in theUnited States. Thus, the hedging value of REITs is to an extent already built into the TSP: if REITsrise when other stocks fall, the aggregate indexes mirrored by the TSP funds will fall less than theywould have otherwise. Similarly, superior returns earned by REITs over any period are captured inthe aggregate return to the TSP stock funds. What the creation of a REIT fund would do is allow TSP participants to increase theproportion of REIT stocks in their portfolios beyond their weighting in broad indices such as theS&P 500. If their timing were right, TSP participants who chose the REIT option could outperformtheir peers who remained in the stock funds. But Figure 2 suggests that they would be choosing avolatile investment option that could lead to losses as well as gains. By offering only a few investment alternatives, the TSP is structured in a way thatdiscourages "return chasing." Conventional wisdom in financial theory is that many investors --particularly small investors -- tend to buy the stocks or mutual funds that did well in the lastreporting period and that this is generally an unsuccessful strategy, for two reasons: return chasersare always paying top-of-the-market prices and, by frequently reallocating their investments, theyincur high transaction costs. Gary Amelio noted that educational programs to discourage suchcounterproductive investment behavior would be expensive. (13) Another argument regarding the hedging and diversification benefits offered by new TSPfunds is that such alternatives ought to be offered (if they are needed) as part of a comprehensive,considered program, rather than piecemeal. If TSP investors would be better off with a REIT choice,observers ask why not add funds based on emerging markets, hedge funds, commodities, junk bonds,and so on? Two general arguments against such multiplication of investment options are made. Onedeals with fund expenses. Current TSP expenses are extremely low by industry standards -- "off thecharts," according to Andrew Saul (14) -- partly because the number of funds is limited. If annualexpenses go up by even a fraction of a percentage point, the effect on total investment returns overa 20- or 30-year time frame can be dramatic. Testimony from Barclays Global Investors, whichserves as a TSP investment manager, indicated that administration of a REIT fund, while desirablefrom a "pure investment perspective," would likely incur management and transaction costsconsiderably above present levels. (15) Second, there is some question whether a wide menu of investment choices is in the interestof TSP participants, many of whom are not (and do not care to become) expert in financial markets. Presenting unsophisticated investors with many choices may result in less-than-optimal behavior,including the chasing of returns (discussed above) or the selection of an unsuitable initial investmentallocation, which the participant may not correct later because the perceived costs of obtainingexpertise are too high. These arguments can be countered by the charge of "paternalism," and thecase for investor choice and self-direction is intuitively attractive. If, as neoclassical economicsassumes, individuals act rationally in their own self-interest, why should the government, or itsdesignees, decide where TSP participants can put their funds? However, a growing body of empirical and theoretical research, called "behavioral finance,"throws doubt on the notion that individual investors can be expected to make the decisions that arebest for themselves. (16) Behavioral finance identifies mistakes that investors make consistently, such as reliance uponinaccurate rules of thumb and being influenced by the form in which an investment opportunity ispresented, rather than the substance. These bad habits appear to be deeply rooted and not easilycorrected by education programs. A recent study of investment returns by defined-contribution plan participants found thatindividuals who chose an asset allocation or balanced fund (such as the TSP lifestyle options)achieved better returns than participants who make allocation decisions themselves. (17) Results like these suggestthat the neoclassical assumption that individuals can be relied upon to act rationally in their ownself-interest may be overly simplistic. This line of analysis seems to support the contention of theTSP directors that the current plan design, based on a few broad choices and low costs, "has beenrecognized by many impartial observers as an optimum approach." (18) S. 2490 , a companion bill to H.R. 1578 , was introduced by SenatorNorm Coleman April 3, 2006, thus bringing the issue to the Senate as well as the House. The HouseGovernment Reform Committee has scheduled new hearings on the subject for April 26, 2006. In March 2006, the Employee Thrift Advisory Council, an advisory panel made up of labor,management, and other federal employees, adopted a resolution opposing the addition of a REIToption to the TSP. Finally, a study has been commissioned by the Federal Retirement ThriftInvestment Board to review the existing TSP investment policy and consider the addition of moreoptions (including a REIT option), but publication is not expected until later in 2006.

Real Estate Investment Trusts (REITs) are mutual funds made up of real estate and mortgageassets. In recent years, their performance has been stronger than broader market indicators, leadingto calls for inclusion of an REIT alternative in the Thrift Savings Plan (TSP) for federal workers. At present, the TSP is limited to five savings vehicles, three of which are broad-based stock indexes.Proponents of inclusion cite greater diversification and participant choice in the TSP as well aspotentially higher returns as benefits of the proposal. The TSP board, while studying the matter, hasargued that changes should only occur as part of a comprehensive program, should not encourage"return chasing" by participants, and should maintain the current very low cost structure of the TSP. H.R. 1578 , the Real Estate Investment Thrift Savings Act, was introduced April12, 2005, to provide for an REIT option in the TSP. Hearings were held on the legislation April 19,2005, by the House Government Reform Subcommittee on the Federal Workforce and AgencyOrganization. Further hearings are scheduled for April 26, 2006. A companion bill, S. 2490 , was introduced in the Senate on April 13, 2006. This report summarizes the legal and economic history of REITs and the factors that havecontributed to recent strong performances of REITs as investment vehicles. It then addresses thearguments behind their possible inclusion as an investment alternative in the TSP. This report will be updated as events warrant.

The U.S. Centers for Disease Control and Prevention (CDC) plays a central role in shaping and implementing U.S. global health policy. The agency is one of three agencies tasked with leading the Global Health Initiative (GHI), an initiative created by the Obama Administration to coordinate ongoing presidential health initiatives and raise investments in other health areas, including maternal and child health, neglected tropical diseases, and family planning and reproductive health ( Figure 1 ). CDC is also an implementing partner in three presidential initiatives that comprise the bulk of U.S. global health assistance: the President's Malaria Initiative (PMI) and the Neglected Tropical Diseases (NTD) Program, both of which are coordinated by USAID, and the President's Emergency Plan for AIDS Relief (PEPFAR), which is coordinated by the State Department. In addition, CDC manages its own bilateral health programs. This report highlights the health-related activities conducted by CDC, outlines how much the agency has spent on such efforts from FY2001 to FY2011, and highlights FY2012 proposed funding levels. Since 1958, CDC has been engaged in global health efforts. At first, CDC's global health engagement focused primarily on malaria control. CDC's global health mandate has grown considerably since then. In 1962, CDC played a key role in the international effort that led to smallpox eradication and in 1967 expanded its surveillance efforts overseas to include other diseases, when the Foreign Quarantine Service was transferred to CDC from the U.S. Treasury Department. As the mission of CDC has expanded, so have the authorities under which it operates. Today, CDC is a partner in a number of global disease control and prevention efforts, including those related to HIV/AIDS, influenza (flu), polio, malaria, measles, tuberculosis (TB), and emerging diseases. In addition, CDC's global health efforts aim to address other global health challenges, such as chronic disease, injury prevention, child and maternal health, and environmental health concerns. Congress appropriates funds to CDC for global health efforts through Labor, Health and Human Services, and Education (Labor-HHS) appropriations. The bulk of funds for CDC's global health programs are provided by Congress to the Center for Global Health, historically through five main budget lines: Global HIV/AIDS, Global Malaria, Global Disease Detection, Global Immunization, and Other Global Health. CDC programs are implemented bilaterally and in cooperation with other U.S. agencies, international organizations, foreign governments, foundations, and nonprofit organizations. The section below explains these programs, and the Appendix illustrates funding levels between FY2001 and FY2012. In addition to direct congressional appropriations, the CDC Center for Global Health receives funding from other sources in support of its global health initiatives. For example, CDC receives support transferred from the Office of the Global AIDS Coordinator (OGAC) at the U.S. Department of State, for the implementation of PEPFAR programs, and from USAID for its role in PMI and the NTD Program, among other programs. These funds are not included in the Appendix . CDC launched its Global AIDS Program (GAP) in 2000 under the LIFE Initiative. GAP, now called the Division of Global HIV/AIDS (DGHA), supports HIV/AIDS interventions through technical assistance to over 75 PEPFAR countries, with in-country presence in 41 countries or regional offices, and offers technical assistance in an additional 29 others. CDC employs medical officers, epidemiologists, public health advisors, laboratory and behavioral scientists, and other public health experts to assist host country governments, local public health institutions, and other indigenous partners working on a range of HIV/AIDS-related activities. The key objectives of DGHA are to implement and strengthen HIV prevention, treatment, and care services and to bolster health systems. Specific activities within the projects include developing and implementing integrated evidence-based prevention, care, and treatment programs; building sustainable public health capacity in laboratory services and systems; evaluating the scope and quality of global HIV/AIDS programs; strengthening in-country capacity to design and implement HIV/AIDS surveillance systems and surveys; and supporting host government capacity to monitor and evaluate the process, outcome, and impact of HIV prevention, care, and treatment programs. In 2003, President Bush announced PEPFAR to create a coordinated U.S. approach for fighting global HIV/AIDS. Following the launch of the $15 billion, five-year initiative, CDC's spending on global HIV/AIDS programs increased significantly, due to transfers from the State Department. Appropriations for CDC's HIV/AIDS programs, however, declined slightly from $124.9 million in FY2004 (excluding support for programs to prevent the transmission of HIV from mother to child) to $118.7 million in FY2011. From FY2004 to FY2008, OGAC transferred some $3.4 billion to CDC for global HIV/AIDS activities. When OGAC transfers are added, from FY2004 to FY2008, HIV/AIDS spending accounted for nearly 80% of all spending by CDC on global health. In FY2009, OGAC transferred about $1.3 billion to CDC for implementation of PEPFAR programs and has not yet released how much it transferred to CDC for FY2010 or FY2011. According to the 2012 Congressional Budget Justification (CBJ), U.S. agencies, including CDC, supported HIV/AIDS treatments for 3.2 million people by the end of FY2010. When PEPFAR was announced, in 2003, only 66,911 people were receiving treatment. CDC has reportedly played an important role in expanding access to HIV/AIDS treatments as well as preventing the transmission of HIV/AIDS from mother to child. Between 2004 and 2009, PEPFFAR support enabled 334,000 babies, whose mothers were HIV-positive, to be born HIV-free. By the end of FY2010, an additional 114,000 infants were born HIV-free through PEPFAR-supported programs. According to the latest estimates, which were based on data collected in 2002, 1.4 million children under age five die annually from vaccine- preventable diseases (VPDs). Several experts, including at the CDC, assert that expanding vaccine coverage is one of the most cost-effective ways to improve global health. Use of basic vaccines, including polio, measles, and DPT, prevents an estimated 2.5 million deaths per year among children younger than five. CDC has increasingly supported efforts to prevent the transmission of vaccine-preventable diseases, particularly polio and measles. CDC global immunization activities primarily focus on children younger than age five who are at the highest risk of contracting polio, measles, and other VPDs. Appropriations in support of these efforts have grown from $3.1 million in FY1991 to $150.8 million in FY2011. Nearly all of the funds that Congress provides CDC for global immunizations are earmarked for polio and measles interventions. CDC leverages funds from other sources to prevent other VPDs, strengthen routine immunization practices, and respond to global requests for technical assistance on immunization-related epidemiologic and laboratory science. For example, CDC has played an important role in introducing newer vaccines globally, including the Hib (which prevents meningitis, pneumonia, epiglottitis, and other serious infections caused by an influenza virus) and meningococcal and rotavirus vaccines (which can prevent severe diarrhea and vomitting). CDC implements immunization programs bilaterally and through international partnerships with groups such as the World Health Organization (WHO), the United Nations Children's Fund (UNICEF), the Pan-American Health Organization (PAHO), the World Bank, the American Red Cross, and Rotary International. CDC staff are detailed to these organizations and offer technical and operational support in improving vaccine-preventable disease surveillance and properly using immunizations. In addition, CDC officials serve on the Global Alliance for Vaccines and Immunization (GAVI Alliance) and act as implementing partners in a number of initiatives, including GAVI's Hib and Accelerated Vaccine Introduction Initiatives and the Meningitis Vaccine Project, all of which seek to accelerate introduction of new or underutilized vaccines in developing countries that can reduce child mortality. In partnership with WHO and UNICEF, CDC developed the Global Immunization Vision and Strategy for 2006-2015 (GIVS), which among other goals, outlines how the international community will collaborate to reduce vaccine-preventable deaths by at least two-thirds from 2000 levels. The GIVS initiative has evolved into the "Decade of Vaccines" initiative, a collaborative effort spearheaded by WHO, UNICEF, the National Institutes of Health, and the Bill & Melinda Gates Foundation, aimed at increasing coordination across the international vaccine community and create a Global Vaccine Action Plan. The Decade of Vaccines aims to sustain the gains made over the past decades in eradicating polio and eliminating measles (see below) by helping to ensure universal application of routine immunizations and using those efforts to strengthen health systems. From FY2001 to FY2011, CDC spent roughly $1.5 billion on expanding global access to polio and measles immunizations. Polio is a highly contagious virus that mostly affects children under five years of age. There is no cure for polio; it can only be prevented through immunization. Less than 1% of those who contract polio (one in 200) become irreversibly paralyzed. Between 5% and 10% of those who become paralyzed die of respiratory failure—when the lungs become paralyzed. As a result of global eradication efforts, polio cases have declined by more than 99% from an estimated 350,000 cases in 1998 to 1,349 cases reported in 2010. CDC provides technical expertise and support to national governments and international organizations in support of the global effort to eradicate polio. Its laboratory support is an important component of such efforts. Over more than 20 years, CDC has helped countries build laboratory capacity in polio, resulting in a global polio network that now involves 145 laboratories around the world, which processed almost 200,000 lab specimens in 2010. According to CDC, polio laboratory methods pioneered by the agency have become the gold standard in the global polio laboratory network. In its multilateral efforts, CDC works closely with the other founding partners of the Global Polio Eradication Initiative—WHO, UNICEF, and Rotary International—and houses the global reference laboratory for polio. From FY2001 to FY2011, CDC has spent approximately $1.1 billion on polio immunizations worldwide. Measles is another highly contagious virus that mostly affects children younger than five years of age. In 2008, measles killed about 164,000 people worldwide, most of whom were children. Healthy people usually recover from measles or suffer moderately from the disease. Measles severely affects those who are poorly nourished, particularly those suffering from Vitamin A deficiency or immune suppressing diseases, such as HIV/AIDS. Those who survive severe measles infection may become blind or suffer from encephalitis (an inflammation of the brain), diarrhea and related dehydration, ear infections, or respiratory infections such as pneumonia. Among populations with high levels of malnutrition and a lack of adequate health care, up to 10% of measles cases result in death. CDC has played an important role in eliminating measles in several countries across the globe. In 1996, for example, the agency partnered with PAHO to develop a measles elimination strategy that led to the elimination of the diseases in the Americas by 2002. The agency is also responsible for the technical and much of the financial support for the Measles/Rubella LabNet, a network of 679 laboratories worldwide that were built on the framework of the aforementioned polio laboratory network. CDC seeks to expand the Measles/Rubella LabNet to meet the global goal to eliminate measles worldwide. From FY2001 through FY2011, CDC spent about $438.9 million on global measles control activities in 42 sub-Saharan African countries and 6 Asia ones. With the funds, CDC has purchased over 200 million measles vaccine doses and provided technical support to ministries of health in those countries. Key technical support activities include planning, monitoring, and evaluating large-scale measles vaccination campaigns; conducting epidemiological investigations and laboratory surveillance of measles outbreaks; and conducting operations research. Along with WHO, UNICEF, the United Nations Foundation, and the American Red Cross, CDC is a partner in the Measles Initiative, which has facilitated the precipitous decline in measles-related deaths from 2000 to 2008. During this period, about 576 million children who live in high risk countries were vaccinated against the disease. As a result, measles-related deaths decreased globally by 74% during that time. The greatest improvements in measles death rates occurred in the Middle East and sub-Saharan Africa, where measles deaths declined by about 90% by 2006, some four years earlier than the 2010 target date. At the end of 2008, CDC's global measles campaign contributed to the decline in measles-related deaths from an estimated 733,000 deaths to about 164,000 in 2008. Through its malaria programs, CDC conducts research and engages in prevention and control efforts. CDC staff provide technical assistance that helps malaria endemic countries strengthen their malaria control activities. Their work includes policy development, program guidance and support, laboratory and applied field research, and monitoring and evaluation. CDC malaria programs are implemented bilaterally, in partnership with other multilateral organizations, and as part of the coordinated U.S. strategy—the Lantos Hyde U.S. Government Malaria Control Strategy—for implementing the President's Malaria Initiative. CDC combats malaria bilaterally with foreign Ministries of Health through international initiatives such as Roll Back Malaria (RBM), and with multilateral partners, such as the World Health Organization (WHO), the United Nations Children's Fund (UNICEF), the Global Fund to Fight AIDS, Tuberculosis, and Malaria (Global Fund) and the World Bank. Through its multilateral partnerships, CDC has staff posted at WHO. CDC's global malaria efforts focus on utilizing data and applying research to develop evidence-based strategies for malaria prevention and control, and monitoring and evaluating existing malaria control programs. Specific activities include designing and implementing technical and programmatic strategies, which include training, supervision, laboratory, communications, monitoring and evaluation, and surveillance systems; developing plans to estimate the impact of malaria control and prevention efforts; evaluating impact of long-lasting insecticide-treated nets (LLINs) and monitoring the spread of insecticide resistance; improving surveillance with the use of hand-held computers equipped with global positioning systems to conduct household surveys in remote villages; evaluating the performance of health workers; and improving the delivery of quality diagnosis and treatment services for malaria and monitoring anti-malarial therapeutic efficacy. From FY2001 to FY2011, CDC has provided roughly $111.7 million on global malaria programs. These funds have been used to provide 19 million insecticide-treated nets, 3.5 million treatments to prevent the transmission of malaria from mother to child, and 40 million anti-malarial treatment doses. In addition to appropriations CDC receives for global malaria efforts, USAID transfers funds to CDC as an implementing partner of the President's Malaria Initiative. In June 2005, President Bush proposed the initiative and asserted that with $1.2 billion spent between FY2006 and FY2010, PMI would seek to halve malaria deaths in 15 target countries in Africa. PMI is led by USAID and jointly implemented by CDC and USAID. According to USAID, an evaluation of the first five years of PMI will be conducted between 2011 and mid-2012. USAID reports, however, that child mortality rates have declined in PMI-focus countries and that malaria interventions have contributed to this phenomenon. From FY2006 through FY2008, USAID transferred an estimated $25 million to CDC for global malaria programs. In FY2009, USAID transferred $15 million to CDC, of which some $13 million was for PMI and nearly $2 million for malaria efforts in the Greater Mekong sub-region. Information is not yet available on transfers for FY2010 and FY2011. Established in 2004, CDC's Global Disease Detection (GDD) program develops and strengthens global public health capacity to rapidly identify and contain disease threats from around the world. The GDD program draws upon existing international expertise across CDC programs to strengthen and support public health surveillance, training, and laboratory methods; build in-country capacity; and enhance rapid response capacity for emerging infectious diseases. By the end of FY2010, CDC had established eight GDD centers, which work to build broad-based public health capacity in host-countries and within the region in support of the International Health Regulations (IHR). These centers were located in China, Egypt, Guatemala, India, Kazakhstan, Kenya, South Africa, and Thailand. In 2011, due to budget reductions, CDC reduced capacity in the Kazakhstan center, and the center no longer serves as a GDD regional center. As such, CDC now manages seven GDD regional centers. The regional centers work to develop six core capacities: (1) emerging infectious disease detection and response, (2) training in field epidemiology and laboratory methods, (3) pandemic influenza preparedness and response, (4) zoonotic disease detection and response at the animal-human interface, (5) emergency preparedness and risk communication, and (6) laboratory systems strengthening. Since 2006, the regional centers assisted in 665 outbreak investigations and other public health emergencies, including typhoid fever; influenza H5N1, H5N2, and H3N2; Congo-Crimean hemorrhagic fever; anthrax; dengue; and Rift Valley fever. From FY2001 to FY2011, CDC spent about $248.6 million on GDD activities worldwide. This figure includes funding for International Emergency and Refugee Health efforts. In FY2012, CDC requested that Congress provide $35.8 million to fund several programs aimed at building public health capacity among recipient country leaders, particularly health ministries, through the budget line entitled "Global Public Health Capacity Development." These activities include the Field Epidemiology (and Laboratory) Training Program [FE(L)TP]; the Sustainable Management Development Program (SMDP); Global Safe Water Sanitation and Hygiene; Maternal and Child Health; Afghanistan Health Initiative; and Health Diplomacy Initiative. Until FY2012, this budget category was called "Other Global Health," and it was used primarily to fund the FELTP and SMDP programs. The FY2012 budget proposes that the other four programs, currently funded through other CDC and HHS offices, be funded through the new Global Public Health Capacity Development program. This section focuses on FELTP and SMDP, the two programs Congress authorized the Center for Global Health to support. Additional information on the other programs can be found in the FY2012 congressional budget justification. FE(L)TP, established in 1980, is a full-time, two-year postgraduate applied public health training program for public health leaders to help strengthen health systems, train health professionals, build capacity to assess disease surveillance, and improve health interventions. The program is modeled after CDC's Epidemic Intelligence Service and is adapted to meet local needs. Participants spend about 25% of their time in the classroom and 75% in field placements, providing public health services to host countries' health ministries. CDC develops the FE(L)TP in conjunction with local health leaders to ensure sustainability and ultimately hand-off the trainings to local officials (typically after four to six years). From 1980 to 2010, CDC has consulted with and supported 41 FE(L)TPs and similar programs in 57 countries. As of March 2011, CDC is supported 18 programs covering 34 countries. In 2010, CDC supported 335 trainees in the FE(L)TPs. These trainees conducted 148 outbreak investigations, 47 planned investigations, and 188 surveillance studies. The Sustainable Management Development Program, established in 1992, also aims to strengthen public health systems by bolstering leadership and management capacity of health workers. SMDP helps countries improve program operations and advance the science base through applied research and evaluation. With partners, SMDP provides technical assistance to programs that are helping to prevent mother-to-child transmission of HIV/AIDS, reduce the transmission of tuberculosis, and improve management of district public health programs that prevent and control diseases. CDC also partners with other groups to analyze the quality of organizational leadership, assess management skills, and identify performance gaps in health systems. Through the program, CDC helps health leaders to create action plans for capacity development that includes a budget, a timeline, and measurable outcomes. After concluding the program, CDC provides post-course technical assistance to support the development of sustainable management development programs and post-training incentives to stimulate lifelong learning. These incentives include website access, regional networking among alumni, conferences, fellowships, and career development opportunities (e.g., laboratory systems), and improve practices to reduce natural or manmade infections that could eventually affect U.S. citizens. From 1992 to 2010, 414 faculty from over 60 countries graduated from SMDP's Management for Improved Public Health (MIPH) course, which builds the capacity of ministries of health and educational institutions by focusing on the skills of planning, priority setting, problem solving, budgeting, and supervision. In addition, 42 participants from 15 countries attended SMDP's inaugural Global Health Leadership Forum in 2010, which focused on helping senior leaders from developing countries create a comprehensive vision and project plan for strengthening their country's health system. From FY2001 to FY2011, CDC spent approximately $49 million on these programs. CDC's activities related to improving global health outcomes expand beyond those funded through the Center for Global Health. CDC also leverages other resources to respond to global requests for technical assistance related to disease outbreak response; prevention and control of injuries and chronic diseases; emergency assistance and disaster response; environmental health; reproductive health; and safe water, hygiene, and sanitation. Specifically, CDC supports global health programs aimed at TB, influenza, and neglected tropical diseases. The section below highlights those activities. CDC collaborates with U.S. and multilateral partners to provide technical support in the global effort to eliminate TB. Bilateral partners include the National Institutes of Health (NIH) and USAID; multilateral partners include the Global Fund, the International Union Against TB and Lung Disease, and WHO. Key activities in CDC's bilateral TB interventions include research (including operations research, research to improve treatment, and epidemiological research); improvement of TB screening and diagnostics; surveillance of TB/HIV prevalence and multi-drug resistant TB (MDR-TB) prevalence; laboratory strengthening; infection control; program evaluation; outbreak investigation control; and subjective matter expertise for policy development. CDC also provides technical assistance to multilateral efforts to contain TB, including the Directly Observed Therapy Short Course (DOTS) program, the Global Stop TB Strategy, and the Green Light Committee Initiative, which helps countries access high-quality second-line anti-TB drugs for those infected with MDR-TB and extensively drug resistant TB (XDR-TB). The agency also partners with WHO to conduct surveillance of drug-resistant TB worldwide. CDC works in over 40 countries around the world to prevent, control, and respond to influenza outbreaks in general, and help high-risk countries develop rapid response in particular. The agency also serves as one of four WHO Collaborating Centers for Influenza. Its responsibilities in this capacity include support of the Global Influenza Surveillance Network. During the 2009 H1N1 influenza pandemic, for example, CDC shipped 2,100 test kits (each able to perform 1,000 test reactions) to 545 laboratories in 150 countries at no cost to the countries, and sent experts to the field to help strengthen laboratory capacity and train health experts to control the spread of the 2009 H1N1 influenza virus. Global influenza operations are implemented bilaterally with countries and in cooperation with groups such as DOD and WHO. Additional related activities include building laboratory capacity of foreign governments for the prompt detection of novel influenza viruses; strengthening epidemiology and influenza surveillance; enhancing laboratory safety; developing and training rapid response teams; and supporting the establishment of influenza treatment and vaccine stockpiles. In FY2005, Congress provided emergency supplemental funds for U.S. efforts related to global pandemic influenza preparedness and response. In each fiscal year since, Congress has funded U.S. efforts to train health workers in foreign countries to prepare for and respond to a pandemic that might occur from any influenza virus, which have included support for CDC's influenza-related activities, though past appropriation measures have not specified how much of those funds CDC should spend on global efforts. For more than two decades, CDC has worked to reduce the illness, disability, and death caused by neglected tropical diseases. CDC partners with other U.S. agencies to implement the NTD Program. In that capacity, CDC helps to develop global policy and guidelines for NTD control programs; conduct research to improve existing diagnostic and other tools needed to monitor programs; monitor and evaluate progress toward control/elimination of NTDs; provide technical assistance to countries and other partners to build capacity and improve programs; and study additional NTDs to identify and develop better tools and approaches to control and eliminate them. Much of CDC's current work focuses on the seven NTDs—lymphatic filariasis (LF), onchocerciasis, schistosomiasis, infections from soil-transmitted helminths (hookworm, Ascaris, whipworm), and trachoma—that can be controlled or eliminated through mass drug administration. From FY2001 to FY2011, Congress provided CDC roughly $3.5 billion for global health activities. Over that decade, CDC increased the size and scope of its global health programs. In FY2001, for example, CDC spent $224.1 million on three key global health programs (HIV/AIDS, immunizations, and malaria), with nearly half of those funds aimed at HIV/AIDS programs ( Figure 2 ). By FY2011, CDC's global health budget had grown by nearly 50%, having reached $330.1 million, and had come to support two additional health areas: Global Disease Detection and health system strengthening through "Other Health Programs." In the early 2000s, concerns about HIV/AIDS dominated discussions about U.S. global health engagement and prompted the development of several initiatives, including the LIFE Initiative (Clinton Administration), International Mother and Child HIV Prevention Initiative (Bush Administration), and the President's Emergency Plan for AIDS Relief (Bush Administration). Through these efforts, Congress provided substantial increases for tackling HIV/AIDS through ongoing U.S. bilateral efforts, coordinated government-wide programs (like PEPFAR), and multilateral initiatives like the Global Fund to Fight AIDS, Tuberculosis and Malaria. The bulk of the increases, however, were provided through the State Department-coordinated PEPFAR. By 2004, global infectious disease outbreaks prompted greater congressional support for programs that would bolster countries' capacity to respond to infectious disease outbreaks. In that year, Congress began funding GDD and "Other Health Programs." The growth in spending on such programs meant that HIV/AIDS ultimately became a smaller portion of CDC's global health budget ( Figure 2 ). According to the FY2011 operating plan of CDC, Congress made available $340.2 million for CDC's global health programs. The Administration requests that Congress provide about $381.2 million for CDC's global health programs in FY2012, some 10% more than FY2010 ( Table 1 ). The FY2012 budget request included several programmatic changes. First, CDC began requesting support for programs aimed at addressing parasitic diseases (like neglected tropical diseases) along with requests for global malaria programs. In the FY2011 operating plan, CDC followed this new budgetary structure to report on FY2010 and FY2011 funding levels for activities related to malaria and parasitic diseases. For comparability, malaria is a subset of the parasitic diseases and malaria budget category in Table 1 . The FY2012 budget request also renamed the "Other Global Health" program as the "Global Public Health Capacity Development" program. The Administration requests that this new program combine support for ongoing efforts related to FELTP and SMDP with activities related to water and sanitation, and maternal and child health. The agency also requests that two activities currently funded through the HHS Office of Global Health Affairs—the Afghan Health Initiative and Health Diplomacy—be funded through this new budgetary category.

A number of U.S. agencies and departments implement U.S. government global health efforts. Overall, U.S. global health assistance is not always coordinated. Exceptions to this include U.S. international responses to key infectious diseases; for example, U.S. programs to address HIV/AIDS through the President's Emergency Plan for AIDS Relief (PEPFAR), malaria through the President's Malaria Initiative (PMI), and neglected tropical diseases through the Neglected Tropical Diseases (NTD) Program. Although several U.S. agencies and departments implement global health programs, this report focuses on funding for global health programs conducted by the U.S. Centers for Disease Control and Prevention (CDC), a key recipient of U.S. global health funding. Congress appropriates funds to CDC for its global health efforts through five main budget lines: Global HIV/AIDS, Global Immunization, Global Disease Detection, Malaria, and Other Global Health. Although Congress provides funds for some of CDC's global health efforts through the above-mentioned budget lines, CDC does not, in practice, treat its domestic and global programs separately. Instead, the same experts are mostly used in domestic and global responses to health issues. As such, CDC often leverages its resources in response to global requests for technical assistance in a number of areas that also have domestic components, such as outbreak response; prevention and control of injuries and chronic diseases; emergency assistance and disaster response; environmental health; reproductive health; and safe water, hygiene, and sanitation. CDC also partners in programs for which it does not have specific appropriations, such as efforts to address international tuberculosis (TB) and respond to pandemic influenza globally. Congress does, however, appropriate funds to CDC to address these diseases domestically. In addition, the State Department and the U.S. Agency for International Development (USAID) transfer funds to CDC for its role as an implementing partner in U.S. coordinated initiatives, including PEPFAR, PMI, and the NTD Program. From FY2001 to FY2011, Congress provided CDC roughly $3.5 billion for global health activities, including $330.2 million in FY2011. The President requested that in FY2012, Congress appropriate $358.6 million to CDC for global health programs—an estimated 5% increase over FY2010-enacted levels. There is a growing consensus that U.S. global health assistance needs to become more efficient and effective. There is some debate, however, on the best strategies. This report explains the role CDC plays in U.S. global health assistance, highlights how much the agency has spent on global health efforts from FY2001 to FY2011, and discusses the FY2012 budget proposal for CDC's global health programs. For more information on U.S. global health funding more broadly, see CRS Report R41851, U.S. Global Health Assistance: Background and Issues for the 112th Congress.

The Mexican economy experienced the most serious decline in economic growth in Latin America after the global financial crisis began in 2008. Mexico's dependence on manufacturing exports and strong ties to the U.S. economy have made the country very vulnerable to external events and changing economic conditions in the United States. Public sector revenues declined as a result of the crisis, and a number of estimates indicate that Mexico's gross domestic product (GDP) contracted by 6.6% in 2009. Though GDP is expected to grow in 2010, some economists predict that Mexico's economy will not return to its pre-crisis level for some time. Although Mexico has done much to modify its economic policy over the last 20 years through trade liberalization, privatization efforts, and a floating exchange rate regime, these policies have not been enough to protect Mexico from fluctuations in the U.S. economy. Many analysts argue that structural weaknesses in the Mexican economy have prevented the country from experiencing higher levels of growth and decreasing its dependence on the U.S. economy. Mexico's economy is of interest to U.S. policymakers because of the strong economic linkages between the two countries, the proximity of Mexico to the United States, and the implications that economic issues have on political and social stability in Mexico. The 111 th Congress is likely to maintain an active interest in Mexico on issues related to trade, economic conditions, migration, border issues, and counter-narcotics. This report provides an overview of Mexico's economy post-financial crisis, effects of the global economic downturn, structural and other challenges in the Mexican economy, and implications for the United States. This report will be updated as events warrant. Based on a nominal GDP of $1.7 trillion in 2009 (at purchasing power parity or PPP ) Mexico's economy is the 11 th -largest economy in the world and the second-largest in Latin America, after Brazil's. Mexico has an open market economy with a strong export sector, though for many years it had strong protectionist trade policies to encourage industrial growth in the domestic economy. The global financial crisis, and the subsequent downturn in the U.S. economy, resulted in the sharpest economic contraction in the Mexican economy in 20 years. It is estimated to have contracted by 6.6% in 2009, as shown in Table 1 , while the Mexican peso depreciated against the dollar by 25%. Mexican merchandise exports to the United States decreased sharply. Mexico also experienced liquidity problems and a loss in investor confidence as a result of large losses on corporate foreign exchange positions in 2008, in addition to the uncertainty over the outbreak of the H1N1 virus in mid-2009. Mexico's policy measures in response to the crisis and its prior economic performance have helped the economy begin to recover and the exchange rate to improve. Estimates for 2010 project that the economy will grow by about 3% to 4% and that domestic demand will also improve, though not significantly. The recovery is also due to an increase in external demand, which has driven up manufacturing exports, rather than from internal demand. Manufacturing exports increased 34% year-on-year during the first five months of 2010, with much of the growth occurring in automotive exports (78% increase), which go mostly to the United States. Total exports have risen 38%. Sectors of the economy that depend significantly on domestic demand, such as utilities, construction, and retail, are struggling, though an improvement is expected later this year. The Economist Intelligence Unit (EIU) projects GDP growth at 2.7% for 2011. Mexico's strong economic ties to the United States after implementation of the North American Free Trade Agreement (NAFTA) have deepened the dependency of the Mexican economy on U.S. economic conditions. Mexico's reliance on the United States as an export market and the relative importance of exports to its overall economic performance make it highly susceptible to fluctuations in the U.S. economy. Exports equaled 26% of Mexico's GDP in 2009, a significant percentage, and 80% of Mexico's exports are destined for the United States. The United States is, by far, Mexico's most important partner in trade and investment, while Mexico is the United States' third-largest trade partner after China and Canada. After oil and gas, most of Mexico's exports are manufactured goods. Because a large percentage of Mexico's exports are destined for the United States, any change in U.S. demand can have significant economic consequences in Mexican industrial sectors. The recent downturn in the world economy caused a sharp decline in U.S.-Mexico trade and affected GDP growth in Mexico. As shown in Figure 1 , economic growth in Mexico has followed the same economic patterns as the United States for many years, but with higher fluctuations in GDP growth rates. After a real decline in GDP of 6.22% in 1995, the Mexican economy managed to grow the following six years at about 4%-5% annual growth. The slowdown in the U.S. economy in 2001, which worsened after the September 11 terrorist attacks, hit Mexico's economy hard. Real GDP growth dropped from 6.6% in 2000 to a contraction of 0.2% in 2001. Improved economic conditions in the United States in the following years helped Mexico's economy improve as well. Real GDP growth in 2004 was 4.0%, up from 0.8% in 2002 and 2003. Following the decline in the U.S. GDP growth rate of 2.7% in 2006 to -2.4% in 2009, Mexico's GDP growth rate fell from 5.1% in 2006 to -6.6% in 2009 (see Figure 1 ). Until the early 1980s, Mexico had strong protectionist economic policies with high trade barriers in several key industries, including the computer and automotive industries. After the Mexican 1982 debt crisis, Mexico's trade policy began to change. The Mexican government took a series of steps toward unilateral trade liberalization to attract foreign investment and make the country more competitive in non-oil exports. In the late 1980s, Mexico proposed negotiations for a free trade agreement with the United States. The Mexican economy suffered a financial crisis in 1995 that resulted from a number of complex financial, economic, and political factors. In response, the government abandoned its previous fixed exchange rate policy and adopted a floating exchange rate regime. Mexico's currency plunged by around 50% within six months as a result, sending the country into a deep recession. The peso steadily depreciated through the end of the 1990s, which led to greater exports and helped the country's exporting industries but sharply raised import prices and lowered its terms of trade. The change in the Mexican economy to an export-based economy may have helped to soften the impact of the currency devaluation. However, the peso devaluation resulted in a decline in real income, hurting the poorest segments of the population and also the newly emerging middle class. After the 1994 devaluation, the government took several steps to restructure the economy and lessen the impact of the currency crisis among the more disadvantaged sectors of the economy. The goal was to create conditions for economic activity so that the economy could adjust in the shortest time possible. The United States and the International Monetary Fund assisted the Mexican government by putting together an emergency financial support package consisting of loans of up to $50 billion, with most of the money coming from the U.S. Treasury. Mexico put forth efforts to demonstrate its commitment to fulfill all of its financial obligations without a default on its debt by adopting tight monetary and fiscal policies to reduce inflation and absorb some of the costs of the banking sector crisis. The austerity plan included an increase in the value-added tax, budget cuts, increases in electricity and gasoline prices to decrease demand and government subsidies, and tighter monetary policy. The global financial crisis that began in 2008 resulted in a deepening of the recession in the U.S. economy that began in 2007. The U.S. economic contraction resulted in lower consumer demand in the United States and, consequently, lower demand for goods from Mexico. This has adversely affected Mexico's GDP growth, employment, production in the manufacturing industry, and investor confidence. Though real GDP growth has resumed in the United States, there is concern that the U.S. economy will not return to its pre-recession growth path or will even remain permanently below it. This will likely continue to have effects on economic conditions in Mexico. Mexico has experienced the deepest recession in the Latin America region following the recent global financial crisis, largely due to its high dependence on manufacturing exports to the United States, although other factors have also contributed. Other Latin American countries have experienced negative economic consequences from the financial crisis but to a lesser extent than Mexico. In Central America, El Salvador had the deepest economic contraction (-3.6%), while in South America, Paraguay was the country with the deepest contraction (-3.8%). Economic growth in most Latin American countries was affected by the crisis, but because most of these countries were experiencing high levels of growth prior to the crisis and are not as dependent on the U.S. economy, they did not experience as deep a recession as Mexico (see Table 2 ). The forecast for 2010 shows most of the economies in the Western Hemisphere rebounding to positive economic growth, with the exception of Venezuela, which is expected to experience a drop in real GDP growth of 5.5%, as shown in Table 2 below. In 2009, Mexico's total trade with the world declined sharply, with lower demand in the United States for Mexican products and lower consumer demand in Mexico contributing to the decline. Mexico's exports to all countries decreased 21.5% to $229.6 billion in 2009 (see Table 3 ). Imports also decreased in 2009, by 24.4% to $234.4 billion. Exports to the United States decreased 17.6% in 2009. Prior to the recession, Mexico had been experiencing steady annual growth in exports. Between 2003 and 2008, Mexico's exports increased from $164.8 billion to $292.6 billion, an increase of 77.5%. Export volumes rose in November and December of 2009, with exports for December 2009 up 23.7% year-on-year from 2008. Preliminary figures by the Mexican government show an increase in exports of 36.3% year-on-year for the first six months of 2010. U.S. trade data show that Mexico's exports to the United States from January-June 2010 are up 38.2% and imports from the United States are up 30.0% year-on-year. Mexico's labor market conditions deteriorated during the crisis, and unemployment rose to its highest level since 2000. As a result, private consumption and retail sales fell significantly. The unemployment rate in the last quarter of 2009 was by far the highest figure in the past decade. The unemployment problem is more severe in urban areas, with the unemployment rate in large cities reaching 7.6% while that in small communities was only 3.7%. Government data on unemployment may not reflect deeper employment effects because the data include jobs in the informal sector, which are oftentimes very low-paying jobs that have no health or retirement benefits. A report by the International Monetary Fund stated that though the unemployment rate peaked in September 2009, private consumption continued to lag afterwards and consumer confidence remained weak. The economic crisis has resulted in a shortage of opportunities in the formal economy in Mexico. Mexico's job market has a large informal sector, and the crisis may have caused a growing trend towards informality and self-employment. The formal sector of the economy contracted after the downturn while the number of jobs in the informal market increased. Informal sector jobs nearly doubled in the third quarter of 2009 when compared to the same period in 2008. One report estimates that 39.3% of the Mexican workforce is in the informal sector and that if workers classified as formal but who receive no health coverage were included, the informality figure would rise to 45.3%. Growth in the informal sector of the economy can present a social problem for the government because workers in the informal sector do not receive the same social benefits as workers in the formal sector. Informal employment tends to be concentrated among poor workers who may not have the ability to save for retirement or for a house, or have health insurance. The financial crisis effect has had a particularly adverse effect on young workers in Mexico, as it has in other parts of Latin American and developing countries worldwide. While an economic crisis can produce a positive effect of motivating students to stay in school longer, it can also have the opposite effect in countries such as Mexico, with youths dropping out of school because they have lost career expectations. The level of unemployed youths represents a serious concern for the Mexican government due to the possibility of youths turning to criminal organizations for work and/or attempting to migrate illegally to the United States. A top education official in Mexico who heads the national adult education program estimated that 700,000 young people dropped out of school last year. The education program has made efforts to coordinate with various state education departments to target recent dropouts and get them back into the education system. Many of the youths who choose not to go back to school often end up in low-paid informal jobs. Those who do go back to college and graduate also face difficulties in finding employment in their fields. Manufacturing industries have been severely affected by the decline in external demand, particularly in high-value-added industries. The sharp drop in exports to the United States led to a large drop in industrial production. As a result, business and consumer confidence has weakened to record lows and subsequently has put downward pressure on consumption and investment. Job losses in Mexico increased in 2008 and 2009, with possibilities of further job losses in export-oriented assembly plants as they cut capacity due to the downturn in demand. The annual growth rate of Mexico's industrial production decreased from 5.7% in 2006 to -0.6% in 2008 and to -10.1% in 2009. A higher demand for Mexican exports to the United States and a projected improvement in Mexico's domestic economy are expected to result in higher industrial production in the next two years. Production growth is projected to reach 4.1% in 2010 and 3.6% in 2011. The economic crisis, combined with the increased violence along the U.S.-Mexico border, has hurt the manufacturing industry, and many of Mexico's export-oriented assembly plants have shut down in recent years, especially along the U.S.-Mexico border. A majority of these export-oriented plants have U.S. parent companies, though some parent companies are located in Asia and Europe. The border region with the United States has the highest concentration of assembly plants and workers. Ciudad Juárez, Chihuahua, the city with the highest concentration of jobs in export assembly plants, has experienced the highest job losses, as a result of lower U.S. demand and the drug-related violence that has occurred in this manufacturing city over the past two years. Manufacturing employment in Ciudad Juarez decreased from 214,272 in July 2007 to 168,011 in December 2009, a loss of 46,261 jobs (22% decrease). In Tijuana, Baja California, employment decreased from 174,105 in July 2007 to 136,957 in December 2009, a loss of 37,148 jobs (21% decrease). The total number of export-oriented manufacturing plants in Mexico increased from 5,083 in July 2007 to 5,245 in December 2009. However, employment decreased from 1,910,112 in July 2007 to 1,641,465 in December 2009, a loss of 268,647 jobs (14% decrease). Although the financial crisis did not impact the energy sector, Mexico's long-term economic recovery and stability will depend upon what happens in the oil industry. The Mexican government depends heavily on oil revenues, which provide 30% to 40% of the government's fiscal revenues, but oil production in Mexico is declining rapidly. Many analysts state that Mexican oil production has peaked and that the country's production will continue to decline in the coming years. Mexico is the seventh-largest producer of oil in the world and is one of the top three sources of U.S. oil imports, along with Canada and Saudi Arabia. Mexico's state oil company, Pétroleos Mexicanos (Pemex) has stated that output from the country's biggest oilfield, Cantarell, is declining much more rapidly than expected. Production is declining so rapidly that Mexico could possibly begin importing oil within 10 years. Mexico's exports of crude oil have been falling since 2006, and it is currently a net importer of both gasoline and natural gas. The Cantarell oilfield is Mexico's main offshore field. Production at Cantarell has been declining rapidly since it reached its peak production level of 2.12 million barrels per day (b/d) in 2004. In 2009, Cantarell produced only 630,000 b/d, down 38% from the 2008 level and 70% from its peak in 2004. National production has fallen for the fifth consecutive year. Nationally, Mexico produced 2.6 million barrels of oil per day in 2009, down from a record 3.4 million barrels per day in 2004. It exported 1.225 million b/d in 2009, compared with 1.403 million b/d in 2008. The Mexican government has used oil revenues from Pemex for government operating expenses, which has come at the expense of needed reinvestment in the company itself. Because the government relies so heavily on oil income, any decline in production has major fiscal implications. According to one journal article, if oil output drops below 2 million b/d, the government would have to cut spending by more than 10% or increase taxes correspondingly, which would likely affect economic recovery. In 2008, the government enacted new legislation that sought to reform the country's oil sector, which was nationalized in 1938, and to help increase production capability. The reforms permit Pemex to create incentive-based service contracts with private companies. Some analysts contend, however, that the reforms did not go far enough and that they do little to help the company address its major challenges. Most experts contend that Pemex has only the capacity to produce in shallow waters and needs to bring in new technologies and know-how through private investment to allow the company to successfully explore and produce in the deep waters in the Gulf of Mexico. The lack of further reforms is keeping Mexico from allowing much-needed foreign investment for oil exploration. Though the performance-based contracts are expected to increase production and reserves, Pemex faces serious challenges in finding new, productive wells and also lacks resources for investment in increasing engineering capacity and exploration, and has an operating deficit as of January 25, 2010. It is estimated that Mexico may have about 50 billion barrels in the deeper waters of the Gulf of Mexico, but many experts contend that the country lacks the expertise, technology, and capital it needs for oil exploration. The flows of FDI to Mexico dropped sharply in 2009. Although investment decisions are affected by a number of factors, the Mexican government attributed a large percentage of the decline to the global financial crisis. Total FDI flows to Mexico decreased by 42.5%, from $24.3 billion in 2008 to $12.2 billion in 2009. Investment flows to Mexico have been fluctuating since the 10-year period between 1999 and 2009 as shown in Figure 2 . The highest growth rate of investment flows during this period was 45.2% in 2004, after a decline of 29.1% during the previous year. The United States is the largest investor in Mexico, accounting for 44.1% of investment flows in 2009 and over 50% of cumulative investment flows between 1999 and 2009. U.S. inflows totaled $6.2 billion in 2009, down from $9.8 billion in 2008, a 37.8% decrease. Other major foreign investors in Mexico are Spain and the Netherlands, accounting for 15.2% and 10.7%, respectively, of cumulative investment flows between 1999 and 2009, respectively. U.S. foreign direct investment in Mexico has increased considerably since the implementation of NAFTA. The stock of U.S. FDI in Mexico increased from $17.0 billion in 1994, the year of NAFTA's implementation, to $97.9 billion in 2009. Although NAFTA's foreign investment provisions may have encouraged U.S. investment by increasing investor confidence, there is a likelihood that much of the growth would likely have occurred anyway because of Mexico's liberalization policies on foreign investment in the late 1980s and early 1990s. Most foreign investment in Mexico is in the manufacturing industry, of which the maquiladora industry is a part, and in financial services. Both sectors experienced declines in investment flows in 2009 following the global financial crisis. Approximately 44% of cumulative FDI flows to Mexico between 1999 and 2009 were in manufacturing and 26% were in financial services. FDI flows in manufacturing decreased by 30% in 2009, from $7.6 billion in 2008 to $5.3 billion in 2009, after reaching a peak of $13.7 billion in 2004 during the 1999-2009 period (see Figure 3 ). FDI flows in financial services decreased from $4.8 billion in 2008 to $3.0 billion in 2009 (38%). On January 27, 2010, the Banco de México (Mexico's Central Bank) reported that remittance inflows fell 16.0% in 2009 to $21.1 billion (see Figure 4 ). The decline in remittances is mostly due to the global financial crisis and the slowdown in the U.S. economy, as the rising jobless rate has taken a toll on Mexican immigrants in the United States. Remittances are the second-highest source of foreign currency after oil, with tourism revenues following in third place. Mexico receives the largest amount of remittances in Latin America and the third-largest in the world, after India and China. Many of the Mexican workers in the United States who send money back to their families work in the construction and services sectors, which have both been negatively affected by the financial crisis. Approximately 239,000 immigrant Hispanics, of which Mexicans comprise 30%, lost their jobs in 2008, with almost 100,000 of these jobs in the construction industry, according to one estimate. The decline in remittances to Mexico is significantly greater than the fall in remittances to other countries dependent on the U.S. economy. In Central America and the Caribbean remittances also fell in 2009 but by considerably lower percentages. In El Salvador, remittances fell 8.5% to $3.6 billion and in Honduras, the fall was 11.1%. Remittances to Mexico are expected to grow 5% in 2010. For a number of years, remittances were considered a stable financial flow for Mexico as workers in the United States made efforts to send money to family members, especially to regions of the country experiencing economic crises or natural disasters. Annual remittances to Mexico grew substantially between 2001 and 2008, from $8.9 billion to $25.1 billion, an increase of 182.0%. The annual growth rate reached a high of 26.3% in 2003, continuing to increase annually at a slower rate until 2009 (see Table 4 ). There is an interrelationship between remittances to Mexico and economic growth in the United States, but not much is known about the extent of this relationship. Although the relationship between GDP growth in the United States and the level of remittances is not very clear, the Mexican government attributes the 2009 decline to the global financial crisis. Mexico's remittance inflows represent a lower percentage of GDP (less than 4%) than countries in Central America, where the inflow could be as high as 16% of GDP, yet many of the poorest communities in Mexico rely on this money for their day-to-day life. Remittances tend to go mostly to areas that are lacking in economic opportunities in the poorer regions of Mexico, and some states have been more severely affected by recent declines than others. Remittances are often a vital lifeline for the poor in Mexico; states that experience more drastic declines may be particularly exposed to risk. A large majority of families spend the money on basic needs, such as rent, food, medicine, or utilities. The financial crisis had significant effects on poverty in Mexico. One study estimates that the crisis will raise the poverty rate by nearly four percentage points between 2008 and 2010. The study also estimates that the poorest 20% of Mexican households will suffer an average loss in per capita income of about 8% between 2008 and 2010, compared with 5% for the entire population. This loss would be in addition to any declines in existing safety-net government transfers that benefit many of the extremely poor in Mexico. Poverty has been one of Mexico's more serious economic challenges for many years, and the government has made significant efforts to address this issue. These efforts were effective in bringing down the poverty rate between 2000 and 2007. However, poverty rates increased in 2008. The extreme poverty rate went up to 18% in 2008, after having fallen from 24% to 14% between 2000 and 2006. Mexico's continuing problem of poverty is especially widespread in rural areas and remains at the Latin American average. In rural areas the percentage of those living in moderate poverty was 61% in 2008, while that of those living in extreme poverty was 32%. The rates for urban areas were 40% and 11%, respectively. Mexico's past economic reforms have helped the country modify its macroeconomic policies and restore policy credibility since the 1995 currency crisis. Key reforms included measures to reduce public debt, the introduction of a balanced budget rule, an inflation targeting framework and a floating exchange rate policy. The measures have been successful in stabilizing inflation, achieving balanced federal budgets, reducing public debt, reducing exposures to currency risk, and lowering current account deficits and foreign financing needs. In addition, the government's actions to build up its foreign reserves helped the country to avoid the financial stress that other emerging markets experienced due to the 2008 global financial crisis. Despite these improvements, numerous political analysts and economists agree that Mexico needs significant political and economic structural reforms to improve its potential for long-term economic growth. The government's responses to the recent global financial crisis helped the country weather the 2009 recession and improve conditions in 2010. The government used a number of tools, including macroeconomic policies, targeted assistance to financial institutions, interventions by Mexico's Central Bank to cut interest rates and maintain the country's liquidity, and actions to increase confidence by securing lines of credit. Mexico worked with the U.S. Federal Reserve and the International Monetary Fund (IMF) to secure a $30 billion swap line from the U.S. Federal Reserve and an IMF Flexible Credit Line of $47 billion. Though Mexico did not use the credit lines, the arrangements helped to improve confidence in the economy. The government also took measures in the FY2010 budget by including substantive tax reforms to offset revenue losses from lower oil production. Mexico's key challenge over the next few years will likely be the issue of further reforms in the tax system to replace the declining share of oil revenues with tax revenues. With its tax revenues representing only 10% of GDP, Mexico has one of the lowest tax collection rates in Latin America, and it is not viewed as being enough to meet the country's social needs. Though the government has already taken some steps to increase tax revenues, economists generally agree that Mexico needs further tax reforms to broaden its tax base. One of Mexico's primary challenges in making its economy more efficient and increasing productivity is the issue of monopolies and limited competition. A 2009 book co-published by the World Bank and Palgrave Macmillan, as well as numerous reports and journal articles, report that special interest groups in business and labor have blocked changes in Mexico that would introduce more market forces into the economy. The publication No Growth Without Equity states that "Mexico seems to be caught up in a high-inequality, low growth state" and that reforms must be put into place in order for Mexico to improve economic growth. One key issue discussed in the World Bank-Palgrave Macmillan book is the oil industry, which, according to the book, is controlled by the federal government and the oil industry labor union, whose own interests are not in balance with the interests of Pemex. The book notes that the "passivity" with which these groups have exercised their property rights with respect to Pemex has hindered the performance of the oil industry and its capacity to grow. The book argues that the influence and power of the federal government, the energy-intensive industrial firms, and the industry's labor union have prevented change from taking place in the oil sector because change would eliminate many of the benefits they have received for many years. Pemex's labor union has resisted change because thousands of jobs are at stake if the company were to be opened up to competition. The large industrial companies that use large amounts of energy at subsidized prices do not want to lose these benefits under a more competitive environment. The country's telecommunications sector is another area that is frequently mentioned as not having enough competition and being controlled by a monopoly. Teléfonos de México controls the telecommunications market in Mexico and has successfully fought antitrust regulators in court. As a result, Mexico's telecommunications industry has probably not developed as fast as it could if more competition were introduced. Some also argue that another challenge to the Mexican economy is the powerful labor unions. Mexico's labor unions have a monopoly on hiring, firing, and collective bargaining and exert a great deal of influence in the energy and healthcare industries and, most importantly, in education. The National Teacher's Union, for example, is the biggest teachers' union in Latin America and the most powerful in Mexico. Analysts argue that the monopolist control over such a large portion of public and private sector activities in Mexico is limiting economic growth in Mexico and preventing the development of a "middle-class society." In September 2009, President Calderón delivered his third state of the union address to the Mexican Congress and proposed a number of reforms to address the economic and political challenges facing the country. These reforms included the following: Proposals to eliminate extreme poverty, introduce universal healthcare, and improve the quality of education for all children. Public sector finance reform. Transformation of state enterprises, which would privatize some parts of the state oil monopoly Pemex. Telecommunications sector reform to increase coverage and allow more competition in this sector. Labor reform measures to bring more flexibility to the labor market by making it easier for companies to hire and fire. Regulatory reform, with the aim of reducing unnecessary government regulations and making the government less bureaucratic. Increase of government coordination and citizen participation in the war against organized crime. Fundamental political reform, which would allow re-election for some public offices. The prospects for passage of President Calderón's proposals by the Mexican Congress are not viewed as very likely. Some of the proposals are viewed as highly controversial and have deep-seated political implications, and efforts to restructure the energy sector or to adopt labor and fiscal reforms have been strongly opposed by the major political parties. Without the structural reforms necessary to bring about significant changes, Mexico's potential to increase economic growth, boost development, and lower the poverty rate will likely be very limited. However, there are signs that the population may be pushing for change, and much will depend on the outcome of the 2012 presidential election. Another serious economic challenge in Mexico is related to the violence taking place in some regions of Mexico after President Calderón's campaign against organized crime and drug trafficking. The escalation of violence has resulted in increased risk aversion, which has impacted foreign investment flows, particularly in the manufacturing industry. The costs from the drug trade far outweigh any of the benefits that drug-trafficking and associated crime might bring in terms of increased cash flows or positive spill-over effects. The costs associated with violence, investment losses, drug abuse, and other direct costs are estimated at $4.6 billion per year, or 0.5% of GDP. Costs could be even higher when taking into account the indirect costs of large numbers of violence-related outward migration, which lowers Mexico's potential growth rate. The city planning department of Juárez estimates 116,000 homes were abandoned as of early 2010 because of the violence. This could translate into a population of up to 400,000 people, one-third of the city, that has migrated. Violence has also had a severe impact on employment in Juárez, with the city losing 23.9% (91,940) of it formal jobs. Some analysts believe that Mexico must increase investor confidence to remain competitive because the drug violence is causing anxiety and uncertainty among investors. Ciudad Juárez, which is close to the border with the United States and where much of the manufacturing industry is located, was, until recently, considered an attractive city for foreign investors and for doing business. However, the border violence that has erupted since Mexico's crackdown on organized crime has changed the business environment, and business leaders have been forced to take steps to increase security in manufacturing plants, such as abolishing overtime so that workers can go home before sunset. The Asociación de Maquiladoras , a local trade group located in Juárez, states that some foreign investors have passed on opening plants in Juárez since 2008, but that this was due to the recession and not to the increase in violence. The relationship between the United States and Mexico is important to policymakers from both countries because of the mutual interest in a number of key issues affecting the two countries, such as bilateral trade, economic competitiveness, and border security. During his state visit to Washington, DC, in May 2010, Mexican President Felipe Calderón emphasized the need for increased cooperation in North America in order to increase the competiveness of the region. President Barack Obama hosted a meeting with President Calderón where the two leaders discussed numerous key bilateral and hemispheric issues affecting the two countries. The leaders reaffirmed the shared values in areas such as economic competitiveness, social and economic well-being, and the security of citizens in both countries. One area of cooperation that was highlighted in a press release after the meeting was the need for mutual economic growth. The two leaders vowed to enhance and reinforce efforts to create jobs, promote economic recovery and expansion, and encourage inclusive prosperity across all levels of society in both countries. The two leaders discussed the following actions for bilateral cooperation to enhance competitiveness: (1) the creation of a Twenty-First Century Border to facilitate the secure and efficient flow of goods and people and reduce the cost of doing business between the two countries; (2) a commitment to continuing cooperation for safe, efficient, secure, and compatible modes of transportation; (3) a commitment to significantly enhance the economic competitiveness and the economic well-being of both countries through improved regulatory cooperation; and (4) the enhancement of intellectual property rights protection to promote innovation and investment in technology and human capital. The two leaders also underscored the importance of human capital and touched upon the issue of immigration. President Obama underscored his commitment to comprehensive immigration reform in the United States while President Calderón stated that his administration was committed to creating more job and educational opportunities in Mexico. Both leaders acknowledged the importance of taking actions to address illegal immigration, border security, and human trafficking groups, and agreed to set priorities for the future. The economic relationship between the United States and Mexico is highly interdependent, with NAFTA playing a central role. The Mexican truck issue is the main trade issue related to NAFTA that has concerned policymakers over the past few years. Under NAFTA, Mexican commercial trucks were to have been given full access to four U.S. border states in 1995 and full access throughout the United States in 2000. Citing safety concerns, however, the United States refused implementation of NAFTA's trucking provisions, and the Mexican government objected. The 111 th Congress terminated a cross-border trucking pilot program that was launched by the Bush Administration. The program was terminated under the FY2009 Omnibus Appropriations Act ( P.L. 111-8 ). On April 2, 2009, a trade association representing carriers in Mexico's trucking industry filed a notice of arbitration under the investment chapter (Chapter 11) of NAFTA. The notice of arbitration alleges that the U.S. Department of Transportation restricts Mexican carrier operations in the United States and Mexican investment in U.S. carriers, which is in violation of NAFTA Articles 1102 and 1103. It also charges that the United States has failed to comply with a 2001 ruling by a NAFTA dispute resolution panel. Mexico retaliated on the termination of the trucking program by imposing tariffs on 90 U.S. products exported to Mexico with an estimated value of $2.4 billion. During his state visit to the United States, President Calderón stated during a press conference that the trucking dispute impacts jobs, companies, and consumers in Mexico and in the United States. President Obama has pledged to work with Mexico to overcome the obstacles in implementing NAFTA trucking provisions. U.S. Transportation Secretary Ray LaHood stated in June 2010 that the Obama Administration would be relaunching the cross-border trucking program with Mexico and would present a proposal to Congress soon. Another key issue that could have significant implications for the United States is Mexico's declining oil production. Mexico is one of the United States' top three suppliers of crude petroleum oil. If Mexico is unable to continue oil production at the same level, the United States may no longer be able to rely on Mexico as a source of oil imports. However, there is a possibility that the Mexican government will eventually pass reform measures to allow foreign investment for increased engineering capacity and exploration. This could bring opportunities for U.S. companies in drilling and exploration services and could increase U.S. merchandise exports such as electrical apparatus, valves, pipes, pumps, electric motors and generators, and other related goods. Some proponents of improving the economic relationship between Mexico and the United States recommend that the two countries work more closely on regulatory cooperation and deepen the economic relationship. Numerous analysts believe that the economic challenges that Mexico is facing are contributing to poverty and organized crime, and that a prosperous and democratic Mexico is in the best interest of the United States. One suggestion is that Mexico and the United States change the relationship from the current emphasis on anti-narcotic efforts and welcome a new stage in bilateral relations by focusing on other concepts such as immigration reform in the United States, energy reform in Mexico, security concerns, harmonization of standards and regulations, and legitimate security and border issues across the region. Another observer contends that Mexico's dependence on the U.S. economy diminishes its ability to diversify its markets and also limits the extent of Mexico's long-term potential for economic growth. He states that the two countries should work together to jointly improve their global competitiveness and in sectors where co-production is possible, but that this will not work if either of the two countries protects itself against imports from the other. Opponents of further North American integration contend that trade liberalization under NAFTA has been harmful to the U.S. economy and resulted in large job losses in the United States. Legislation was introduced in the 111 th Congress for the United States to withdraw from NAFTA ( H.R. 4759 ). The bill would require the president to give written notice to Mexico and Canada of the U.S. withdrawal, which would occur six months after the bill's enactment. The bill had 27 co-sponsors and was referred to the House Ways and Means Committee. Supporters of the bill argue that NAFTA did not live up to its promises and that it has resulted in large job losses in the United States and Mexico. Opponents of the bill contend that NAFTA has had overall positive economic effects in all three countries of North America and that withdrawing from NAFTA would diminish trade and investment flows across the region, hurting U.S. exports and economic growth and causing more job losses. The higher tariffs, they argue, would hurt U.S. exports to Mexico. They point to the losses in exports that have occurred already from Mexico's retaliatory tariffs due to the trucking dispute, and those exports represent only a small percentage of total U.S. exports to Mexico.

The state of Mexico's economy is important for U.S. policymakers for many reasons, most significantly because a prosperous and democratic neighboring country is in the best interest of the United States. The two countries have strong economic, political, and social ties, which have direct policy implications related to bilateral trade, economic competitiveness, migration, and border security. In May 2010, President Barack Obama hosted Mexican President Felipe Calderón at a meeting in the White House in which the two leaders discussed key issues affecting the two countries. They agreed to continue and reinforce cooperation on creating jobs, promoting economic recovery and expansion, and encouraging inclusive prosperity across all levels of society in both countries. The 111th Congress is likely to maintain an active interest in Mexico on issues related to the North American Free Trade Agreement (NAFTA) and other trade issues, economic conditions in Mexico, migration, border security issues, and counter-narcotics. The global financial crisis that began in 2008 and the U.S. economic downturn had strong adverse effects on the Mexican economy, largely due to its economic ties and dependence on the U.S. market. Mexico's gross domestic product (GDP) contracted by 6.6% in 2009, the sharpest decline of any Latin American economy. Mexico's reliance on the United States as an export market and the relative importance of exports to its overall economic performance make it highly susceptible to fluctuations in the U.S. economy. Most other Latin American countries are not as dependent on the United States as an export market. Economic reforms over the past 20 years and the government's responses to the effects of the global financial crisis have helped Mexico weather the economic downturn and improve conditions in 2010. However, sustained economic recovery will likely depend on the U.S. economic recovery and the ability to sustain this growth. In addition to the adverse effects from the global financial crisis and the U.S. economic contraction, Mexico's economy is experiencing numerous other challenges. The escalation of violence since the government's crackdown on organized crime and drug trafficking has led to investor uncertainty in some regions of the country and, subsequently, a sharp decline in foreign direct investment flows. The impact has been the most severe on the manufacturing industry, which is mostly located along the U.S.-Mexico border and has experienced significant job losses. Increasing unemployment throughout the country has led to a growing trend towards informality and self-employment. This may present a long-term problem for the government because growth in the informal sector can lead to increased poverty levels, diminished productivity, and lower prospects for sustained economic growth. Another issue is the 16% drop in remittances to Mexico in 2009, which has mostly affected the poor. Remittance inflows, which are largely from the United States, are Mexico's second-highest source of foreign currency after oil. Numerous analysts have noted that Mexico's potential to promote economic growth, increase productivity, and lower the poverty rate is very limited without implementing substantial structural reforms. President Calderón has proposed a number of reforms to address these challenges, including proposals to eliminate extreme poverty, overhaul public finances, privatize parts of the state oil company, adopt labor reforms, reform the telecommunications sector, and encourage political reforms. Most of these proposals, however, have deeply rooted political implications and have been strongly opposed by the major political parties in the Mexican Congress. There are some signs that the population may be pushing for change, but the prospects for passing any of the proposals will likely depend on the outcome of the 2012 presidential elections.

In August 2003, a political accord was signed that formally ended over three and one-half yearsof armed civil conflict in Liberia, a small West African country of about 3.3 million people. Sincethat time, the country has made steady progress toward consolidating peace, initiating post-warresettlement and socio-economic reconstruction, and establishing functional interim stateinstitutions. Despite such progress, there are indications that these and other related goals -- suchas the conduct of credible and transparent democratic elections, the creation of a durably transparentand effective governance regime, and a transition from reconstruction to long-term economic growth-- face diverse and substantial obstacles. Donor Assistance. Liberia's progress has been aided, in part, by international donors, including the United States, which held a pledging conferencefor Liberia in New York on February 5-6, 2004. At the conference, donors pledged over $522million in relief and reconstruction assistance for Liberia; $200 million of this amount was pledgedby the United States. (1) The donor conference, attendedby representatives of 96 countries and 45public and private organizations, reviewed the plans of the National Transitional Government ofLiberia (NTGL) for a post-conflict transition, as well as progress toward implementation of a peaceaccord signed in August 2003. It also received an update on the activities and views of the UnitedNations (U.N.) Mission in Liberia (UNMIL) and considered a program of assistance organizedaround a "Results-Focused Transition Framework" centering on reconstruction and rehabilitationactivities in 2004 and 2005. The framework's main elements, which underpin the efforts of themultiple functional U.N. agencies and many of the non-governmental organizations that are activein Liberia, include the following: Security maintenance, demobilization and reintegration, development of democratic governance and the rule of law, police training and reform, andelections; Protection of refugees and internally displaced persons (IDPs), advocacy forhuman and gender-based rights, combating HIV/AIDS; Provision of basic services, including water, sanitation, health care, andeducation, and related services; Economic development policy strategy and restoration of productive capacityand livelihoods; and Reconstruction of infrastructure, e.g., electricity, transport,telecommunications, and housing. U.S. Supplemental Appropriation. The donor conference followed President Bush's November 6, 2003, signing into law of the EmergencySupplemental Appropriations Act for Defense and for the Reconstruction of Iraq and Afghanistan,2004 , P.L. 108-106 . It provided $245 million for assessed costs of United Nations (U.N.)peacekeeping operations in Liberia, and up to $205.5 million for peace, humanitarian disaster, andfamine assistance for Liberia. (2) U.N. Mission and Transitional Government. The authorization of sharply increased U.S. assistance to Liberia followed the deployment on October1, 2003 of UNMIL, authorized by the U.N. Security Council on September 19, 2003, and theestablishment of the National Transitional Government of Liberia (NTGL). The NTGL, inauguratedon October 14, 2003, was formed in accordance with a peace agreement signed in Accra, Ghana,which formally ended the Liberian conflict. The NTGL is led by Gyude ( Joo-deh ) Bryant, abusinessman and Episcopal church layman of ethnic Grebo descent, who leads the Liberian ActionParty. As head of state, Bryant occupies the office of chairman, a post designated in the August 2003Comprehensive Peace Agreement (hereafter labeled the CPA), as the top executive NTGL positionin order to emphasize the transitory nature of the NTGL and to forebear the naming of a presidentprior to elections. The NTGL vice-chairman is Wesley Johnson, a university economics lecturerwho heads the Liberian United Peoples' Party. Peace Accord. The signing of the CPA on August 18, 2003 followed two and a half months of negotiations mediated by the Economic Community ofWest African States (ECOWAS) and the International Contact Group on Liberia (ICGL). (3) Itssignatories include the armed parties in Liberia's conflict and Liberia's leading political parties andcivil society groups. The armed parties included the forces of Liberia's former president, CharlesTaylor, and two armed anti-Taylor rebel groups, Liberians United for Reconciliation and Democracy(LURD) and the Movement for Democracy in Liberia (MODEL). The accord provides for disarmament, demobilization, rehabilitation and reintegration (DDRR) programs and a peace-building process in Liberia. It mandates that the NTGL implement a largelyfailed June 17, 2003 cease-fire agreement; (4) monitorand coordinate the DDRR process, withinternational assistance, as well as a range of other political and reconstruction programs; and assistin the preparation and conduct of internationally supervised elections in October 2005. (5) Other keyprovisions of the accord include The stipulated establishment of various political processes, legal authorities, mandates, and bodies, including an Implementation Monitoring Committee (IMC) and a NationalCommission for Disarmament, Demobilization, Rehabilitation and Reintegration (NCDDRR) toimplement the peace accord, and a timetable for this purpose; Military and police restructuring; Release of political prisoners and prisoners of war; The apportionment of key government leadership positions among accordsignatories; "Consideration" of "a recommendation for general amnesty to all persons andparties engaged or involved in military activities during the Liberian civil conflict"; Naming of a new supreme court; and The creation of a Contracts and Monopolies Commission (CMC), aGovernance Reform Commission (GRC), an Independent National Commission on Human Rights(INCHR), a National Electoral Commission (NEC), a National Transitional Legislative Assembly(NTLA), and a Truth and Reconciliation Commission (TRC). Key Turning Points. The signing of the peace accord was preceded by two key events: the departure from Liberia on August 11, 2003 of CharlesTaylor, who resigned from the presidency and went into exile in Nigeria after accepting an offer ofpolitical asylum from its government; and the deployment by ECOWAS of a military interventionforce known as the ECOWAS Mission in Liberia (ECOMIL). The departure of Taylor, elected Liberia's president in 1997 after its first civil war (1989-1997), followed intense international pressure on him to leave Liberia, as he had publicly pledged to do onJune 4, 2003. After Taylor's departure, the vice president, Moses Blah, assumed the presidency ashead of a caretaker government, pending the swearing in of the NTGL. Several developments appearto have motivated Taylor's decision to leave. These include the possibility that if he did not acceptNigeria's asylum offer, he would have faced immediate extradition to Sierra Leone to answerinternational war crimes charges (see below); continuing military gains by LURD and MODEL; andLURD's refusal to engage in serious conflict resolution efforts while Taylor remained in office. Hisdeparture appears to have been a key factor motivating LURD and MODEL to agree to the CPA. The ECOWAS intervention sought to end heavy fighting and alleviate a worsening humanitarian crisis in the wake of the failed June 17 cease-fire. ECOMIL was mandated withmonitoring and securing the cease-fire, enabling the delivery of relief aid, and preparing the way forUNMIL. Lead elements of ECOMIL, predominantly comprised of a Nigerian battalion that had beenserving with the U.N. Mission in Sierra Leone (UNAMSIL), began deploying to Liberia on August4, 2003. An additional Nigerian battalion, one of several West African forces trained underOperation Focus Relief, (6) and troops from Mali,Senegal, Gambia, Guinea Bissau, Togo, Ghana, andBenin, continued to arrive throughout August and into September 2003. ECOMIL, which reacheda full force strength of over 3,560 members by mid-September, deployed with the aid of extensiveU.S. and U.N. assistance. The United States provided logistical and transport services,communications equipment, and other supplies worth $26 million in funds drawn from U.S.peacekeeping operations accounts. This assistance was delivered primarily by PAE GovernmentServices, Inc., a military logistics services firm that had previously supported ECOWAS forces inLiberia and Sierra Leone, in liaison with elements of the U.S. military Joint Task Force Liberia (seebelow). Liberians United for Reconciliation and Democracy (LURD). Liberia's recent conflict, the second in a decade, (7) began when LURDlaunched a series of cross-border raids into Liberia's northwestern Lofa County in mid-year 2000,reportedly from nearby bases in southern Guinea. These actions resembled several similar, butabortive, attacks launched in 1999, likely by fighters who later formed LURD, which began tocoalesce in mid-1999. It was initially primarily comprised of Liberians living in Sierra Leone andGuinea as exiles and refugees. (8) LURD's nominalleader, Sekou Damate Conneh, is a formerLiberian tax collector of Mandingo heritage who fled to Guinea in 1990. He later worked as an autotrader and businessman, and was imprisoned after returning to Liberia in 1997; he later again fledto Guinea. Conneh reportedly has close relations with the authorities in Conakry, but these appearto have been mediated, in part, by his wife, Aisha Keita-Conneh, who is reportedly a personaladvisor to Conté, including on spiritual matters. Differences between the couple, discussed below,contributed to internal rifts within LURD. MODEL. The formation of LURD was motivated by its members' mutual opposition to what they viewed as a persistent pattern of ethnic bias, politicalexclusion, human rights abuses, and corruption under Taylor. LURD's ethnically diverse make-upreflected the commonality of such views across ethnic lines. Such shared views were not strongenough, however, to permanently overcome parochial self interests, leadership rivalries, and a historyof competition between the two ethnic groups, the Mandingo and the Krahn, that initially formed thebulk of LURD's membership. In early 2003, such issues prompted some of its Krahn members todepart LURD and form MODEL. (9) MODEL appears to have been formed as the result of a merger between LURD members based in the west of Cote d'Ivoire, Liberia's neighbor, and Force Lima, a militia based in the same area. Force Lima was formed in late 2002 to counter Liberian militias -- reportedly backed by the Taylorgovernment -- that entered the Cote d'Ivoire in support of two Ivorian rebel groups that inNovember 2002 had taken up arms against the Ivorian government of President Laurent Gbagbo. Many of Force Lima's recruits were anti-Taylor Liberian Krahn refugees who had lived for extendedperiods in western Cote d'Ivoire, which is the traditional homeland of the Guere, an Ivorian ethnicgroup closely related to the Krahn by culture and language. Force Lima, and later MODEL, werereportedly backed by the Gbagbo government, which dismissed such allegations, and its supporters. Despite the emergence of MODEL as a LURD splinter group, there remained linkages between the two organizations. They reportedly shared some common sources of financial support, and somemembers were affiliated with both groups, which shared a common foe and did not militarily opposeone another. In addition to such commonalities, both groups have faced internal divisions, and bothare seen as susceptible to further fissures, particularly due to by rank-and-file members' resentmentof their leaders' actual or perceived access to state resources and the perks of state office, whichsome hold as officials of the NTGL. Pattern of Conflict. After the first LURD attacks in 2000, the armed rebel campaign, though episodic and seasonal, grew both in its geographic extentand military intensity. Initially concentrated in Lofa, hostilities gradually spread south and then tocentral Liberia, as LURD launched operations further afield, including attacks near to the capital,Monrovia. By late 2002, many western and central Liberian towns had been the site of combat orhad experienced indirect effects of war, such as influxes of displaced persons, the activities of armedelements, and the negative impact on daily life and economic activities of generally rising insecurity. As the conflict grew, rebel forces gradually seized more territory and held it for increasingly longperiods, notably in 2003, but the military situation was often fluid. Belligerents' territorial controlwas limited and transitory. Fighting often focused on provisioning, looting, and harassment raids,and often targeted displaced persons' camps, rural industries, and towns along Liberia's rudimentaryroad network. Marginal changes in variables, such as access to arms materiél, provisions, ormanpower, often shifted the tactical balance between forces, which were often poorly trained,lacking in discipline, and frequently prone to arbitrary behavior. All of the armed groups recruitedlarge numbers of children and adolescents, and heavy use of drugs, alcohol, and other intoxicantswas, and likely remains, common among Liberian combatants. (10) Rebel Gains. In early 2003, MODEL moved into eastern Liberia from the areas in Cote d'Ivoire near the Liberian border. It soon made significantmilitary in-roads there, and over the next few months expanded its area of operations, successfullyseizing territory and many towns in Liberia' eastern counties and along the coast. (11) In April 2003,an ECOWAS assessment team reported that LURD and MODEL together controlled about 60% ofLiberian territory. Rebel gains continued. LURD launched three intense assaults on the capital, twoin June and one in late July. Monrovians dubbed these "World War" "I," "II," and "III" because ofthe indiscriminate use of mortars and other projectiles during the fighting, and due to the highcivilian casualty rate that resulted. Decline of Conflict. Periodic fighting continued following the deployment of ECOMIL, and persisted after the signing of the CPA and the subsequentdeployment of UNMIL in early October 2004. It gradually decreased in scope and frequency,however, as peacekeepers expanded their areas of deployment. Fighting following the CPAappeared to have been motivated by looting opportunities -- particularly in contested zones -- andby the belligerents' attempts to consolidate or extend control over territory and weaken their foesprior to the further deployment of peacekeepers. (12) Another factor motivating the continued use ofarms was the apparent reticence of the armed groups' leaders to participate in disarmament beforetheir political demands, primarily relating to the allocation of government positions, were met --despite having signed and repeatedly publicly endorsed the peace accord. Political Conditions. As the LURD insurgency burgeoned, political conditions deteriorated, and the Taylor government began to curtail politicalactivities. In early 2002, it imposed a state of emergency and, separately, a ban on political activitiesand gatherings. (13) These actions, which remainedin effect until September 2002, reflected Taylor'spersistent intolerance of political opposition. Under his leadership, foreign observers and manyLiberians assert, opposition parties were harassed and their activities curtailed. U.S. Ambassadorto Liberia John W. Blaney, like many Liberian and foreign observers, charged that opposition partieswere harassed, their activities curtailed, and that presidential candidate eligibility restrictions,including lengthy domestic residency requirements, were likely to limit electoral competition ingeneral elections then slated to be held in October 2003. (14) Opposition parties charged that theElectoral Commission, which regulated elections law and administration, was controlled by partisansof Taylor's ruling National Patriotic Party (NPP), and that a range of proposed electoral code reformswere likely create outcomes favorable to the NPP. Such concerns prompted repeated domestic andinternational calls for elections to be postponed, but the government insisted until early May 2003that credible elections could and would be held in mid-October 2003, as scheduled. In May 2003,as rebels gains continued, the Taylor government indicated that it might accept a 12 to 18 monthelection deferral, if a constitutionally valid term extension "framework" could be crafted. (15) Human Rights Conditions. As restrictions on political activities increased, a rising number of security operations and attendant human rightsabuses were reported. Persons viewed by state security forces as dissidents or rebel supporters,particularly ex-fighters and members of certain ethnic groups, were detained and harassed, oftenviolently, during raids in urban areas and camps for internally displaced persons (IDPs). Manydetainees were released relatively quickly, sometimes after beatings and or bribing of arrestingagents; a smaller number were held for longer periods. Theft and extortion by security forces,frequently linked to lack of combatant pay, reportedly became frequent, as did the impressment ofyouths into military service. In war-affected areas, reports of more numerous and severe abuses against civilians were common. Human rights and other groups assert that both government and rebel forces have carriedout executions, beatings, torture, and other abuses against civilians, including rape, and abductionfor purposes of forced labor. The same actors were accused of looting and burning towns and IDPcamps, causing further internal dislocation. Both rebel and state forces periodically issued summaryjudgments and sanctions, often violent, against those within their own ranks accused of looting andother crimes. During the LURD assaults on Monrovia in June and July 2003, government militaryforces were reportedly particularly abusive and violently exploitative. Widespread abuses continuedin combat zones after the signing of the CPA, notably in September 2003, and following thedeployment of UNMIL, though at a gradually decreasing rate. Humanitarian Conditions. The spread of hostilities caused already poor humanitarian and economic conditions in much of Liberia todeteriorate sharply, particularly in late 2002 and 2003. Even where relief aid could be delivered,needs often outstripped available supplies. IDP camps in Liberia were typically overcrowded andaffected by severe resource constraints. The U.N. Office for the Coordination of HumanitarianAffairs (OCHA) reported in May 2003 that in camps "minimum standards of assistance are not met,and there are major gaps with regard to the provision of food, safe water and sanitation, health andeducation services as well as protection." Humanitarian assistance increasingly became the targetof raids by the armed groups. IDP camps were violently assaulted and their residents forced to flee,abandoning food allocations that combatants then seized. By April/May 2003 humanitarian relief agencies were unable to provide emergency assistance in 11 of Liberia's 15 counties due to combat and related insecurity. Subsequently, suchorganizations lost access to nearly all of Liberia; all but a few withdrew entirely from Liberia forextended periods from June through August 2003. Three major attacks on Monrovia in June andJuly caused IDPs to flee to central Monrovia, causing a dramatic and extensive worsening ofhumanitarian conditions. By August, over 300,000 displaced persons were living in or nearMonrovia. Food stocks ran extremely low, and food price inflation rose sharply, as did cases ofmalnutrition, notably among children. Access to potable water decreased due to contamination andovercrowding, and outbreaks of respiratory and stomach disease, including cholera, occurred. Suchconditions were aggravated by the extensive violence that characterized the fighting in Monrovia. Civilians were robbed and abused by combatants, hundreds of victims of gunshot and shrapnel wereadmitted to hospitals, and several hundred bodies were collected from streets during and after eachmajor military assault. The belligerents also stole numerous vehicles from relief groups and lootedhumanitarian supply warehouses. As of mid-September 2003, fighting had internally displacedabout 500,000 Liberians, and about 311,000 were refugees to neighboring countries as ofOctober/November. (16) Thousands of IDPs andrefugees from other countries remained in areas ofLiberia that continued to be largely inaccessible to relief agencies until several months after thepeace accord. Persistent Regional Threat. For nearly a decade and a half prior to the August 2003 peace accord, cycles of conflict in Liberia generated a range ofeffects that undermined the national security, political stability, and economic prosperity of itsneighbors, and brought about negative repercussions in the wider sub-region. Among the mostserious of such effects -- which continue to threaten Liberia's neighbors -- include the spread ofsmall arms; the diffusion of violence-based social norms, often with commercial underpinnings; anincreasing amount of mercenary activity in the region; the deployment of diverse, often state-assistedrebel groups along regional borders; a rise in human rights abuses; and the creation of aggrievedrefugee and internally displaced populations. A variety of fighters allied with Taylor's 1989-1997civil war faction or, after his election, with the Liberian government, participated in the SierraLeonean civil war (1991-2002); (17) in fighting insouthern Guinea in 2000-2001; and in Cote d'Ivoirein late 2002 and 2003. Guinea and Liberia. Taylor's government and that of Lansana Conté, Guinea's president, maintained poor, highly antagonistic relations. Conté bitterlyopposed Taylor, and each government regularly accused the other of sponsoring aggression againstit. During and after the first Liberian civil war, many factional opponents of Taylor and civilians --many from ethnic groups, notably the Mandingo, who feared mistreatment by the Taylor government-- sought refuge in Guinea. LURD, which grew out of this exile milieu, allegedly received supportfrom the government of Guinea, beginning around the time of its inception. LURD fighters laterassisted the Guinean government to defeat a series of attacks on towns and villages in southernGuinea carried out between September 2000 and early 2001 by a mix of forces made up of RUFfighters from Sierra Leone, Liberian militias, a small number of Guinean rebels, and mercenariesfrom the region. In addition to allowing LURD to maintain rear bases in southern Guinea, theGuinean government reportedly supported LURD by supplying it with arms, and periodicallyprovided tactical military assistance, such as cross-border mortar and helicopter air fire support. Such reports were routinely been denied by Guinea's government. (18) The influence of Guinea with respect to developments in Liberia was underlined by a series of visits to Conakry during and after the peace negotiations by officials, including U.S. andECOWAS diplomats; the interim Liberian President, Moses Blah; UNMIL head Jacques Klein; andChairman Bryant. LURD leaders also appeared to have received continuing logistical and securitysupport from Guinea in the period after the signing of the peace accord. In late September 2003,Conneh traveled to Liberia from Guinea to announce LURD's intention to end combat. His convoywas guarded by Guinean government soldiers and included Guinean government vehicles, and hepaid tribute to Guinea's role in backing LURD's objectives. (19) Similarly, when Aisha Keita-Connehtraveled to Monrovia in January 2004, she was accompanied by Guinean military bodyguards. (20) Cote d'Ivoire and Liberia. In late 2002, a mix of factional fighters, mercenaries, and refugee recruits from Liberia became involved in clashes, humanrights abuses, and looting in western Cote d'Ivoire. Violence there burgeoned in the wake of aSeptember 2002 rebellion centered in northern Cote d'Ivoire. The Liberians joined diverse armedgroups that were active in the Ivorian west, some fighting in support of the Ivorian government, andsome against it; others were involved in banditry. The Taylor government asserted that it wasunaffiliated with any of these groups, but there were repeated reports to the contrary. Fighters andlooted goods reportedly traversed the Liberia-Cote d'Ivoire border frequently, and the two country'sgovernments accused one another of sponsoring armed rebel groups against the other. Such chargeswere the product of Cote d'Ivoire's current political crisis, but had roots in direct and indirect,long-standing, Ivorian involvement in Liberia's two conflicts. Numerous press and analytical reportscharged that the Ivorian government provided backing for MODEL. Though violence in westernCote d'Ivoire has generally subsided, there have been periodic reports of tensions between localIvorian citizens and foreign immigrants and refugees in the area. Peace efforts in both Liberia and Cote d'Ivoire have taken heed of the cross-border dynamics of conflict along the Liberian-Ivorian frontier. Many of the same actors mediating in Cote d'Ivoirewere involved in congruous efforts to end Liberia's conflict, and UNMIL and the U.N. Operationin Cote d'Ivoire (UNOCI) share intelligence information. In November 2003, UNMIL head JacquesKlein appealed for French-speaking peacekeepers, in light of cross-border flows between Liberia,Cote d'Ivoire, and Guinea of refugees and armed groups. Similarly, former President Taylor and hisIvorian counterpart, Laurence Gbagbo, met in Togo in early May 2003. They later announced plans,which were never implemented, to deploy along their shared border a joint military monitoring force. Poor economic conditions and persistent conflict-related humanitarian needs have long motivated a continuous flow of international relief assistance to Liberia and its neighbors. Similarly,the region has been the focus of repeated international conflict resolution efforts centered aroundmediation attempts and, in the case of Liberia, the imposition of proscriptive sanctions on itsgovernment. Some policy makers also have expressed concern over reports alleging that the Taylorgovernment hosted Al Qaeda agents and facilitated their purchase of West African diamonds. (21) U.N. Security Council Sanctions. Liberia is subject to international sanctions first imposed, though since modified, by the U.N. Security Councilin March 2001 (S/RES/1343) after it found that the Taylor government had repeatedly violatedearlier U.N. resolutions by providing military support and safe haven for the rebel Sierra LeoneRevolutionary United Front (RUF), in part in exchange for Sierra Leonean diamonds. S/RES/1343demanded that the Taylor government end such support, seize RUF assets and expel all RUFmembers in Liberia, and end its trafficking in arms for diamonds. It banned the direct or indirectimport of rough diamonds from or through Liberia; flights of Liberian-registered aircraft; theshipment of arms and related materiél to Liberia; and foreign travel by senior Liberian officials. The sanctions were extended for a year in May 2002 (S/RES/1408), after the Security Council found that Liberia had not fully complied with S/RES/1343, as Liberia later formally admitted,claiming the right to do so for reasons of self defense under Article 51 of U.N. Charter. Some Taylorcritics advocated widening the sanctions to include measures to decrease the Taylor government'saccess to national timber, rubber, and maritime revenues, which they alleged it was diverting forprivate purposes and uses to fund regional conflict. On May 6, 2003, the Security Council extendedsanctions on Liberia for a year (S/RES/1478) and added a ten-month ban on the import of Liberiantimber, which began July 7, 2003, though it also decided to assess and mitigate possible negativehumanitarian or socio-economic effects of its sanctions. On December 22, 2003, the Security Council terminated the sanctions and replaced them with new ones (S/RES/1521). In doing so, it cited concerns that the cease-fire and CPA were "not yetbeing universally implemented throughout Liberia"; that much of its territory remained outside theauthority of the NTGL, particularly where UNMIL had yet to deploy; that there continued to belinkages between the illegal exploitation and trade of natural resources like diamonds and timber,leading to a the proliferation and trafficking of illegal arms, and the fueling and exacerbation ofconflicts in Liberia and other areas of West Africa; and that the situation in Liberia, the proliferationof arms and armed non-state actors and mercenaries in the subregion continued to constitute a threatto international peace and security in Liberia and the region. S/RES/1521 banned for one year: The export to Liberia for any recipient of all arms, military materiél, and technical support relating to such items, with certain exceptions for UNMIL and otherU.N.-approved purposes, such as security sector reform programs, and humanitarian/protectivepurposes; Foreign travel or transit of "individuals... who constitute a threat" to Liberia'speace process or regional security, specifically including senior members of the former Taylorgovernment and their spouses, members of the Liberian armed forces with links to Taylor, andindividuals affected by travel restrictions under S/RES/1343; The direct or indirect import of rough diamonds from or through Liberia;and The import of Liberian logs and timber products. It also urged the NTGL toestablish full control over timber harvesting areas and timber-based revenues S/RES/1521 also Called upon NTGL to establish an "effective Certificate of Origin regime" for Liberian rough diamonds that would potentially allow Liberia to join the Kimberley Process and leadto a lifting of the diamond trade sanctions; Urged the NTGL to establish full control and oversight of all public revenues,specifically including those generated by the Liberian International Ship and Corporate Registry, andto use such funds for national development; and Mandated the formation of a sanctions monitoring Committee and aninvestigatory panel of experts. On June 17, 2004, the Security Council reviewed the sanctions under S/RES/1521, but declined to lift them (S/RES/1549). Instead, having taken note of a NTGL request that sanctions on Liberia'stimber and diamonds be lifted, the Security Council decided to re-establish a panel of experts andmandated that it assess general compliance with the sanctions and progress toward the goalsunderlying their imposition, which the NTGL had also requested. The passage of S/RES/1549 waspreceded by the Security Council's decision on March 12, 2004 (S/RES/1532), to freeze the assetsof the former president, Charles Taylor, as well as those of his family and close allies, and to traceand freeze funds and other economic assets owned or controlled by the same parties. PresidentBush's Executive Order 13348, of July 22, 2004, implements this ban in the United States. Thetransitional government of Liberia implemented the ban in Liberia in mid-October 2004, though theSupreme Court subsequently halted the action with reference to two reputed Taylor associates. U.N. and ECOWAS. The establishment and deployment of UNMIL was preceded by the Security Council's authorization, before the CPA wassigned, of a Multinational Force (MNF) in Liberia. Its purpose was to support the implementationof the much-violated June 17, 2003 cease-fire agreement and to establish a secure environment forthe delivery of humanitarian relief. On August 1, 2003, the Security Council adopted a resolution1497. It authorized an MNF and labeled as "critical" President Taylor's departure from power, tobe followed by the installation of a transitional government in Liberia and the subsequentdeployment of a U.N. stabilization successor force to the country by October 1, 2003. It providedthe MNF with a waiver of U.N. sanctions banning the import of military materiél into Liberia andauthorized the MNF to act under Chapter VII of the U.N. Charter (i.e., gave it authority to usemilitary force to ensure international peace and security). It also provided that all personnel of "acontributing state" would be subject to the "exclusive jurisdiction" of that state, unless jurisdictionis waived by a state. The provision was seen as exempting participating troops from potentialprosecution in the International Criminal Court (ICC). (22) While S/RES/1497 did not explicitly equate the MNF with the ECOWAS intervention force that was then preparing to deploy to Liberia, it did authorize UNAMSIL to provide logistical supportfor 30 days to ECOWAS for the purpose of fielding the force that subsequently became known asECOMIL. The term MNF was used in the resolution, in part, because in the weeks preceding theauthorization of the MNF, ECOWAS leaders had conditioned their contribution of troops to theMNF on the expectation they would be joined in this effort by other nations. In the end, however,no other nations contributed troops to the MNF; it was ultimately comprised solely of ECOMIL,which deployed days after S/RES/1497 was passed, as described previously. U.N. Mission in Liberia (UNMIL). UNMIL, authorized on September 19, 2003, by the U.N. Security Council, acting under Chapter VII of theU.N. Charter (S/RES/1509), commenced operations on October 1, 2003. The formal deploymentof UNMIL, which at the time lacked the bulk of its troop strength, had the legal effect of dissolvingECOMIL and transferring its authority to UNMIL. Simultaneously, the troops that had comprisedECOMIL were inducted into UNMIL, and became its initial core force. UNMIL was authorized a force of up to 15,000 U.N. military personnel, including as many as 250 military observers, 160 staff officers, and up to 1,115 civilian police officers, and "appropriate"civilian components. Upon the establishment of UNMIL, the small, previously existing U.N. Officein Liberia (UNOL) was dissolved, and certain of its assets folded into UNMIL. The Security Councilgave UNMIL a multi-faceted, 12-month initial mandate. Key duties include monitoring andimplementation of the CPA and June cease-fire accord, and creation of an action plan forimplementing a comprehensive DDRR program, in cooperation with other international actors. S/RES/1509 also mandated that UNMIL: Disengage and canton at secure sites the Liberian armed parties' military forces; Support the work of the Joint Monitoring Committee (JMC), a body createdunder the June 17 cease-fire accord; Implement a voluntary disarmament program; Provide security for key government installations, and other vital infrastructure,such as transport hubs; Protect and enable the free operation of U.N. staff andfacilities; Facilitate the provision of humanitarian aid; Assist in the protection and promotion of human rights in Liberia;and Protect civilians under imminent threat of violence, under certainconditions. The resolution further mandated that UNMIL assist the NTGL to: Monitor, restructure, and retrain Liberia's police and military forces; Re-establish national authority and administrative capacitiesnation-wide; Develop a "strategy to consolidate governmental institutions, including anational legal framework and judicial and correctional institutions"; Restore proper administration and regulation of natural resources;and Prepare for national elections scheduled for no later than the end of2005; UNMIL is headed by Jacques Paul Klein, who had been appointed Special Representative of the Secretary-General for Liberia on July 9, 2003. Klein is a retired U.S. Air Force General andsenior U.S. diplomat, and former head of the U.N. Mission in Bosnia and Herzegovina (UNMIBH). Other top UNMIL officials include its Force Commander, Lieutenant-General Daniel IshmaelOpande of Kenya, the former commander of UNAMSIL; Souren Seraydarian of Syria, the DeputySpecial Representative of the Secretary-General for Operations and Rule of Law; Abou Moussa ofChad, the Deputy Special Representative of the Secretary-General for Relief, Recovery andRehabilitation and U.N. Humanitarian Coordinator for Liberia; and UNMIL Police CommissionerMark A. Kroeker, the former police chief of Portland, Oregon. Numerous medium to long-term challenges face Liberia and its donors. These include: Achieving a transition from a situation of humanitarian crisis requiring emergency assistance to one characterized by resettlement and economicrecovery. The re-establishment of state authority throughout Liberia's national territory. The rebuilding and reform of government institutions, facilities, and capacities, notably those of the functional ministries, revenue-earning and regulatory independent agencies, thepolice, and the justice system. General socio-economic recovery and rehabilitation of national physical infrastructure. Other current peace and security-related operational issues that face the NTGL, UNMIL, and Liberia's international donors include continued implementation of the CPA, particularly with regardto maintenance of security; completion of DDRR; progress in preparing for elections; and resolutionof the status of Charles Taylor, both as an exile in Nigeria and as a war crimes indictee. Current Humanitarian Situation. Humanitarian conditions remain difficult in much of Liberia, but are continuing to improve, particularly inMonrovia and other urban areas. Relief organizations have progressively expanded their areas ofoperation nationwide since August 2003, when humanitarian emergency operations were reinitiatedafter the deployment of ECOMIL and the signing of the peace accord. The socio-economic situationalso began to slowly stabilize at that time due to the arrival of renewed food and fuel imports andthe reopening of businesses and key transport corridors. During the past year, U.N. agencies, inconcert with non-governmental organizations (NGOs) and NTGL ministries, in a forum called theHumanitarian Action Committee, have implemented a wide range of projects. These target needsrelating to nutrition, water and sanitation, primary healthcare services and transportationinfrastructure rebuilding, and the continuing assessment of socio-economic conditions in local areasthroughout Liberia. Many initial efforts have taken the form of "quick-impact projects" meant toprovide immediate basic outputs. Several disease immunization campaigns have also beenundertaken. Despite considerable progress, there remain high levels of basic humanitarian need in Liberia. In August 2004, according to USAID, quoting U.N. High Commissioner for Refugees (UNHCR)data, there were 300,000 internally displaced persons (IDPs) living in camps in Liberia. Additionally, there were 350,000 Liberian refugees living in Guinea, Sierra Leone, Côte d'Ivoire,and Ghana, as well as 4,000 Sierra Leoneans living in Liberia. As of early June, about 80,000Liberian refugees had independently repatriated to Liberia following the end of the conflict. Accessto relief supplies and, in some cases, limited public services are most readily available IDP campsand informal settlements in urban areas, but these are also characterized by overcrowding. Nutrition. Over 418,000 individuals currently depend on monthly food distributions from the World Food Program (WFP), though the number ofbeneficiaries has varied widely, to almost double that number in some months. In early August2004, the WFP announced that it would decrease rations due to shortages of pulses, effectivelyreducing the daily caloric nutrition levels of rations by about 27%, though corn-soya supplementswere added. Further food aid supply shortages were forecast by the WFP due to lapses in donorfunding. As of late August, according to a September 2004 WFP report, severe malnutrition -- attributable, in part, to illnesses, such as malaria, diarrhea, and cholera that tend to rise during thecurrent rainy season -- was being reported in some areas. Such reporting, and associated reliefresponses, are in part due to the continuing extension of relief agency activities and increasinglyregular assessments of medical and humanitarian needs throughout the country. Provision ofadequate potable water is a key component of both emergency relief delivery and resettlementprograms. Resettlement. While increasing numbers of IDPs are spontaneously resettling (i.e., autonomously moving to permanent places of settlement with little,if any, assistance from relief agencies), the bulk of displaced populations have yet to move to theirpermanent areas of residence. U.N. and NGO agencies that will support resettlement operations arecurrently planning these activities, and stockpiling and procuring resources that will be required tocarry them out. Such resources include seed, tool, and basic transitional non-food item packages,as well as follow-up programs aimed at rehabilitating and providing basic social service facilitiesfor newly resettled communities. Formal resettlement programs will not begin until areas targetedfor return have been declared safe by an organ called the Security Assessment Committee forResettlement (SACR), made up of NTGL, U.N., and NGOs representatives. Such declarations willrequire that in each targeted area, UNMIL peacekeepers be deployed; disarmament programs becompleted; social and local police services be functioning; that the area be freely accessible tohumanitarian agencies; and that spontaneous resettlements in the area be assessed, as a means ofdetermining the likely success of formal return activities. The UNHCR began to assist in therepatriation and resettlement of refugees from surrounding countries in early October 2004. Education. In late 2003, the NTGL Education Ministry of the began efforts to reinitiate education activities, which had declined dramatically asthe conflict grew. Most Liberian young adults and school-aged children have had limited access toschooling and are largely illiterate, in contrast to older generations, which are generallywell-educated by regional standards. The NTGL's efforts have been assisted by the U.N. Children'sFund (UNICEF), through its Back to School Campaign. UNICEF helped coordinate educationalfacility assessments, delivered "school in a box" emergency school supply kits, and implemented arapid master teacher "train the trainers" program. According to UNMIL, most primary andsecondary schools in urban areas are operational, and UNICEF has delivered over 10,000 schoolsupply kits adequate for the needs of 800,000 pupils; has trained 12,000 primary school teachers; andis supplying schools with access to clean water. Nationwide, current core activities aimed atrebuilding the education sector include facilities and manpower assessments; creation of teachertraining, vocational/skills-building, and education promotion programs; efforts to support girls'education; school rehabilitation, construction, and provisioning; and school-based delivery ofhealthcare and supplementary nutrition. WFP programs currently reach over 395,000 pupils, andplans call for the expansion of such aid to about 65,000 additional children by late 2004 (23) . Compared to progress in reopening schools, progress toward reinitiating activities at the universitylevel has been halting. The University of Liberia (UL) has opened, but only about 20% of enrolledstudents are reportedly fully registered, and in August 2004, students and faculty launched a boycottin protest against the nomination of the NTGL of a new UL president. (24) General Economic Recovery. Nation-wide, commerce is growing, in part because key transport routes are free of factional checkpoints. In coreurban areas, a wide variety of imported goods are reportedly available from major trading companies,many Lebanese-run, which in turn supply small-scale retailers and street merchants. Publicinfrastructure remains devastated. Monrovia, with a population of about 1 million, lacks piped waterand public electricity mains; most electricity is produced by private generators. These sectors aretargeted for donor-aided rehabilitation. In July 2004, a Spanish firm was awarded a licence toexplore for offshore oil. Despite a normalizing economic situation, some observers are concerned that the upswing in economic activity in Liberia is driven by donor-financed expenditures, and may not reflectfundamental economic recovery. As of mid-October 2004, $354 million of $520 million in donorpledges made in February 2004 had been received. About half of these receipts were earmarked forhumanitarian activities and about half for reconstruction projects. Some observers worry thathumanitarian crises in other world regions, such as Sudan, may undermine donors' actualcontribution of assistance they have previously pledged. Re-establishment of State Institutions. A phased extension of state authority continues to be undertaken by the NTGL and the National TransitionalLegislative Assembly (NTLA) with the assistance of UNMIL, particularly its civil affairs elements. It has been hampered, however, due to a paucity of basic facilities and resources to rehabilitate them;by insecurity, notably in rural areas; and by friction among local authorities (25) . The latter include amix of those affiliated with the armed factions, who in some cases were appointed prior to theestablishment of the NTGL and in others in coordination with the NTGL; traditional leaders; andthose still in place from previous regimes. NTLA and local objections to unilateral nominations oflocal officials by the NTGL executive have reportedly led to deeper cooperation between thesebranches of the transitional government, principally through a process by which a county-levelcommittee vets and recommends a pool of candidates from which NTGL nominees are selected bythe NTGL chair. Generally, in areas outside the capital, the dispatch of government officials has centered on key population centers and areas where UNMIL has deployed troops and where the demobilization ofex-combatants has been initiated. Key tasks of local officials include coordination with the NTGL,U.N., and NGO agencies of programs to reintegrate and resettle ex-combatants and internallydisplaced persons in their communities of residence; the initiation of local infrastructure and publicfacilities needs-assessments; and, in a few cases, the initiation of reconstruction projects. Anotherkey goal of the NTGL is to restore state control, in concert with local officials where appropriate,over the exploitation and regulation of natural resources, notably forests and diamonds, in part inorder to comply with the conditions required for U.N. sanctions on Liberia to be lifted. Thegovernment recently deployed revenue collectors to Liberia's main towns. Throughout much of2004, protection of borders had been an on-going area of concern with regard to the reassertion ofcentral state authority, because in many instances, factional fighters remained in control of frontiers. In early September, however, the UNSG reported that UNMIL had worked with the NTGL to deployimmigration and customs officials to key border crossings, and was engaged in negotiations witharmed faction elements aimed at ensuring they relinquish to the NTGL public facilities that havecontrolled or occupied. UNMIL is also assisting ad-hoc committees to mediate housing and propertydisputes, particularly those pertaining to families resettling or returning to their home areas. In Monrovia, many NTGL ministry headquarters lack basic equipment, provisions, and the logistical capacity or resources to obtain them, though donor-funded ministerial rehabilitationprojects, including U.S.-funded programs, are attempting to remedy this situation. Despite suchchallenges, the NTGL has taken a number of steps to re-establish basic government processes. It hasdirected that all state revenues be submitted to the central bank, though some critics claim that notall funds have been subjected to this requirement, and replaced the former Taylor-era head of theCentral Bank, who critics had accused of aiding corrupt practices under the former government. In late March 2004, the NTGL submitted a $23.5 million interim budget, derived from maritime and customs receipts among other domestic revenues, covering the period from February to June2004, which the legislature passed weeks later, with minor increases. The budget covered onlygovernment current wage bills, but did not address massive civil servant salary arrears, a centralgrievance of public sector workers, a key political constituency. In mid-May 2004, in response tosuch concerns and following talks with public sector labor leaders, the NTGL stated that it wouldbegin bi-monthly payments of such arrears through mid-2005, beginning in late July 2004, aftercompletion of a general public audit aimed at removing ghost workers from the state payrolls andpreventing future salaries fraud. Despite this commitment, in late May government workersundertook a labor strike, viewed by the NTGL as illegal, to demand immediate payment of salaryarrears. The government worker strike began during a separate, multi-week wage arrears strike byLiberia Telecommunications Corporation workers. In late July, NTGL Chairman Bryant reiteratedthe NTGL's commitment to beginning arrears payments. The NTGL subsequently proposed a regular$80 million 2004/2005 budget. Transparency. While the NTGL has made progress toward re-initiating government functions, some observers worry that it may lack thecapacity to ensure that all state operations are conducted in a transparent and accountable manner. Some claim that government office holders are acting for their own benefit or are engaging innepotism. Critics claim that in a post-conflict country with an average 2003 income of $130 percapita, the issuance of new vehicles to numerous public office holders, including most of theparliament, is an indication of these office holders' self enrichment. They also cite concerns aboutrepeated overseas trips by NTLA officials, some accompanied by retinues of associates; the sale ofLiberian state overseas properties, such as embassies, and of a $10 million stockpile of iron ore, anddisposition of revenues thereof; the taxation of former monopoly firms; the disposition of revenuesfrom certain shipping-related state agencies; and lack of progress toward auditing and regulatingnatural resource concessions and proceeds (26) . UNMIL head Jacques Klein has criticized the NTGLfor making making slow progress in many areas, notably with regard to elections. In late July,reportedly noting that "each of the warring factions got ministries ... staffed top to bottom with theirpeople," he attributed such lack of progress to the assertion that "some people are thinking, 'Whynext year? I like being in my government job - what's the rush?' " (27) In late October 2004, a joint World Bank/International Monetary Fund (IMF) fiscal management assessment team in Liberia called for increased transparency, reform, and accountabilityin NTGL fiscal management and budgeting. The team stated that they viewed such an outcome asa pre-condition for the removal of U.N. sanctions on Liberia, and as a signal to donors consideringthe provision of increased aid to Liberia. The team also stated that donors are concerned about theNTGL's purchase of 76 Grand Cherokee jeeps for the parliament, though they expressed optimismthat donors would likely eventually grant Liberia foreign debt relief. (28) Despite some criticisms of its performance, the NTGL has received plaudits from many observers for undertaking incipient reforms of the Central Bank of Liberia (CBL), including an orderthat all state revenues be placed in a CBL account. The NTGL has also announced that severalgovernment agencies are to be audited, with foreign technical assistance. The replacement of theformer CBL governor has generated similar praise. In May 2004, the then-CBL governor, EliasSaleeby, resigned under pressure from the NTLA and, reportedly, from the IMF. Saleeby, a formerIMF staff who had served as Central Bank governor during the Taylor regime, had been re-appointedto the post in October 2003. He had, however, become the focus of increasing criticism fromparliamentarians who challenged his authority to print about $12.3 million worth of Liberiancurrency, without parliamentary approval, during Taylor's final months in power. Saleeby reportedlyhad claimed that a 1999 law gave the Bank the authority to do so. He was also the target of criticismfrom diverse Liberian and foreign observers because of his close association with Taylor and thehigh level of public sector corruption and fiscal chaos that characterized the Liberian governmentunder Taylor and Saleeby's tenure. In May 2004, a visiting IMF delegation reportedly threatenedto refuse to work with the Central Bank until Saleeby's resignation. (29) Reforms in the Security and Legal Sectors. A Rule of Law Implementation Committee, made up of NTGL and UNMIL representatives, has beenformed to coordinate police, judicial, and prison reforms. Liberia's National Police Academyre-opened in mid-July, and training of screened and vetted cadets, drawn from a mix of internalpolice and external candidates, began in at the end of the month. The Academy's capacity remainslimited, however, due to rehabilitation requirements, for which funds were lacking as of earlySeptember 2004. Further police recruitments, aided by UNMIL CIVPOL, are continuing, and allexisting law enforcement personnel are being enrolled in a nation-wide registry. A limited number of courts at various levels, including the Supreme Court, are now functioning, though with limited resources, and UNMIL-aided training and vetting of judges at all levels belowthe Supreme Court has begun. UNMIL and experts from various donor countries are working withthe NTGL to reform and rehabilitate the national justice system through implementation ofmonitoring, advisory and training programs in diverse rule-of-law institutions, through limited,quick-impact rehabilitation projects targeting key institutions' facilities. Plans for the reform of Liberia's armed forces, as provided for under the Comprehensive Peace Agreement (CPA), are not complete. U.S. Defense and State Department officials are in the processof assessing and recommending a potential program for military restructuring. Of the $200 millionin IDFA funds under P.L. 108-106 , $35 million was dedicated to U.S. assistance to support Liberianmilitary reform. U.S. defense officials, however, estimate that a total of between $118 million and$200 million will ultimately be required to achieve the goal of rebuilding a 3,000- 4,000 personmilitary. Other U.S. planning projects a possible need for a 4,000-6,000 person military. Officials have provisionally identified within the Administration's FY2005 and FY2006 requests $118 millionin regional peacekeeping, Foreign Military Financing, and supplemental funds that, if appropriatedand sanctioned for this purpose, might be used to substantially begin such restructuring. They arealso seeking the assistance of other donor nations in accomplishing this goal. UNMIL Deployment. UNMIL troops have deployed throughout Liberia, including at key border sites, and its civilian police (CIVPOL) elementsare present at 25 main locations nationwide, and are expected to undertake further deployments. Asof the end of September 2004, UNMIL, which has an authorized troop ceiling of 15,000 personnel,had a total strength of 14,363 troops; 201 military observers; and 1,089 CIVPOL; and over 423international civilian personnel. The deployment of a communications group then under formationwas expected to bring UNMIL up to its fully authorized troop level. UNMIL had experienced 23fatalities, none as a result of a hostile act. As of the same date, UNMIL personnel were drawn from60 countries; the largest combined military/CIVPOL contingents were from Bangladesh, Pakistan,Ethiopia, and Nigeria. The United States had contributed six troops; five military observers; and 72civilian police. UNMIL had earlier faced challenges in recruiting personnel from troop contributingcountries. (30) Security Situation. The nation-wide deployment of UNMIL, together with the continuing success of disarmament and demobilization programs forex-combatants (see below), has contributed to a generally calm and improving security situation inLiberia, though the country remains subject to periodic unrest and volatility. In addition to carryingout disarmament activities, UNMIL troops routinely monitor roads and borders, the latter by landand air, and carry out search and seizure operations aimed at intercepting and halting trafficking inillicit arms and ammunition. No significant cease-fire violations between the three armed factionswere recorded to date in 2004. Intra-factional rivalries have on several occasions, however, turnedviolent and threatened public security, as have periodic civil unrest and criminal activities, includingsporadic looting and assaults, theft, or extortion of civilians by ex-combatants. Such threats haveprimarily affected Monrovia and other population centers, where many disarmed ex-combatants arepresent, and localities awaiting the start of disarmament programs. Intra-Factional Tensions. Limited discord within MODEL and among former government force elements, most commonly involving disputes betweenfield level fighters and their immediate commanders, has periodically been reported. More seriousintra-factional tensions, however, have occurred within LURD. Throughout late 2003 and 2004,there were persistent reports of rivalries between one group of LURD members, including severalkey political leaders said to be allied primarily with Sekou Conneh, and a second LURD faction. The latter includes several key military commanders who reportedly back Conneh's wife, AishaKeita-Conneh, and Kabineh Janneh, a former LURD peace accord negotiator and the current NTGLMinister of Justice. While Keita-Conneh, who like her husband is a founding leader of LURD, holdsno formal position within the organization, she has long wielded extensive influence over largesegments of LURD. LURD has long been subject to internal discord; both during the conflict and during the peace talks that ended it, disagreements among the group's leaders were reported. Tensions grew inJanuary 2004, however, when a group of LURD military leaders, disenchanted with Sekou Connehfor not backing their candidacies for positions in the NTGL, alleged that he was engaging infavoritism and accepting bribes in exchange for positions allocated to LURD in the NTGL. Somecalled on Keita-Conneh, who claims to be the "founder and main leader" of LURD, to take over itschairmanship from Conneh. These tensions also appear to have been aggravated by an on-goingmarital dispute between Conneh and Keita-Conneh that reportedly relates, in part, to Conneh'snomination of a relative of his former wife to be NTGL Finance Minister. (31) Such tensions persisted throughout 2004. In early April, LURD fighters, claiming that they were not receiving adequate disarmament assistance and that their leaders were neglecting theirneeds, looted and rioted in the central city of Gbargna. In early June, a group of LURD leaders,claiming status as LURD's "National Executive Council," suspended Conneh "indefinitely" aschairman of LURD, and days later appointed Chayee Doe as the new LURD chair. Doe, however,died in mid-June while undergoing brain surgery in the United States. Subsequently, in June, Jannehwas chosen by the Council as Acting and then permanent LURD Chairman. In early August, the twoopposed LURD factions targeted one another in a series of actions involving vehicle theft,abductions, fistfights and shootings. These incidents, which threatened to escalate and pose ageneral threat to public security, were halted by UNMIL through a combination of police and troopforce deployments and mediation. Conneh immediately dismissed the legitimacy of his alleged replacement in June 2004, and continues to claim his position as chairman -- though for much of the period after the CPA'ssigning, he resided abroad, and only periodically visited Liberia (32) . His absence from Liberia duringkey events -- such as an April 2004 opening of a disarmament camp in Tubmanburg, LURD'swartime headquarters, and during peace negotiations -- has led some observers to hypothesize thathe may initially have been chosen as a figurehead leader who could later be replaced. According tosuch views, he was selected because he had access to funding and links to the Guinean government,but held little direct sway over LURD's military elements. During the post-accord period, in thisview, Conneh has continually had to struggle to assert his authority within the group, and hasattempted to form alliances with politicians who possess political connections and aspirationsindependent of those of the core military LURD leadership. Such factors may underlie the spate ofintra-LURD violence in early August; it appears, in large part, to have been spurred by Conneh'sreturn to Monrovia and the prospect that he might attempt to re-assert control over LURD'sMonrovia-based leadership. Since that time, Conneh's position appears to have strengthened, assome military leaders formerly allied with Keita-Conneh have begun to distance themselves fromher. The on-going tensions within LURD are worrying to many observers because of LURD's key position within the NTGL, and its history of using the force of arms to achieve political ends. WereLURD to permanently split into mutually opposed factions, some believe, the threat of significantrenewed armed conflict could re-emerge, and could again destabilize Liberia and endanger theviability of the peace accord. However, in accordance with the CPA, LURD has announced that willofficially dissolve as an armed force on October 31. Observers anticipate that the group willtransform itself into a political party. Substantial progress toward two key challenges to implementation of the CPA -- resolution of persistent disagreements about appointments to posts in the National Transitional Governmentof Liberia (NTGL), and completion of the disarmament and demobilization process -- has beenmade, though neither goal has been completely met. Other key peace accord-related tasks facing theNTGL include the need to improve its functional capacity; ensuring progress toward security sectorreform; and establishing the legal and operational conditions and capacities necessary for the conductof free and fair elections in October 2005. NTGL Posts. Job-related political demands by the armed actors, notably LURD, repeatedly threatened to prevent the initiation of demobilizationand to undermine the accord and the formation of the NTGL. In mid-September 2003, LURDasserted that the Bryant Administration was planning to deny LURD assistant minister posts, incontravention of the peace accord, and threatened not to join the NTGL. In mid-October, LURDagain requested that job allocations be clarified prior to the inauguration of the National TransitionalLegislative Assembly (NTLA) (33) . Inmid-December 2003, the three armed factions issued a formaldeclaration, which they dubbed The Monrovia Clarification on the 18 August 2003 ComprehensivePeace Agreement , demanding control over virtually all top government posts, including sixministries and 16 independent government agencies allocated to the unarmed political parties andcivil society under the CPA. Their demand, if upheld, would reportedly have caused civilian groupsto lose as many as 33 positions, and spurred the civilians, including the Deputy Chairman of theNTGL, Wesley Johnson, to threaten to resign from the NTGL in protest. While most suchdisagreements have been resolved, in early September 2004, the UNSG reported that "there are stillongoing disputes over government posts which have made it difficult for the TransitionalGovernment to function as a cohesive administration." (34) Similar disputes, mostly pitting the formerarmed factions against unarmed political parties and civil society groups, had earlier arisen over themanner in which National Transitional Legislative Assembly (NTLA) seats had been selected.Disagreements over disputed NTLA seats have since been resolved, apart those affecting one seat,for which a special election was slated to be held. Disarmament, Demobilization, Rehabilitation and Reintegration(DDRR). Liberia's peace accord requires the cantonment and "disarmament,demobilization, rehabilitation and reintegration" (DDRR) of the armed parties to the conflict. AnUNMIL-supervised disarmament process began in December 2003, but faced immediate andsubstantial problems related to the operational and logistical challenges of rapidly initiating anationwide DDRR program. A key point of the initial failure related to misinformation about theprotocol for paying disarming combatants when the program began in mid-December. Plans calledfor a two-stage payment of $300 to disarming combatants, the first $150 installment to be paid afterinitial induction into the DDRR process. When disarming combatants learned that they would notreceive on-the spot payments upon surrendering their weapons, they rioted and looted in and nearthe capital. Although the unrest was successfully suppressed, and UNMIL announced that it wouldpay each disarming fighter $75 in exchange for their weapon upon entrance into the cantonment site,the DDRR process was halted, pending further planning. Other factors that contributed to thisoutcome included a series of public criticisms of DDRR plans; LURD's initial opposition to theestablishment of a DDRR camp in its territory; and the publicly announced need for more extensivepreparations of DDRR camps, further deployments of UNMIL troops, and public education aboutthe disarmament process. After repeated postponements, the DDRR process began anew in mid April 2004, and has since recorded significant success, despite a few localized violent incidents associated with someex-combatants' dissatisfaction over the DDRR process and the mishandling of military materiel. Over 95,000 combatants, more than double the initial UNMIL projection of 38,000, have beendemobilized to date. The total includes over 12, 600 women and 10,000 children, about 22% ofthem girls, and at least 530 foreign combatants. Over 21,000 weapons, predominantly lightweapons, have been turned in, as well as substantial amounts of ammunition and unexplodedordnance. Disarmament has occurred in most areas of the country, including some remote borderzones. (35) Disarmament Challenges. Not all ex-combatants inducted into the DDRR program have surrendered a weapon. This has led to two criticisms of theDDRR process. First, some critics allege that non-combatants are taking advantage of the processto gain demobilization payments, a claim denied by UNMIL, which asserts that it vets all DDRRinductees. Second, some observers fear that the former armed factions may be sequesteringsignificant caches of weapons, which might facilitate a return to armed conflict if Liberia's weakpolitical institutions fail to mediate competing interests. They point to UNMIL's seizure of multipleweapons, on several occasions, as possible evidence for such claims. Similar concerns have beenexpressed with regard to the lower-than-anticipated number of heavy weapons being surrendered. There have been periodic though unconfirmed reports that former Taylor loyalists may be attemptingto recruit and train fighters in southern Guinea, possibly in order to incite a rebellion against thatcountry's government, which opposed that of Taylor. There have also been reports that some weapons from Liberia have been smuggled out of Liberia into neighboring countries. Some worry, in particular, that weapons and/or ex-combatantsmay cross into neighboring Cote d'Ivoire, where the political situation remains unsettled, and whereDDRR plans call for the payment of demobilization stipends nearly three times as large as thosebeing offered in Liberia. A related matter of contention arises because, although not all disarmedex-combatants surrendered weapons during the much of the DDRR process to date, in August 2004,UNMIL officials reportedly began to reject prospective inductees into disarmament camps wholacked a weapon. While the hand-over of arms is not presently official policy, UNMIL is reportedlyconsidering requiring male combatants to turn in a weapon, while exempting disarming female andchild combatants from such an obligation. The alleged rejection of prospective inductees has causedconsternation among those affected. In mid- September 2004, the National Commission on DDRR(NCDDRR) received a complaint from a former government commander claiming that 2,000 of hismen had been rejected for DDRR. The completion date for disarmament has also been a matter of contention. In late August 2004, the deputy UNMIL force commander announced that the disarmament program would beextended to December. This would mean that disarmament would continue after refugee repatriationprograms, which began in October, had commenced. The head of UNMIL, Jacques Klein,subsequently announced that the previously-planned disarmament end-date of October 30 would befollowed. On September 7, however, the NCDDRR rejected the October 30 date, calling it"unrealistic and unilateral." It asserted that several disarmament sites had yet to be opened and thatfurther time for disarmament in remote, seasonally inaccessible areas was required. A NCDDRRspokesman also stated that none of the three former armed factions or the NTGL had been officiallynotified of the date announced by Klein, a claim later denied by the deputy head of UNMIL. Chairman Bryant, however, subsequently accepted the October 30 date, and in late September,UNMIL opened its last disarmament site. (36) A related challenge facing the disarmament process is a reportedly inadequate level of funding for ex-combatant reintegration programs, due in part to donor concerns. Some donors reportedly willnot release pledges for reintegration support until the disarmament process has formally ended. While several large reintegration programs are operating, United Nations and NTGL officialsmaintain that given current levels of funding, not all ex-combatants will receive reintegrationassistance, which these officials see as threatening to the sustainability of the DDRR program as awhole. Child Soldiers. U.N. agencies have estimated that there are over 15,000 child soldiers in Liberia, many forcibly recruited by the belligerent forces foruse as soldiers, domestic workers, involuntary sexual companions, and porters. Disarmament plansinclude special provisions for addressing the special needs of child ex-combatants, and a ChildProtection Working Group (CPWG) chaired by UNICEF has been created. In late August 2004,however, UNICEF Carol Bellamy made press statements indicating that only about half of theUNICEF's appeal for reintegration projects for child ex-combatants had been funded by donors. (37) In January 2004, an independent National Elections Commission (NEC) was appointed by the NTGL, as required under Liberia's CPA; its members include two former Supreme Court justicesand two former Taylor-era members of the NEC. Its mandate is to ensure the conduct of elections"in a manner that is acceptable to all" no later than October 2005 (38) . As called for under the CPA,the United Nations, in cooperation with other members of the ICGL (see above), is designing aprospective U.N. elections assistance program, and possible legal and operational reforms of theelectoral system, as well as a potential elections time line. Such an aid program would have two keygoals: the conduct of "credible" and expertly administered elections, and the creation of a sustainablenational electoral administration capacity in future elections. A report of an assessment undertaken in April 2004 by the elections technical assistance group IFES stated that any eventual electoral framework should address the following tasks or issues: Establishment of electoral system (constituency, number of representatives, electoral formula); Creation of electoral boundaries; Determination of type of elections to be held (national,general); Eligibility to vote and process for becoming a voter (including provisions forrefugees and IDPs); Eligibility and process for political candidacy; Political party registration and the electoral campaignprocesses; Elections administration (procedures of operations,appointments); Voting, vote-counting, and the announcement of resultsprocedures; Sanctions for specific electoral offences; Consultative mechanisms; Elections observation and guarantees for the rights of political partyrepresentatives; and Election dispute resolution. (39) An assessment mission by the U.N. Department of Political Affairs Electoral Assistance Division in April 2004 found that the NEC had "very little material and staff capacity to carry outcivic and voter education, voter registration, constituency delimitation and polling." It asserted thatthese activities could not be carried out in timely manner without "extensive internationalassistance." The United Nations projects that administration of the elections will require a one yeardeployment to the UNMIL electoral unit of 32 international experts, 11 national experts, 49 nationalGeneral Service staff; a five-month deployment of an additional 92 national General Service staffto support the Unit's data center; a six to nine month deployment of 220 U.N. Volunteers; and thehiring for six months of 4,080 temporary registration staff. The UNSG has proposed that the costof these workers, as well as funding for registration materials and partial funding for voter educationmaterials, be included in UNMIL's 2005-2006 budget submission. Under this proposal, however,all direct NEC Commission funding would have to come from other sources. In addition to electoralconduct work, the UNMIL CIVPOL unit is preparing for the elections by supporting the training ofabout 1,800 Liberian Police Service personnel. UNMIL projects that a five-week nationwide voterregistration exercise will begin in April 2005 and to proceed for around five weeks. (40) In July 2004, the NEC chair announced that an estimated $12.4 million would be required to conduct the election, and that about one third of this cost would likely be represented by the in-kindsupport being provided by UNMIL. By comparison, a rough estimate by IFES in April 2004 totaled"$16 million for an elections and operational budget for the period of July 2004 - January 2006," butIFES warned that "this figure would not include local elections, a costly constituency delimitationexercise, out-of country refugee registration/voting, and the necessary logistical support." (41) The NEC has also begun to prepare for the 2005 election. In July 2004, it hosted a consultative meeting with Liberian political parties. This process reportedly generated a consensus that Liberiansgenerally favor a direct, constituency-based elections, the traditional electoral method in Liberia,rather than proportional party elections, which were employed in the 1997 post-war special election. Following this consultative process, in late August, the NEC submitted to the NTLA for ratificationa draft electoral law, the Electoral Reform Bill, which is currently under parliamentaryconsideration. (42) It proposes the followingmeasures, which include proposed suspensions of articlesof the current constitution and a variety of related legal reforms: Suspension of Article 83(b), which requires elections on the basis of an absolute majority for all public offices. Instead, the president and vice president would be chosenby a first round absolute majority (over 50%) vote, to be followed by a simple majority run-off votebetween the two highest vote earners if no candidate received an absolute majority in the first roundvote. County-based simple majority votes would be used to elect House representatives andsenators. Due to the "unlikely" probability of a national census before the 2005 elections,suspension of Article 80(d) of the constitution, which requires a census to demarcate constituenciestotaling no more than 100. Instead, the number of House seats would be fixed at sixty four,representing multi-member constituencies for each county. Each winning candidate would beelected by "an approximately equal number" of voters, though means for accomplishing this end arenot entirely provided for in the bill. Due to the increase of counties from nine to fifteen since the adoption of thecurrent constitution, suspension of Article 78, requiring political parties to be defined as associationsof at least 500 members in each of at least six counties. Instead the same requirements would apply,but with applicability to at least 12 counties. Currently registered parties would not be subject to thisamendment, and inter-party electoral coalitions would be permitted. Funding of the NEC by the public treasury, provided that a formal finance andaudit process overseen by special committees be established to oversee NEC spending and ensurethe accountability of NEC activities. The enactment, for diverse reasons, of a number of technical amendments tothe New Elections Law of 1986, including several provisions aimed at preventing electoralmalfeasance and setting campaign spending limits. Due to widespread population displacements, the bill would also: Suspend Article 52(c), which requires that presidential and vice presidential candidates reside Liberia 10 years prior to an election, but wold add a provision requiring that thetwo incumbents not come from the same county; Suspend Article 30(b), which requires one year of residence and status astaxpayers of all legislative candidates within the constituencies that they propose to represent; and Amend the New Elections Law of 1986 to allow the NEC to administrativelyand operationally facilitate the registration and voting of displaced persons and refugees, and toprovide assistance to illiterate and disabled persons. Taylor Indictment. A key factor that appears to have motivated Taylor's departure from power was the unsealing of an indictment against him bythe Special Court for Sierra Leone (SCSL) a hybrid U.N.-Sierra Leonean body established to trythose most responsible for war crimes and human rights abuses during Sierra Leone's civil war (43) . The indictment, issued on March 7, 2003, was publicly unsealed on June 4, 2003, as Tayloraddressed opening remarks to the Ghana peace talks. Simultaneously, an arrest warrant for Taylorwas issued, and the SCSL requested that the Ghanaian government detain and transfer him to SierraLeone for prosecution. Ghana claimed non-receipt of SCSL's request, and Taylor abruptly returnedto Liberia, reportedly on a Ghanaian state aircraft. The indictment was seen as weakening Taylor'sstature and bargaining power; the following day, LURD mounted a fierce assault on Monrovia, inan apparent bid to gain pre-negotiation military superiority. The attack, and the initial failure ofMODEL to send a delegation to Ghana, temporarily postponed the talks. LURD threatened towithdraw from the talks if Taylor, who LURD labeled a war criminal, did not resign. Taylor thenthreatened to pull out of talks unless the indictment was lifted. The talks continued, however,leading to the June 17 cease-fire accord. Indictment: Implications and Asylum Offer. Taylor's indictment was controversial. It was seen by many analysts as a potential impediment toa rapid political settlement leading to Taylor's departure from power and from Liberia. In late June2003, Abdulsalami Abubakar, the former Nigerian head of state and the ECOWAS peacenegotiations mediator, called the indictment counter-productive to mediation efforts. Nigeriasubsequently offered asylum to Taylor, reportedly with strong U.S. encouragement. He initiallyrejected the offer because Nigeria would not guarantee his safety from extradition to face trial, butlater accepted it, after meeting with Nigerian President Olesegun Obasanjo on July 6, and departedLiberia on August 11. The exact terms of his asylum were not publicly stated, but the offerreportedly was made in exchange for Taylor's agreeing to resign, withdraw from Liberian politics,and not talk to the press. News reports alleged, however, that he continued to directly communicatefrom Nigeria with political allies in Liberia, in an attempt to exert continuing control over economic,political, and military events in Liberia (44) . Inmid-September 2003, the Nigerian government rebukedTaylor for his actions, warning that it would "not tolerate any breach of this condition and otherswhich forbid him from engaging in active communication with anyone engaged in political, illegalor governmental activities in Liberia." (45) Reportsof such activities by Taylor have since declined, andhis influence appears to be slowly waning, although periodically such allegations continue to appearin the media. Some observers of Liberian affairs believe his influence -- as projected through avariety of allies, such as top former Taylor administration officials who hold high offices in theNTGL -- remains significant. Nigeria. Taylor's asylum has caused considerable controversy within Nigeria. Many Nigerians find the presence in their country of a war crimesindictee repugnant. Others see Taylor as a long-time enemy of Nigeria, in part because his forcesreportedly murdered and abused Nigerians during and after the first Liberian civil war. SeveralNigerian legislators have called for Nigeria to surrender Taylor to the International PoliceOrganization (Interpol), which in December 2003 issued a Red Notice for Taylor in response to arequest from the Special Court, but not all legislators support such a move (46) . On December 10,2003, a coalition of Nigerian, Liberian, and Nigerian NGOs, in collaboration with Open Society, apolitical reform and advocacy organization, called on the Nigerian government to revoke Taylor'sasylum and surrender him to the Special Court (47) . More recently, in July 2004, a working quorumof Liberia's transitional parliament rejected a petition from a coalition of 80 human rights andpro-democracy groups calling for the parliament to urge Chairman Bryant to demand that Nigeriaextradite Taylor to face trial before the SCSL. Taylor's asylum is also the object of a court case by two Nigerian plaintiffs seeking transfer of Taylor to the SCSL. The plaintiffs, former businessmen whose limbs were amputated by SierraLeonean RUF rebels in 1999, are pursuing a consolidated court case that seeks to have the Nigeriangovernment reconsider, and ultimately rescind, its provision of asylum to Taylor. They contend thatTaylor's asylum is illegitimate because it was granted by the Nigerian executive branch, rather thanthe National Refugee Commission, which they contend has sole legal authority to decide asylumclaims. They claim that the executive's actions breached their rights under the Nigerian constitutionand international law, and assert that the Nigerian government's provision of asylum is obstructingTaylor's trial before the SCSL. The government contends that the Nigerian Federal High Court,which is hearing the case, lacks jurisdiction to entertain a suit filed by the two plaintiffs because theylack standing in the case, since they are not parties to the SCSL. It also contends that the plaintiffs'case was filed after relevant statutes of limitation had expired. (48) In September 2004, the human rights advocacy group Amnesty International applied to the Federal High Court for leave to submit an amicus curiae (friend of the court) brief in the case. Thebrief focuses on two issues: whether war crimes indictees of the SCSL are entitled underinternational law to have or retain refugee status, which the brief concludes is not permitted; andwhether under international law Nigeria must surrender such an indictee if it does not investigateand, if evidentiarily warranted, prosecute such a case. The brief concludes Nigeria must investigatethe case against Taylor or surrender him to the SCSL for prosecution. (49) Status of SCSL Case Against Taylor. Taylor is pursuing efforts to have the SCSL indictment lifted. In August 2003, his representatives filed acomplaint before the International Court of Justice (ICJ) challenging the jurisdiction of the SpecialCourt to prosecute him. However, according to an ICJ press release, "no action will be taken in theproceedings ... unless and until Sierra Leone consents to the Court's jurisdiction in the case" -- anunlikely prospect, given the Sierra Leone government's support for the case against Taylor. The ICJfinding followed a similar motion first filed before the Special Court itself in July 2003. In lateOctober and November 2003, the Special Court heard arguments by lawyers for Taylor asserting thathis indictment is invalid because he was head of state, and therefore was immune from prosecution,when it was issued. His then-legal counsel also maintained that the Special Court has no power toenforce an arrest warrant outside the borders of Sierra Leone. Taylor's efforts to quash the indictment have failed. In late May 2004, the SCSL Appeals Chamber rejected Taylor's claim of immunity from prosecution. The prosecution team is nowawaiting Taylor's appearance before the SCSL. In addition, in March 2004, SCSL prosecutionagents, acting under a Liberian court warrant, carried out a search of Taylor's former residences inLiberia, as well as those of his key associates. Taylor could also potentially face additional legalcharges before the sub-regional ECOWAS court. The court's president stated in mid-September2004 that the court has the authority to hear cases filed by a national of any member state, includingcases pertaining to Taylor's role in the Liberian conflict or those in other ECOWAS states. (50) Asylum: Debate and Implications. The possibility that asylum might provide Taylor with de facto indemnity from prosecution prompted considerabledebate over the implication that the conditions pertaining to his departure from Liberia gave primacyto goals related to political negotiations, rather than those related to justice and the rule of law. Some policy makers and observers, viewing the need for peace as paramount, saw Taylor'sextradition to Sierra Leone as a less pressing objective than a resolution of the war in Liberia and theformation of a transitional government there. Many advocates of this view -- reportedly includingthe Bush Administration -- do not necessarily support indefinite asylum for Taylor, but rather maysee it as a temporary expedient, and implicitly leave the future disposition of his case subject to legaldecisions by the Special Court and decisions by the Nigerian government. (51) Other observers,including some Members of Congress, maintain that Taylor must face the serious charges againsthim, and that his asylum substantially undermines the deterrent effect on other human rights abusers,including the armed parties in Liberia, of the prospect of being subjected to criminal sanctions. (52) Pressure on Nigeria. Some advocate bringing pressure on Nigeria, which asserts that it "will not be harassed" over its asylum offer, to extraditeTaylor, and several provisions of U.S. law support that goal, in part by conditioning some U.S. aidto Nigeria on its transfer of Taylor to the SCSL. (53) Some observers worry, however, that suchlegislation unfairly targets Nigeria, and could damage U.S.-Nigerian relations or be perceived asunjustifiably punishing Nigeria, and thereby potentially undercut its extensive efforts to bring peaceto Liberia. They argue that the transfer of Taylor to Nigeria was undertaken with full U.S.cognizance and reportedly was urged by Secretary of State Colin Powell. In addition, they stress thatNigerian ECOWAS officials were central in the mediation of the CPA and note that Nigeriaspearheaded the ECOMIL intervention and is a leading UNMIL troop contributing country. U.S. Law and Taylor. Several U.S. legislative provisions pertain to Taylor's asylum. P.L. 108-106 includes $2 million for "for rewards for anindictee of the Special Court for Sierra Leone." Though it does not mention Taylor by name, thisprovision is widely assumed to be targeted at and applicable to him. After the enactment of P.L.108-106 , the Nigerian government, which called the reward provision "an incitement to terrorism,"increased security for Taylor, and asserted that the provision might prompt violations of itssovereignty (54) . State Department officials oppose such infringements of sovereignty or associated illegal actions and assert that the apprehension of indictees for which there are U.S. rewards should beundertaken by appropriate government authorities. They also contend that such rewards are notfugitive bounties; rather, according to the State Department, when offered, they are given inexchange for credible information leading to a fugitive's apprehension and transfer to the appropriatecourt of jurisdiction, on a case-by-case basis. In Taylor's case, they maintain, no reward is necessarybecause Taylor is under the control of the Nigerian government. The offer of a reward for hisapprehension would be potentially offered only if he becomes a fugitive. S. 2809 , theDepartments of Commerce, Justice, and State, the Judiciary, and Related Agencies AppropriationsAct, 2005, would provide funding for emergencies in the diplomatic and consular service, providingthat funds previously appropriated "for rewards for an indictee of the Special Court for Sierra Leone"be transferred to the SCSL (55) . Other U.S.legislation has concerned the Nigerian government. P.L.108-199 which contains FY2004 foreign operations appropriations, incorporated some provisionssimilar to those in H.R. 2800 (Kolbe). These include measures that could deny someforms of U.S. assistance to Nigeria, including funds for debt restructuring, if it fails to surrender andtransfer Taylor to the Special Court. For much of 2002 until June 2003, Bush Administration policy toward Liberia centered on threeactivities: urging the Taylor Administration and its armed opponents to uphold human rights norms,cease armed hostilities, and engage in direct negotiations; providing emergency humanitarianassistance; and providing relatively small amounts of development assistance (DA). DA,administered by the U.S. Agency for International Development (USAID), supported internationaland local NGO projects. These sought to increase access to basic health care; bolster food securityby improving food crop production, processing and marketing capacities and small-scalecommunity-level income generation and infrastructure building capacities; and support adult literacyand providing civic education and public information. USAID also focused on improving prospectsfor successful electoral change, primarily through capacity building efforts targeted at civil societygroups and local independent media. Responses to Increasing Conflict. Beginning in late May and early June 2003, Administration activities relating to Liberia shifted toward ensuringthe protection of Americans and U.S. government personnel and assets in Liberia, and facilitatingthe Liberian cease-fire and peace negotiations in Accra, Ghana (June-August 2003). Several U.S.military teams were dispatched to the region to bolster security for the U.S. embassy, which was hitby mortar fire and stray bullets during heavy fighting in Monrovia, and to evacuate Americans. TheFrench military also evacuated Americans from Liberia. Embassy Attacks. On June 25, 2003 Greystone, a U.S. embassy storage compound occupied by thousands of civilians fleeing fighting and mortarfire, was hit by two explosions during a second major assault by LURD on Monrovia. Three personswere killed, including two local embassy workers, and 16 were injured. The State Department issueda sharp condemnation of the attack, after earlier labeling the LURD assault a "serious violation ofthe cease-fire" and stated that the attack might remove "any international credibility or recognition"retained by LURD (56) . On June 26, Liberian crowdspiled eleven bodies, including children, in frontof the U.S. embassy, in a demonstration calling for immediate U.S. intervention to halt the fighting. On July 20, a team of 21 U.S. Marines, part of a 41 member Fleet Anti-Terrorism Security Team(FAST) trained to guard U.S. diplomatic installations, was deployed to Monrovia. Upon its arrival,the FAST faced a hail of mortar fire falling in the vicinity of the embassy. Its deployment wasbacked by U.S. air transport teams based in Senegal and Sierra Leone; the latter carried out severalevacuations from Monrovia. In late July 2003, all of these U.S. military elements became part ofa larger U.S. military effort, dubbed Joint Task Force Liberia. Conflict Resolution Efforts. The United States, a key member of the ICGL, actively participated in the peace negotiations in Ghana. These effortssought to improve the security environment in Monrovia; enable then-suspended or otherwiseinterrupted emergency relief operations to resume; and to further resolve the conflict and a transitionof state power. After a cease-fire agreement was signed on June 17, the United States repeatedly andstrongly urged the Liberian belligerents to adhere to it, and to prevent civilian casualties. In late July,Deputy Assistant Secretary of State Pamela Bridgewater traveled to Guinea, where she reportedlymet with LURD Chairman Sekou Conneh and Guinean government officials to emphasize the needfor an end to the conflict and for Guinean support of LURD. Her visit was quickly followed by avisit to Guinea by Walter Kansteiner, Assistant Secretary of State for Africa, who reiteratedBridgewater's message to Guinean officials. In July and August 2003, the United States assisted the deployment of ECOMIL to Liberia (see "Overview and Recent Developments," above) -- a course of action that was preceded by extensivepublic debate about the potential and relative merit of a direct U.S. military intervention. OnceECOMIL had deployed, U.S. policy makers pushed for the creation of a U.N. peacekeeping missionin Liberia. The United States also acted to protect the interests of some Liberians living in theUnited States by granting to those who qualified for Temporary Protected Status (TPS). (57) Many Liberians and a number of foreign policy advocates had for several years called for direct international intervention in Liberia -- preferably, in their view, a U.S. led intervention -- to stopthe civil war and assist in resolving the political issues underlying it. As fighting in and aroundMonrovia grew, such calls, including several from world leaders, increased, contributing to agrowing debate in the press and among U.S. policy makers about a potential U.S. intervention inLiberia. Perspectives on Intervention. Proponents of a potential U.S. intervention in Liberia argued that the United States had long been involved in Liberia-- beginning by founding it -- and benefitted from substantial and enduring Liberian support forthe United States during the Cold War. Opponents argued that bilateral ties had weakenedconsiderably since the 1980s, and that Liberia was peripheral to U.S. interests; that its conflict wasessentially an internal political contest for state power; that potential dangers to U.S. troops, ifdeployed to Liberia, were not warranted; and that the United States was already over-extendedmilitarily across the globe. Some warned that U.S. troops in Liberia would face dangers akin tothose faced by the U.S. intervention in Somalia in 1992, in which 29 Americans died. Proponentsasserted that Liberia's political and military situation was qualitatively different from that ofSomalia, and that its citizens welcomed Americans. They also argued that Liberia had become alynchpin for persistent political and economic instability; had engendered increasingly porous borderzones beset by cross-border crime, arms flows, and smuggling; and was the source of severe regionalhumanitarian crises. Liberia had become a failed state, they asserted, that undermined regional U.S.democracy and governance policy goals and constituted a direct threat to the United States byproviding operational space for international criminal actors and international terrorists. They citedreports that the Taylor government had directly aided international terrorist financing by allegedlyfacilitating the purchase by Al Qaeda operatives of Sierra Leonean diamonds. (58) Initial U.S. Responses. U.S. officials responded to mounting calls for U.S. military intervention by stating that they were assessing the situation inLiberia. They offered no firm commitments or pledges to deploy U.S. troops, however, andsuggested that African militaries could mount an effective intervention force. Secretary of DefenseDonald Rumsfeld noted that African troops had "been well-trained" and equipped for peacekeepingby the United States (59) . On June 30, 2003 JamesCunningham, the U.S. Deputy Ambassador to theU.N., said that prior to the establishment of an intervention force, the United States would requirethat Taylor give up power; that a political agreement among the Liberian parties be finalized; andthat there be international support for a continued peace process. (60) Humanitarian Assessment and Security Team. In early July 2003, a U.S. Humanitarian Assessment and Security Team (HAST) was dispatchedfrom U.S. European Command (EUCOM) to Monrovia. The 32-member team included experts withmedical, contracting, civil engineering, logistics, water purification and other technical expertise,and a security component. Initial plans called for the HAST to undertake an assessment over a week,but the mission was extended (61) . Some observerssupportive of a U.S. intervention, but skeptical thatone would take place, viewed the HAST as a stop-gap measure undertaken to demonstrate U.S.engagement with Liberia and counter growing international pressure for a U.S.-led intervention onthe eve of President Bush's July 7-12 state visit to Africa. (62) Military Assistance and Monitoring. A second U.S. military team was dispatched to ECOWAS member states to assess the force readiness andmilitary logistical and equipment needs of these countries prior to their anticipated deployment ofa joint intervention force to Liberia, and to assess a possible U.S. role in supporting such a force (63) . The United States also deployed a private contractor as a member of the Joint Verification Team,a monitoring body that was to be created under the June 2003 cease-fire accord. The contractorperformed liaison functions on behalf of the United States and the ICGL. The same delegate laterassisted ECOWAS to undertake a pre-deployment assessment mission, and subsequently acted asa liaison between ECOMIL and the Joint Task Force Liberia, and helped ECOMIL form the JointMonitoring Committee (JMC), as provided for under the CPA. Joint Task Force Liberia. In late July 2003, just prior to the arrival a U.S. Amphibious Ready Group (ARG) off the Liberian coast, U.S. militaryelements in the region responding to events in Liberia were integrated into an ad-hoc operational unitdubbed Joint Task Force Liberia. The ARG, which arrived in early August, was deployed inanticipation of possible contingencies requiring a military role, most notably the provision of U.S.assistance to the ECOMIL. It complemented the air support and embassy security teams already inthe region. Personnel from the ARG, part of Joint Task Force Liberia, provided coordination supportfor PAE's delivery of goods and logistics services to ECOMIL (see "Overview and RecentDevelopments," above), and undertook various other security, flight, and infrastructure/logisticalassessment duties in Liberia. (64) Three types of U.S. assistance is provided to Liberia: long-term development aid (DA); emergency humanitarian assistance; and post-conflict-focused International Disaster and FamineAssistance (IDFA) aid. Budget figures for these accounts are presented in Appendix 1. The USAIDDA program during the latter years of the Taylor presidency exclusively aided NGOs, notably thoseengaged in primary health care, agriculture, and peace-building activities. It was inactive, however,for much of FY2003 due to insecurity associated with the war. The bulk of USAID's FY2004programs in Liberia are being funded under IDFA. FY2004 DA assistance is limited to $2.4 millionin Child Survival and Health (CSH) programs that support capacity-building for community-basedbasic health services delivery organizations, and $100,000 in Nonproliferation, Anti-terrorism,Demining, and Related/Small Arms and Light Weapons Destruction (NADR-SALW) funds. Inaddition, a three-year, $1.5 million Displaced Children and Orphans Fund program targetingvulnerable children has been initiated, and some Patrick J. Leahy War Victims Fund monies arebeing used to aid disabled children. USAID's West Africa Regional Program supports a smallHIV/AIDS information project. Programs under the Bush Administration's FY2005 request for Liberia would complement and extend core IDFA program goals. Under the USAID request, an integrated set of CSH programs($1.997 million) would improve access, quality and demand for health services through variouscapacity-building initiatives. Under USAID's Community Revitalization and Reintegration program($.545 million in DA and $25 million in ESF), USAID would resettle and reintegrate refugees, IDPsand ex-combatants in their permanent post-war communities of residence, as well as promote goodgovernance, reconstruction, and economic development. In addition, $5 million in State DepartmentInternational Narcotics Control and Law Enforcement (INCLE) funds would be used to continue toextend IDFA programs aimed at creating a "credible and competent" national Liberian police forceand competent judicial institutions, and promoting various anti-corruption measures. The delivery of U.S. emergency humanitarian assistance to Liberia, provided by USAID's Offices of U.S. Foreign Disaster Assistance (OFDA) and Food for Peace (FFP), flowed to Liberiaas the conflict grew, beginning with aid provided after a Complex Emergency for the Mano Rivercountries (Guinea, Liberia, and Sierra Leone) was declared in FY2002. In FY2003, a Liberia-specific Complex Emergency was declared. As of August 27, 2004, total U.S. humanitarianassistance to Liberia in FY2004 totaled $72.96 million. (65) Such aid has supported: Shelter and camp management activities for internally displaced persons (IDPs) and returning refugees, and IDP abuse protection initiatives, including those targetingsexual/gender-based violence; Targeted emergency food assistance, which includes staple food commodities, provided through direct distribution and food for work programs, and targeted therapeutic andsupplementary feeding programs delivered to vulnerable individuals and through emergency schoolfeeding, maternal/child health programs; Measles immunization and other health programs, including in IDP camps; Access to water and sanitation; Support for the coordination, logistics, and information activities of the U.N. and other humanitarians organizations; and Reintegration of Liberian returnees and IDPs. USAID also helped create the Humanitarian Information Center (HIC) for Liberia, an information clearing house for humanitarian aid agencies in Liberia managed by the U.N. Office forthe Coordination of Humanitarian Affairs (OCHA). OFDA disaster assessment teams carried outmultiple evaluation missions in the months after the peace accord. Their findings helped shapepreparations for both continuing USAID emergency aid programs and post-conflict recoveryassistance. These preparations also draw from assessment missions undertaken by USAID's AfricaBureau and Office of Transition Initiatives (OTI), and information from the U.S. diplomatic missionin Monrovia. In addition to supporting the operation of UNMIL, current U.S. Liberia-related assistance funds a variety of programs meant to consolidate Liberia's transition to peace. USAID and the departmentsof State, the Treasury, and Defense, both individually and in ad-hoc inter-agency working groups,are implementing this integrated package of post-war assistance, which is being predominantlyfunded by approximately $200 million in IDFA funds appropriated under P.L. 108-106 . Key Issues. Key considerations guiding the pace of delivery and the organization of this aid include: The potentially limited capacity of the NTGL, Liberian non-governmental organizations (NGOs), and other local organizations to efficiently use or absorb large quantities ofexternal resources; The need to ensure that programs of assistance and capacity-building produce sustainable and durable results; and The need to incorporate audit functions and a monitoring role for the USAID Inspector General for all USAID-provided assistance to Liberia, and for Treasury Department effortsand general U.S. assistance programs to stress the need for public accountability in Liberia, giventhe relatively large size of the IDFA aid package, and given Liberia's long history of public sectorcorruption. The IDFA aid has been programed for delivery in two "phases," the first worth a total of $144 million, and the second $86 million, as reflected in tables 1 and 2: Table 1. U.S. Assistance for Liberia: IDFA, Phase I ($millions) Sources: Information from USAID and the State Department. Notes Table 2. U.S. Assistance for Liberia: IDFA, Phase II ($ millions) Sources: Information from USAID and the State Department. Notes a. USFS: U.S. Forest Service /International Programs. Other Aspects of U.S. Policy toward Liberia. In December 2003, President Bush issued PresidentialDetermination No. 2004-11, which, on the basis of a finding that U.S. assistance toLiberia is in the U.S. national interest, waived "Brooke Amendment"requirementsthat would otherwise have barred or restricted such aid (66) . The State Department hasalso stated that the United States has concluded a bilateral "Article 98 agreement"with Liberia, in part to protect the safety of U.S. personnel operating in Liberia, thusallowing the United States to provide certain kinds of military assistance to Liberia (67) . The United States is also involved in efforts to assess Liberia's progress towardmeeting the provisions under which U.N. sanctions against it may be lifted. Murder of U.S. Official. No recent progress has been reported in the investigation of the May 2004 murder inMonrovia of John Auffrey, a Defense Department civilian employee who was amember of a U.S. mission that assessed needs and prospects for Liberian militaryrestructuring. Auffrey, a former U.S. Peace Corps volunteer in Sierra Leone, wasfatally stabbed during a robbery in his hotel room. Soon after the crime, foursuspects were provisionally identified, and at least three rewards were offered forinformation leading to their apprehension. In June 2004, three Liberian policeofficers were reportedly charged with aiding the suspects, and several suspects linkedto the killing were later charged with murder. The main suspect, however, who wasreportedly sighted in August 2004 in a country adjacent to Liberia, remains at large. (68) From June 2003 through September of that year, Liberia garnered frequent Congressional attention, most notably over the issue of a potential U.S. interventionin Liberia. Reactions by some Members of Congress to potential U.S. interventionin Liberia varied widely. Some, notably several Members of the Congressional BlackCaucus, urged that immediate and substantial U.S. resources and actions be taken toresolve the conflict in Liberia and provide its people with what these Members sawas badly-needed humanitarian assistance (69) . OtherMembers voiced considerablecaution or outright opposition in relation to direct U.S. military intervention inLiberia. Representative Ron Paul, for instance, introduced H.Con.Res. 255 , entitled "Expressing the sense of the Congress that the United States militaryshould not become involved in the Liberian civil war, either alone or as part of aUnited Nations peacekeeping force." (70) Congressional debate incorporated many ofthe perspectives previously outlined (see "Debate on U.S. Intervention in Liberia"). Many Members urged the Administration to confer closely with Congress and keepMembers clearly informed about U.S. policy decisions on Liberia. Some called fora vote in Congress on any decision to deploy U.S. troops on the ground. On October 2, 2003, the House Committee on International Relations Subcommittee on Africa held a hearing entitled U.S. Policy Toward Liberia . Liberiaalso featured prominently in hearings held during summer, 2003, by the HouseArmed Services Committee; the Senate Committee on Armed Services; the SenateCommittee on Foreign Relations; and the House Committee on InternationalRelations. Current Appropriations. H.R. 4818 (Kolbe). Foreign Operations, Export Financing, andRelated Programs Appropriations Act, 2005, introduced July 13, 2004, was reportedby the House Committee on Appropriations as an original measure, H.Rept. 108-599 ,on July 13, 2004. It was passed by the House on July 15, 2004 and subsequentlyamended and passed by the Senate, along with a request for a conference, onSeptember 23, 2004, in lieu of S. 2812 . During Senate considerationof H.R. 4818 , Senator Leahy offered S.Amdt. 3684 ,providing not less than $25 million in ESF assistance for Liberia, which was agreedto by unanimous consent. In addition, the Senate version of H.R. 4818 would provide Liberia with a portion of $5 million to address sexual andgender-based violence; and not less than $30 million in Foreign Military Financingaid. The House version contained no similar Liberia-related provisions. 2003 Iraq Supplemental Assistance for Liberia. The key source of U.S. assistance for Liberia is P.L.108-106 , the Emergency Supplemental Appropriations Act for Defense and for theReconstruction of Iraq and Afghanistan, 2004, ( H.R. 3289 [C. W. BillYoung]). P.L. 108-106 was passed by Congress and signed into law by PresidentBush following the deployment of UNMIL and the inauguration of the NTGL. Itappropriates International Disaster and Famine Assistance (IDFA) funds for Liberiatotaling approximately $200 million to support peace and humanitarian interventionoperations unrelated to natural disasters, and $245 million for the assessed costs ofU.N. peacekeeping in Liberia. During Senate debate on S. 1689 (Stevens), the Iraq Supplemental Appropriations bill (FY2004), which wasincorporated into P.L. 108-106 , several Liberia-related amendments were offered. These included S.Amdt. 1884 (Byrd); S.Amdt. 1885 (Brownback); and S.Amdt. 1807 (Chafee). Other Enacted Legislation. Other Liberia-related bills that passed into law during the 108th Congress include: H.J.Res. 2 (C. W. Bill Young). Joint Resolution making consolidated appropriations for the fiscal year ending September 30, 2003, and forother purposes. Introduced January 7, 2003; enacted as P.L. 108-007 . Prohibits theappropriation of Foreign Military Financing (FMF) for Liberia; and requires specialnotification for any funds appropriated by the Act for Liberia. H.R. 2673 (Bonilla). The Omnibus Appropriations Act, FY2004. Introduced July 9, 2003; enacted as P.L. 108-199 . It prohibits the use of FMF fundsfor Liberia. Requires regular notification to the Committees on Appropriations aboutuse of the funds for Liberia appropriated under the Act. Recognizes the contributionof the Nigerian government to promoting stability and reconciliation in Liberia. Includes measures that could deny some forms of U.S. assistance to Nigeria,including funds for debt restructuring. Such measures are applicable to Nigeriabecause it is a country in which an indictee of the Special Court for Sierra Leone(SCSL), i.e., Charles Taylor, is "credibly alleged to be living." Under the Act, sucha country can receive certain kinds of U.S. assistance only if the Secretary of Statedetermines and reports to the Committees on Appropriations that such a governmentis cooperating with the SCSL, including by surrendering and transferring to the SCSLpersons it has indicted. The president can waive such stipulations in the interest ofU.S. national security, if certain conditions are met. Other Legislation Introduced. Other Liberia-specific bills and resolutions introduced in the 108th Congress includethe following: H.Con.Res. 233 (Fossella). Expressing the sense of Congress regarding the dire humanitarian situation in Liberia and efforts to introduce peace andjustice to that country; introduced June 26, 2003 and referred to the HouseCommittee on International Relations. H.Con.Res. 240 (Payne). Expressing the sense of Congress with respect to the urgency of providing support for the "Agreement on Ceasefire andCessation of Hostilities Between the Government of the Republic of Liberia andLiberians United for Reconciliation and Democracy and the Movement forDemocracy of Liberia" and for other purposes; introduced July 8, 2003 and referredto the House Committee on International Relations. H.Con.Res. 255 (Paul). Expressing the sense of the Congress that the United States military should not become involved in the Liberian civil war,either alone or as part of a United Nations peacekeeping force; introduced July 24,2003 and referred to the House Committee on International Relations. H.R. 1930 (Patrick J. Kennedy). Liberian Refugee Immigration Protection Act of 2003; introduced May 1, 2003; referred to the Subcommittee onImmigration, Border Security, and Claims, Committee on the Judiciary. S. 656 (Reed). Liberian Refugee Immigration Fairness Act of 2003; introduced March 19, 2003, read twice, and referred to the Committee on theJudiciary. H.R. 3918 (Jackson-Lee). Comprehensive Immigration Fairness Reform Act of 2004; introduced March 9, 2004; referred to the Subcommittee onImmigration, Border Security, and Claims, Committee on the Judiciary. H.R. 4885 (Jackson-Lee). Comprehensive Immigration Fairness Act; introduced July 21, 2004; referred to the Committee on the Judiciary. H.R. 4511 (Waters). The Justice and Understanding By IMF Loan Elimination and Equity Act of 2004; introduced June 3, 2004; referred to theSubcommittee on Domestic and International Monetary Policy, Trade, andTechnology, Committee on Financial Services. H.R. 4793 (Waters). Justice and Understanding By International Loan Elimination and Equity Act of 2004; introduced July 9, 2004; referred to theCommittee on Financial Services. Appropriations bills introduced in the 108th Congress that contain Liberia-specific provisions include: S. 1426 (McConnell). Foreign Operations Export Financing and Related Programs Appropriations Act, 2004. FY2004 foreign operationsappropriations were authorized by H.R. 2673 ( P.L. 108-199 , see above),which contains some provisions similar to those in S. 1426 . S. 1426 , as placed on the Senate Calendar on July 17, 2003, seeks toprohibit appropriation of Foreign Military Financing (FMF) for Liberia and requirespecial notification for any funds appropriated by the Act for Liberia. H.R. 2673 included such measures. S. 1426 also wouldprohibit assistance to governments abetting trade or commerce in diamonds minedin Liberia. Such a provision was not contained in H.R. 2673 , but it didlimit the use of appropriated funds by the Overseas Private Investment Corporationand the U.S. Export-Import Bank to countries participating in the Kimberley Processregulatory regime on conflict diamonds. Currently, Liberia would be affected by thisprovision. H.R. 2800 (Kolbe). Foreign Operations Appropriations, FY2004 bill. House and Senate conferees agreed to a conference report for H.R. 2800 ; their agreement was incorporated into H.R. 2673 (see above). H.R. 4818 (Kolbe). Foreign Operations, Export Financing, and Related Programs Appropriations Act, 2005 ; introduced July 13, 2004; reported bythe House Committee on Appropriations as an original measure, H.Rept. 108-599 ,on July 13, 2004; passed by the House on July 15, 2004; amended and passed by theSenate, along with a request for a conference, on September 23, 2004, in lieu of S. 2812 ; message on Senate action sent to the House on September 23,2004. During Senate consideration of H.R. 4818 , Senator Leahy offered S.Amdt. 3684 , providing not less than $25 million in ESF assistance forLiberia, which was agreed to unanimous consent. In addition, the Senate version of H.R. 4818 would provide Liberia with a portion of $5 million to addresssexual and gender-based violence; and not less than $30 million in Foreign MilitaryFinancing aid. In P.L. 108-106 , Congress authorized a relatively large appropriation for Liberia. Oversight activities related to the expenditure of these funds may now become thefocal point for congressional engagement with Liberia. Leading issues that maywarrant such attention include peace consolidation, the trial of Charles Taylor for warcrimes, the operation of the U.N. Mission in Liberia, progress toward rebuildingdemocratic and transparent governance, and U.S. assistance. Key issue in each ofthese areas include: Peace Consolidation and Reconstruction. Progress toward implementation of the Liberianpeace accord, particularly with regard to The disarmament, demobilization, reintegration, and resettlement process; Effective functioning of the Liberian transitional government,notably to include the executive's freedom to execute its legal authorities andduties; Re-establishment of nation-wide governmental authority; Socio-economic rebuilding; and Security sector reform and training. Trial of Charles Taylor. Ensuring the trial of Charles Taylor before the Special Court for Sierra Leone, a stated goal ofU.S. policy on Liberia. UNMIL. Operational efficiency and effectiveness of UNMIL, possibly to include: The formulation and implementation of bench-marked goals for progress in its areas of competence under its mandate; Assurance of adequate force size and capacities during militarymaneuvers, to avoid the kind of military difficulties that beset U.N. peacekeepers inSierra Leone early in their mission there; and Operational and logistical cooperation with other U.N. missionsin the region, in order to avoid duplication of efforts, efficient use of similarresources, and to achieve economies of scale where possible. (71) Democracy and Governance. Progress toward democratization and the rule of law, notably to include: The absence of the threat of force or violence to accomplish political goals, as provided for under the peace accord; Protection and promotion of human rights and civic freedoms,including of speech, movement, and assembly; and Implementation of institutional reforms to ensure fiscal andlegal transparency and accountability in government operations, and with regard tothe use of donor-provided assistance. U.S. Assistance. Monitoring and evaluation of U.S. assistance, particularly relating to The sequencing of emergency, transitional and development assistance, and the relation of these to long-term institutional reforms andsocio-economic development goals; The assistance delivery model employed, e.g., direct use of U.S.government staff and resources versus use of contractor or grantees to accomplishU.S. programmatic goals in Liberia; and Comparative efficiency of outcomes resulting from the use ofdifferent programing models, e.g., direct financing of small-scale non-profit,non-governmental organization projects versus use of larger for-profit contractorsand consortia delivering diverse, integrated packages of deliverables, as through theuse of indefinite quantity contracts. After increasing briefly following Liberia's 1989-1997 war, U.S. assistance forLiberia steadily declined, reflecting the Clinton and Bush Administrations' generallycritical views of the Taylor Administration. In FY2002, aid began to be channeled"only through non-governmental organizations" and was "focused narrowly on healthand food security needs in rural communities, along with a modest effort to assistcivil society." (72) The decreasing level of assistanceappeared to be a response to"Liberia's negative role in regional security" and fomenting of conflict in SierraLeone and Guinea "by supporting the [RUF] through illicit diamond and armstrafficking." (73) Subsequent Bush AdministrationCongressional Budget justificationsfor Liberia reflected similar concerns. The Administration's regular FY2004 requestfor Liberia, for instance, stated that "[t]he primary U.S. national interests in Liberiaare to prevent the Government of Liberia from fomenting violence and instability inneighboring countries, and to promote comprehensive internal reform and goodgovernance in Liberia." (74) While regulardevelopment assistance to Liberia graduallydeclined, U.S. emergency assistance to Liberia began to increase as the country'ssecond civil war burgeoned and humanitarian conditions deteriorated. Table 3. U.S. Emergency and Humanitarian Assistance to Liberia, FY2002-FY2004 ($ Millions) Source: USAID/OFDA, "Liberia -- Complex Emergency," Situation Report [s], including #14, FY2004, Aug. 27, 2004 and #1, FY2004, Oct. 1, 2003; and Mano River Countries (Guinea, Liberia, and Sierra Leone),report #1, Fiscal Year (FY) 2003, Oct. 9, 2002. a. USAID/OFDA: USAID, Office of U.S. Foreign Disaster Assistance (OFDA). b. USAID/FFP: USAID, Food for Peace Program, P.L. 480 Title II FoodAssistance. c. State/PRM: State Department, Bureau for Population, Refugees, andMigration. Table 4. Recent U.S. Bilateral Development Assistance to Liberia ($ Millions; totals may reflect rounding) Sources: Annual U.S. Agency for International Development (USAID) Congressional Budget Justifications; and State Department Congressional BudgetJustifications for Foreign Operations; USAID, "USAID Assistance To Liberia," Fact Sheet, Feb. 27, 2003; USAID Complex Emergency Situation Reports for Liberia;and CRS estimates allocations. �Includes $.4 million for anti-polio Africa Regional account program. Actual CSH was $1.6 million. * Some of these funds may fund multi-lateral programs for Liberia. **FFP/ P.L. 108-106 assistance may overlap with Emergency Assistance, above. a. CSH: Child Survival and Health Programs Fund (formerly Child Survival andDisease Fund). b. DA: Development Assistance c. ESF: Economic Support Fund d. NADR/SALW: Nonproliferation, Anti-terrorism, Demining, & Related/Small andLight Weapons Programs e. INCLE: International Narcotics Control and Law Enforcement f. International Disaster and Famine Assistance; P.L. 108-106 . g. P.L. 480, Title II food assistance; primarily Food for Peace Program (FFP). h. DHRF: Democracy and Human Rights Fund Program (DHRF) Table 5. P.L.108-106 Supplemental U.S. Assistance for Liberia, FY2004 ($ Millions)

This report, which is updated periodically, covers recent events in Liberia and related U.S. policy. In 2003, Liberia began a post-conflict transition process to achieve enduring peace,socio-economic reconstruction and democratic governance. This process resulted from the signingof a peace accord and the resignation of then-president Charles Taylor in August 2003, after monthsof international mediation. The accord ended a civil war that burgeoned in 2000 which pitted theforces of Taylor against two armed anti-Taylor rebel groups. The war led to an extreme deteriorationin political, economic, humanitarian, and human rights conditions in Liberia. It also affectedneighboring states, from which anti-Taylor forces operated; against which the Taylor regimesponsored acts of armed aggression; and in which large numbers of Liberians sought refuge. Liberia's security situation, though periodically volatile, has improved steadily since August 2003. A disarmament and demobilization program, which encountered repeated initial difficulties,has inducted over 95,000 ex-combatants to date. This process is jointly supervised by the UnitedNations Mission in Liberia (UNMIL) and the National Transitional Government of Liberia (NTGL),which received over $522 million in aid pledges at a February 2004 donor conference. UNMILbegan operations on October 1, 2003. The NTGL, formed under the August accord and installed onOctober 14, 2003, is mandated with re-establishing government authority and preparing for electionsin late 2005. The transition faces many challenges, most related to the socio-economic effects ofwar; the dominant role within the NTGL of former armed factions, which are prone to internaldissension; and limited state capacities. UNMIL has reached full force strength, and has deployedpeacekeepers to most areas of the country, but insecurity remains a challenge in many rural areas.Implementation of the peace accord and of the NTGL's mandate have been beset by disagreementsover the allocation of positions, accusations of corruption, and leadership rivalries within the NTGL. The legal status of Taylor, who is living in exile in Nigeria and is under indictment by the SpecialCourt for Sierra Leone for war crimes related to his alleged involvement in war crimes in SierraLeone, remains unresolved. U.S. legislation urges Nigeria to hand Taylor over to the court. Considerable public and congressional debate over possible U.S. intervention in Liberia occurred in mid-2003. The United States did not intervene militarily, but it did: deploy limitedmilitary forces to Liberia to bolster U.S. security interests; assist an the Economic Community ofWest African States (ECOWAS) military force to deploy to Liberia prior to UNMIL; help mediatethe August accord; and provide International Disaster and Famine Assistance (IDFA) ($200 million)and support for UNMIL ($250 million). In addition to H.R. 4818 , the ForeignOperations FY2005 Appropriations bill, current Liberia-related bills pertain to proposals to changethe immigration status of certain Liberian nationals and to cancel certain Liberian national debts.Liberia-related bills introduced in the 108th Congress include H.Con.Res. 240 ; H.Con.Res. 233 ; H.Con.Res. 255 ; H.J.Res. 2 ; H.R. 2673 ; H.R. 1930 ; H.R. 3918 ; H.R. 3289 ; H.R. 2800 ; H.R. 4511 ; H.R. 4793 ; H.R. 4818 ; H.R. 4885 ; S. 2812 ; S. 1426 ; and S. 656 .

Congress is currently considering reauthorization of the National Flood Insurance Program (NFIP). The House passed a reauthorization bill ( H.R. 2874 ) in November 2017, and three bills have been introduced in the Senate, but so far the NFIP has received a series of short-term reauthorizations. The debate over a longer reauthorization of the NFIP is taking place during the 2018 hurricane season, and in the aftermath of the 2017 hurricane season, which produced widespread flooding and renewed concern about the structure of the NFIP and its solvency in the face of catastrophic flood losses. The NFIP is authorized by the National Flood Insurance Act of 1968 and was reauthorized until September 30, 2017, by the Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12). Congress amended elements of BW-12, but did not extend the NFIP's authorization further in the Homeowner Flood Insurance Affordability Act of 2014 (HFIAA). The NFIP received a short-term reauthorization through December 8, 2017, a second short-term reauthorization through December 22, 2017, and a third short-term reauthorization through January 19, 2018. The NFIP lapsed between January 20 and January 22, 2018, and received a fourth short-term reauthorization until February 8, 2018. The NFIP lapsed for approximately eight hours during a brief government shutdown in the early morning of February 9, 2018, and was then reauthorized until March 23, 2018. The NFIP received a sixth reauthorization until July 31, 2018, and a seventh reauthorization until November 30, 2018. The NFIP is managed by the Federal Emergency Management Agency (FEMA), through its subcomponent Federal Insurance and Mitigation Administration (FIMA). The general purpose of the NFIP is both to offer primary flood insurance to properties with significant flood risk, and to reduce flood risk through the adoption of floodplain management standards. A longer-term objective of the NFIP is to reduce federal expenditure on disaster assistance after floods. The NFIP is discussed in more detail in CRS Report R44593, Introduction to the National Flood Insurance Program (NFIP) , by [author name scrubbed] and [author name scrubbed]. A brief overview of private flood insurance in the NFIP is given in CRS Insight IN10450, Private Flood Insurance and the National Flood Insurance Program (NFIP) , by [author name scrubbed] and [author name scrubbed]. The NFIP is the primary source of flood insurance coverage for residential properties in the United States. As of May 2018, the NFIP had over 5 million flood insurance policies providing over $1.28 trillion in coverage. The program collects nearly $3.6 billion in annual premium revenue. Nationally, as of July 2018, 22,322 communities in 56 states and jurisdictions participated in the NFIP. According to FEMA, the program saves the nation an estimated $1.87 billion annually in flood losses avoided because of the NFIP's building and floodplain management regulations. FEMA expects this amount to increase over time as additional new construction is built to increasingly better standards. Floods are the most common natural disaster in the United States, and in recent years all 50 states have experienced flood events. U.S. flood losses in 2016 were about $17 billion, with losses from five individual flood-related events in 2016 exceeding $1 billion. 2017 was the most costly year for U.S. hurricane losses on record. Losses from the Midwest flooding in April and May 2017 are estimated at $1.7 billion and losses from the California flooding in February 2017 at $1.5 billion. The total for the 2017 hurricanes significantly exceeds the previous record of $214.8 billion (CPI-adjusted), from the 2005 hurricane season. Total losses (insured and uninsured) for the 2017 hurricane season are estimated at a record $270.3 billion, with losses for Hurricane Harvey estimated at $127.5 billion, Hurricane Maria at $91.8 billion, and Hurricane Irma at $51.0 billion. This report summarizes key insurance reform provisions in recent legislation and identifies key issues for congressional consideration as part of the possible reauthorization of the NFIP. It describes selected provisions in the bill to reauthorize the NFIP passed by the House ( H.R. 2874 , the 21 st Century Flood Reform Act) and the bills introduced in the Senate that relate to the issues discussed in the report. The provisions discussed in the report are listed in Table 1 at the end of this report. The statute for the NFIP does not contain a comprehensive expiration, termination, or sunset provision for the whole of the program. Rather, the NFIP has multiple different legal provisions that generally tie to the expiration of key components of the program. Unless reauthorized or amended by Congress, the following will occur on November 30, 2018: The authority to provide new flood insurance contracts will expire. Flood insurance contracts entered into before the expiration would continue until the end of their policy term of one year. The authority for NFIP to borrow funds from the Treasury will be reduced from $30.425 billion to $1 billion. Other activities of the program would technically remain authorized following November 30, 2018, such as the issuance of Flood Mitigation Assistance (FMA) grants. The House Financial Services Committee completed markup on June 21, 2017, of seven bills to reform and reauthorize the NFIP. The 21 st Century Flood Reform Act ( H.R. 2874 ) came to the House floor under H.Res. 616 , and included provisions from the six other bills. H.R. 2874 passed the House on a vote of 237-189 on November 14, 2017. H.R. 2874 would authorize the NFIP until September 30, 2022. Three bills have been introduced in the Senate that reauthorize the expiring provisions of the NFIP: S. 1313 (Flood Insurance Affordability and Sustainability Act of 2017), S. 1368 (Sustainable, Affordable, Fair, and Efficient [SAFE] National Flood Insurance Program Reauthorization Act of 2017), and S. 1571 (National Flood Insurance Program Reauthorization Act of 2017). None of these bills have yet been considered by the committee of jurisdiction. S. 1313 would authorize the NFIP until September 30, 2027; S. 1368 would authorize the NFIP until September 30, 2023; and S. 1571 would authorize the NFIP until September 30, 2023. The remainder of this report will summarize relevant background information and proposed changes to selected areas of the NFIP in H.R. 2874 , S. 1313 , S. 1368 , and S. 1571 . The report does not examine every provision in detail, but focuses on selected provisions that would introduce significant changes to the NFIP, particularly those related to the issues identified by the Government Accountability Office (GAO) described below. In a recent report, GAO examined actions which Congress and FEMA could take to reduce federal fiscal exposure and improve national resilience to floods, and recommended that Congress should consider comprehensive reform covering six areas: (1) outstanding debt; (2) premium rates; (3) affordability; (4) consumer participation; (5) barriers to private sector involvement; and (6) NFIP flood resilience efforts. This report will discuss the areas identified by GAO as well as additional issues which Congress may wish to consider. As a public insurance program, the goals of the NFIP were originally designed differently from the goals of private-sector companies. As currently authorized, the NFIP also encompasses social goals to provide flood insurance in flood-prone areas to property owners who otherwise would not be able to obtain it, and reduce government's cost after floods. The NFIP also engages in many "non-insurance" activities in the public interest: it disseminates flood risk information through flood maps, requires communities to adopt land use and building code standards in order to participate in the program, potentially reduces the need for other post-flood disaster aid, contributes to community resilience by providing a mechanism to fund rebuilding after a flood, and may protect lending institutions against mortgage defaults due to uninsured losses. The benefits of such tasks are not directly measured in the NFIP's financial results from underwriting flood insurance. From the inception of the NFIP, the program has been expected to achieve multiple objectives, some of which may conflict with one another To ensure reasonable insurance premiums for all; To have risk-based premiums that would make people aware of and bear the cost of their floodplain location choices; To secure widespread community participation in the NFIP and substantial numbers of insurance policy purchases by property owners; and To earn premium and fee income that, over time, covers claims paid and program expenses. GAO noted that competing aspects of the NFIP, notably the desire to keep flood insurance affordable while making the program fiscally solvent, have made it challenging to reform the program. Promoting participation in the program, while at the same time attempting to fund claims payments with the premiums paid by NFIP policyholders, provides a particular challenge. Throughout its history, the NFIP has been asked to set premiums that are simultaneously "risk-based" and "reasonable." Different Administrations and Congresses have placed varied emphases and priorities on those goals for premium setting. GAO has reported in several studies that NFIP's premium rates do not reflect the full risk of loss because of various legislative requirements, which exacerbates the program's fiscal exposure. GAO also noted in several reports that while Congress has directed FEMA to provide subsidized premium rates for policyholders meeting certain requirements, it has not provided FEMA with funds to offset these subsidies and discounts, which has contributed to FEMA's need to borrow from the U.S. Treasury to pay NFIP claims. As of January 2018, the written premium on approximately 5 million policies in force was $3.5 billion. The maximum coverage for single-family dwellings (which also includes single-family residential units within a 2-4 family building) is $100,000 for contents and up to $250,000 for buildings coverage. The maximum available coverage limit for other residential buildings is $500,000 for building coverage and $100,000 for contents coverage, and the maximum coverage limit for non-residential business buildings is $500,000 for building coverage and $500,000 for contents coverage. Included within NFIP premiums are several fees and surcharges mandated by law on flood insurance policies. First, the Federal Policy Fee (FPF) was authorized by Congress in 1990 and helps pay for the administrative expenses of the program, including floodplain mapping and some of the insurance operations. The amount of the Federal Policy Fee is set by FEMA and can increase or decrease year to year. As of October 2017, the fee is $50 for Standard Flood Insurance Policies (SFIPs), $25 for Preferred Risk Policies (PRPs), and $25 for contents-only policies. Second, a reserve fund assessment was authorized by Congress in BW-12 to establish and maintain a reserve fund to cover future claim and debt expenses, especially those from catastrophic disasters. By law, FEMA is required to maintain a reserve ratio of 1% of the total loss exposure through the reserve fund assessment. As of February 2018, the amount required for the reserve fund ratio was approximately $12.79 billion. However, FEMA is allowed to phase in the reserve fund assessment to obtain the ratio over time, with an intended target of not less than 7.5% of the 1% reserve fund ratio in each fiscal year (so, using February 2018 figures, not less than approximately $959 million each year). The reserve fund assessment has increased from its original status, in October 2013, of 5% on all Standard Flood Insurance Policies and 0% on Preferred Risk Policies. Since April 2016, FEMA has charged every NFIP policy a reserve fund assessment equal to 15% of the premium. However, FEMA has stated that as long as the NFIP maintains outstanding debt, it would expect that the reserve fund will not reach the required balance, as amounts collected may be periodically transferred to Treasury to reduce the NFIP's debt. In addition to the reserve fund assessment, all NFIP policies are also assessed a surcharge following the passage of HFIAA. The amount of the surcharge is dependent on the type of property being insured. For primary residences, the charge is $25; for all other properties, the charge is $250. Revenues from the surcharge are deposited into the reserve fund. The HFIAA surcharge is not considered a premium and is currently not included by FEMA when calculating limits on insurance rate increases. Except for certain subsidies, flood insurance rates in the NFIP are directed to be "based on consideration of the risk involved and accepted actuarial principles," meaning that the rate is reflective of the true flood risk to the property. However, Congress has directed FEMA not to charge actuarial rates for certain categories of properties and to offer discounts to other classes of properties in order to achieve the program's objective that owners of existing properties in flood zones could afford flood insurance. There are three main categories of properties which pay less than full risk-based rates. Pre-FIRM properties are those which were built or substantially improved before December 31, 1974, or before FEMA published the first Flood Insurance Rate Map (FIRM) for their community, whichever was later. Therefore, by statute, premium rates charged on structures built before they were first mapped into a flood zone that have not been substantially improved, known as pre-FIRM structures, are allowed to have lower premiums than what would be expected to cover predicted claims. The availability of this pre-FIRM subsidy was intended to allow preexisting floodplain properties to contribute in some measure to pre-funding their recovery from a flood disaster instead of relying solely on federal disaster assistance. In essence, the flood insurance could distribute some the financial burden among those protected by flood insurance and the public. BW-12 phased out almost all subsidized insurance premiums, requiring FEMA to increase rates on certain subsidized properties at 25% per year until full-risk rates were reached: these included secondary residences, businesses, severe repetitive loss properties, and properties with substantial cumulative damage. Subsidies were eliminated immediately for properties where the owner let the policy lapse, any prospective insured who refused to accept offers for mitigation assistance, and properties purchased after or not insured by NFIP as of July 6, 2012. All properties with subsidies not being phased out at higher rates, or already eliminated, were required to begin paying actuarial rates following a five-year period, phased in at 20% per year, after a revised or updated FIRM was issued for the area containing the property. Thus the subsidies on pre-FIRM properties would have been eliminated within five years following the issuance of a new FIRM to a community. As BW-12 went into effect, constituents from multiple communities expressed concerns about the elimination of lower rate classes, arguing that it created a financial burden on policyholders, risked depressing home values, and could lead to a reduction in the number of NFIP policies purchased. Concerns over the rate increases created by BW-12 led to the passage of HFIAA, which reinstated certain premium discounts and slowed down some of the BW-12 premium rate increases. HFIAA repealed the property-sale trigger for an automatic full-risk rate and slowed the rate of phaseout of the pre-FIRM subsidy for most primary residences, allowing for a minimum and maximum increase in the amount for the phaseout of pre-FIRM subsidies for all primary residences of 5%-18% annually. HFIAA retained the 25% annual phaseout of the subsidy from BW-12 for all other categories of properties. As of September 2016, approximately 16.1% of NFIP policies received a pre-FIRM subsidy. Historically, the total number of pre-FIRM policies is relatively stable, but the percentage of those policies by comparison to the total policy base has decreased. HFIAA established a new subsidy for properties that are newly mapped into a Special Flood Hazard Area (SFHA) on or after April 1, 2015, if the applicant obtains coverage that is effective within 12 months of the map revision date. Certain properties may be excluded based on their loss history. The rate for eligible newly mapped properties is equal to the PRP rate, but with a higher Federal Policy Fee, for the first 12 months following the map revision. After the first year, the newly mapped rate begins to transition to a full-risk rate, with annual increases to newly mapped policy premiums calculated using a multiplier that varies by the year of the map change. As of September 2016, about 3.9% of NFIP policies receive a newly mapped subsidy. Using the authority to set rate classes for the NFIP and to offer lower than actuarial premiums, FEMA allows owners of properties that were built in compliance with the FIRM in effect at the time of construction to maintain their old flood insurance rate class if their property is remapped into a new flood rate class. This practice is colloquially referred to as "grandfathering," "administrative grandfathering," or the "grandfather rule" and is separate and distinct from the pre-FIRM subsidy. FEMA does not consider the practice of grandfathering to be a subsidy for the NFIP, per se, because the discount provided to an individual policyholder is cross-subsidized by other policyholders in the NFIP. Thus, while grandfathering does intentionally allow policyholders to pay premiums that are less than their known actuarial rate, the discount is offset by others in the same rate class as the grandfathered policyholder. Congress implicitly eliminated the practice of offering grandfathering to policyholders after new maps were issued in BW-12, but then subsequently reinstated the practice in HFIAA, which repealed the BW-12 provision that terminated grandfathering and allowed grandfathered status to be passed on to the new owners when a property is sold. FEMA does not have a definitive estimate on the number of properties that have a grandfathered rate in the NFIP, though data are being collected to fulfill a separate mandate of HFIAA. Unofficial estimates suggest that at least 10%-20% of properties are grandfathered, and these figures may increase with time as newer maps are introduced in high population areas. The current categories of properties which pay less than the full risk-based rate are determined by the date when the structure was built relative to the date of adoption of the FIRM, rather than the flood risk or the ability of the policyholder to pay. Other ways of reforming the premium structure to reflect full risk-based rates could address a number of the policy goals identified by GAO. For example, actuarially sound rates could place the NFIP on a more financially sustainable path, risk-based price signals could give policyholders a clearer understanding of their true flood risk, and a reformed rate structure could encourage more private insurers to enter the market. However, charging actuarially sound premiums may mean that insurance for some properties is considered unaffordable, or that premiums increase at a rate which may be considered to be politically unacceptable. Section 102 would phase out the pre-FIRM subsidy for primary residences at a rate of 6.5%-15% (compared to the current rate of 5%-18%), except that in the first year after enactment, the minimum rate increase would be 5%; in the second year after enactment, the minimum rate increase would be 5.5%; and in the third year of enactment, the minimum rate increase would be 6%. The phaseout of the pre-FIRM subsidy for other categories of properties (non-primary residences, non-residential properties, severe repetitive loss properties, properties with substantial cumulative damage, and properties with substantial damage or improvement after July 6, 2012) would remain at 25%. This section would make it possible, but not certain, for FEMA to raise premiums more rapidly than under current legislation by increasing the minimum rate at which the pre-FIRM subsidy could be removed for primary residences. Section 105 would require FEMA, not later than two years after enactment, to calculate premium rates based on a consideration of the differences in flood risk resulting from coastal flood hazards and riverine, or inland flood hazards. Six months prior to the effective date of risk premium rates, FEMA would be required to publish in the Federal Register an explanation of the bases for, and methodology used to determine, the chargeable premium rates to be effective for flood insurance coverage under this title. Certain aspects of coastal flood risk are already incorporated into NFIP rates, notably risk from wave action (known as the "V" zone); how this may change with this possible new requirement is not yet known. Section 111 would require FEMA to conduct a study to evaluate insurance industry best practice and develop a feasible implementation plan and projected timeline for including the replacement cost value of a structure in setting NFIP premium rates. FEMA would be required to begin gradually phasing in the use of replacement cost value in setting NFIP premium rates 12 months after enactment, with replacement cost value to be used in setting all NFIP premium rates by December 31, 2020. If this provision were enacted, it is anticipated that those structures with higher replacement costs than current local or national averages would begin paying more for their NFIP coverage than those structures that are below the average, which would pay less. How much more, or how much less, is uncertain. Section 112 would cap the premiums for 1-4 unit residential properties with elevation data meeting FEMA's standards at $10,000 per year, adjusted for inflation every five years. There is currently no statutory cap on premiums. This cap could affect approximately 800 properties, or 0.02% of NIFP policies, though that figure is subject to considerable change (likely increasing) as premium rates change in the future. Section 301 would require FEMA, not later than three years from enactment, to calculate premium rates based on both the risk identified by the applicable FIRMs and by other risk assessment data and tools, including risk assessment models and scores from appropriate sources. This provision would expand on the existing method of determining rates (the FIRM) and allow alternatives, such as a risk score methodology (for example, a scale of 1 to 10 or 1 to 100, where the premiums would increase with the numerical score). Until FEMA develops these new risk assessment tools, it is not possible to say how this would affect premiums. Section 502 would increase the HFIAA surcharge from $25 to $40 for primary residences and from $250 to $275 for non-residential properties and most non-primary residences. However, the HFIAA surcharge for non-primary residences which are eligible for a Preferred Risk Policy would drop from $250 to $125. This provision would increase the amount that most policyholders pay for flood insurance. FEMA does not include the HFIAA surcharge in their calculation of premium rate increases, so this increase would not be affected by the cap set out in Section 102. Section 503 would require FEMA, beginning in FY2018, to place in the reserve fund an amount equal to not less than 7.5% of the required reserve ratio. If in any given year FEMA does not do so, for the following fiscal year the Administrator would be required to increase the reserve fund assessment by at least one percentage point over the rate of the annual assessment (i.e., from the current 15% to 16%), and to continue such increases until the fiscal year in which the statutory reserve ratio is achieved. This provision would likely increase premiums for all NFIP policyholders. S. 1313 , Section 207, would require FEMA to conduct a study to evaluate insurance industry best practice and develop a feasible implementation plan and projected timeline for including the replacement cost value of structures in setting NFIP premium rates. FEMA would be required to begin gradually phasing in the use of replacement cost value in setting NFIP premium rates 12 months after enactment, with replacement cost value to be used in setting all NFIP premium rates four years after enactment. S. 1313 , Section 209, would establish a baseline amount that tracks the Federal National Mortgage Association (Fannie Mae) maximum loan limits for single-family dwellings. This section would set the contents coverage limits at 50% of the baseline amount. The coverage limit for single-family dwellings would be set at the baseline amount and the coverage limit for other residential and non-residential properties at 200% of the baseline amount. As the Fannie Mae loan limit increases, the NFIP building coverage limits would also increase. S. 1368 , Section 102, would prohibit FEMA from increasing the amount of covered costs above 10% per year on any policyholder during the six-year period beginning on the date of enactment. Covered costs include premiums, surcharges (including the surcharge for Increased Cost of Compliance coverage and the HFIAA surcharge), and the Federal Policy Fee. This would limit the rate of increase of covered costs for all categories of policies, not just policies for primary residences, and would be particularly significant for those policies where the pre-FIRM subsidy is currently being phased out at 25% per year. This section would also amend the basis on which premiums are calculated so that an average historical loss year would exclude catastrophic loss years. This would probably lower premiums for all policyholders. S. 1368 , Section 104, would raise the building coverage limits to $500,000 for single-family dwellings and $1,500,000 for non-residential buildings. S. 1571 , Section 301, would require FEMA to conduct a study to evaluate insurance industry best practices and develop a feasible implementation plan and projected timeline for including the replacement cost value in setting NFIP premium rates. FEMA would be required to submit a report not later than 18 months after enactment, and implement the recommendations one year after submitting the report. The NFIP was not designed to retain funding to cover claims for truly extreme events; instead, the statute allows the program to borrow money from the Treasury for such events. For most of the NFIP's history, the program has generally been able to cover its costs, borrowing relatively small amounts from the U.S. Treasury to pay claims, and then repaying the loans with interest. However, Congress increased the level of NFIP borrowing to pay claims in the aftermath of the 2005 hurricane season (particularly Hurricanes Katrina, Rita and Wilma), increasing the borrowing limit to $18.5 billion in 2005, and increasing the borrowing limit again in 2006 to $20.775 billion. Following Hurricane Sandy, Congress increased the borrowing limit of the NFIP to the current $30.425 billion. In January 2017, the NFIP borrowed $1.6 billion due to losses in 2016 (the August 2016 Louisiana floods and Hurricane Matthew). On September 22, 2017, the NFIP borrowed the remaining $5.825 billion from the Treasury to cover claims from Hurricane Harvey, reaching the NFIP's authorized borrowing limit of $30.425 billion. On October 26, 2017, Congress cancelled $16 billion of NFIP debt, making it possible for the program to pay claims for Hurricanes Harvey, Irma, and Maria. FEMA borrowed another $6.1 billion on November 9, 2017, to fund estimated 2017 losses, including those incurred by Hurricanes Harvey, Irma, and Maria and anticipated programmatic activities, bringing the debt up to $20.525 billion. The NFIP currently has $9.9 billion of remaining borrowing authority. If there were to be a lapse in authorization on or after November 30, 2018, and the borrowing authority is reduced to $1 billion, FEMA would continue to adjust and pay claims as premium dollars come into the National Flood Insurance Fund (NFIF) and reserve fund. If the funds available to pay claims in the NFIF and the reserve fund were to be depleted, claims would have to wait until sufficient premium dollars were received to pay them unless Congress were to appropriate supplemental funds to the NFIP to pay claims or increase the borrowing limit. In the event that Congress does not provide funding to cover unpaid claims, policyholders might avail themselves of judicial remedies to recover these funds from the U.S. Treasury. The NFIP's debt is conceptually owed by current and future participants in the NFIP, as the insurance program itself owes the debt to the Treasury and pays for accruing interest on that debt through the premium revenues of policyholders. Under its current authorization, the only means the NFIP has to pay off the debt is through the accrual of premium revenues in excess of outgoing claims, and from payments made out of the reserve fund. For example, since the NFIP borrowed funds following the 2005 hurricane season, the NFIP has paid $2.82 billion in principal repayments and $3.83 billion in interest to service the debt through the premiums collected on insurance policies. In a recent report, GAO noted that charging current policyholders to pay for debt incurred in past years is contrary to actuarial principles and insurers' pricing practices; according to actuarial principles, a premium rate is based on the risk of future losses and does not include past costs. GAO also argued that this creates a potential inequality because policyholders are charged not only for the flood losses that they are expected to incur, but also for losses incurred by past policyholders. The cancellation of $16 billion of NFIP debt in October 2017 represents the first time that NFIP debt has been cancelled, although Congress appropriated funds between 1980 and 1985 to repay NFIP debt. Earlier in 2017, GAO had considered the option of eliminating FEMA's debt to the Treasury, suggesting that if the debt were eliminated, FEMA could reallocate funds used for debt repayment for other purposes such as building a reserve fund and program operations, and arguing that this would also be more equitable for current policyholders and consistent with actuarial principles. Eliminating the entire NFIP debt would require Congress to cancel debt outright, to appropriate funds for FEMA to repay the debt, or to change the law to eliminate the requirement that FEMA repay the accumulated debt. No projections of the NFIP debt have yet been made that take account of the cancellation of $16 billion of NFIP debt or the, as yet unknown, total claims of the 2017 hurricane season. As required by law, FEMA submitted a report to Congress in 2013 on how the borrowed amount from the U.S. Treasury could be repaid within a 10-year period. This report indicated that in most realistic scenarios, the debt would not be paid off for at least 20 years, and that period could increase considerably with future catastrophic incidents. FEMA estimated in March 2017 that the NFIP's $24.6 billion debt would require annual interest-only payments of nearly $400 million, noting that if interest rates were to rise, these payments would increase significantly and FEMA might not be able to retire any of its debt, even in low loss years. In April 2017, FEMA updated some of the assumptions in the October 2015 NFIP Semi-Annual Debt Repayment Progress Report and estimated that at the end of 20 years, the NFIP's net debt would increase by a further $9.4 billion. Also in April 2017, the Congressional Budget Office (CBO) projected that the NFIP would have insufficient receipts to pay the expected claims and expenses over the 2018-2027 period and that FEMA would need to use about $1 billion of its borrowing authority to pay those expected claims. Although the debt cancellation means that the 2017 hurricane season will probably not require an increase in the borrowing limit, the NFIP will have a debt very similar to the debt after the 2005 hurricane season. Since 2005, the program has devoted more resources to interest payments than to repaying the debt, and it seems unlikely that this would be different in the future without congressional action. S. 1368 , Section 301, would freeze interest accrual on the NFIP's debt to the Treasury for six years after enactment. This would make it possible for the NFIP to spend saved amounts from foregone interest payments for a variety of other purposes. Some stakeholders have expressed concern related to the perceived affordability of flood insurance premiums and the balance between actuarial soundness and other goals of the NFIP. Particularly following the increase in premiums associated with BW-12 and HFIAA, concerns were raised that risk-based premiums could be unaffordable for some households. Section 100236 of BW-12 called for an affordability study by FEMA and also a study by the National Research Council of the National Academy of Sciences (NRC) regarding participation in the NFIP and the affordability of premiums. In HFIAA Section 9, Congress also required FEMA to develop a Draft Affordability Framework "that proposes to address, via programmatic and regulatory changes, the issues of affordability of flood insurance sold under the National Flood Insurance Program, including issues identified in the affordability study…." FEMA published their Affordability Framework on April 17, 2018. The NRC report was published in two parts. The first NRC report considered the many ways in which to define affordability and identify which households need financial assistance with premiums. They noted that there are no objective definitions of affordability for flood insurance, nor is there an objective threshold that separates affordable premiums from unaffordable premiums and thus defines affordability either for an individual property owner or renter, or for any group of property owners or renters. They suggested that if affordability were to be addressed through some form of government assistance, a number of questions would need to be answered by Congress or FEMA: (1) Who will receive assistance? (2) What assistance will be provided? (3) How will assistance be provided? (4) How much assistance will be provided? (5) Who will pay for the assistance? (6) How will assistance be administered? The NRC report suggested that eligibility for assistance could be based on (1) being cost-burdened by flood insurance, (2) the loss of pre-FIRM subsidies or grandfathered cross-subsidies, (3) the requirement to purchase flood insurance, (4) housing tenure, (5) household income, (6) mitigation, or (7) community characteristics. The first NRC report identified potential policy measures that might reduce the burden of premium payments, or that might direct mitigation assistance towards households that qualify for assistance, such as means-tested mitigation grants, mitigation loans, means-tested vouchers, federal tax deductions and credits, disaster savings account, expanding the variety of individual mitigation measures that reduce premiums, encouraging the selection of higher premium deductibles, reducing NFIP administrative cost loadings in premiums, eliminating the mandatory purchase requirement, or relying on the Treasury to help pay claims in catastrophic loss years. The report concluded that policymakers will need to decide whether they want to define cost burden with reference to income, housing costs in relation to income, premium paid in relation to property value, or some other measure. GAO also considered the issue of affordability, suggesting that an affordability program that addresses the goals of encouraging consumer participation and promoting resilience would provide means-tested assistance through appropriations rather than through discounted premiums, and prioritize it to mitigate risk. They argued that providing premium assistance through appropriations rather than discounted premiums would address the policy goal of making the fiscal exposure more transparent because any affordability discounts on premium rates would be explicitly recognized in the budget each year. GAO suggested that linking subsidies to ability to pay rather than the existing approach to subsidies would make premium assistance more transparent and thus more open to oversight by Congress and the public. They also argued that means-testing premium assistance would help ensure that only those who could not afford full-risk rates would receive assistance, which could lower the number of policyholders receiving a subsidy and thus increase the amount that the NFIP receives in premiums and reduce the program's federal fiscal exposure. GAO estimated that 47%-74% of policyholders could be eligible for subsidy if income eligibility was set at 80% or 140% of area median income, respectively. GAO also suggested that instead of premium assistance, it would be preferable to address affordability by providing assistance for mitigation measures that would reduce the flood risk of the property, thus enhancing resilience, and ultimately result in a lower premium rate. Reducing flood risk through mitigation could also reduce the need for federal disaster assistance, further decreasing federal fiscal exposure. Another approach to making premiums affordable, at least for policyholders in the relevant communities, would be to introduce policies to increase the number of communities participating in the Community Rating System (CRS) or to encourage communities already participating in the CRS to improve their rating. The CRS is a program offered by FEMA to incentivize the reduction of flood and erosion risk, as well as the adoption of more effective measures to protect natural and beneficial floodplain functions. FEMA awards points that increase a community's "class" rating in the CRS. Policyholders in the SFHA within a CRS community receive a 5%-45% discount on their SFIP premiums, depending on their community's rating. In order to participate in the CRS program, a community must apply to FEMA and document its creditable improvements through site visits and assessments. As of June 2017, FEMA estimated that only 5% of eligible NFIP communities participate in the CRS program. However, these communities have a large number of flood policies, so more than 69% of all flood policies are written in CRS-participating NFIP communities. Although the CRS discount reduces flood insurance premiums for individual communities, the CRS discount is cross-subsidized into the NFIP program, such that the discount for one community ends up being offset by increased premium rates in all communities across the NFIP. For example, the average 11.4% discount for CRS communities in April 2014 was cross-subsidized and shared across NFIP communities through a cost (or load) increase of 13.4% to overall premiums. FEMA does not currently have the authority to implement an affordability program, nor does FEMA's current rate structure provide the funding required to support an affordability program. If an affordability program were to be funded from NFIP funds, this would require either raising flood insurance rates for NFIP policyholders or diverting resources from another existing use. Alternatively, an affordability program could be funded fully or partially by congressional appropriation. Section 103 would authorize a state or a consortium of states to create a voluntary flood insurance affordability program for owner-occupants of 1-4 unit residences in communities participating in the NFIP. Eligibility would be determined by the state, but the affordability program would not be available to a household with income that exceeds the greater of (i) the amount equal to 150% of the poverty level for each state, or (ii) the amount equal to 60% of the median income of households residing in the state. Assistance could be only in the form of either establishing a limit on the amount of chargeable risk premium paid or limiting the rate of increase in the amount of chargeable premiums. The state affordability program would be funded through a surcharge on each policy within that state that is not eligible to participate in the affordability program. Because this approach to affordability would be funded by other NFIP policyholders, it would create a new cross-subsidy within the NFIP for any states that develop an affordability program. Because the affordability assistance is limited to single-family owner-occupiers, this surcharge could potentially be levied on policyholders with equally low, or lower incomes, who are renters with contents-only policies, or owner-occupiers who live in multiunit buildings. S. 1313 , Section 208, would provide affordability vouchers for owner-occupied households with NFIP policies in SFHAs with income less than 165% of area median income and for which the cost of flood insurance premiums, surcharges, and fees would result in excess costs for that year. Excess costs are defined as when the sum of the total amount of NFIP premiums, surcharges and fees plus the annual housing expenses exceed 40% of the total household income for the year. The voucher would offset excess costs and would be used towards payment of flood insurance premiums, surcharges, and fees. Policyholders with household incomes below 80% of the area median income would receive a voucher for 100% of the excess costs. Policyholders with household incomes of 81%-120% of area median income would receive vouchers for 80% of excess costs, and policyholders with household incomes of 121%-165% of area median income would receive vouchers for 60% of excess costs. It is unclear how these vouchers would be funded. S. 1368 , Section 103, would require FEMA to establish an Affordability Assistance Fund which would be separate from other NFIP funds and available without fiscal year limitation. This Affordability Assistance Fund would be credited with the income from the HFIAA surcharge. Section 103 would require FEMA to offer zero or low-interest loans to fund mitigation projects by homeowners, and would also require FEMA to provide financial assistance in the form of a voucher, grant, or premium credit to an eligible household, defined as one where housing costs exceed 30% of the household's adjusted gross income for the year and the total assets owned by the household are not greater than $1 million. The voucher, grant or premium credit would provide an amount equal to the lesser of the difference between either the annual housing expenses or 30% of the annual adjusted gross income of the household and the costs of NFIP premiums plus principal and interest payments for a loan provided under this section. A long-standing objective of the NFIP has been to increase purchases of flood insurance policies, and this objective of widespread NFIP purchase was one motivation for keeping NFIP premiums reasonable and for later introducing the requirement to purchase flood insurance as a condition of receiving a federally backed mortgage for properties in a SFHA, commonly referred to as the mandatory purchase requirement. Early in the program, the federal government found that making insurance available, even at subsidized rates, did not provide sufficient incentive for communities to join the NFIP or for individuals to purchase flood insurance. In response, Congress passed the Flood Disaster Protection Act of 1973, which required the purchase of flood insurance and placed the responsibility for ensuring compliance on lending institutions. This mandatory purchase requirement was later strengthened by the National Flood Insurance Reform Act of 1994. In a community that participates or has participated in the NFIP, owners of properties in the mapped SFHA are required to purchase flood insurance as a condition of receiving a federally backed mortgage. By law and regulation, federal agencies, federally regulated lending institutions, and government-sponsored enterprises (GSE) must require these property owners to purchase flood insurance as a condition of any mortgage that these entities make, guarantee, or purchase. However, there are no official statistics available from the federal mortgage regulators responsible for compliance with the mandate, and no up-to-date data on national compliance rates with the mandatory purchase requirement. A 2006 study commissioned by FEMA found that compliance with this mandatory purchase requirement may be as low as 43% in some areas of the country (the Midwest), and as high as 88% in others (the West). A more recent study of flood insurance in New York City found that compliance with the mandatory purchase requirement by properties in the SFHA with mortgages increased from 61% in 2012 to 73% in 2016. The escrowing of insurance premiums, which began in January 2016, may increase compliance with the mandatory purchase requirement more widely, but no data are yet available. Both the GAO and the NFIP report to Congress on options for privatizing the NFIP suggested that the mandatory purchase requirement could potentially be expanded to more (or all) mortgage loans made by federally regulated lending institutions for properties in communities participating in the NFIP. This would increase the consumer participation rate in the NFIP and potentially balance the NFIP portfolio with an increased number of lower risk properties. According to GAO, some private insurers have indicated that a federal mandate could help achieve the level of consumer participation necessary to make the private sector comfortable with providing flood insurance coverage by increasing the number of policyholders, which would allow private insurers to diversify and manage the risk of their flood insurance portfolio and address concerns about adverse selection. The Association of State Floodplain Managers also suggested that all properties within the SFHA should be required to have flood insurance, not just those with federally backed mortgages. The flooding caused by the 2017 hurricanes highlighted the issue of low penetration rates of flood insurance. In the counties in Texas with a FEMA Individual Assistance declaration for Hurricane Harvey, the average penetration rate for all 41 counties was 10%, with a 21% penetration rate for structures within the SFHA in those counties. The counties with the highest penetration rate were on the coast (see Figure 1 ): Aransas County (72% penetration in SFHA, 43% penetration county-wide), Nueces County (70% in SFHA, 21% county-wide), and Galveston County (64% in SFHA, 47% county-wide). In the counties in Florida with a FEMA Individual Assistance declaration for Hurricane Irma, the average penetration rate for all 48 counties was 12%, with a 31% penetration rate for structures within the SFHA in those counties. The counties with the highest penetration rate (see Figure 2 ) were St. Johns County (73% in SFHA, 35% county-wide), Flagler County (72% in SFHA, 18% county-wide), Nassau County (62% in SFHA, 25% county-wide), and Palm Beach County (62% in SFHA, 22% county-wide). NFIP penetration rates were extremely low in Puerto Rico, with only 4,436 NFIP residential policies at the time Hurricane Maria hit, for an average penetration rate of 0.23%, and in the Virgin Islands, with only 1,412 NFIP policies, for an average penetration rate of 2.5%. NFIP policies are not distributed evenly around the country; about 37% of the policies are in Florida, with 11% in Texas and 9% in Louisiana, followed by California with 5% and New Jersey with 4%. These five states account for approximately 66% of all of the policies in the NFIP. NFIP participation rates are higher in coastal locations than in inland locations, and are highest in the most risky areas due to mandatory purchase requirements. The NFIP could potentially be financially improved with a more geographically diverse policy base and, in particular, through finding ways to increase coverage in areas perceived to be at lower risk of flooding than those in the SFHA. FEMA has identified the need to increase flood insurance coverage across the nation as a major priority for the current reauthorization and beyond, and has set a goal of doubling flood insurance coverage by 2023, through the increased sale of both NFIP and private policies. Closing the insurance gap is one of the key strategic objectives of FEMA's 2018-2022 strategic plan. Section 507 would increase the civil penalties from $2,000 to $5,000 on federally regulated lenders for failure to comply with enforcing the mandatory purchase requirement. In addition, the federal entities for lending regulations, in consultation with FEMA, would be required jointly to update and reissue the guidelines on compliance with mandatory purchase. Section 513 would require a report by GAO on the implementation and efficacy of the mandatory purchase requirement within 18 months of enactment. S. 1313 , Section 102, would require FEMA to conduct a study in coordination with the National Association of Insurance Commissioners to address how to increase participation in flood insurance coverage through programmatic and regulatory changes, and report to Congress no later than 18 months after enactment. This study would be required to include but not be limited to options to (1) expand coverage beyond the SFHA to areas of moderate flood risk; (2) automatically enroll customers in flood insurance while providing customers the opportunity to decline enrollment; and (3) create bundled flood insurance coverage that diversifies risk across multiple peril insurance. S. 1368 , Section 410, would require FEMA to conduct a study and report to Congress within one year of enactment on the percentages of properties with federally backed mortgages located in SFHAs satisfy the mandatory purchase requirement, and the percentage of properties with federally backed mortgages located in the 500-year floodplain that would satisfy the mandatory purchase requirement if the mandatory purchase requirement applied to such properties. S. 1571 , Section 303, would require the federal banking regulators to conduct an annual study regarding the rate at which persons who are subject to the mandatory purchase requirement are complying with that requirement. Section 303 would also require FEMA to conduct an annual study of participation rates and financial assistance to individuals who live in areas outside SFHAs. One of the reasons that the NFIP was originally created was because private flood insurance was widely unavailable in the United States. Generally, private companies could not profitably provide flood coverage at a price that consumers could afford, primarily because of the catastrophic nature of flooding and the difficulty of determining accurate rates. Until recently the role of the private market in primary residential flood insurance has been relatively limited. The main role of private insurance companies at the moment is in the operational aspect of the NFIP. FEMA provides the overarching management and oversight of the NFIP, and retains the actual financial risk of paying claims for the policy (i.e., underwrites the policy). However, the bulk of the day-to-day operation of the NFIP, including the marketing, sale, writing, and claims management of policies, is handled by private companies. The arrangement between the NFIP and private industry is authorized by statute and guided by regulation. There are two different arrangements that FEMA has established with private industry. The first is the Direct Servicing Agent (DSA), which operates as a private contractor on behalf of FEMA for individuals seeking to purchase flood insurance policies directly from the NFIP. The DSA also handles the policies of severe repetitive loss properties. The second arrangement is called the Write-Your-Own (WYO) Program, where private insurance companies are paid to write and service the policies themselves. Roughly 86% of NFIP policies are sold by the private insurance companies participating in the WYO Program. Companies participating in the WYO program are compensated through a variety of methods. Some have argued that the levels of WYO compensation are too generous, while others have argued that reimbursement levels are insufficient to cover all expenses associated with servicing flood policies under the procedures set by FEMA. A GAO study found that FEMA does not systematically consider actual flood expenses and profits when establishing WYO compensation, and has yet to compare WYO companies' actual expenses and compensation. Therefore, FEMA lacks the data to determine how much profit WYO companies make and whether the compensation payments are appropriate. In addition to the WYO program, there is a small private flood insurance market which most commonly provides commercial coverage, coverage above the NFIP maximums, or coverage in the lender-placed market. In general, the private flood market tends to focus on high-value properties, which command higher premiums and therefore the extra expense of flood underwriting can be more readily justified. At the moment very few private insurers compete with the NFIP in the primary voluntary flood insurance market. Some suggest that this is partly because the non-compete clause—the contractual restriction placed on WYO carriers against offering standalone private flood products that compete with the NFIP—curtails the potential involvement of the WYO companies. However, FEMA has announced proposed changes for FY2019 in which they would remove restrictions on WYO companies choosing to offer private flood insurance, while maintaining requirements that such private insurance lines remain entirely separate from a WYO company's NFIP insurance business. If implemented, this would effectively remove the non-compete clause without need for legislation. Private insurer interest in providing flood coverage has increased in recent years. Advances in the analytics and data used to quantify flood risk mean that a number of private insurance companies and insurance industry organizations have expressed interest in private insurers offering primary flood insurance in competition with the NFIP. Private insurance is seen by many as a way of transferring flood risk from the federal government to the private sector. A reformed NFIP rate structure could have the effect of encouraging more private insurers to enter the primary flood market; FEMA's subsidized rates are often seen as the primary barrier to private sector involvement in flood insurance. Even without the subsidies mandated by law, the NFIP's definition of full-risk rates differs from that of private insurers. Whereas the NFIP's full-risk rates must incorporate expected losses and operating costs, a private insurer's full-risk rates must also incorporate a return on capital. As a result, even those NFIP policies which are considered to be actuarially sound from the perspective of the NFIP may still be underpriced from the perspective of private insurers. The rules on the acceptance of private insurance for the mandatory purchase requirement have had a significant impact on the market potential for private insurers. In BW-12, Congress explicitly allowed federal agencies to accept private flood insurance to fulfill the mandatory purchase mortgage requirement as long as the private flood insurance "provides flood insurance coverage which is at least as broad as the coverage" of the NFIP, among other conditions. The implementation of this requirement has proved challenging, with the responsible federal agencies issuing two separate Notices of Proposed Rulemaking (NPRM) addressing the issue in October 2013 and November 2016. The crux of the implementation issue may be seen as answering the question of who would judge whether specific policies met the "at least as broad as" standard and what criteria would be used in making this judgment. The uncertainty about whether or not private policies would meet this standard has been viewed as a barrier to private sector participation in the flood insurance market, along with FEMA's policy on continuous coverage. Continuous coverage is required for property owners to retain any subsidies or cross-subsidies in their NFIP premium rates. A borrower may be reluctant to purchase private insurance if doing so means they would lose their subsidy should they later decide to return to NFIP coverage. Many insurers also view the lack of access to NFIP data on flood losses and claims as a barrier to more private companies offering flood insurance. It is argued that increasing access to past NFIP claims data would allow private insurance companies to better estimate future losses and price flood insurance premiums, and ultimately to determine which properties they might be willing to insure. However, FEMA's view is that the agency would need to address privacy concerns in order to provide property level information to insurers, because the Privacy Act of 1974 prohibits FEMA from releasing policy and claims data which contains personally identifiable information. Private sector competition might increase the financial exposure and volatility of the NFIP, as private markets will likely seek out policies that offer the greatest likelihood of profit. In the most extreme case, the private market may "cherry-pick" (i.e., adversely select) the profitable, lower-risk NFIP policies that are "overpriced" either due to cross-subsidization or imprecise flood insurance rate structures. This could leave the NFIP with a higher density of actuarially unsound policies that are being directly subsidized or benefiting from cross-subsidization. Because the NFIP cannot refuse to write a policy, those properties that are considered "undesirable" by private insurers are likely to remain in the NFIP portfolio—private insurers will not compete against the NFIP for policies that are inadequately priced from their perspective. Private insurers, as profit-seeking entities, are unlikely to independently price flood insurance policies in a way that ensures affordable premiums as a purposeful goal, although some private policies could be less expensive than NFIP policies. It is likely that the NFIP would be left with a higher proportion of subsidized policies, which may become less viable in a competitive market. Any significant increase in private insurer writing that "depopulates" the NFIP may undermine the NFIP's ability to generate revenue, reducing the amount of borrowing that can be repaid or extending the time required to repay the debt. As the number of NFIP policies decreases, it may become increasingly difficult for the remaining NFIP policyholders to subsidize policies and repay NFIP debt. In the long term the program could be left as a residual market for subsidized or high-risk properties. While this may be a valid policy choice, a likely consequence is that the NFIP as a residual market would not be financially self-sustaining and would require support from the federal government in some form. If the number of NFIP policyholders were to decrease significantly, it might also be difficult to support the NFIP's non-insurance functions of reducing flood risk through floodplain management and mapping. Enforcement of flood mitigation standards could be more challenging within a private flood insurance system, as the current system makes the availability of NFIP insurance in a community contingent on the implementation of floodplain management standards. However, government investment in mitigation could increase private market participation by reducing the flood exposure of high risk properties and thereby increasing the number of properties that private insurers would be willing to cover. The Association of State Floodplain Managers (ASFPM) has expressed concerns that the widespread availability of private flood insurance could lead some communities to drop out of the NFIP and rescind some of the floodplain management standards and codes they had adopted, leading to more at-risk development in flood hazard areas. ASFPM suggested that this issue could be addressed by allowing private policies to meet the mandatory purchase requirement only if they were sold in participating NFIP communities. In HFIAA, Congress revised the authority of FEMA to secure reinsurance for the NFIP from the private reinsurance and capital markets. In January 2017, FEMA purchased $1.042 billion of insurance, to cover the period from January 1, 2017, to January 1, 2018, for a reinsurance premium of $150 million. Under this agreement, the reinsurance covers 26% of losses between $4 billion and $8 billion arising from a single flooding event. Although it is too early to estimate the total claims, FEMA has so far paid over $8.6 billion in claims for Hurricane Harvey, triggering the 2017 reinsurance. In January 2018, FEMA purchased $1.46 billion of insurance to cover the period from January 1, 2018, to January 1, 2019, for a reinsurance premium of $235 million. The agreement is structured to cover losses above $4 billion for a single flooding event, covering 18.6% of losses between $4 billion and $6 billion, and 54.3% of losses between $6 billion and $8 billion. In April 2018, FEMA announced that it would seek to transfer additional NFIP risk to private markets through a reinsurance procurement in which the reinsurer acts as a transformer to transfer NFIP-insured flood risk through the issuance of a catastrophe bond, to be effective for a term of "likely" three years. The purchase of private market reinsurance reduces the likelihood of FEMA needing to borrow from the Treasury to pay claims. In addition, as GAO noted, reinsurance could be beneficial because it allows FEMA to recognize some of its flood risk and the associated risk up front through the premiums it pays to the reinsurers rather than after the fact borrowing from Treasury. From a risk management perspective, using reinsurance to cover losses in only the more extreme years could help the government to manage and reduce the volatility of its losses over time. However, because reinsurers understandably charge FEMA premiums to compensate for the risk they assume, the primary benefit of reinsurance is to transfer and manage risk rather than to reduce the NFIP's long-term fiscal exposure. For example, a reinsurance scenario which would provide the NFIP with $16.8 billion coverage (sufficient for Katrina-level losses) could cost an estimated $2.2 billion per year. However, the NFIP's finances do not offer room for expenditure of this amount on reinsurance, as the current premium income is only about $3.5 billion per year, and most of that is required to pay claims. Section 201 would revise the definition of private flood insurance previously defined in BW-12. This section would strike existing statutory language describing how private flood insurance must provide coverage "as broad as the coverage" provided by the NFIP. Instead, the definition would rely on whether the insurance policy and insurance company were in compliance in the individual state (as defined to include certain territories and the District of Columbia). Further, "private flood insurance" would be specifically defined as including surplus lines insurance. Though the majority of regulation of private flood insurance would then rest with individual states, federal regulators would be required to develop and implement requirements relating to the financial strength of private insurance companies from which such entities and agencies will accept private insurance, provided that such requirements shall not affect or conflict with any state law, regulation, or procedure concerning the regulation of the business of insurance. The dollar amount of coverage would still have to meet federal statutory requirements and the GSEs may implement requirements relating to the financial strength of such companies offering flood insurance. This section would also specify that if a property owner purchases private flood insurance and decides then to return to the NFIP, they would be considered to have maintained continuous coverage. This section would allow private insurers to offer policies that provide coverage that might differ significantly from NFIP coverage, either by providing greater coverage or potentially providing reduced coverage that could leave policyholders exposed after a flood. Section 202 would apply the mandatory purchase requirement only to residential improved real estate, thereby eliminating the requirement for other types of properties (e.g., all commercial properties) to purchase flood insurance from January 1, 2019. This would likely affect the policy base of the NFIP by reducing the number of commercial properties covered. However, it is uncertain how many would elect to forgo insurance coverage (public or private) entirely. To the extent that commercial properties no longer choose to carry insurance (or are allowed to do so by the conditions of their mortgages), there may be increased uninsured damages to these properties from floods. Section 203 would eliminate the non-compete requirement in the WYO arrangement with FEMA that currently restricts WYO companies from selling both NFIP and private flood insurance policies. This would allow the WYO companies to offer their own insurance policies while also receiving reimbursement for their participation in the WYO Program to administer the NFIP policies. It is unknown what criteria WYO companies would use to establish their own policies, and how they would choose to offer those policies rather than NFIP policies to potential customers. Section 204 would require FEMA to make publicly available all data, models, assessments, analytical tools, and other information that is used to assess flood risk or identify and establish flood elevations and premiums. This section would also require FEMA to develop an open-source data system by which all information required to be made publicly available may be accessed by the public on an immediate basis by electronic means. Within 12 months after enactment, FEMA would be required to establish and maintain a publicly searchable database that provides information about each community participating in the NFIP. This section provides that personally identifiable information would not be made available; the information provided would be based on data that identifies properties at the zip code or census block level. Ultimately, this data could be used to better inform the participation of private insurers in offering private flood insurance, as well as informing future flood mitigation efforts. However, the availability of NFIP data could make it easier for private insurers to identify the NFIP policies that are "overpriced" due to explicit cross-subsidization or imprecise flood insurance rate structures, and adversely select these properties, while the government would likely retain those policies that benefit from those subsidies and imprecisions, potentially increasing the deficit of the NFIP. Section 506 would establish that the allowance paid to WYO companies would not be greater than 27.9% of the chargeable premium for such coverage. It would also require FEMA to reduce the cost of companies participating in the WYO program. Section 511 would require annual transfer of a portion of the risk of the NFIP to the private reinsurance or capital markets to cover a FEMA-determined probable maximum loss target that is expected to occur in the fiscal year, no later than 18 months after enactment. S. 1313 , Section 101, would require annual transfer of a portion of the risk of the NFIP to the private reinsurance or capital markets in an amount that is sufficient to maintain the ability of the program to pay claims, and limit the exposure of the NFIP to potential catastrophic losses from extreme events. S. 1313 , Section 401, would allow any state-approved private insurance to satisfy the mandatory purchase requirement, and allow private flood insurance to count as continuous coverage. This section would also change the amount of insurance required for both private flood insurance policies and NFIP policies in order to satisfy the mandatory purchase requirement. The required coverage would be the lesser of 80% of the purchase price of the property, the maximum NFIP coverage for that type of property, or the outstanding balance of the loan (for multiunit structures only). This section would require FEMA, within two years of enactment, to report on the extent to which the properties for which private flood insurance is purchased tend to be at a lower risk than properties for which NFIP policies are purchased (i.e., the extent of adverse selection), by detailing the risk classifications of the private flood insurance policies. This data, while identifying adverse selection based on risk profiles, might not identify if there has been adverse selection based on subsidization. S. 1313 , Section 402, would give temporary authority for sale of private flood insurance by WYO companies for certain properties during the first two years after enactment (e.g., non-residential properties, severe repetitive loss properties, business properties, or any property that has incurred flood-related damage in which the cumulative amount of payments equaled or exceeded the fair market value of the property). After two years and on completion of a study measuring the risk classification underwritten by participating WYO companies, if the FEMA Administrator determines that the provision of flood insurance to properties in addition to those categories above will not adversely impact the ability of the NFIP to maintain a diverse risk pool, the Administrator is authorized to expand (or limit) the participation of WYO companies in the broader flood insurance marketplace. S. 1313 , Section 403, would require FEMA to study the feasibility of selling or licensing the use of historical structure-specific NFIP claims data to non-governmental entities, while reasonably protecting policyholder privacy, and report within a year of enactment. This section would also authorize FEMA to sell or license claims data as the Administrator determines is appropriate and in the public interest, with the proceeds to be deposited in the National Flood Insurance Fund. S. 1313 , Section 602, would require FEMA, not later than one year from enactment, to create and maintain a publicly searchable database that includes the aggregate number of claims filed each month, by state; the aggregate number of claims paid in part or in full; and the aggregate number of claims denials appealed, denials upheld on appeal, and denials overturned on appeal; without making personally identifiable information available. S. 1368 , Section 302, would establish that the total amount of reimbursement paid to WYO companies would not be greater than 22.46% of the chargeable premium for such coverage. S. 1368 , Section 304, would require FEMA, within 12 months of enactment, to develop a schedule to determine the actual costs of WYO companies, including claims adjusters and engineering companies, and reimburse the WYO companies only for the actual costs of the service or products. S. 1571 , Section 302, would specify that FEMA may consider any form of risk transfer, including traditional reinsurance, catastrophe bonds, collateralized reinsurance, resilience bonds, and other insurance-linked securities. An area of controversy involves NFIP coverage of properties that have suffered multiple flood losses, which are at greater risk than the average property insured by the NFIP. One concern is the cost to the program; another is whether the NFIP should continue to insure properties that are likely to have further losses. The NFIP currently uses more than one definition of repetitive loss. The statutory definition of a repetitive loss structure is used for applications for Flood Mitigation Assistance (FMA) grants. A slightly different definition is used for Increased Cost of Compliance Coverage, and a third definition is used for internal tracking of insurance data and also for the Community Rating System. The statutory definition of a severe repetitive loss property is a property which has incurred four or more claim payments exceeding $5,000 each, with a cumulative amount of such payments over $20,000; or at least two claims with a cumulative total exceeding the value of the property. The definition of severe repetitive loss property is consistent across program elements in the NFIP. According to FEMA, repetitive loss (RL) and severe repetitive loss (SRL) properties account for approximately $17 billion in claims, or approximately 30% of total claims over the history of the program. As of January 31, 2017, there were 90,000 currently insured repetitive loss properties and 11,000 currently insured severe repetitive loss properties. The currently insured repetitive loss and severe repetitive loss properties (which represent about 2% of the overall policies in the NFIP) have accounted for approximately $9 billion in claims, or approximately 16% of total claims over the history of the program. A study of all of the residential NFIP claims filed between January 1978 and December 2012 showed that the magnitude of claims for repetitive loss structures as a percentage of building value was higher than non-repetitive loss properties by 5%-20%. Section 402 would require certain NFIP communities with a history of flood loss to identify where repeatedly flooded properties are located and assess the continuing risks to such areas and develop a community-specific plan for mitigating flood risks in these areas or face possible sanctions from FEMA. Covered communities include those which participate in the NFIP within which such properties are located: (i) 50 or more repetitive loss structures for each of which, during any 10-year period, two or more claims for payment under flood insurance coverage have been made with a cumulative amount exceeding $1,000; (ii) five or more severe repetitive loss structures for which mitigation activities have not been conducted; or (iii) a public facility or a private nonprofit facility that has received assistance for repair, restoration, reconstruction, or replacement under Section 406 of the Stafford Act ( P.L. 93-288 ) in connection with more than one flooding event in the most recent 10-year period. To assist communities in the preparation of plans, FEMA would be required to provide covered communities with appropriate data regarding property addresses and dates of claims associated with insured properties within the community. Before sanctioning a community for not fulfilling the requirements of this section, FEMA would be required to issue notice of noncompliance before sanctions and recommendations for actions to bring the community into compliance. FEMA would also be required to consider the resources available to the community affected, including federal funding, the portion of the community that lies within the SFHA, and other factors that make it difficult for the community to conduct mitigation activities for existing flood-prone structures. FEMA would be required to develop sanctions in future regulations. In making determinations regarding financial assistance for mitigation, FEMA may consider the extent to which a community has complied with this subsection. Although a community may incorporate plans required under this section into flood mitigation plans or hazard mitigation plans, which they may already be required to complete, covered communities may feel that this section imposes significant additional requirements. Section 504 would define a new "multiple-loss property" category, which would include three types of properties: (1) a revised definition of repetitive loss property; (2) a severe repetitive loss property, with the same definition as the existing statutory definition; and (3) a new category of extreme repetitive loss property. The new definition of a repetitive loss property would be a structure that has incurred flood damage for which two or more separate claims of any amount have been made. The new definition of an extreme repetitive loss property would be a structure which has incurred flood damage for which at least two separate claims have been made with the cumulative amount of such claims payments exceeding 150% of the maximum coverage available for the structure. This section also defines the term "qualified claims payment" as a claims payment of any amount made in connection with a flood event that occurred after the date of enactment. Any multiple-loss properties which are not paying full risk-based rates, and for which two qualified claims payment have been made, would have premium rates increased at 10% per year until the full risk-based rate is reached. After three qualified claims payment, rates would be increased at 15% per year until the full risk-based rate is reached. Severe repetitive loss properties and extreme repetitive loss properties would be subject to a minimum annual deductible of $5,000. Flood insurance would not be available to an extreme repetitive-loss property for which a claim payment for flood loss was made after the date of enactment if the property owner refused an offer of mitigation. This section would establish a broader definition of repetitive loss properties than the current definition, which would bring more properties into the multiple-loss categories. This section would also establish that only future claims would count towards classifying a property as a multiple-loss property, and would eliminate grandfathering for multiple-loss properties after two future claims. Section 505 would eliminate any new or renewed NFIP coverage for multiple-loss properties with excessive lifetime claims. The section defines such properties as those where aggregate amounts in claims payments that have been made after18 months from enactment exceed three times the amount of the replacement value of the structure. This provision would represent the first time that the NFIP would refuse to cover a property. S. 1571 , Section 101, contains provisions which are almost identical to those in H.R. 2874 , Section 402, for repeatedly flooded communities. The only difference is that in the definition of a covered community, the criteria for repetitive loss structures is only that 50 or more RL structures are located within the community, without the additional criteria in H.R. 2874 . The NFIP requires most policyholders to purchase ICC coverage, which is in effect a separate insurance policy to offset the expense of complying with more rigorous building code standards when local ordinances require them to do so. This Increased Cost of Compliance Coverage is authorized in law, with rates for the coverage as well as how much can be paid out for claims, set by FEMA. The amount that can be charged for ICC coverage is capped in law at $75 per year: currently ICC premiums vary between $4 and $70. ICC policy premiums are separate from standard flood insurance policy premiums. ICC coverage provides an amount up to $30,000 in payments for certain eligible expenses. For example, ICC claims payments may be used toward the costs of elevating, demolishing, relocating, or flood-proofing non-residential buildings, or any combination of these actions. ICC coverage is in addition to the building coverage provided by the standard flood policy. However, FEMA's policy is that the payment on the building claim plus the ICC claim cannot exceed the statutory maximum payment of $250,000 for residential structures or $500,000 for non-residential structures. Since the ICC was introduced in 1997, the program has received over $1.4 billion in premiums and paid over $700 million in claims, with over $450 million in underwriting expenses and $50 million of claims handling expenses. However, between $100 million and $200 million has yet to be paid on claims for older years. For the years on which FEMA has data, 2007-2015, the NFIP has lost money on ICC on a cash flow basis. During that time period, on aggregate premiums of $701 million, the NFIP had aggregate ICC underwriting losses of $171 million. According to ICC data, elevation is the most common form of mitigation. Approximately 61% of all ICC claims closed with payment are single family residential claims involving compensation for elevation of a structure to or above the Base Flood Elevation (BFE). Although the cost of elevating a structure depends on the type of building and elevation requirement, the average cost of elevating an existing property has been estimated at $33,239 to $91,732, and suggestions have been made for years that the amount of ICC coverage should be raised. The need to increase the amount of ICC coverage is one of the areas where H.R. 2874 and all of the Senate bills agree; although the suggested amounts differ, all would raise the $30,000 limit. Section 403 would authorize FEMA to supplement the existing ICC coverage with the option of allowing policyholders to purchase additional ICC coverage up to $60,000, for a surcharge priced accordingly by FEMA. This section would also expand the availability of ICC coverage to include properties that FEMA or a community identifies as being at high risk for future flood damages, and properties located in a covered community (as defined in Section 402). This may allow policyholders to claim ICC coverage in certain circumstances to mitigate their property before a flood, rather than waiting until after they had been flooded. S. 1313 , Section 204, would increase ICC coverage to $75,000, and would exempt the ICC payment amount from the maximum payout of an NFIP policy. S. 1313 , Section 404, would require a private flood insurance policy to provide coverage that meets or exceeds the increased cost of compliance coverage provided by a standard flood insurance policy under the NFIP. S. 1368 , Section 201, would increase ICC coverage to $100,000, and would exempt ICC payment amounts from the maximum payout of an NFIP policy. This section would make ICC coverage available to all NFIP policyholders, in and out of SFHAs, if the community has established land use and control measures for the area in which the property is located. This section would also allow policyholders to use ICC coverage for any eligible project costs under the FMA, HMGP, or Pre-Disaster Mitigation (PDM) programs for acquisition, demolition, elevation, relocation, or small structural projects funded under those programs. S. 1571 , Section 103, would increase primary ICC coverage to $60,000, with the option of allowing policyholders to purchase additional ICC coverage up to $100,000, for a surcharge priced accordingly by FEMA, and would exempt ICC payment amounts from the maximum payout of an NFIP policy. This section would make ICC coverage available to all NFIP policyholders, in and out of SFHAs, if the community has established land use and control measures for the area in which the property is located. This section would also allow policyholders to use ICC coverage for any eligible project costs under the FMA, HMGP, or Pre-Disaster Mitigation (PDM) programs for acquisition, demolition, elevation, relocation, or small structural projects funded under those programs. All of the bills include provisions related to administrative reforms of the NFIP, pilot projects, and other studies, which are not described in detail in this report. Table 1 identifies the provisions in the House and Senate bills related to administrative reform, divided into the following categories: (1) payment and purchase requirements, (2) disclosure, information, claims, appeals, administrative reform, and oversight; and (3) fraud and litigation. Only the disclosure requirements will be discussed in this report. Although some individual states require real estate transactions to be accompanied by a disclosure of information pertaining to flood or other hazards, there is currently no flood risk disclosure requirement under the NFIP. In fact, property owners may not have knowledge of the entire past flood history of their property. Section 109 would require that no new flood insurance coverage may be provided after September 30, 2022, unless an appropriate body (e.g., the local or state government) has imposed, by statute or regulation, a duty on any seller or lessor of improved real estate to provide a property flood hazard disclosure which discloses any actual knowledge of the seller of prior physical damage caused by flood to any building on the property, prior insurance claims for flood losses (NFIP or private flood insurance), any previous notification regarding the designation of the property as a multiple-loss property, and any federal legal obligation to obtain and maintain flood insurance running with the property. This disclosure may affect properties that have flood history during real estate transactions by reducing the likelihood of the sale of the property or reducing its value. S. 1313 , Section 203, would require a seller or lessor to provide a flood risk information pamphlet produced by FEMA and disclose the available flood risk profile of the property, including any past flood damage to the property or past claims for flood losses (NFIP or private flood insurance); any information known regarding designation of the property as a repetitive loss or severe repetitive loss property and elevation certificate that is available to the seller or lessor; and any requirement that the property be covered by flood insurance because the property owner, or a previous owner, obtained any form of disaster assistance under the Stafford Act. This section would also establish a 10-day period (or a period of a different length of time if mutually agreed upon by the parties) during which the purchaser or lessor may review options for managing or mitigating flood risk with respect to the property. This disclosure requirement may affect the likelihood of the sale of properties with flood risk, but could also allow for the possibility of mitigation by purchasers. S. 1368 , Section 423, would require landlords to disclose to tenants the flood zone of the property, whether the property is covered by flood insurance, and the availability of contents coverage under the NFIP. This could encourage a higher take-up of contents coverage by renters. S. 1571 , Section 105, would require that no new flood insurance coverage may be provided after September 30, 2022, unless the relevant public body has imposed, by statute or regulation, a duty on any seller of improved real estate to provide a property flood hazard disclosure which discloses any actual knowledge of the seller of prior physical damage caused by flood to any building on the property, prior insurance claims for flood losses (NFIP or private flood insurance), any previous notification regarding the designation of the property as a multiple-loss property, and any federal legal obligation to obtain and maintain flood insurance running with the property. The same requirements would apply to lessors of a rental property with a lease of 30 days or longer. In the debate about the future of the NFIP, the fact that flood insurance is only one of the functions of the NFIP's key responsibilities is sometimes overlooked. The NFIP has always been more than just an insurance program. In addition to providing flood insurance, the program identifies and maps flood hazards, sets minimum floodplain management standards, and offers grants and incentive programs for household- and community-level investments in flood risk reduction. The main non-insurance policy goal of the NFIP is to mitigate and reduce the nation's comprehensive flood risk through the development and implementation of floodplain management standards. FEMA develops, in coordination with participating communities, flood maps called Flood Insurance Rate Maps (FIRMs) that depict the community's floodplain and flood risk zones. FIRMs provide the basis for setting insurance rates and identifying properties whose owners are required to purchase flood insurance. The FIRMs also provide the basis for establishing floodplain management standards that communities must adopt and enforce as part of their participation in the NFIP. Flood maps adopted across the country vary considerably in age and in quality, and there is no consistent, definitive timetable for when a particular community will have its maps revised and updated. By law, once every five years, FEMA is required to assess the need to revise and update all floodplain areas and flood-risk zones defined, delineated, or established by the mapping program, based on an analysis of all natural hazards affecting flood risks. This requirement does not dictate, however, that the FIRMs actually be updated once every five years. Generally, flood maps may require updating when there have been significant new building developments in or near the flood zone, changes to flood protection systems (e.g., levees, sea walls, sand dunes), or environmental changes in the community. The FEMA mapping process, and some NFIP flood maps, have been criticized for being out of date, using poor quality data or methods, or not taking account of changed conditions. In addition, the procedure to update maps is time consuming, in large part due to the lengthy statutory consultation and appeals process. In BW-12, Congress reestablished and reauthorized a body called the Technical Mapping Advisory Council (TMAC). The TMAC is a federal advisory committee established to review and make recommendations to FEMA on matters related to the national flood mapping program. The TMAC is broadly authorized to review and recommend improvements to how FEMA produces and disseminates flood hazard, flood risk, and flood map information. The TMAC is required to submit an annual report to the FEMA Administrator summarizing its activities, its evaluation of FIRMs and FEMA's mapping activities, and its recommendations for improving elements of the mapping program. Within a year of passage of BW-12, the TMAC was also required to submit to the FEMA Administrator a one-time report with recommendations on how to ensure that FIRMs incorporate the best available climate science to assess flood risks and ensure that FEMA uses the best available methodology to consider the impact of sea level rise and future development on flood risk. This report, the Future Conditions report, was submitted in final form in February 2016. FEMA is legally required to "incorporate any future risk assessment" by the TMAC in the Future Conditions report into any revision or update of the NFIP's FIRMs. Further, among the information FEMA is required to include in the updating of FIRMs, is "any other relevant information as may be recommended by the [TMAC]." Statute does not provide guidance on how or when the Administrator should act on the TMAC recommendations. However, on an annual basis, BW-12 required FEMA to report to the authorizing committees of jurisdiction in Congress and the Office of Management and Budget (OMB) on the recommendations from the TMAC and how FEMA is addressing TMAC recommendations to improve flood insurance rate maps and flood risk data. If FEMA does not act or defers to act on certain TMAC recommendations, FEMA is also required to explain that decision in the BW-12 mandated annual report. TMAC has produced two annual reports, for 2015 and 2016, in addition to the Future Conditions report and the 2016 National Flood Mapping Program Review . In the 2015 Annual Report, one of the TMAC recommendations was that FEMA should transfer to a structure-specific flood risk assessment, with a complementary recommendation in the 2016 Annual Report that FEMA should develop risk-based structure-specific premiums for all structures within and outside the SFHA. To do so would require data on the elevation of the first floor of each structure in relation to the BFE. NFIP flood mapping is currently funded in two ways, through (1) annual discretionary appropriations and (2) discretionary spending authority from offsetting money collected from the Federal Policy Fee (FPF). In FY2015, $100 million was appropriated for flood hazard mapping and risk analysis. In FY2016, $190 million was appropriated, and in FY2017, $175.5 million was appropriated. The President's budget request for FY2018, which was submitted to Congress in May 2017, proposed eliminating the discretionary appropriation for flood mapping. However, in the FY2018 Omnibus, Congress appropriated $262.5 million for flood hazard mapping and risk analysis. The FPF is paid to FEMA and deposited in the National Flood Insurance Fund (NFIF). FEMA has the authority to set the amount charged for the FPF, but Congress retains the authority to determine how much to spend, and on what, from the fees collected. The monies available in the NFIF, other than those used to pay claims, are available only to the extent approved in appropriation acts as offsetting collections. In recent years, Congress has generally followed the budget request from FEMA with relation to the authorized offsetting collections appearing in appropriations bills that are funded using the FPF revenue. In addition, Congress generally directs in appropriations law that FPF revenue in excess of the authorized offsetting collection amounts should be spent on floodplain management and mapping. GAO calculated that FEMA should collect $197 million in revenue from the FPF in 2017. Before FY1986, program costs for administrative expenses, surveys, and studies were financed through congressional appropriations. At the beginning of FY1986, the NFIP was required for the first time to pay all program and administrative expenses with funds derived from insurance premiums. Funding for floodplain mapping changed again in the Omnibus Budget Reconciliation Act of 1990, when Congress required FEMA to establish the FPF to cover the administrative expenses incurred in implementing the flood insurance and floodplain management program. The income from the FPF is designated to pay for floodplain mapping activities, floodplain management programs, and certain administrative expenses. FEMA disagreed with this change, arguing that the benefits of those programs are enjoyed by all communities and residents in the floodplain, not just NFIP policyholders. They contended that most of the salary, study, and floodplain management costs are federal in nature and benefit taxpayers as a whole through programs that reduce future flood losses and resultant federal expenditure. About 66% of the resources from the FPF are allocated to flood mapping, with floodplain management receiving about 19% of the overall income from the FPF. To the extent that the private flood insurance market grows and policies move from the NFIP to private insurers, FEMA will no longer collect the FPF on those policies and less money will be available for floodplain mapping and management. Concerns have been raised about maintaining the activities funded by the FPF, with some stakeholders arguing that a form of FPF equivalency, or some form of user fee, should be applied to private flood insurance. Section 302 would create a new appeal process if FEMA denies a request to update a flood map based on new information regarding flood elevations or other flood mitigation factors. The initial appeal would be through a FEMA administrative process, with the possibility of a further appeal to the Scientific Resolution Panel. This would give communities the opportunity to appeal requests for a Physical Map Revision, which may currently be prioritized by FEMA on the basis of available resources; these prioritizations are not subject to appeal. Section 306 would require the TMAC within 12 months after enactment to develop a procedure to use in mapping flood hazards located in communities and states that choose to develop alternative maps to the FIRMs developed by FEMA. The recommended standards and requirements would be required to include procedures for providing notification and appeal rights to individuals within the communities of the proposed flood elevation determinations. FEMA would be required to approve or disapprove such proposed maps for use in the NFIP within six months of receiving the proposed alternative maps. This provision would therefore allow states and local governments to finance and develop their own FIRMs independent of the existing process and in accordance with the TMAC procedures, subject to final approval by FEMA. S. 1313 , Section 404, would require an insurance company that issues a policy for private flood insurance to impose and collect an annual surcharge equivalent to the FPF, which would be transferred to the FEMA Administrator and deposited in the NFIF. S. 1313 , Section 501, would reauthorize the National Flood Mapping Program at $500 million annually for each of fiscal years 2018 through 2027. S. 1313 , Section 502, would require TMAC within one year after enactment to develop and establish a set of standards, guidelines and procedures for states, local governments, and other organizations to use in mapping risk and developing alternative maps to FIRMS; and also to develop a procedure for certification by FEMA within 90 days of submission. Upon certification, such map would be considered the FIRM in effect for all purposes for the NFIP and would not be able to be revised, updated, or replaced for three years. S. 1313 , Section 503, would encourage the use of high-resolution mapping technology in the development of FIRMs. S. 1313 , Section 504, would require FEMA to replace the flood zone D designation in levee-protected areas with risk zones that are more appropriate for the level of protection that the levee affords. S. 1368 , Section 204, would reauthorize the National Flood Mapping Program at $800 million annually for each of fiscal years 2018 through 2023. This section would require FEMA to use the most up-to-date and high resolution mapping technology. This section would also require FEMA to develop a dynamic, database-derived digital display of structure-specific flood risk information, as recommended by TMAC, not later than five years after enactment, and issue guidelines for mass letters of map change for states and communities which incorporate such improved flood risk data. Until FEMA would develop these structure-specific risk-based premiums, it is not possible to say how this would affect premiums for specific flood zones or properties. S. 1368 , Section 208, would require FEMA to develop a new flood zone designation for areas behind non-accredited levees, and make flood insurance available to properties located within those levee-impacted areas. Until FEMA develops rates for this new flood zone, a structure located behind a non-accredited levee would be eligible for rates associated with areas of moderate flood hazards. S. 1368 , Section 209, would create a new appeal process if FEMA denies a request to update a flood map. This appeal process could be made by state or local governments, owners, or renters, on the basis that the BFE is scientifically or technically inaccurate or that factors exist that mitigate the risk of flooding. FEMA would be required to provide an opportunity for an administrative hearing. If the appeal does not result in a decision in favor of the party submitting the appeal, that party would be able to request that an appeal of the adverse decision be held through independent, non-binding arbitration. Certain expenses would also be refunded or reimbursed under this provision. S. 1368 , Section 303, would require FEMA to develop a fee schedule based on recovering the actual costs of providing FIRMs and charge any private entity an appropriate fee for use of such maps. This requirement would provide a mechanism by which private insurance companies could contribute to the costs of floodplain mapping in lieu of paying the FPF. S. 1571 , Section 201, would continue existing authorization of the National Flood Mapping Program at $400 million annually for each of fiscal years 2018 through 2023. S. 1571 , Section 202, would require FEMA, as soon as practicable, to modernize the flood mapping inventory for communities for which FIRMS have not been modernized. This section would also require FEMA to use the most up-to-date mapping technology and, in consultation with TMAC, to develop a dynamic, database-derived digital display environment of building-specific flood risk information to store and disseminate flood maps and hazard data, not later than five years after enactment. Flood insurance can sometimes be seen as if it is the solution to flooding, but insurance does not prevent flooding, it merely makes it possible to recover more rapidly financially after a flood. It is better to avoid being flooded than to receive funding for flood recovery after a disaster. Flood mitigation creates safer communities and can save money for individuals and taxpayers. The importance of FEMA's mitigation programs (which include, but are not limited to, the FMA program) is illustrated by research findings that for every dollar invested by FEMA in flood mitigation between 1993 and 2003, society as a whole saved $7 due to reduced future flood losses. The NFIP encourages communities to adopt and enforce floodplain management regulations such as zoning codes, subdivision ordinances, building codes, and rebuilding restrictions. Internal FEMA studies have found that structures built to FEMA standards experience 73% less damage than structures not built to those standards. FEMA conducted a losses avoided study which reviewed 2,240 of the 6,000 mitigated properties in North Carolina and estimated that those mitigation activities avoided losses of $206 million to $234 million. Mitigation activities, however, form only a small part of the NFIP activities and are funded entirely by premiums and fees paid by NFIP policyholders. The NFIP offers three programs which encourage communities to reduce flood risk: the Community Rating System (CRS), the Flood Mitigation Assistance Grant Program (FMA), and Increased Cost of Compliance coverage (ICC). A greater linkage between insurance risk transfer and physical risk reduction measures could help to address concerns about increasing flood risk. By rewarding behavior that reduces risks through pricing, insurance has the potential to incentivize or even require policyholders and communities to address the underlying flood risk. Insurance provisions could also provide incentives to limit flood damage by rewarding well-designed buildings with lower premiums, lower deductibles, or higher coverage limits. However, a recent study of residential flood insurance markets in 25 countries found little evidence of either governments or insurance companies actively encouraging risk reduction by linking the cost of insurance to mitigation activities, with the sole exception of the NFIP through the Community Rating System. One provision which is in H.R. 2874 and all of the Senate bills discussed in this report relates to the need to provide premium credits for mitigation measures for buildings where standard measures such as elevation are not feasible due to the structural characteristics of the building. This is particularly relevant to older buildings, attached dwelling units such as townhomes, row houses or brownstones, and other multifamily and high-rise residential buildings. Section 113 would require FEMA to offer policyholders a reduction of the risk premium rate for the use of approved actions that mitigate the flood risk of their property, including innovative mitigation techniques that could be deployed on a block or neighborhood scale in dense urban environments and the elevation of mechanical systems such as heating, ventilation, and air conditioning. This would expand on existing authority provided in the law, by specifically requiring FEMA to provide the premium reduction for approved mitigation methods. Section 504 would give priority under the FMA program to property owners for direct grants for carrying out mitigation activities that reduce flood damage to extreme repetitive-loss properties, with up to 100% federal cost share subject to availability of funds. This section would also authorize $225 million for each fiscal year for the FMA program, subject to offsetting appropriations. This is a higher amount than was authorized for FY2017. Funding for the FMA program could also be provided by penalties collected for violations of the mandatory purchase requirement and grant funds recouped by FEMA from recipients who did not carry out funded mitigation activities. S. 1313 , Section 201, would reallocate the HFIAA surcharge to help fund flood mitigation programs, including the Pre-disaster Hazard Mitigation Program (PDM) and the FMA program. S. 1313 , Section 205, would offer an NFIP policyholder a one-time premium credit of not more than $500 if the policyholder submits data and information that is necessary for FEMA to determine the level of flood risk for the property. In most cases this is likely to be used to defray the costs of obtaining an elevation certificate. S. 1313 , Section 206, would authorize FEMA to offer policyholders a reduction of the risk premium rate that is not less than 10% of that rate for the use of approved actions that mitigate the flood risk of their property, including innovative mitigation techniques for buildings in dense urban environments and the elevation of mechanical systems. This section would also allow an owner of a share of a cooperative building to purchase flood insurance coverage under the NFIP on the same terms as a condominium owner. S. 1368 , Section 202, would authorize $1 billion for each of the first six fiscal years after the date of enactment to fund the FMA program and requires FEMA to prioritize properties that have suffered repetitive losses; properties which have unaffordable premiums, as determined by FEMA; and properties for which losses exceed the replacement value of the property. S. 1368 , Section 203, would authorize $500 million for the PDM program for each of the first six full fiscal years after the date of enactment. S. 1368 , Section 204, would offer an NFIP policyholder a one-time premium credit of not more than $500 for the cost of obtaining an elevation certificate. S. 1368 , Section 205, would reallocate the HFIAA surcharge to affordability and mitigation assistance as described in S. 1368 , Section 103. S. 1368 , Section 206, would authorize FEMA to offer policyholders a reduction of the risk premium rate for the use of approved actions that mitigate the flood risk of their property, including any alternative mitigation methods with respect to a multifamily building in an urban area. S. 1368 , Section 207, would require FEMA to give priority to flood mitigation activities that provide benefits to an entire floodplain or community, or to a portion of such a community. S. 1368 , Section 422, would require FEMA to appoint a regional coordinator to provide technical assistance to small communities to enable those communities to effectively participate in and benefit from the CRS program. S. 1571 , Section 104, would authorize $200 million for the PDM program for each of the first six fiscal years after the date of enactment. S. 1571 , Section 106, would authorize FEMA to offer policyholders a reduction of the risk premium rate for the use of approved actions that mitigate the flood risk of their property, including any alternative mitigation methods with respect to a multifamily building in an urban area. This section would also authorize FEMA to require appropriate public bodies to develop land use and control measures for the repair, restoration or substantial improvement of any mid-rise or high-rise multifamily buildings and to account for those land use and control measures in determining appropriate policy rates. S. 1571 , Section 107, would require FEMA to appoint a regional coordinator to provide technical assistance to small communities to enable those communities to effectively participate in and benefit from the CRS program, and would authorize to be appropriated such sums as may be necessary to carry this out. In the future, and in the context of land development, improved flood mapping, and climate change, an increased number of properties will be at risk of flooding. A 2013 report on the impact of climate change and population growth on the NFIP concluded that by 2100, the 1% annual-chance fluvial floodplain area is projected to grow nationally by about 45%. The study found that no significant decreases in floodplain depth or area are anticipated for any region of the nation at the median estimates; in fact, median flows may increase even in areas that are expected to become drier on average. In the populated areas of most interest to the NFIP, about 30% of these increases may be attributed to increased runoff caused by the increase in impermeable land surfaces caused by population growth and development, while the remaining 70% represents the influence of climate change. The implication of this is that, on a national basis, approximately 13.5% of the growth in the fluvial SFHA is likely to be due to population growth and would occur even without any climate change. For the coastal environment, the typical increase in the coastal SFHA is projected to be about 55% by 2100. In addition, modeling indicated that there would be increased variability in expected total losses in any given year, which may be greater than the NFIP's current funding borrowing structure accommodates. Coastal flooding is not only a concern for the future; many areas are already experiencing 'nuisance flooding' from minor tidal flooding or rainstorms. The frequency and duration of minor tidal flooding has increased significantly in recent decades along many U.S. coasts. While not catastrophic, such flooding can significantly disrupt normal commerce and activity, and the seemingly minor inconveniences and local economic losses from each event can have a cumulative effect that results in considerable hidden costs to residents and businesses. Currently the NFIP distinguishes between the SFHA (1%-annual-chance-floodplain) and the area beyond the SFHA, yet over 20% of NFIP claims are for properties outside SFHAs. Recent floods, such as the floods in South Carolina in October 2015 and in Louisiana in August 2016, have mainly affected properties which were not mapped in SFHAs. The SFHA boundary can create a false belief that flood risk changes abruptly at the line, and that properties outside the SFHA are safe. In reality, flood risk varies both inside and outside the SFHA. Flood maps that depict the spectrum of risk that properties face rather than focusing only on the boundary of the SFHA would avoid the current "in or out" classification created by the SFHA designation. In addition to finding a way to communicate that flood risk is not binary but instead varies spatially, future flood maps may also need to find a way to communicate temporal variation in flood risk. Insurance policies are based on FIRMs, which are a 'snapshot' of the flood risk at the time of mapping; they are not an indication of the flood risk decades into the future and thus are not necessarily the best guide for future land-use decisions. The TMAC recommended that FEMA adapt its flood mapping to allow for population growth and development both in and outside the floodplain and increased future flood risk. It argued that if technical credible flood hazard information is not available for communities, the federal government will always be looked to for assistance after a disaster and this assistance is likely to be more costly than providing technically credible flood hazard data would have been. If FEMA is to provide maps which are fit-for-purpose to identify future flood risks, TMAC maintains, this will require both additional funding for mapping and higher-quality data, and a different approach to account for a potential future that is not necessarily based on the past. For example, New York City and FEMA are planning a new map product to be used for planning and building purposes to better account for future flood risk due to climate change and sea level rise. Flood insurance will continue to be priced against FIRMs that depict current flood risk. Floodplains and coastal areas across the United States will likely continue to be inhabited and sustain damages from floods, some of which may be catastrophic. Flood is different from many other risks in that the distribution of potential losses is skewed in a way that certain low frequency, high magnitude events may have the potential to exceed the aggregate capacity of private insurers and render the market insolvent. A large pool of flood risk does not result in a normally distributed portfolio of risks over the long run. Flood risks are highly correlated: when a large flood occurs, many geographically adjacent properties are affected. FEMA's report to Congress on privatization of the NFIP concluded that it is difficult to imagine a practical system of flood insurance in which there is not some level of government involvement in the flood risk financing chain. They argued that when low-frequency, high-magnitude events occur with a portfolio of highly correlated risks, the government will ultimately play a role in paying for the economic costs associated with a catastrophic flood, whether or not it chooses to underwrite the risk. Although the NFIP has always had borrowing authority from Congress, a robust approach has not been developed by which the NFIP can repay catastrophic flood losses, although the program has taken steps in this direction with the BW-12 reserve fund assessment, the HFIAA surcharge, and the purchase of reinsurance. However, the current reinsurance purchases would not compensate for a Katrina-level storm. This is an important consideration for reauthorization because events like Hurricane Katrina and Hurricane Sandy are not outside the expected range of NFIP losses. FEMA predicted in March 2017 that a single storm that results in a loss to the NFIP of the size that occurred in Hurricane Katrina ($16.3 billion) had 1%-2% chance of occurring in any given year, while a single storm that results in a loss as large as the one that occurred in Hurricane Sandy had a 4%-5% chance of occurring in any given year. FEMA expected to have another loss year like those within the next decade. In fact, such losses occurred much sooner than anticipated, with Hurricanes Harvey, Irma, and Maria. The 2017 hurricane season was the first time that the United States had ever been hit by three category four hurricanes, and was the second-largest claims year in the NFIP's history—second only to the 2005 hurricane season. Although it is too soon to estimate the total flood claims from the 2017 hurricane season, as of June 30, 2018, the NFIP had paid $10.426 billion in claims in response to Hurricanes Harvey, Irma, and Maria. Total NFIP claims for Hurricane Harvey are expected to be between $8.7 billion and $9.01 billion, for Hurricane Irma between $1.003 billion and $1.074 billion, and for Hurricane Maria between $25 million and $34 million. The National Research Council affordability report considered the option of forgiving all or part of the NFIP debt within a larger affordability context. In this report, the NRC suggested that after forgiving all or part of the NFIP debt, Congress could designate the Treasury as reinsurer for the NFIP as was the case in the original legislation. It suggested that Congress could, for example, explicitly state that when the total annual losses in the NFIP exceeded some designated threshold (for example, $2 billion to $6 billion, perhaps on the basis of the average of non-catastrophic historical claims years), the Treasury could provide funds for the NFIP to honor all of the claims. The funds could be provided through the Disaster Relief Fund, and, if needed, by an emergency supplemental budget. Taken together, it argued, those two actions could result in lower NFIP premiums, enhance affordability, and in turn lead to less spending on disaster assistance. Congress would incur occasional costs by designating the Treasury as the source of funds for payment of claims above the defined threshold in high-loss years but would not need to draw on the Treasury each year to provide assistance payments to policyholders who face unaffordable premiums. The American Academy of Actuaries (AAA) argued that neither private insurers nor government entities can fully absorb any level of catastrophic loss and continue to operate. It noted that insurance systems have a trigger for socializing risk of extreme events, such as a solvency standard based on a particular event (for example, the 200-year flood), beyond which mechanisms like guaranty funds pay losses. In the case of the NFIP, the premiums charged to policyholders would require a volatility loading large enough to service and eventually repay any debt generated by catastrophic debts over a multidecadal time horizon. The AAA report suggested that prospectively addressing this first requires recognition that there is a maximum amount of short-term loss that can be fully funded by NFIP revenue. One approach would be to establish a sufficiency standard for the loss level that the NFIP revenue would be expected to fund fully. For example, this could be expressed as a maximum loss amount per catastrophic event, determined on the basis of an acceptable annual probability, or a maximum aggregate amount of annual loss. Any losses exceeding the defined sufficiency standard incurred by the NFIP could be agreed to be funded publicly. The AAA report argued that private insurers are held to an analogous standard, after which state guarantee funds reimburse policyholders for claims from insolvent private insurers using funds from assessments paid by solvent insurers. It concluded that adopting an explicit standard of this type for the NFIP would provide clarity as to what its funding sources should be and give taxpayers an understanding of when public contributions to NFIP finances are appropriate. The NFIP currently has no financial structure in place, other than borrowing from the Treasury, to guarantee it can pay claims from a catastrophic loss year. To ensure the future financial solvency of the NFIP after catastrophic events, FEMA has suggested that a systematic analysis may consider the costs and benefits of using the reserve fund, borrowing authority, reinsurance, other forms of risk transfer, and perhaps a Treasury backstop at some catastrophic loss level. It may also include a metric for communicating the resiliency of the system to different levels of catastrophic events, in order to define the scenarios that the system can sustain and those it cannot. GAO concluded that the sequence of actions taken by Congress is important; for example, requiring full-risk rates for all policyholders and expanding the mandatory purchase requirement would create affordability concerns which would warrant having an affordability assistance program already in place. According to GAO, when addressing barriers to private sector involvement, it would be important to protect NFIP's flood resilience activities at the same time; and addressing the outstanding debt would be best accompanied by premium rate reform to help reduce the likelihood of a recurrence of another unpayable debt buildup. As Congress considers a long-term reauthorization of the NFIP, a central question may be who should bear the costs of floodplain occupancy in the future. The NRC study on affordability concluded that the costs of floods can be borne in three possible ways, or in some combination of them. The first is that individual policyholders (whether NFIP or private) bear location cost in the form of insurance premiums paid and damages falling within policy deductible amounts. The second is that the federal taxpayers bear floodplain location costs in several possible ways: if the federal government develops a premium assistance program, or makes up for NFIP premium revenue shortfalls, or pays for pre-flood mitigation, or makes post-flood disaster assistance payments to individual households. Third, property owners and other floodplain or coastal zone inhabitants bear the costs for losses that are uninsured or otherwise uncompensated. While there are many ways to finance flood risk, the majority of the cost will likely ultimately be allocated across these three stakeholder groups: policyholders (the insured), government, and uninsured flood victims, requiring potentially difficult policy choices by Congress.

The National Flood Insurance Program (NFIP) was established by the National Flood Insurance Act of 1968 (NFIA, 42 U.S.C. §4001 et seq.), and was most recently reauthorized until November 30, 2018 (P.L. 115-225). The general purpose of the NFIP is both to offer primary flood insurance to properties with significant flood risk, and to reduce flood risk through the adoption of floodplain management standards. A longer-term objective of the NFIP is to reduce federal expenditure on disaster assistance after floods. The NFIP also engages in many "non-insurance" activities in the public interest: it disseminates flood risk information through flood maps, requires community land use and building code standards, and offers grants and incentive programs for household- and community-level investments in flood risk reduction. Unless reauthorized or amended by Congress, the following will occur on November 30, 2018: (1) the authority to provide new flood insurance contracts will expire and (2) the authority for NFIP to borrow funds from the Treasury will be reduced from $30.425 billion to $1 billion. The House passed H.R. 2874, the 21st Century Flood Reform Act, on November 14, 2017, on a vote of 237-189. H.R. 2874 would authorize the NFIP until September 30, 2022. Three bills have been introduced in the Senate to reauthorize the NFIP: S. 1313 (Flood Insurance Affordability and Sustainability Act of 2017), S. 1368 (Sustainable, Affordable, Fair, and Efficient [SAFE] National Flood Insurance Program Reauthorization Act of 2017), and S. 1571 (National Flood Insurance Program Reauthorization Act of 2017). None of these bills have yet been taken up by the committee of jurisdiction. Issues which Congress may consider in the context of reauthorization include (1) NFIP solvency and debt; (2) premium rates and surcharges; (3) affordability; (4) increasing participation in the NFIP; (5) the role of private insurance and barriers to private sector involvement; (6) recurrent flooding and properties with multiple losses; (7) administrative reforms; (8) non-insurance functions of the NFIP such as floodplain mapping and flood mitigation; and (9) future flood risks, including future catastrophic events. The Federal Emergency Management Agency (FEMA) has identified the need to increase flood insurance coverage across the nation as a major priority for the current reauthorization and beyond, with a goal of doubling flood insurance coverage by 2023 through the increased sale of both NFIP and private policies. The NFIP's premium rates do not reflect the full risk of loss because of various legislative requirements, which may exacerbate the program's fiscal exposure. The categories of properties which pay less than the full risk-based rate are determined by the date when the structure was built relative to the date of adoption of the Flood Insurance Rate Map, rather than the flood risk or the ability of the policyholder to pay. A reformed NFIP rate structure could have the effect of encouraging more private insurers to enter the primary flood market; however, full risk-based premiums could be unaffordable for some households. Although the NFIP has always had borrowing authority from Congress, an approach has not been developed by which the NFIP can repay catastrophic flood losses. To ensure the future financial solvency of the NFIP after catastrophic events, FEMA has suggested that a systematic analysis may consider the costs and benefits of using the reserve fund, borrowing authority, reinsurance, other forms of risk transfer, and perhaps a Treasury backstop at some catastrophic loss level. This report summarizes key insurance reform provisions in recent legislation, identifies issues for congressional consideration as part of the possible reauthorization of the NFIP, and describes selected provisions which relate to the issues listed above in the bill to reauthorize the NFIP passed by the House (H.R. 2874, the 21st Century Flood Reform Act) and the bills yet to be considered by the Senate (S. 1313, S. 1368, and S. 1571).

House Judiciary Committee Chairman Goodlatte introduced H.R. 3713 , the Sentencing Reform Act of 2015, for himself, ranking Judiciary Committee Member Representative Conyers, and a number of others on October 8, 2015. The proposal addresses four issues: the so-called safety valve that permits courts to disregard otherwise applicable mandatory minimum sentencing requirements in certain drug cases; the mandatory minimum sentencing requirements in such cases; the mandatory minimum sentencing requirements in firearms cases; and the retroactive application of the Fair Sentencing Act. The bill's Senate counterpart, S. 2123 , features many of the same provisions, often in identical language. The so-called safety valve provision of 18 U.S.C. 3553(f) allows a court to sentence qualified defendants below the statutory mandatory minimum in controlled substance trafficking and possession cases. To qualify, a defendant may not have used violence in the course of the offense. He must not have played a managerial role in the offense if it involved group participation. The offense must not have resulted in a death or serious bodily injury. The defendant must make full disclosure of his involvement in the offense, providing the government with all the information and evidence at his disposal. Finally, the defendant must have an almost spotless criminal record. Any past conviction that resulted in a sentence of more than 60 days, that is, a sentence meriting the assignment of more than 1 criminal history point, is disqualifying. Criminal history points are a feature of the U.S. Sentencing Commission's Sentencing Guidelines. The Guidelines assign points based on the sentences imposed for prior state and federal convictions. For example, the Guidelines assign 1 point for any past conviction that resulted in a sentence of less than 60 days incarceration; 2 points for any conviction that resulted in a sentence of incarceration for 60 days or more; and 3 points for any conviction that resulted in a sentence of incarceration of more than a year and a month. The Sentencing Commission's report on mandatory minimum sentences suggested that Congress consider expanding safety valve eligibility to defendants with 2 or possibly 3 criminal history points. The report indicated that under the Guidelines a defendant's criminal record "can have a disproportionate and excessively severe cumulative sentencing impact on certain drug offenders." The commission explained that the Guidelines are construed to ensure that the sentence they recommend in a given case calls for a term of imprisonment that is not less than an applicable mandatory minimum. In addition, the drug offenses have escalated mandatory minimums for repeat offenders. Moreover, similarly situated drug offenders may be treated differently, because the states punish simple drug possession differently and prosecutors decide when to press recidivism qualifications differently. H.R. 3713 would change the safety valve in two ways. First, a defendant would be safety valve eligible with 4 or fewer criminal history points if he had not been convicted previously of a 2-point drug trafficking or violent crime (one that resulted in a sentence of 60 days or more), or any 3-point offense (one for which he was incarcerated for more than 13 months). Second, the proposal would permit the court to waive the criminal history disqualification, in cases other than those involving a past serious drug felony or serious violent felony conviction, if it concluded that the defendant's criminal history score overstated the seriousness of his criminal record or the likelihood that he would commit other offenses. The Controlled Substances Act and the Controlled Substances Import and Export Act establish a series of mandatory minimum sentences for violations of their prohibitions. Class A offenses involve trafficking—that is, importing, exporting, or manufacturing, growing, possessing with the intent to distribute—a very substantial amount of various highly addictive substances, such as more than 10 grams of LSD. Class A offenses carry a sentence of imprisonment for not less than 10 years or more than life. Class B offenses involve substantial but lesser amounts, such as 1 gram of LSD. Class B offenses carry a sentence of imprisonment for not less than 5 years or more than life, and imprisonment for not less than 10 years or more than life in the case of a subsequent conviction. Penalties for both sets of offenses increase if the crime results in a death or if the defendant has a prior conviction for a drug felony. H.R. 3713 would create a mini-safety valve to reduce the mandatory minimum for Class A offenses to imprisonment for not less than 5 years, unless the offender had used violence in the commission of the offense; had acted as a supervisor, leader, supplier, or importer for a drug undertaking; sold to minors; failed to fully reveal all the information or evidence at his disposal relating to the offense or related offenses; or had prior serious drug or violent felony convictions. H.R. 3713 would both expand and contract the recidivist mandatory minimums. Under existing law, any prior drug felony conviction triggers the enhanced recidivist mandatory minimum. Under H.R. 3713 , only drug convictions carrying a maximum penalty of 10 years or more and resulting in a sentence of a year or more would trigger the increased recidivist mandatory minimums. On the other hand, convictions for kidnapping, burglary, arson or other serious violent crimes would also serve as a basis for the recidivist mandatory minimums. In addition, it would reduce the mandatory minimums for Class A recidivists. A defendant with a single qualifying prior offense would face a mandatory minimum of not less than 10 years rather than one of not less than 15 years. The defendant with two or more prior qualifying offenses could expect a mandatory minimum of not less than 25 years instead of a mandatory life sentence. The bill would allow the courts, on their own motion or that of the defendant or the Bureau of Prisons, to resentence defendants, convicted prior to H.R. 3713 's enactment, as though the bill's reduced recidivist mandatory minimums were in place at the time of prior sentencing. In doing so, the courts would be compelled to consider: the nature and seriousness of the risks to an individual or the community; the defendant's conduct following his initial sentencing; and the statutory sentencing factors that they must ordinarily weigh before imposing punishment. H.R. 3713 would insist on a sentence of imprisonment for not more than 5 years to be added to, and to be served after, any sentence imposed for the drug trafficking, exporting, or importing offenses, when fentanyl, a chemical used to "cut" heroin, is involved. There are two firearms-related offenses that call for the imposition of a mandatory minimum sentence of imprisonment. One, the so-called three strikes provision, also known as the Armed Career Criminal Act (ACCA), imposes a 15-year mandatory minimum sentence on an offender convicted of unlawful possession of a firearm who has three prior convictions for a drug offense or a violent felony. The other, 18 U.S.C. 924(c), imposes one of a series of mandatory terms of imprisonment upon a defendant convicted of the use of a firearm during the course of a drug offense or a crime of violence. The ACCA limits qualifying state and federal drug offenses to those punishable by imprisonment for more than 10 years. The qualifying federal and state violent felonies are burglary, arson, extortion, the use of explosives, and any other felony that either has the use or threat of physical force as an element. H.R. 3713 would reduce the mandatory minimum penalty from 15 years to 10 years. It also would make the modification retroactively applicable in the same manner as the proposed mandatory minimum reductions in the case of controlled substances. That is, H.R. 3713 would permit federal courts to reduce the terms of imprisonment of defendants previously sentenced, after considering the defendant's conduct after his initial sentence, "the nature and seriousness of the danger to any person or the community," and the generally applicable sentencing factors of 18 U.S.C. 3553(a). H.R. 3713 's retroactivity would apply to defendants without a prior drug offenses but not to those with serious violent felony convictions. Section 924(c) brings firearm mandatory minimum tack-on status to any federal drug felony and to any other federal felony, that by its nature involves a substantial risk of the use of physical force or that features the use of physical force or threat of physical force as an element. The ACCA calls for a single 15-year mandatory minimum. Section 924(c), in contrast, imposes one of several different minimum sentences when a firearm is used or possessed in furtherance of another federal crime of violence or of drug trafficking. The mandatory minimums, imposed in addition to the sentence imposed for the underlying crime of violence or drug trafficking, vary depending upon the circumstances: imprisonment for not less than 5 years, unless one of the higher mandatory minimums below applies; imprisonment for not less than 7 years, if a firearm is brandished; imprisonment for not less than 10 years, if a firearm is discharged; imprisonment for not less than 10 years, if a firearm is a short-barreled rifle or shotgun or is a semi-automatic weapon; imprisonment for not less than 15 years, if the offense involves armor-piercing ammunition; imprisonment for not less than 25 years, if the offender has a prior conviction for violation of 18 U.S.C. 924(c); imprisonment for not less than 30 years, if the firearm is a machine gun or destructive device or is equipped with a silencer; and imprisonment for life, if the offender has a prior conviction for violation of 18 U.S.C. 924(c) and if the firearm is a machine gun or destructive device or is equipped with a silencer. Section 924(c)'s repeat offender provision is somewhat distinctive. Most recidivist statutes assess a more severe penalty if the defendant commits a second offense after proceedings for the first have become final. Section 924(c) assesses successively more severe penalties for each count within the same prosecution. Under this stacking of counts, a defendant convicted of several counts arising out of a single crime spree involving the robbery of several convenience stores, for example, may face a mandatory term of imprisonment of well over 100 years. H.R. 3713 would make clear that a conviction must have become final before it could be counted for purposes of enhancing the mandatory minimum. H.R. 3713 also would reduce the repeat offender mandatory minimum assessment from imprisonment for not less than 25 years to not less than 15 years. The assessment however, would encompass recidivists with prior equivalent state convictions as well. Except for defendants with prior serious violent felony convictions, H.R. 3713 it would permit courts to apply its amendments to 18 U.S.C. 924(c) retroactively, provided they took into account the defendant's post-conviction conduct, the nature and seriousness of threats to individual or community safety, and the generally applicable sentencing factors. H.R. 3713 contains a third firearms amendment that, although not a strict mandatory minimum amendment, would increase the likelihood of imprisonment by operation of implementing sentencing guidelines by simply increasing the maximum sentence authorized for the offense or offenses. More precisely, it would increase from imprisonment for not more than 10 years to not more than 15 years the sentences for the following firearms offenses: false statements in connection with the purchase of a firearm or ammunition; sale of a firearm or ammunition to, or possession by, a convicted felon or other disqualified individual; while in the employ of a disqualified individual, receipt or possession of a firearm or ammunition; knowing transportation of stolen firearms or ammunition; knowing sale, possession, or pledge as security of stolen firearms or ammunition; or transfer or possession of a machine gun under certain circumstances. Originally, the Controlled Substances Act made no distinction between powder cocaine and crack cocaine (cocaine base). The 1986 Anti-Drug Abuse Act introduced a 100-1 sentencing ratio between the two, so that trafficking in 50 grams of crack cocaine carried the same penalties as trafficking in 5,000 grams of powder cocaine. The 2010 Fair Sentencing Act (FSA) replaced the 5,000 to 50 ratio with the present 500-28 ratio, so that trafficking in 280 grams of crack cocaine carries the same penalties as 5,000 grams of powder cocaine. The Sentencing Commission subsequently adjusted the Sentencing Guidelines to reflect the change and made the modification retroactively applicable at the discretion of the sentencing court. The FSA reductions apply to cocaine offenses committed thereafter. They also apply to offenses committed beforehand when sentencing occurred after the time of enactment. Federal courts have discretion to reduce a sentence imposed under a Sentencing Guideline that was subsequently substantially reduced. The FSA, however, does not apply to sentences imposed prior to its enactment, and it does not apply in sentence reduction hearings triggered by new Sentencing Guidelines. In such proceedings, the courts remain bound by the mandatory minimums in effect prior to enactment of the FSA, so in some instances they may not reduce a previously imposed sentence to the full extent recommended by the FSA-adjusted Sentencing Guidelines. H.R. 3713 would change that. It would allow a court to reduce a sentence that was imposed for an offense committed prior to the FSA, to reflect the FSA amendments, unless the court had already done so or unless the original sentence was imposed consistent with the FSA amendments.

H.R. 3713, the Sentencing Reform Act of 2015, addresses the sentences that may be imposed in various drug and firearms cases. It proposes amendments to those areas of federal law that govern mandatory minimum sentencing requirements for drug and firearm offenses; the so-called safety valves which permits court to impose sentences below otherwise required mandatory minimums in the case of certain low-level drug offenders; and the retroactive application of the Fair Sentencing Act. Related reports include CRS Report R44246, Sentencing Reform: Comparison of Selected Proposals, by [author name scrubbed] and [author name scrubbed].

The Transportation, Housing and Urban Development, and Related Agencies (THUD) appropriations subcommittee is charged with providing annual appropriations for the Department of Transportation (DOT), Department of Housing and Urban Development (HUD), and related agencies. Title I of the annual THUD appropriations bill funds the Department of Transportation. The mission of DOT is to serve the United States by ensuring a fast, safe, efficient, accessible, and convenient transportation system that meets vital national interests and enhances the quality of life of the American people today and into the future. DOT is primarily a grant-making and regulatory organization; its programs are organized roughly by mode, providing grants to support the construction of transportation infrastructure for highways, transit, and intercity passenger rail, while providing regulatory oversight to promote safety for the freight rail, commercial trucking, and maritime industries. The exception is aviation; the Federal Aviation Administration (FAA) not only administers grants for airport development and regulates the safety of aviation operations, it also operates the air traffic control system of the United States, and it thus accounts for the majority of the employees of DOT. Title II of the annual THUD appropriations bill funds the Department of Housing and Urban Development. HUD's mission is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD's programs are primarily designed to address housing problems faced by households with very low incomes or other special housing needs. These include several programs of rental assistance for persons who are poor, elderly, and/or have disabilities. Three rental assistance programs—Public Housing, Section 8 Vouchers, and Section 8 project-based rental assistance—account for the majority of the department's nonemergency funding (about three-quarters of total funding in FY2010). Two flexible block grant programs—HOME and Community Development Block Grants (CDBG)—help communities finance a variety of housing and community development activities designed to serve low-income families. Other, more specialized grant programs help communities meet the needs of homeless persons, including those with AIDS. HUD's Federal Housing Administration (FHA) insures mortgages made by lenders to home buyers with low downpayments and to developers of multifamily rental buildings containing relatively affordable units. Title III of the THUD appropriations bill funds a collection of related agencies. The agencies under the jurisdiction of the subcommittee are a mix of transportation-related agencies and housing and community development-related agencies. They include the Access Board, the Federal Maritime Commission, the National Transportation Safety Board, the Amtrak Office of Inspector General, the Neighborhood Reinvestment Corporation (often referred to as NeighborWorks), the United States Interagency Council on Homelessness, and the costs associated with the government conservatorship of the housing-related government-sponsored enterprises, Fannie Mae and Freddie Mac. Table 1 provides a timeline of legislative action on the FY2012 THUD appropriations bill, and Table 2 lists the total funding provided for each of the titles in the bill for FY2011 and the amount requested for that title for FY2012. Between 2003 and 2008, the House and Senate Committees on Appropriations reorganized their subcommittee structures three times. Prior to FY2005, DOT and HUD were funded in separate appropriations bills under the jurisdiction of separate subcommittees. From the time those departments were placed under the jurisdiction of the same subcommittee through FY2008, the list of other agencies also under the jurisdiction of the Transportation, Department of Housing and Urban Development, and Related Agencies subcommittees changed as well. These changes make year-to-year comparisons of Transportation and Housing and Urban Development appropriations bills complex, as their appropriations appear in different bills in combination with various other agencies. Other factors, such as supplemental appropriations for response to disasters (such as the damage caused by the Gulf Coast hurricanes in the fall of 2005) and changes in the makeup of the Department of Transportation (portions of which were transferred to the Department of Homeland Security in 2004), also complicate comparisons of year-to-year funding. Table 3 shows funding trends for DOT and HUD over the period FY2005-FY2010, omitting emergency funding and other supplemental funding, and the amounts requested for FY2012. The purpose of Table 3 is to indicate trends in the funding for these agencies, which is why emergency supplemental appropriations are not included in the figures. The numbers cited in discussions of the THUD appropriations act can be confusing. Different totals may be published by the committees in their tables and press releases, reported in the press or by advocates, and even presented in this report, all of which may be correct. This is possible because the THUD appropriations bill includes different types of funding mechanisms and savings mechanisms, which can result in different figures being reported for the same programs, depending on how the numbers are being presented. The following section of this report explains the different types of funding often included in the THUD appropriations bill. Most of the programs and activities in the THUD bill are funded through regular annual appropriations , also referred to as discretionary appropriations. This is the amount of new funding allocated each year by the appropriations committees. Appropriations are drawn from the resources of the general fund of the Treasury. For some accounts, the appropriations committees provide advance appropriations , or regular appropriations that are not available until the next fiscal year. In some years, Congress will also provide emergency appropriations , usually in response to disasters. These funds are sometimes provided outside of the regular appropriations acts—often in emergency supplemental spending bills—and are generally provided in addition to regular annual appropriations. Although emergency appropriations typically come from the general fund, they may not be included in the discretionary appropriation total reported for an agency. In addition to appropriations, much of the Department of Transportation's budget is derived from contract authority . Contract authority is a form of budget authority based on federal trust fund resources, in contrast to "regular" (or discretionary) budget authority, which is based on the resources of the general fund of the Treasury. Contract authority for DOT is generally derived from the Highway Trust Fund and the airport and airways trust fund. Congressional appropriators are generally subject to limits on the amount of new non-emergency discretionary funding they can provide in a year. One way to stay within these limits is to appropriate no more than the allocated amount of discretionary funding in the regular annual appropriation act. Another way is to find ways to offset a higher level of discretionary funding. A portion of the cost of providing regular annual appropriations for the THUD bill is generally offset in two ways. The first is through rescissions , or cancellations of unobligated or recaptured balances from previous years' funding. The second is through offsetting receipts and collections , generally derived from fees collected by federal agencies. When the Appropriations Committee subcommittees are given their "302(b) allocations"—that is, when the total amount that the Appropriations Committee has to spend for a fiscal year is divided among the subcommittees—that figure includes only net discretionary budget authority (non-emergency appropriations, less any offsets and rescissions); contract authority from trust funds is not included. This can lead to confusion, as the annual discretionary budget authority allocations for THUD are typically around half of the total funding provided in the bill, with the remainder made up of contract authority. The Budget Control Act of 2011 (BCA), which was enacted into law ( P.L. 112-25 ) on August 2, 2011, following negotiations over raising the ceiling on the national debt, established overall limits, or caps, on the amount of total federal discretionary appropriations that can be provided for each of FY2012 through FY2021. Within these annual spending limits, decisions about the actual amount of appropriations for individual programs or agencies will continue to be made through the regular appropriations process. Under the law, these limits are to be enforced through a sequestration process involving the cancellation of budgetary resources (i.e., spending cuts). This means that if the limits are breached, spending for each non-exempt program will be cut by a uniform percentage. The FY2012 302(b) allocations, including the allocation for the THUD subcommittee, were established to reflect the discretionary spending caps established under the BCA. Once the THUD subcommittees receive their 302(b) allocations, they must decide how to allocate the funds across the different agencies within their jurisdiction. As shown in Figure 1 , when it comes to net discretionary budget authority (appropriations, less any offsets), the vast majority of funding allocated by the appropriations committee generally goes to HUD (over 74% in FY2011). However, as shown in Figure 2 , when taking into account contract authority—which, as noted earlier, is not allocated by the appropriations committees—the total resources available to DOT are greater than the resources available to HUD. Besides the level of the 302(b) allocation, one of the most important factors in determining how much in new appropriations the THUD subcommittee will provide in each year is the amount of savings available from rescissions and offsets. Each dollar available to the subcommittee in rescissions and offsets serves to reduce the "cost" of providing another dollar in appropriations. As shown in Table 4 , in FY2011, without rescissions and offsets, it would have "cost" the THUD Subcommittee an additional $8 billion to provide the same amount of appropriations. In any given year, the amount of these "budget savings" can be higher or lower, meaning that the "cost" of providing the same level of appropriations may be higher or lower. The legislative acts authorizing both the federal aviation program and the federal surface transportation programs have expired, and the programs' authorizations have been extended repeatedly. The aviation program has been extended 22 times; the extension is scheduled to expire on January 31, 2012. An aviation reauthorization bill has passed both the House and the Senate, but the two bodies have not been able to agree on a final version of the bill. The surface transportation program has been extended; the current extension is scheduled to expire on March 2012. Bills reauthorizing parts of the surface transportation program have been introduced in the Senate, and the House is reportedly planning to introduce reauthorization legislation in early 2012. DOT funding has typically increased from year to year. The FY2011 appropriation broke that trend, with an overall new funding level of $72.6 billion, $4.3 billion (5.5%) less than the comparable FY2010 level. The Obama Administration's FY2012 budget request reflected a reauthorization proposal for DOT surface transportation programs. This included a proposed restructuring of some surface transportation programs and a $50 billion "up-front" appropriation, on top of DOT's requested base FY2012 funding, to provide an immediate boost to transportation infrastructure improvement and job creation. This up-front funding was depicted as an alternative to the typical surface transportation reauthorization funding plan, in which funding levels gradually increase over an authorization period of several years. This proposal would have front-loaded a large increase in funding in the first year of the Administration's proposed six-year surface transportation reauthorization plan, with funding levels for each of the subsequent five years lower than the total for FY2012. The Administration did not submit legislation to implement its reauthorization proposal during the 1 st session of the 112 th Congress; the existing authorization for surface transportation programs has been extended and Congress provided funding in that existing arrangement. Thus, while the FY2011 enacted funding and the congressional figures for FY2012 are comparable, comparing the surface transportation figures to those in the FY2012 budget request is complex. This requires an unwinding of the proposed new program structures in the Administration's request to be able to compare the request to the existing program structure, and decisions about how to allocate the additional $50 billion request for up-front funding between discretionary funding and mandatory funding. The Senate Committee on Appropriations allocated about $20 billion of the up-front funding request to discretionary funding, resulting in a discretionary budget request of $34.0 billion, compared to enacted new funding of $17.6 billion in FY2011. The remaining $30 billion was allocated to mandatory (trust fund) budget authority, resulting in a request for $94.4 billion, up from $54.2 billion enacted in FY2011. Most highway and transit funding comes from the Highway Trust Fund, whose revenues come largely from the federal motor fuels excise tax ("gas tax"). For several years, expenditures from the fund have exceeded revenues; for example, in FY2010, revenues were approximately $35 billion, while expenditures were approximately $50 billion. Congress transferred a total of $34.5 billion from the general fund of the Treasury to the Highway Trust Fund during the period FY2008-FY2010 to keep the trust fund solvent. The Congressional Budget Office projects that the trust fund will become insolvent around the end of FY2012, given current revenue and expenditure levels. A host of reports by the Department of Transportation, congressionally created commissions, and nongovernmental groups assert that the nation is not spending enough to maintain its existing transportation infrastructure, let alone to make needed improvements. These reports call for considerably higher levels of spending on transportation infrastructure, by both the federal government and the states. One dilemma faced by Congress is that while raising the federal gas tax—which has not been increased since 1993 and which is not indexed for inflation—is seen as the simplest and most efficient way to provide significantly increased funding for transportation infrastructure, there appears to be little support in Congress or in the Administration for raising the gas tax. The President's FY2012 budget proposed to rename the fund the Transportation Trust Fund and to increase authorized expenditures from the fund to a total of $554 billion over the next six years by increasing the funding levels of existing surface transportation programs and by adding the Federal Railroad Administration and the Federal Transit Administration's New Starts transit construction program to the programs funded by the fund. This proposal reflected, in part, a recommendation of the National Commission on Fiscal Responsibility and Reform to expand the Highway Trust Fund to cover rail infrastructure—but the Commission also recommended increasing the gas tax by 15 cents per gallon by 2015, and thereafter limiting expenditures from the fund to match its revenues. The budget request did not propose an increase in the gas tax, nor did it explain how the fund would support the proposed higher level of expenditures; it said that the President did not support an increase in the federal gasoline tax, but would work with Congress to find new revenue sources. The House draft stated that it provided funding from the Highway Trust Fund at a level that the revenues of the fund could support in FY2012; this represented a reduction in funding of 35% from FY2011 levels for the two largest accounts supported by the Highway Trust Fund (from $41.1 billion to $27.0 billion for the federal-aid highway program account, and from $8.3 billion to $5.2 billion for the transit formula and bus grant funding account). The Senate bill's committee report said that the bill recommended the levels of funding for highway and transit that are authorized in the SAFETEA extensions; that is virtually the same level as in FY2011 ($41.1 billion for highways and $8.4 billion for transit). The report did not address the Highway Trust Fund's revenue difficulties. The conference agreement provided $39.9 billion for the federal-aid highway program, plus another $1.7 billion for the Disaster Relief Program, to fund repairs to damaged infrastructure. The amount provided for the federal-aid highway program is $2.0 billion less than the amount provided for the program in FY2011, and $2.0 billion less than the amount recommended by the Senate. This is the authorized level for FY2012, but the authorized level for FY2012 was reduced from FY2011. The conference report notes that the funding level provided will deplete the Highway Trust Fund by the end of FY2012, and that without additional revenues, the Highway Trust Fund will not be able to support a federal-aid highway program in FY2013. The President's budget requested $123 million for the EAS program, a $27 million (12%) decrease from the $150 million Congress provided in FY2011. The Senate approved $143 million for the program for FY2012; the House Appropriations Committee THUD subcommittee draft bill recommended $100 million. The conference agreement provided $143 million. These funds are added to $50 million that is reserved for the program each year, so the total funding that is available as a result of the enacted figure is $193 million, compared to a total of $200 million in FY2011 (and the same amount in FY2010). The conference agreement included a directive to the Secretary that, if the amount appropriated was not sufficient to meet the costs of the program for FY2012, the Secretary shall transfer funds from other accounts to cover the costs of the program. This program seeks to preserve air service to small communities by subsidizing the cost of that service. Supporters of the EAS program contend that preserving airline service to small communities was a commitment Congress made when it deregulated airline service in 1978, as anticipated reductions in air service due to deregulation were claimed to reduce economic development opportunities in rural areas. Critics note that the subsidy cost per passenger is relatively high, that many of the airports in the program serve few passengers, and that some of the airports receiving EAS subsidies are little more than an hour's drive from major airports. The costs of the program have more than doubled since FY2008. This is due to several factors. Route reductions by airlines have resulted in an average of six new communities joining the program each year in recent years. Also, there is a requirement that planes servicing EAS communities must have, at a minimum, capacity to carry 15 passengers. Critics of this requirement note that smaller planes would be cheaper to operate and that the number of passengers at many EAS airports could be handled by smaller planes. The Administration proposed to limit FY2012 funding in the program to those communities which received subsidies in FY2011 (the same proposal was made for the FY2011 budget, seeking to limit recipients to those funded in FY2010), and to eliminate the 15-passenger aircraft requirement. The Senate-passed bill supported both of these proposals. The House draft bill supported the limit on new recipients. The conference agreement included both Administration proposals. It also included a provision barring any efforts to implement a plan that would require EAS communities to assume the costs of the subsidies they require ("local participation"); this provision has been included in DOT appropriation acts since the "local participation" program was created in 2003. The budget proposed $5 billion for a national infrastructure bank. The bank would provide loans or grants to finance transportation projects having national or regional significance. Such projects, such as major bridges on the interstate highways system, are often difficult to build under the current structure of transportation funding, because they benefit the residents of many states but their costs fall on the residents of the state in which the project is located. In the past, such projects have sometimes been financed through specific funding designations (earmarks) by Congress. The national infrastructure bank would, according to the Administration, provide a means for such projects to be evaluated and for the most productive projects to be selected and financed. Legislation to implement this proposal was not enacted, and the proposal was not funded by the House draft, the Senate-passed bill, or the conference agreement. The budget proposed $4 billion for high speed and intercity passenger rail development under a new account, Network Development. This was described as the first installment of a proposed six-year, $53 billion program. High speed and intercity passenger rail development is seen as a way of creating new jobs; providing a new transportation option for intercity travel; and increasing the capacity, competitiveness, and environmental sustainability of the transportation system. To date, Congress has provided $10.1 billion for DOT's high speed and intercity passenger rail grant program, beginning with $8 billion in the American Recovery and Reinvestment Act of 2009. However, all of that funding was provided by the 111 th Congress. In the Full Year Continuing Appropriations Act, 2011, which was enacted by the 112 th Congress after the Administration submitted its FY2012 budget request, Congress eliminated funding for the high speed and intercity passenger rail grant program for FY2011, and rescinded $400 million of the unobligated portion of the $10.5 billion already appropriated. The FY2012 Senate bill recommended $100 million for the grant program. The FY2012 House draft did not include any funding for the program. The conference agreement did not provide any funding for the program. In common usage, references to "high speed rail" are generally taken to mean systems such as those of Japan, France, Spain, and China, where trains travel on dedicated networks at speeds greater than 150 miles per hour. Perhaps because it is convenient to abbreviate references to this program by dropping the middle phrase "and intercity passenger rail," it is often taken to be a program designed just to fund high speed lines similar to those in other countries. But much of the funding in this program has gone to develop intercity passenger rail service with top speeds of 90 or 110 miles per hour. In its public comments the Administration has emphasized the high speed rail portion of the program. Critics have questioned the economic efficiency of building expensive high speed rail lines, or even of improving conventional rail lines. While grants have been awarded to 23 states, after the elections of November 2010, the newly elected governors of three states—Wisconsin, Ohio, and Florida—rejected grants for rail projects for which their states had received grants totaling $3.6 billion. The governors said their states could not afford the costs of improving or building and maintaining rail lines that would likely require ongoing operating support. The Administration redistributed the grant money to several other states that are pursuing passenger rail development. The budget proposed to place Amtrak funding into a new Federal Railroad Administration account, system preservation, for which $4 billion was requested. This account would fund public rail asset development and maintenance; initially Amtrak would be the only recipient of grants, though in the future competition for the grants is envisioned. It appears that the budget request envisioned $1.5 billion for "base" funding (comparable to the $1.5 billion Amtrak received for FY2011), and another $2.5 billion that would come from the up-front supplemental funding, for the $4 billion total. Amtrak's own FY2012 grant request totaled $2.2 billion. The Senate bill recommended $1.48 billion for Amtrak; that is almost identical to the amount provided in FY2011, but $80 million less than provided in FY2010. The House draft recommended $1.12 billion. The conference agreement provided $1.42 billion, $66 million less than Amtrak received in FY2011. FTA's Capital Investment Grants program funds new fixed-guideway transit lines and extensions to existing lines. It is is commonly referred to as the New Starts and Small Starts. New Starts (major capital investment projects) include capital projects with total costs over $250 million which are seeking more than $75 million in federal funding. Small Starts include capital projects with total costs under $250 million which are seeking less than $75 million in federal funding. New Starts projects must go through a multi-stage process, during which they are repeatedly evaluated by FTA. Projects must receive positive ratings to proceed to the next step. The final step is signing of a full-funding grant agreement (FFGA) with FTA. The FFGA details how much funding the project will receive from FTA and the steps of project development. One purpose of the FFGA is to encourage accurate estimates of project costs; cost overruns are the responsibility of the grantee. The Capital Investment Grants program received $2.0 billion in FY2010; in FY2011, it received $1.6 billion. For FY2012, the Administration requested $3.2 billion for the New Starts program (see " New Starts Funding Share "). The Senate-passed bill would have provided $2.0 billion, the same level provided in FY2010 but $400 million more than the amount provided in FY2011. This would cover the majority of the costs for existing and pending full funding grant agreements. The House draft recommended funding at approximately the FY2011 level ($1.6 billion). The conference agreement provided $1.955 billion. The federal share for New Starts projects can be up to 80%. Since FY2002, DOT appropriations acts have included a provision directing FTA not to sign any full funding grant agreements that provide a federal share of more than 60%. This provision was again included in the Senate bill. The House draft bill proposed to prohibit FTA from signing any agreement with a federal share of more than 50%. The conference bill retained the 60% limit. Critics of this provision note that the federal share for highway projects is typically 80% and in some cases is higher. They contend that, by providing a lower share of federal funding (and thus requiring a higher share of local funding), this provision tilts the playing field toward highway projects when communities are considering proposed new transportation projects. Advocates of this provision note that the demand for New Starts funding greatly exceeds the amount that is available, so requiring a higher local match allows FTA to support more projects with the available funding. They also note that requiring a higher local match likely encourages communities to scrutinize the costs and benefits of major transit projects more closely. Table 6 presents an account-by-account summary of FY2012 appropriations for HUD, compared to FY2011. Totals for the House have not been included, since a formal bill has not been introduced and the draft bill has not been reported by the House Appropriations Committee. For a more complete discussion of FY2012 appropriations for HUD, see CRS Report R41700, Department of Housing and Urban Development (HUD): FY2012 Appropriations , coordinated by [author name scrubbed]. The Section 8 Housing Choice Voucher program, which is funded by the Tenant-based Rental Assistance account, is the largest HUD assistance program for low-income families both in terms of funding and the number of families served. Each year, the roughly 2 million vouchers being used by families to supplement their rent in the private market expire and need new funding in order to be renewed. Each year, the President's budget includes an estimate for the amount of funding that would be necessary to renew some or all of the existing vouchers in use. It is then up to the appropriations committees to decide (1) whether the President's estimate is still the correct estimate of the amount of funding needed to maintain current services; (2) how much they wish to provide for the program (current services, less, or more); and (3) how the funds should be allocated. Additionally, the account typically also funds administrative fees and, in some years, additional vouchers. The FY2012 President's Budget request included about $17 billion for voucher renewals, which, they contended, would be sufficient to maintain current services. The Senate appropriations bill included the President's requested level for renewals, but would have rescinded another $750 million to be offset against agencies with reserve funding above a specified level. Recent estimates released by low-income housing advocacy groups have contended that the amount provided for renewals in the Senate bill would not be sufficient to fully fund renewal needs. The President's Statement of Administrative Policy released during Senate floor consideration on the bill stated that the "funding provided for [the Housing Choice Voucher Program] is sufficient to maintain rental assistance to current low-income residents." P.L. 112-55 funds voucher renewals at the President's requested level, but, like the Senate bill, rescinds $650 million, which will be achieved by offsetting allocations to PHAs with reserves. The Public Housing Operating Fund account provides formula-based funding to local Public Housing Authorities (PHAs) for the ongoing operation and maintenance of low-rent Public Housing. The President's FY2012 budget requested a 14% reduction in the Operating Fund compared to the final FY2011 funding law. The President's budget proposes to supplement the requested funding level by offsetting the funding allocations to PHAs with reserves above a certain level. This proposal would effectively force certain PHAs to spend down their reserves. This proposal has been opposed by PHA industry groups, who contend that the reserves are necessary and that the proposal punishes PHAs who have managed their funding well. HUD contends that if funding is limited, this strategy ensures that funding levels will be higher for agencies without large reserves. The Senate appropriations bill included the President's requested funding level, but would have offset PHAs' reserves by a lower level ($750 million, compared to $1 billion as proposed by the President). Like the Senate bill, P.L. 112-55 funds the operating fund at the requested level and includes the offset, but caps it at $750 million. The President's FY2012 budget included a request for several statutory changes related to income and rent determination that would affect HUD's rental assistance programs, including the public housing and Section 8 programs. The provisions are designed to streamline and simplify the administration of the rental assistance programs. Similar provisions were included in Section 8 voucher reform legislation considered in the 111 th Congress. HUD estimated that these changes would result in an overall reduction in the cost of HUD rental assistance programs. The Senate bill included the requested reforms; the House draft bill did not. P.L. 112-55 did not include the proposed reform language. Additionally, President Obama's FY2012 budget again requested funding for a new "Transforming Rental Assistance" initiative, which was initially proposed in the FY2011 budget request. The initiative is designed to streamline HUD's multiple rental assistance programs in order to permit owners of HUD-assisted properties to better leverage outside resources. Specifically, the $200 million requested would be used to transfer a variety of HUD-assisted housing units with project-based rental assistance from their existing subsidy types to a new form of project-based rental assistance. For FY2012, HUD is proposing that TRA be treated as a demonstration, with a rigorous assessment component, under which up to 236,000 units of public housing and other rent-assisted units owned by private property owners could convert to long-term Section 8 contracts or project-based Section 8 vouchers. According to HUD's budget documents, the demonstration will test conversion under TRA as a tool for preserving public and other assisted housing. Further, this new form of rental assistance will feature tenant mobility, meaning that families living in units receiving this new form of project-based rental assistance would have the option to take their subsidies with them if they choose to move to a new unit of private market housing. The Senate bill included the authority for HUD to conduct a "Rental Assistance Demonstration", but did not provide additional funding for the demonstration, instead directing the Secretary to use its existing resources. The House draft bill did not include authority for RAD. P.L. 112-55 includes a modified version of RAD, similar to what was proposed in the Senate, with no additional funding and participation capped at 60,000 units. The President's FY2012 budget requested $88 million for HUD's housing counseling program, an increase of $500,000 over the FY2010 level. However, in FY2011 Congress did not provide any funding for HUD's housing counseling program. The elimination of HUD housing counseling funding reflected the fiscal environment at the time that the FY2011 appropriations law was passed, as well as some concerns over the time it took HUD to distribute prior years' funds. Some policymakers also questioned whether the funding was duplicative of foreclosure mitigation counseling funds that have been appropriated to the National Foreclosure Mitigation Counseling Program, administered by NeighborWorks America, since FY2008. However, proponents of HUD's housing counseling program note that the HUD funding can be used for a wider range of types of housing counseling than the NeighborWorks funds, which are limited to foreclosure counseling. The Senate bill proposed $60 million for HUD's housing counseling program. S.Rept. 112-83 encouraged HUD to work with Neighborworks to reduce duplication and to prioritize the use of HUD housing counseling funds for activities that are not supported under by NeighborWorks. (See " Funding for Neighborworks National Foreclosure Mitigation Counseling Program " later in this report.) The House draft bill did not include funding for HUD's housing counseling program. P.L. 112-55 provided $45 million for HUD's housing counseling program. For more information on both HUD's housing counseling program and the NeighborWorks counseling funding, see CRS Report R41351, Housing Counseling: Background and Federal Role , by [author name scrubbed]. Through the Section 202 Supportive Housing for the Elderly program and the Section 811 Supportive Housing for Persons with Disabilities program, HUD provides capital grants and rental assistance to nonprofit developers to build or rehabilitate housing units for elderly residents and residents with disabilities. In FY2011, funding for the two programs was cut roughly in half. In his FY2012 budget, the President requested that funding levels for Section 202 be restored to levels closer to the amount provided in FY2010. The President also requested that Section 811 be increased, but not to levels provided in FY2010. The reason the President gave for requesting a lower level for Section 811 is a change in the way the program is funded, since some of the costs of the program are now met by funds provided through the tenant-based rental assistance account. The Senate bill proposed to fund Section 202 at about $30 million less than FY2011 levels and Section 811 at FY2011 levels, whereas the House draft bill proposed significant funding increases for both programs. P.L. 112-55 funded both programs at levels just above the Senate proposed funding levels. During Senate floor consideration of the Minibus, an amendment was approved that would have increased the Government Sponsored Enterprises (GSE) conforming loan limits and Federal Housing Administration (FHA) loan limits for some high cost communities through December 31, 2013. On October 1, 2011, the loan limits under these programs reverted from higher temporary limits, which had been enacted and extended over the past several years, to lower statutory limits. The changes to the GSE conforming loan limits were to be accompanied by a fee increase designed to offset the cost of the increase. P.L. 112-55 included the FHA loan limit increases proposed in the Senate bill, but did not include the GSE loan limit changes. (See also " GSE Conforming Loan Limit Changes " later in this report.) Table 7 presents appropriations levels for the various related agencies funded within the Transportation, HUD, and Related Agencies appropriations bill. Since FY2008, Congress has provided increased appropriations for the Neighborhood Reinvestment Corporation (Neighborworks) for a National Foreclosure Mitigation Counseling Program (NFMCP). This money was provided in addition to funding for HUD's housing counseling program. However, in FY2011 Congress did not provide any funding for HUD's housing counseling program. The elimination of HUD housing counseling funding reflected the fiscal environment at the time that the FY2011 appropriations law was passed, as well as some concerns over the time it took HUD to distribute prior years' funds. Some policymakers also questioned whether the funding was duplicative of foreclosure mitigation counseling funds that have been appropriated to the National Foreclosure Mitigation Counseling Program. Proponents of HUD's housing counseling program note that the HUD funding can be used for a wider range of types of housing counseling than the NeighborWorks funds, which are limited to foreclosure counseling The President's FY2012 budget requested $88 million for HUD's Housing Counseling Program, to be provided in addition to the $80 million requested for Neighborworks NFMCP. The Senate-passed FY2011 appropriations bill included $65 million for the NFMCP and $60 million for HUD's housing counseling program. S.Rept. 112-83 encourages HUD to work with Neighborworks to reduce duplication and to prioritize the use of HUD housing counseling funds for activities that are not supported under the NFMCP. The House draft bill included $80 million for the NFMCP, but no funding for HUD's program. P.L. 112-55 includes $80 million for the NFMCP and $45 million for HUD's program. For more information on both HUD's housing counseling program and the NeighborWorks counseling funding, see CRS Report R41351, Housing Counseling: Background and Federal Role , by [author name scrubbed]. On October 1, 2011, conforming loan limits for high cost areas reverted from higher temporary limits, which had been enacted and extended over the past several years, to lower statutory limits. The conforming loan limit establishes the maximum size mortgage that Fannie Mae and Freddie Mac (two of the housing-related Government Sponsored Enterprises, or GSEs) can purchase. The GSE conforming loan limits have implications for HUD FHA insured loans and Department of Veterans Affairs loans, since the loan limits for those programs are tied to the GSE conforming loan limits. S.Amdt. 857 , approved during Senate floor consideration of the FY2012 "Minibus," would have increased the GSE conforming loan limits (and, as a result, the FHA and VA loan limits) for some high cost communities through December 31, 2013. When the conforming loan limit increase was extended in FY2011, the Congressional Budget Office scored the policy change as having a budgetary cost (as shown in Table 7 ). The changes to the GSE conforming loan limits proposed in S.Amdt. 857 would have be accompanied by a fee increase designed to offset that cost. P.L. 112-55 does not include a loan limit increase for the GSEs, but does extend the FHA loan limits. For more information about conforming loan limits, see CRS Report RS22172, The Conforming Loan Limit , by [author name scrubbed] and [author name scrubbed].

The Transportation, Housing and Urban Development, and Related Agencies (THUD) appropriations subcommittee is charged with providing annual appropriations for the Department of Transportation (DOT), Department of Housing and Urban Development (HUD), and related agencies. The HUD budget generally accounts for the largest share of discretionary appropriations provided by the subcommittee. However, when mandatory funding is taken into account, DOT's budget is larger than HUD's budget. Mandatory funding typically accounts for a little less than half of the bill total. The President's FY2012 budget request for DOT reflected a reauthorization proposal for DOT surface transportation programs. This proposal would have front-loaded a large increase in funding in the first year of the Administration's proposed six-year surface transportation reauthorization plan, with funding levels for each of the subsequent five years lower than the total for FY2012. The President's FY2012 budget for HUD requested about a $2.5 billion increase in funding for HUD's programs and activities, to be partially offset by about a $1.6 billion increase in offsetting collections and receipts. The House never introduced a formal FY2012 THUD appropriations bill. A draft bill, marked up by the THUD subcommittee, included significantly decreased funding for both HUD and DOT relative to FY2011. The Senate-passed FY2012 THUD appropriations bill provided increased funding for DOT relative to FY2011 but decreased funding for HUD relative to FY2011. In the final FY2012 THUD appropriations law (Division C of P.L. 112-55, referred to as a "Minibus" because it included appropriations bills from two other subcommittees), Congress provided about $57 billion in discretionary funding for the programs and activities funded under the Transportation, HUD, and Related Agencies subcommittee. This total funding level is an increase over the FY2011 level of $55 billion. DOT received approximately the same level of new funding as it received in FY2011, while net budget authority for HUD decreased by about $3.7 billion from FY2011. The FY2012 DOT budget appears to be larger than it was in FY2011 because the FY2011 appropriations act included over $3 billion in rescissions to offset the DOT budget total, which had the effect of making the total look smaller without reducing the amount of funding available to the agency. DOT also received nearly $2 billion in emergency relief appropriations in FY2012, which counterbalanced a $2 billion reduction in highway funding. Most of the decrease in HUD's net budget authority is attributable to increases in the amount of offsetting collections available to offset the cost of the HUD budget, although total funding for programs and activities was reduced by about $1 billion.

The Multinational Species Conservation Fund (MSCF; 16 U.S.C. §4246) supports international conservation efforts benefitting several species of animals. The MSCF has five sub-funds, which provide grants for activities to conserve tigers, rhinoceroses, Asian and African elephants, marine turtles, and great apes (gorillas, chimpanzees, bonobos, orangutans, and various species of gibbons). Each of the funds receives appropriations from Congress through the U.S. Fish and Wildlife Service (FWS). This support is often in conjunction with efforts under the Convention on International Trade in Endangered Species (CITES) and local efforts in the countries in which these animals reside. MSCF provides funding in the form of technical and cost-sharing grants to groups conducting conservation activities in the species' home range countries. The grants address habitat conservation, improve law enforcement, and provide technical assistance for conserving the specified species. The conservation efforts funded by the MSCF funds also benefit from funding and in-kind support provided by partners and collaborators. Congress and constituents have shown interest in conserving iconic endangered species in foreign countries, such as elephants and tigers. Congress has appropriated funds to address wildlife trafficking and to conserve foreign endangered species and their habitats, and it is considering other forms of funding to augment this support. One form of existing support is funds generated through semipostal stamps, which are first-class stamps that are sold with a surcharge over their postage value. The additional charge is recognized by the stamp purchaser as a voluntary contribution to a designated cause (for more information, see " Overview of Semipostal Stamps ," below). To boost funds for conservation programs under MSCF, Congress authorized the creation and distribution of the Multinational Species Conservation Funds Semipostal Stamp (MSCF stamp) under the Multinational Species Conservation Funds Semipostal Stamp Act of 2010 ( P.L. 111-241 ). This law requires the U.S. Postal Service (USPS) to issue and sell the MSCF stamp. A portion of the proceeds (11 cents, less USPS's administrative costs) from the stamp are transferred to the U.S. Fish and Wildlife Service (FWS), which equally distributes the stamp-generated funds among the five MSCF sub-funds (see Figure 1 ). The other portion of the revenue goes to the Postal Service Fund, which is a revolving fund in the U.S. Treasury that consists largely of revenues generated from the sale of postal products and services. USPS introduced the MSCF stamp, entitled "Save Vanishing Species," in September 2011. The stamp depicts an Amur tiger, a design approved by the Postmaster General, who has the final authority to decide the design for semipostal stamps. Congress initially provided for the MSCF stamp to be available to the public for at least two years. Congress extended the mandated sale of the MSCF stamp by an additional four years through the Multinational Species Conservation Funds Semipostal Stamp Reauthorization Act of 2013 ( P.L. 113-165 ). Authorization for the MSCF stamp is set to expire in September 2017. This expiration does not preclude USPS from continuing to issue and sell the stamp, should it choose to do so. As of November 2016, more than 36.6 million MSCF stamps had sold, generating more than $3.9 million for conservation. According to FWS, funds from the stamps have supported 84 conservation projects in 33 countries. Projects and programs funded by stamp sales address antipoaching activities, capacity building for conserving species, community engagement and outreach, habitat restoration, and activities to raise public awareness of the illegal wildlife trade, among other things. In addition, federal grants from MSCF receive matching funds from nonfederal conservation supporters. FWS has noted that the funds from stamp sales have leveraged more than double their value in funds for conservation. For example, from FY2012 to FY2016, $3.1 million of funds generated from stamps leveraged $12.5 million in additional funds from nonfederal stakeholders for conservation projects. The MSCF stamp's efficacy in generating funds for international conservation made reauthorizing the stamp a priority for addressing wildlife trafficking, as the Presidential Taskforce on Wildlife Trafficking created by the Obama Administration in 2014 noted. Funds generated by MSCF stamp sales have supported efforts to decrease wildlife trafficking. For example, FWS used MSCF stamp funds to support a program that rehabilitates trafficked tigers for return to the wild in Indonesia. Semipostal stamps are first-class letter stamps that are sold with a surcharge over their postage value. The additional charge is recognized by the stamp purchaser as a voluntary contribution to a designated cause. For example, a first-class stamp may be purchased for 49 cents, but a first-class semipostal stamp costs 60 cents. USPS sells a semipostal stamp and then transfers a portion of the proceeds (less USPS's administrative costs) to the U.S. Treasury, which allocates funding to the federal agency designated to administer the funds. The agency then expends or distributes the funds for the statutorily designated purpose. Congress first authorized the issuance of semipostal stamps in 1997. The first semipostal stamp sold in the United States was the Breast Cancer Research stamp in 1997, which was created by the Stamp Out Breast Cancer Act ( P.L. 105-41 ). This act authorized the USPS to issue a first-class stamp at a price up to 25% higher than the standard first-class stamp price. The law required USPS to deliver 70% of the additional proceeds to the National Institutes of Health and 30% to the Department of Defense to fund breast cancer research, less USPS's administrative costs. After the success of the Breast Cancer Research stamp, Congress enacted the Semipostal Authorization Act ( P.L. 106-253 ) in 2000. The act gave USPS broad authority to issue and sell semipostal stamps for causes that USPS considers to be in the "national public interest and appropriate." The law specified that funds raised must go only to federal agencies supporting the cause, and it gave discretion to USPS for the selection and depiction of future semipostal stamps. The authority for USPS to issue semipostal stamps expires 10 years after the issuance of the first stamp. This 10-year sunset provision has not started, because USPS has not issued any semipostal stamps through its own authority. All current semipostal stamps have been mandated separately in enacted legislation. However, USPS recently revised its semipostal regulations (39 C.F.R. 551) and has begun the process of developing and issuing its first discretionary semipostal stamp. Recent changes to the USPS semipostal program could affect the MSCF stamp. In 2016, the USPS amended its regulations and began the process of developing and issuing its own semipostal stamps. The Semipostal Authorization Act of 2000 ( P.L. 106-253 ) provided USPS with authority to issue semipostals for a 10-year period beginning on the date on which semipostals are first made available to the public. Under the original regulations implementing the Semipostal Stamp Program, USPS stated that it would not exercise its authority to issue semipostal stamps under 39 U.S.C. §416 until after the sales period of the Breast Cancer Research Stamp is concluded. A rule issued by USPS in April 2016 retracts the restriction on the start of the discretionary Semipostal Stamp Program. The amended regulations state that USPS will issue one discretionary semipostal stamp at a time, five in total, to be sold for a period of no more than two years each. Public proposals for the first discretionary semipostal were due in July 2016. The final decision regarding the subject of the discretionary semipostal stamps belongs to the Postmaster General; as of February 28, 2017, a decision on what semipostals to issue had not been made. If the MSCF stamp is not reauthorized in 2017, USPS could discontinue the MSCF stamp and focus on other semipostal stamps per its plan in the amended regulations. Several bills introduced in the 115 th Congress address the MSCF stamp and other semipostal stamps. Some bills would reauthorize the issuance of the MSCF stamp for an additional four years (e.g., S. 480 and H.R. 1247 ). Further, H.R. 1247 would require an MSCF semipostal stamp depicting an African elephant in addition to an Amur tiger. Other bills would require USPS to issue semipostal stamps supporting other causes, such as the Peace Corps ( H.R. 332 ), efforts to combat invasive species ( H.R. 1837 ), agricultural conservation programs ( H.R. 581 ), and the families of fallen service members ( H.R. 1147 ). H.R. 128 would take away the general authority of USPS to issue semipostal stamps. Under the bill, USPS could issue semipostals as long as the stamps were mandated by Congress. Overall, many people view semipostal stamps as an easy and inexpensive way to raise both funds from the public and awareness for a given organization or cause. (See Table 1 .) Supporters of the MSCF stamp also contend the following points: Some contend that the MSCF stamp has a great deal of support and leverages additional funds for conservation. They note that funds generated and leveraged by the sale of the stamp have provided a boost to conservation and antipoaching efforts for species targeted by the MSCF. Further, they assert that semipostal stamps have the potential to generate greater amounts of funding, as evidenced by the success of the Breast Cancer Research Stamp. According to some, the MSCF stamp provides the public with an opportunity to participate in financing conservation and anti-wildlife trafficking efforts for MSCF species. Some contend that, apart from raising funds for conservation, MSCF stamps can be used to raise public awareness of wildlife trafficking. In addition, some contend that MSCF stamps created in collaboration with efforts in other countries could increase public awareness about wildlife trafficking and conservation on an international scale. Some potential detracting points associated with the issuance of the MSCF stamp and other semipostal stamps include the following: In the past, USPS expressed limited interest in selling semipostal stamps. During a Senate hearing in 2000, a USPS representative noted that USPS did not favor the issuance of further semipostal stamps after the Breast Cancer Research Stamp. USPS stated that fundraising was a diversion from the service's core mission and that the philatelic community opposed semipostals on the grounds that they dilute the quality of the stamp program. USPS further noted that choosing among the many worthy causes eager for semipostal revenue would be difficult and requested that Congress help make decisions on what semipostal stamps should be created in the future. Given USPS's stated intention in 2016 to issue semipostal stamps under its general authority, the service's position may have changed. Further, if USPS issues more types of semipostal stamps, it is unclear whether the increased competition will decrease sales of the MSCF stamp. Some might suggest that causes other than the MSCF could receive wider attention and therefore should be prioritized over the MSCF for semipostal stamp programs. The success of semipostal stamps varies widely. The Breast Cancer Research Stamp has generated several million dollars a year for its cause, but two other semipostal stamps—the "Heroes of 2001" and "Stop Family Violence" semipostal stamps—generated significantly less funding (see Table 1 ). It is difficult to predict which causes would benefit most from the sale of semipostals. Some might contend that future MSCF stamps may not generate sufficient funds to support their existence. No analysis has clarified the precise factors that affect the sales of any particular semipostal. Factors that could affect the success of semipostal sales, such as the MSCF stamp, may include advertising, competition with other semipostal stamps, and popularity of the cause represented by the semipostal stamp. Some might be concerned that the range of eligible uses for funds generated by MSCF stamp is limited to a small set of species. They might suggest creating specific or alternative guidelines so that the funds raised address broader international conversation efforts.

The Multinational Species Conservation Fund (MSCF) supports international conservation efforts benefitting several species of animals, often in conjunction with efforts under the Convention on International Trade in Endangered Species (CITES). MSCF receives annual appropriations under the U.S. Fish and Wildlife Service (FWS) to fund five grant programs for conserving tigers, rhinoceroses, Asian and African elephants, marine turtles, and great apes (gorillas, chimpanzees, bonobos, orangutans, and various species of gibbons). To provide a convenient way for the public to contribute to these activities and to boost funds for these conservation programs, Congress authorized the Multinational Species Conservation Funds Semipostal Stamp Act of 2010 (P.L. 111-241). With the MSCF semipostal stamp (MSCF stamp) program set to expire in 2017, Congress is considering whether to reauthorize the MSCF stamp through pending legislation (e.g., S. 480 and H.R. 1247). Semipostal stamps are postage stamps that are sold with a surcharge above the normal price for a 1-ounce first-class letter stamp. For example, the current price for a first-class stamp is 49 cents, whereas a first-class semipostal stamp costs 60 cents. The additional charge is recognized by the stamp purchaser as a voluntary contribution to a designated cause. Since 1997, Congress has authorized the U.S. Postal Service (USPS) to sell four different semipostal stamps, including the MSCF stamp. The MSCF stamp, entitled "Save Vanishing Species," was first issued by USPS on September 22, 2011. A portion of the stamp's sale proceeds is transferred to the U.S. Fish and Wildlife Service, which administers the MSCF and provides grants to international organizations to help protect the species listed above. As of November 2016, proceeds from MSCF stamp sales had generated more than $3.9 million for the MSCF. Many view semipostal stamps as an easy and inexpensive way to raise funds and awareness for a given organization or cause. Some contend that the MSCF stamp provides a significant amount of funding for MSCF conservation programs and raises awareness about the conservation of certain international threatened and endangered species. Others argue that semipostal stamps detract from the mission of the USPS and divert consumers away from other stamps the USPS has to offer. Additionally, some contend that other causes could benefit more than the MSCF from a semipostal stamp program.

Indian tribes are unique in that they are quasi-sovereign entities that enjoy all the sovereign rights not divested by treaties or Congress, or inconsistent with their dependent status. As "domestic dependent nations," "Indian tribes are distinct, independent political communities, retaining their original natural rights in matters of local self-government." However, they are subordinate to the sovereignty of the United States. Because of tribes' unique status, courts have wrestled with the issue of whether statutes that do not mention tribes apply to tribes. The National Labor Relations Act (NLRA), which does not mention tribes, gives employees the right to collectively bargain with employers, and imposes on employers the obligation to bargain with employees in good faith. Section 2(2) of the NLRA defines the term "employer" to exclude "the United States or any wholly owned government corporation or any state or political subdivision thereof." In 1976, the National Labor Relations Board (NLRB), the agency responsible for enforcing the NLRA, concluded that tribal employers were "implicitly" exempted from the NLRA as governmental entities. Later, it decided the exemption did not extend to tribal employers located off tribal land. In 2004, the NLRB abandoned the location-based test in favor of a test that presumes the NLRA applies, but allows exceptions if application of the NLRA interferes with a tribe's right of self-governance in intramural matters or treaty rights. Since 2004, the NLRB has been enforcing the NLRA against tribal casinos. The Tribal Labor Sovereignty Act of 2015, H.R. 511 and S. 248 , would amend the NLRA's definition of employer to exclude, "any enterprise or institution owned and operated by an Indian tribe located on its Indian lands" effectively reinstating the Board's position before 2004. The remainder of this report discusses how the NLRB developed its current position on applying the NLRA to tribal casinos, considers how it has applied the NLRA since 2004, and discusses how the Tribal Labor Sovereignty Act of 2015 relates to the history of the NLRB applying the NLRA to tribal enterprises. The NLRB's position on enforcing the NLRA against tribal employers has changed over time. This section explains the reasoning behind the Board's positions. In 1976, the NLRB considered for the first time whether the NLRA applied to tribal employers in Fort Apache Timber Co. In this case, the White Mountain Apache Tribe (Tribe) owned and operated the Fort Apache Timber Co. on its reservation. The Board did not indicate whether the timber company employed non-Indian employees, but mentioned that it participated in interstate commerce. The NLRB identified the question presented as: "whether an Indian tribal governing council qua government, acting to direct the utilization of tribal resources through a tribal commercial enterprise on the tribe's own reservation, is an 'employer' within the meaning of the Act." The NLRB explored the legal status of Indian tribes, focusing on their sovereignty and right of self-government. Although the Board did not find that the tribal timber company was excluded from the definition of "employer" under section 2(2), the Board concluded that it was "implicitly exempt" within the meaning of the NLRA. In a footnote, the NLRB noted that the Supreme Court found that a utility district owned by private individuals was exempt because the utility district was responsible to public figures, making it a political subdivision of a state. Using that reasoning, the NLRB concluded, "the Fort Apache Timber Company is an entity administered by individuals directly responsible to the Tribal Council of the White Mountain Apache Tribe, hence exempt as a governmental entity recognized by the United States, to whose employees the Act was never intended to apply." The Board applied the reasoning of Fort Apache in Southern Indian Health Council to conclude that the employer at issue, which was a consortium of a number of tribes and operated on a reservation, was exempted from the NLRA as a governmental entity because the employer, and its personnel policies, were controlled by the tribes. In 1992, the NLRB considered whether its reasoning in Fort Apache Timber Co. applied to a tribal employer that was located outside the tribe's reservation in Sac and Fox Industries . In this case, the NLRB determined that Fort Apache and Southern Indian Health Council were inapplicable because those cases involved tribal employers located on reservations and application of the NLRA would have interfered with the tribes' "right of internal sovereignty." The NLRB noted that in Fort Apache and Southern Indian Health Council it had found the tribal employers implicitly exempt as governmental entities, but determined that the Fort Apache reasoning was not binding because it applied to tribal employers on land within the tribes' reservations. This case, however, involved a tribal employer located far away from the reservation. Having concluded that Fort Apache was not binding, the NLRB turned to the jurisprudence governing when statutes of general applicability apply to tribes to determine whether the NLRA applied to Sac & Fox Industries. The NLRB first quoted the Supreme Court's opinion in Federal Power Comm'n v. Tuscarora Indian Nation : "it is now well settled by many decisions of this Court that a general statute in terms applying to all persons includes Indians and their property interests." However, the NLRB noted exceptions to this rule, and cited Donovan v. Coeur d'Alene Tribal Farm , a case decided by the U.S. Court of Appeals for the Ninth Circuit. The so-called Coeur d'Alene exceptions provide that a statute of general applicability will not apply to a tribe if (1) the law touches "exclusive rights of self-governance in purely intramural matters;" (2) application of the law to the tribe would abrogate treaty rights; or (3) there is proof in the legislative history or elsewhere that Congress did not intended that the law would apply to tribes. If any of those exceptions apply, Congress must explicitly express its intention that tribes be subject to the statute. Because the NLRB found that the tribal business did not fit any of the exceptions, it concluded the business was subject to the NLRA. The NLRB considered its jurisdiction over off-reservation tribal employers again in Yukon Kuskoksim Health Corp. The employer at issue was like the employer in Southern Indian in that it was a health care organization run by a consortium of tribes. However, it was not located on a reservation. Finding the tribal employer's off-reservation location determinative, the Board found the NLRA applied. The NLRB continued to assert jurisdiction based on whether the tribal employer was located on or off a reservation until 2004, when it decided San Manuel Indian Bingo and Casino . In this case, the NLRB was asked to reject the Fort Apache / Sac and Fox Industries location-based test. In considering whether to do so, the Board noted that as tribal businesses have grown, they have employed increasing numbers of non-Indians and begun to compete with non-tribal employers. It assessed the premises underlying Fort Apache and Sac and Fox Industries and rejected them. Thus, the NLRB overturned Fort Apache , modified Sac and Fox Industries , formulated a new rule for when the NLRA would apply to tribes, which it asserted would accommodate both federal labor policy and federal Indian policy, and applied the NLRA to the tribal casino located on a reservation. In place of the location-based test, the NLRB adopted the Tuscarora / Coeur d'Alene test, which assumes a statute that does not mention tribes applies to tribes unless application of the statute would trigger one of the Coeur d'Alene exceptions. However, the NLRB took an additional analytical step of assessing its "discretionary jurisdiction," by "balanc[ing] the Board's interest in effectuating the policies of the [NLRA] with its desire to accommodate the unique status of Indians in our society and legal culture." This step involved "examin[ing] the specific facts in each case to determine whether the assertion of jurisdiction over Indian tribes will effectuate the purposes of the Act." The NLRB explained that when tribal businesses employ significant numbers of non-Indians, compete with non-tribal businesses, and participate in interstate commerce by catering to non-Indian customers, the "special attributes of tribal sovereignty" are not implicated. Distinguishing a tribal enterprise from a tribal government function, the NLRB wrote that exercising jurisdiction over such tribal enterprises would fulfill its mandate to "protect and foster interstate commerce" and "effectuate the policies of the Act while doing little harm to the Indian tribes' special attributes of sovereignty or statutory schemes designed to protect them." The NLRB explained that application of the NLRA to all tribal activities was not appropriate because at times, when tribes perform governmental functions, they act consistent with their "mantle of uniqueness." Such governmental functions are likely to occur on reservations and likely do not involve non-Indians or interstate commerce. Therefore, when tribes engage in self-government of internal matters, the NLRB wrote, the Board's interest in effectuating the purpose of the NLRA is lesser and the tribal interest in autonomy is greater. The NLRB applied this analytical framework to the San Manuel Indian Bingo and Casino and concluded that application of the NLRA would fulfill its mandate to effectuate the purpose of the NLRA. First, the NLRB determined that none of the Coeur d'Alene exceptions applied. The casino argued that application of the NLRA would interfere with the tribe's self-governance because casino revenue funded the government. However, the NLRB employed a narrow reading of Coeur d'Alene 's self-government exception and wrote that the casino's reasoning would result in the self-government exception swallowing the Tuscarora rule. Accordingly, the NLRB concluded that the NLRA applied to the San Manuel Indian Bingo and Casino. The casino appealed the NLRB's decision to the U.S. Court of Appeals for the D.C. Circuit in San Manuel Indian Bingo and Casino v. NLRB . The court of appeals upheld the NLRB's decision, but used an analysis different from that used by the Board. Despite the fact that the court of appeals upheld the NLRB's decision in San Manuel based on different reasoning, the NLRB has used its reasoning based on the Tuscarora / Coeur d'Alene test from its San Manuel decision in subsequent enforcement actions. This section discusses the arguments the tribes have made against applying the NLRA to their casinos and how the NLRB has analyzed those arguments. In Little River Band , the NLRB enforced the NLRA against a tribal casino owned by the Little River Band of Ottawa Indians (Tribe). The Tribe challenged the Board's jurisdiction by arguing that it exercises "inherent sovereignty" over labor relations on its reservation, that it had exercised that sovereignty in passing a labor ordinance that governed casino workers, and that application of the NLRA would impermissibly interfere with its tribal sovereignty and internal self-governance. The Board rejected the Tribes' argument, applying its reasoning from San Manuel . The Board concluded that the Tribe's labor ordinance did not fall within the Coeur d'Alene exception for self-government in intramural affairs because the labor ordinance was not related to self-governance – it regulated labor at a business that served and employed non-Indians. The U.S. Court of Appeals for the Sixth Circuit affirmed the Board's ruling. The court considered the law governing tribal jurisdiction over non-members, described that jurisdiction as being at the periphery of the tribe's sovereignty, applied the Tuscarora / Coeur d'Alene test, and concluded that regulation of non-Indian labor relations at the casino did not fit within the exception for self-government in intramural affairs. The Saginaw Chippewa Indian Tribe of Michigan (Tribe) challenged the jurisdiction of the NLRB to apply the NLRA to its casino. The Tribe argued that the NLRA did not apply because its treaties guaranteed its right to self-government and its right of exclusive use of the reservation. The right to self-government, the Tribe argued, included the right to operate a casino, and the right to exclude included the right to regulate the conduct of its employees and to exclude federal personnel. The NLRA, it argued under the Tuscarora / Coeur d'Alene test, would infringe its right to self-government and its treaty right to exclusive use of the reservation, and, accordingly, should not apply. The NLRB found that running a casino did not fit within the self-government exception because the casino is a commercial, not governmental, activity and its regulation does not interfere with internal tribal activities because the casino employs non-Indians, competes with non-Indian businesses, and attracts non-Indian customers. The Board cited its opinion in San Manuel for support. Although the Board conceded that the Tribe's treaties set aside the reservation for the Tribe's exclusive use, it wrote that such a "general" treaty right was insufficient to qualify for the treaty right exception. If such a general right were to prohibit the application of federal law, it reasoned, virtually no federal laws would apply to reservations created by treaties. Finally, the Board weighed the policy interests implicated in the case, stating that when the tribe is fulfilling a traditional governmental function, the Board's interest in enforcing the NLRA is weaker than when the tribe is engaging in a commercial venture involving non-Indians. Because the casino is commercial in nature, competes with non-Indian businesses, and services non-Indian customers, the Board found, the "special attributes of the Tribes sovereignty" are not implicated by application of the NLRA. Therefore, the NLRB concluded that policy considerations weigh in favor of applying the NLRA. The U.S. Court of Appeals for the Sixth Circuit upheld the NLRB's enforcement of the NLRA against the casino. However, the panel made clear that but for the Little River Band precedent, it would have applied a different analysis and reached a different result. In this case, the Chickasaw Nation (Tribe) argued that the NLRA should not apply under the Tuscarora / Coeur d'Alene test because it would violate three treaty rights guaranteed by the 1830 Treaty of Dancing Rabbit Creek: the right to self-government, the right to exclude, and, under Article 4, a right to be free of federal laws, except those passed to address Indian affairs. The Board did not address the first two rights. Instead, it focused on Article 4 of the treaty, which provides, among other things, that the Tribe will not be subject to "all laws, except such as from time to time may be enacted in their own National Councils ... and which may have been enacted by Congress, to the extent that Congress under the Constitution are required to exercise a legislation over Indian Affairs." The treaty also provided that ambiguities in the treaty "shall be construed most favorably towards" the Tribe. The Board concluded that Article 4, "forecloses application of the [NLRA], which is not a law enacted by Congress in legislation specific to Indian affairs." Because no party argued that the NLRA was passed under the Indian Commerce Clause or directed at Indian affairs, the Board concluded that enforcement of the NLRA would abrogate a "specific" treaty right guaranteed by Article 4. The Tribe had an 1866 treaty with the United States, which some parties argued abrogated the Article 4 right. Article 7 of this 1866 treaty states that the Tribe agrees, "to such legislation as Congress and the President ... may deem necessary for the better administration of justice and the protection of the rights of persons and property within Indian Territory." However, the NLRB rejected the arguments that Article 7 granted the U.S. broad legislative power over the Tribe and that the NLRA falls within the kind of legislation specified in the treaty. The Board concluded that Article 4 of the 1830 treaty and Article 7 of the 1866 treaty were compatible. Therefore, the Tribe's rights under Article 4 persisted. Furthermore, the Board noted, Article 45 of the 1866 treaty provides "all the rights, privileges and immunities heretofore possessed by [the Tribe] ... or to which they were entitled under the treaties and legislation heretofore made ... shall be, and are hereby declared to be, in full force, so far as they are consistent with the provisions of this treaty." Because the Board read Article 4 of the 1830 treaty and Article 7 of the 1866 treaty to be compatible, it concluded, "asserting jurisdiction [to enforce the NLRA against the casino] would abrogate treaty rights specific to the [Tribe]." Accordingly, it dismissed the complaint. In enforcing the NLRA against tribal casinos, the NLRB seems to follow its analysis from San Manuel , which relies on the Tuscarora / Coeur d'Alene test, and a weighing of the labor policy interests and the Indian policy interests. The tribes fighting application of the NLRA to their casinos have made the following arguments. In Little River Band , the Tribe argued that application of the NLRA would violate its inherent sovereignty and right of self-government. The NLRB and U.S. Court of Appeals for the Sixth Circuit rejected this argument because they viewed the casino as a commercial enterprise, not a governmental activity, which is not intramural in nature because it employs and serves non-Indians. In Soaring Eagle , the Tribe argued that its treaty guaranteed it the right to self-government and the right to exclude, which includes the right to regulate employee conduct. The Board rejected the self-government argument for the same reasons it rejected the argument in Little River Band . It concluded that the right to exclude guaranteed by the treaty was a "general" right that did not qualify for the treaty right exception under Coeur d'Alene . The U.S. Court of Appeals for the Sixth Circuit, bound by the precedent of Little River Band , upheld application of the NLRA to the casino. Finally, in Chickasaw Nation , the tribe argued that its treaty right to self-government, its right to exclude, and its right to be free of federal laws that did not concern Indian affairs exempted its casino from the NLRA. The Board accepted that the "specific" treaty right to be free of federal laws, except those concerning Indian affairs, would be abrogated by application of the NLRA. Accordingly, it concluded the NLRA did not apply. The Tribal Labor Sovereignty Act of 2015, H.R. 511 and S. 248 , would amend the definition of employer to exclude, "any enterprise or institution owned and operated by an Indian tribe located on its Indian lands." It would define "Indian lands" to mean the following: (A) all lands within the limits of any Indian reservation; (B) any land title to which is either held in trust by the United States for the benefit of any Indian tribe or individual subject to restriction by the United States against alienation; and (C) any lands in the State of Oklahoma that are within the boundaries of a former reservation (as defined by the Secretary of the Interior) of a federally recognized Indian tribe. It appears, therefore, under this bill, the NLRA would not apply to tribal enterprises located within reservations, on tribal or individual trust or restricted fee land, or, in Oklahoma, within a tribe's former reservation. In effect, it seems that the bill would reinstate a location-based test similar to the one that the Board overturned in San Manuel .

The National Labor Relations Act (NLRA) provides workers with the right to collectively bargain with employers and requires employers to bargain in good faith. The NLRA excludes from the definition of the term "employer" "the United States or any wholly owned government corporation or any state or political subdivision thereof." The NLRA does not specify whether Indian tribal employers are covered. Prior to 2004, the National Labor Relations Board (NLRB), the agency responsible for enforcing the NLRA, followed a rule that excluded from the NLRA tribal employers located on tribal land, but included tribal employers located off of tribal land. In 2004, in San Manuel Indian Bingo and Casino, the NLRB adopted a new position and held that the NLRA applied to all tribal employers, regardless of their location, unless its application would interfere with treaty rights or quintessentially governmental functions. In San Manuel Indian Bingo and Casino v. NLRB, the U.S. Court of Appeals for the D.C. Circuit upheld the NLRB's application of the NLRA to the tribal casino. In recent years, the NLRB has asserted jurisdiction over a number of tribal casinos, relying on its analysis in San Manuel. In June 2015, in Little River Band of Ottawa Indians v. NLRB, the U.S. Court of Appeals for the Sixth Circuit upheld the NLRB's reasoning and application of the NLRA to a tribal casino, despite the fact that the tribe had adopted its own labor ordinance to regulate tribal labor relations and asserted that application of the NLRA would impair this exercise of its inherent sovereignty. In July 2015, the same court considered whether the NLRA applied to another tribe's casino. Because the panel was bound to follow the precedent of Little River Band, it upheld the NLRB assertion of jurisdiction. However, the panel indicated that it would have applied a different analysis and reached a different result, but for the Little River Band precedent. The Tribal Labor Sovereignty Act of 2015, H.R. 511 and S. 248, would amend the NLRA's definition of employer to exclude "any enterprise or institution owned and operated by an Indian tribe located on its Indian lands." In effect, it appears that the bills would reinstate a location-based test similar to the one used by the NLRB prior to 2004, when it decided San Manuel.

The Bureau of Labor Statistics (BLS) defines the employment-population ratio as the ratio of total civilian employment to the civilian noninstitutional population. Simply put, it is the portion of the adult population (16 years and older) that is employed. The ratio is one of several indicators used to assess labor market strength, and is reported monthly alongside the unemployment rate and other statistics by BLS. It is used primarily as a measure of job holders and to track the pace of job creation, relative to the adult population, over time. Recent estimates show that employment as a percentage of the civilian population has not returned to pre-recessionary levels. In November 2007, the employment-population ratio was 62.9%, indicating that 62.9% of the adult population had a job in that month. This rate fell steadily during the recession and several months beyond, before stabilizing around 58.5% in October 2009. Between October 2009 and March 2014, the ratio fluctuated within 0.3 percentage points of 58.5%. Since then, the employment-population rate has climbed slowly to 59.3%, its value in April 2015. The slow pace of growth in the employment-population ratio in the post-recessionary period is further remarkable because it coincided with a sharply falling unemployment rate. This is interesting because, in recent decades, the employment-population ratio has tracked the unemployment rate closely in the United States, though moving in opposite directions. Based on this pattern, the expectation was that falling unemployment would be met with a rising employment-population ratio; but this has not been the case. The new pattern points to significant changes in the labor force participation rate (i.e., a decline) that counterbalance the effects of a lower unemployment rate on adult employment. This report provides an overview of the employment-population ratio. It opens with a discussion of its value as a labor market indicator, noting its key features and limitations. This is followed by an examination of long-term and recent trends. The contribution of demographic and economic factors to recent patterns is explored at the close of the report. Several features of the employment-population ratio make it an attractive employment indicator for labor market analysis. It is easy to interpret, and can be used to make meaningful comparisons across time and groups with dissimilar population size. Because it takes into account the impacts of both labor force participation and unemployment, it is a useful summary measure when those forces place countervailing pressures on employment. The employment-population ratio has a simple interpretation: it is the share of adults who are employed. As such it provides information about the magnitude of employment (relative to population), and the degree to which an economy is using a key productive resource (labor). This is important to labor market analysis, but has broader economic significance as well (i.e., to national output and growth). That the employment-population ratio gauges employment against population , and not the labor force , is an interpretational advantage over several other labor market indicators, including the unemployment rate. As the U.S. economy recovers from the most recent recession, considerable discussion has centered on the unemployment rate and how its decline should be interpreted. Analysts have debated the extent to which a falling unemployment rate indicates a strengthening labor market, or signals an exodus of discouraged workers from the labor force. Unlike the unemployment rate, which assesses the job status of workers in the labor force, the employment-population ratio places employment in the context of a much broader group of potential workers (i.e., the adult population). This feature provides the employment-population ratio a degree of stability, because movement in and out of the labor force only registers in the numerator of the ratio. When the employment-population ratio rises, it means that a larger percentage of the adult population has a job. By contrast, the unemployment rate can fall without a corresponding rise in employment if unemployed workers leave the labor force. Placing employment in the context of the adult population permits more meaningful comparisons over time and across countries than mere employment levels. Consider, for example, that approximately 136.6 million workers were employed in the United States in February 2000. Fifteen years later, in February 2015, U.S. employment stood at nearly 148.3 million workers. Despite the addition of 11.7 million workers, the employment-population ratio in February 2015 (59.3%) was 5.3 percentage points below the ratio for February 2000 (64.6%), indicating that the adult population grew faster than employment over that period. Similarly, controlling for population facilitates international comparisons, particularly between countries with markedly different population sizes. The employment-population ratio has additional value as a summary measure when the unemployment rate and labor force participation rate send conflicting signals about employment growth. To see this, it helps to look at the employment-population ratio in terms of its principal components: (1) the rate at which the adult population participates in the labor market (i.e., the labor force participation rate), and (2) the proportion of jobseekers who are able to secure employment (i.e., employment rate of the labor force). In other words, the employment-population ratio describes concurrently the proportion of the adult population who want jobs and the success rate of this group in obtaining jobs . This can be seen mathematically through a simple decomposition: That is: Because the labor force is the sum of all employed and unemployed workers (i.e., labor force = employment + unemployment), the expression can be re-written in terms of the unemployment rate: That is: Changes in the employment-population ratio are therefore determined by changes in the labor force participation rate and changes in the unemployment rate (or, equivalently, by changes in the labor force participation rate and the employment rate). All things equal, a rise in the labor force participation rate or a decline in the unemployment rate will increase employment. When they occur together (i.e., a simultaneous rise in labor force participation and drop in the unemployment rate), the employment-population ratio will necessarily increase. This is intuitive, because when a larger share of the population are seeking employment and finding it with greater success, employment will rise. Similarly, a simultaneous decline in labor force participation rate and increase in the unemployment rate will cause the employment-population ratio to fall. The net impact on employment is less clear when the unemployment rate and the labor force participation rate are both rising or both falling . In these cases, the employment-population ratio is a particularly valuable summary measure of these competing forces on employment. Under the both falling scenario, for example, the share of adults looking for jobs decreases (i.e., the labor force participation rate falls) but the portion of jobseekers who successfully find employment increases (i.e., the unemployment rate falls). Under these conditions, the labor force participation rate and employment rate place countervailing pressures on employment. Because it accounts for both factors, the employment-population ratio reports their net impact on employment. This feature of the indicator was particularly useful to labor market assessments following the 2007-2009 recession, when declining unemployment coincided with declining labor force participation. Like all labor market indicators, the employment-population ratio has limits. For one, the employment-population ratio does not provide the full picture of labor market conditions. It does not provide information about hours of work (i.e., whether jobs held are part-time or full-time), wages and benefits, or job quality. On its own, the employment-population ratio cannot be used to assess labor force flows. That is, additional information is needed to determine whether a drop in employment represents more people exiting employment or fewer new entrants. Additional information is also needed to determine whether changes in the employment-population ratio are driven by cyclical factors (i.e., the impacts of economic recession and growth on labor demand) or structural factors (e.g., demographic trends). Figure 1 plots the employment-population ratio from January 1950 to April 2015. In addition to providing a long-term view of the employment-population ratio, the figure illustrates the indicator's cyclical nature. Sharp declines in the ratio coincide with each of the 10 recessions shown in the figure, followed by growth during expansions. Between 1960 and 2000, the employment-population ratio more than recovered from each economic downturn and followed an upward trend. After peaking at 64.7% in April 2000, however, the trend reversed. Although the employment-population ratio continued to rise during periods of expansion, its gains were not sufficient to offset the large declines that occurred during the 2001 and 2007-2009 recessions. Consequences of the new employment-population ratio trend depend importantly on what is driving the change, and whether recent developments are permanent or transitory. Some information about drivers and the permanency of the new trend can be gained from a look at the employment-population ratio's principal components: the unemployment rate and the labor force participation rate. Figure 2 plots the employment-population ratio (blue line, left axis) and the unemployment rate (red line, right axis) from January 1995 to April 2015. It shows that, until recently, movements in the employment-population ratio mirrored those of the unemployment rate, falling with a rising unemployment rate and rising as the unemployment rate falls. The close tracking of the employment-population ratio and unemployment rate can be seen until the beginning of 2010. After that point, the unemployment rate falls steadily, with little movement in the employment-population ratio. These patterns suggest that between 1995 and 2010, the unemployment rate (i.e., the success rate of jobseekers) was the driving factor behind movement in the employment-population ratio. More recently, however, the disconnect between the employment-population ratio and the unemployment rate patterns points to changes in labor force participation. Several factors can affect labor force participation. Demographics such as age and gender have played an important role in the recent decline in the overall labor force participation rate. The ongoing retirement of baby boomers, for example, accounts for some downward pressure on the overall labor force participation rate. Younger workers' decisions to pursue or extend schooling have affected participation rates at the other end of the age spectrum. The rise in married women's labor force participation was a central driving force of the steep rise in labor force participation from 1965 to the late 1980s. By contrast, men's labor force participation has declined steadily since the 1950s, and the pace of decline accelerated during the most recent recession. In January 1950, 86.2% of men participated in the labor market. This rate fell to 77.8% in January 1980 and 71.2% in January 2010. In February 2015, men's labor force participation rate was 69.4%. Labor market conditions also play a part if they increase the number of discouraged workers or other persons marginally attached to the labor force. Demographic and labor force factors can be interrelated; for example, poor labor market opportunities may influence the timing of retirement and choices about educational investment. Trends in the employment-population ratio for "prime-age" individuals—those between 25- to 54-years old—can shed light on the extent to which recent patterns are driven by labor force participation patterns among older and younger workers. The aging population and the tendency for labor force participation rates to slow down for older workers imply a sizable structural decline in overall labor force participation. Despite an increase in their participation rate over the past 20 years, older individuals' (55 years and older) participation rate is more than 40 percentage points below the rate for their prime-age counterparts. At the same time, younger adults (i.e., those in the 16- to 24-year-old-age group)—whose participation rates are relatively low—are delaying entry into the labor market and their participation rates are drifting further downward. See Figure A-1 for additional details on labor force participation trends by age. The employment-population ratio for the prime-age population is interesting in this context because this group is much less likely to be affected by retirement trends and schooling decisions than older and younger age groups. Their labor force participation rates are, however, likely to respond to overall labor market conditions, like labor demand, among other factors. Comparing employment-population ratio trends of the prime-age population to the full adult population (i.e., 16 years and older) can therefore provide some information about whether and to what extent the ratio's slowdown is influenced by economic versus age factors. Figure 3 compares the standard employment-population ratio (for individuals 16 and older) and the employment-population ratio for the prime-age population. There are some similarities in employment-population ratio patterns across the two groups of workers: The employment-population ratios for both prime-age individuals and the full adult population declined sharply during the most recent recession and for a short period thereafter and have been slow to approach their pre-recession values. The trends differ in notable ways as well: Prime-age workers' employment-population ratio fell by 4.9 percentage points—a 6.1% loss—between November 2007 (79.7%) and December 2009 (74.8%), when its decline came to a halt. Over the same period, the employment-population ratio for the full adult population fell by 4.6 percentage points (a 7.3% decline). The employment-population ratio for prime-age workers has made more progress toward recovery. Since reaching its low-point of 74.8% in December 2009, prime-age workers have recouped more than half of the 4.9 percentage point loss in ratio. By contrast, the full adult population has recovered less than a quarter of its 4.6 percentage point loss. In April 2015, the employment-population ratio among prime-age individuals was at nearly 97% of its pre-recession value. For the full adult population it remained at 94% of its pre-recession value. Taken together, these similarities and differences suggest that recent labor force participation patterns of young and older individuals have placed downward pressure on the overall employment-population ratio, but age factors do not fully explain its slow recovery. Trends in the employment-population ratio also reflect labor market differences between men and women. Figure 4 charts the employment-population ratio for prime-age men and women from January 1995 to April 2015. The recent experience of prime-age men and prime-age women—that is, since the onset of the 2007-2009 recession—is particularly interesting. Prior to 2008, prime-age men's and women's employment-population ratios moved more-or-less in concert, although separated by approximately 15 percentage points. During the recent recession and the years thereafter, however, prime-age men's employment-population ratio has been more volatile than that of prime-age women. Although moving in the same general direction, men experienced a greater loss during the recession, and a more pronounced recovery in the years that followed. Additional insights can be gained by unpacking the employment-population ratio into its principal components: the unemployment rate ( Figure 5 ) and labor force participation rate ( Figure 6 ). Although both sexes experienced a sharp rise in unemployment during the most recent recession, the rise was experienced to a much greater degree by prime-age men. At the same time, prime-age men's labor force participation rate, already on a downward trajectory, continued to decline, while prime-age women's labor force participation rate was temporarily elevated and flat. Labor market differences between men and women are likely to be the product of several factors. Among them is the tendency for men to be employed in occupations that experience relatively high job loss during recessions (e.g., production, construction, and material transport jobs). Women's labor participation rates—elevated and flat during the recent recession—may reflect women's labor market entry in response to lost income (i.e., from job loss of another household member), or as suggested by Hotchkiss and Rios-Avila, they may have delayed a planned departure from the labor market until the end of the economic downturn.

The Bureau of Labor Statistics (BLS) defines the employment-population ratio as the ratio of total civilian employment to the civilian noninstitutional population. Simply put, it is the portion of the population that is employed. The ratio is used primarily as a measure of job holders and to track the pace of job creation, relative to the adult population, over time. The employment-population ratio has several properties that make it an attractive indicator for labor market analysis. It is easy to interpret and can be used to make meaningful comparisons across time and groups with dissimilar population size. Because it takes into account both the impacts of labor force participation and unemployment, it is a useful summary measure when those forces place countervailing pressures on employment. Like all labor market indicators, it has limits. For example, it does not distinguish between part-time and full-time employment, and it is silent on wages, benefits, and job conditions. Trends in the employment-population ratio also do not provide information about job flows (i.e., whether a drop in employment represents more people exiting employment or fewer new entrants). Recent estimates show that employment as a percentage of the civilian population has not returned to pre-recessionary levels. In November 2007, the employment-population ratio was 62.9%, indicating that 62.9% of the adult population had a job in that month. This rate fell steadily during the recession and several months beyond, before stabilizing around 58.5% in October 2009. Between October 2009 and March 2014, the ratio fluctuated within 0.3 percentage points of 58.5%. Since then, the employment-population ratio has climbed slowly to 59.3%, its value in April 2015. These patterns should be taken in the context of shifting demographics and other recent developments in the United States. Notably, the large baby boomer cohort has started to retire, and younger individuals are spending more time in school or otherwise delaying labor market entry. A comparison of recent employment-population ratio trends for the "prime-age" population (persons in the 25- to 54-year-age group) with those for the full adult population (persons 16 years and older) suggests that recent labor force participation patterns of young and older workers have placed downward pressure on the employment-population ratio, but age factors do not fully explain its slow recovery.

Since the United States and Vietnam established diplomatic relations in 1995, the two countries have expanded relations and cooperation across a wide range of sectors. As U.S.-Vietnam bilateral economic, military, and diplomatic ties have grown, so has interest in strengthening cooperation in the nuclear energy sphere. A civilian nuclear cooperation agreement was initialed by the two countries in December 2013 and signed in May 2014 under Section 123 of the Atomic Energy Act of 1954 (as amended). Such "123 agreements" are necessary for the export of nuclear reactors and components and can help facilitate the transfer of nuclear energy technology. The U.S.-Vietnam 123 agreement was subject to congressional review. Congress received the agreement with the required supporting documents on May 8, 2014, for review. It may enter into force after the 90 th day of continuous session after its submittal to Congress (a period of 30 plus 60 days of review) unless a joint resolution disapproving the agreement is enacted. The congressional review period for this agreement was completed on September 9, 2014. At least four issues were prominent during the congressional review period: (1) whether the agreement should have included stronger nonproliferation commitments such as a legally binding commitment by Vietnam not to build uranium enrichment and reprocessing facilities; (2) the extent to which Vietnam's human rights record should affect the decision to enter into a nuclear energy agreement; (3) the weight that should be given to the growing strategic relationship between the United States and Vietnam; and (4) the extent to which U.S. companies would benefit from an agreement. Vietnam also has nuclear cooperation agreements with Russia, France, China, South Korea, Japan, and Canada. The U.S. nuclear industry contends that billions of dollars of exports could result from the Vietnam 123 agreement. While it is unclear what, if any, contracts the U.S. nuclear industry would conclude with Vietnam's nuclear energy sector, it is likely that U.S. companies would provide services as part of a reactor supply agreement that Vietnam signed with Japan in 2010. Such services would not necessarily require a U.S. 123 agreement, but transfers might be facilitated if one were in place. The first major step by the United States and Vietnam toward a 123 agreement was the signing of an agreement to strengthen nuclear safety and the nascent nuclear regulatory framework in Vietnam in 2008. Under that agreement, U.S. Nuclear Regulatory Commission experts have been advising the Vietnam Agency for Radiation and Nuclear Safety and Control (VARANS). The U.S. Department of Energy (DOE) and the Nuclear Regulatory Commission (NRC) train Vietnamese officials on nonproliferation and nuclear safety best practices related to power plant operation, and assisted with the drafting of Vietnam's Atomic Energy Law, passed by Vietnam's National Assembly in June 2008. Vietnamese technicians have also attended nonproliferation safeguards training programs at U.S. national laboratories. In March 2010, the United States and Vietnam signed a Memorandum of Understanding Concerning Cooperation in the Civil Nuclear Field that was designed to increase cooperation on nuclear safety and facilitate development of an independent regulatory agency. Then-U.S. Ambassador to Vietnam Michael Michalak said he anticipated the 2010 Memorandum would be a "stepping stone" to a bilateral nuclear energy cooperation (Section 123 agreement). Vietnam's current nuclear infrastructure consists of a research reactor and several research institutes. Under the Atoms for Peace program in the early 1960s, the United States provided South Vietnam with a 250 kilowatt (kw) pool-type TRIGA Mark-II research reactor. This research reactor, located at Dalat, used highly enriched uranium (HEU) fuel and went critical in 1963. It was used for training, research, and radioisotope production. The research reactor was shut down during the Vietnam War. After North Vietnam defeated the South in 1975 and reunified the country, the Vietnam Atomic Energy Commission (VAEC) was established in 1976 for civilian nuclear research. The International Atomic Energy Agency (IAEA) has provided technical cooperation (TC) assistance to Vietnam since it joined the Agency in 1978. In the early 1980s, the Soviet Union helped Vietnam restore and upgrade the research reactor to a 500 kw Russian VVR-M design. This research reactor was powered with highly enriched uranium, weapons-usable material which is considered to be a potential nuclear security risk. With U.S. assistance under the Department of Energy's Global Threat Reduction Initiative, since 2007, Vietnam has converted the Dalat research reactor from HEU to low enriched uranium (LEU) fuel, and returned the HEU fresh and spent fuel to Russia. The shipments, which removed a total of 11 kg of HEU, were completed in July 2013. This activity advanced U.S.-Vietnam cooperation in the nuclear nonproliferation sphere. As Vietnam's economy has grown, so have its energy demands, which, according to one source, grew by 15% annually in the first decade of the 2000s. To help keep pace, Vietnam plans to build its first nuclear power plants in the coming decades. Nuclear power is projected to provide 20%-30% of the country's electricity by 2050. Vietnam first began considering nuclear power as an option in a 1995 government study that recommended the introduction of nuclear energy by 2015. Feasibility studies were conducted in the late 1990s and early 2000s. In 2004, then-Prime Minister Phan Van Khai endorsed the "Strategy for Vietnam's Electricity Development 2004-2010." In 2006, the Prime Minister signed the "Strategy for Peaceful Uses of Atomic Energy up to 2020," which specified a nuclear power target of 2,000 megawatts of electric generating capacity (MWe) by 2020, and an eventual 20,000 MWe by 2040. The latter would represent 25%-30% of Vietnam's electricity production. Vietnam's National Assembly in November 2009 approved plans to build the first two 1,000 MWe reactors at Phuoc Dinh, Ninh Thuan province ( Ninh Thuan 1 plant) which were to come on-line by 2020. Two additional 1,000 MWe reactors are planned to be built in nearby Vinh Hai ( Ninh Thuan 2 plant) and be brought on-line by 2026 (see Figure 1 below). The country's nuclear energy plan envisioned a three-phase approach: Phase I, 2010-2015: training technical specialists, setting up regulatory frameworks and cooperation agreements, approval of licenses, etc. Phase II, 2015-2020: construction phase for first nuclear plants at Phuoc Dinh; beginning construction at Vinh Hai. Phase III, 2020-2030: additional reactor construction, up to an additional 6,000 MWe. The Vietnamese government issued a master plan in July 2011 that called for two additional reactors to be constructed at Phuoc Dinh by 2025 and two more at Vinh Hai by 2027, plus two larger reactors, possibly Korean, at another site to begin operating by 2029. Another 4,000 megawatts of planned capacity would bring the country's generating capacity to 14,800 megawatts by 2030. However, Vietnam's Prime Minister announced in January 2014 that it might delay construction of the first plant, at Phuoc Dinh, until 2020, potentially pushing back the planned completion of the first reactor to the mid-2020s. Difficulties in training staff for the planned nuclear power program have been mentioned by news reports as a possible reason for the delay. The Russian firm AtomStroyExport is to build two 1,200 MWe light-water reactors (standard commercial reactors) at the Ninh Thuan 1 power plant at Phuoc Dinh. They will be built on a turnkey basis, and will be operated by state-owned utility Electricity of Vietnam (EVN). As with other Russian-built nuclear power plants in non-nuclear weapon states, the contract includes a provision to both supply fuel and take back spent (used) fuel. The Russian atomic energy agency, Rosatom, will set up a training center in Vietnam to help prepare nuclear specialists. Cost estimates for the power plants vary; Rosatom reportedly has forecast the cost of the first two-reactor plants as up to $8 billion, but some press reports that included related infrastructure development estimate a total of $10 billion. Russia's Ministry of Finance is expected to finance the majority of these costs. Under the 2011 master plan, AtomStroyExport is to build two additional reactors at the site as well. Up to four light-water reactors at Ninh Thuan 2 are to be built by the Japanese consortium International Nuclear Energy Development of Japan Company (JINED). The Japanese government has offered low-interest and preferential loans for the project, as well as assistance in waste treatment and infrastructure support. According to the IAEA, Vietnam has no plans for developing a full fuel cycle capability. Current plans would store spent nuclear fuel on-site for at least 30 years, and studies on more permanent disposal are underway. As mentioned above, Russia will take back the spent fuel from the Russian-built plants. Other suppliers, such as Japan, do not usually do so, so Vietnam will need to explore spent fuel storage options. Vietnam is now exploring how to exploit its domestic uranium reserves in the north of the country, and is cooperating with Canadian and Japanese firms on initial exploration. Vietnam has signed a memorandum of understanding with India on uranium ore processing technologies. As of mid-2014, Vietnam's nuclear energy plans do not appear to have generated significant domestic opposition, though members of the Champa ethnic group, an ethnic minority in Vietnam, have said that the plants will infringe upon Champa villages and centers of worship in Ninh Tuan province and that the Vietnamese government has harassed individuals who have criticized the plants. It is unclear if the apparent absence of major opposition is due to widespread support for the government's energy vision, apathy or a lack of awareness, and/or a reluctance to challenge the government on one of its significant priorities. The U.S. nuclear industry may have a role in the reactor projects in Vietnam. The Japanese supply consortium, JINED, is offering boiling water reactor (BWR) and pressurized water reactor (PWR) designs for Ninh Thuan 2 , and Vietnam has not yet selected which type it will use. Japanese BWR designs are based on General Electric (GE) technology, while Japanese PWR designs originally came from Westinghouse (now mostly owned by Toshiba). Japan is largely self-sufficient in nuclear technology, but it is possible that some U.S. components and services would be used for the Vietnam project. JINED member Hitachi, for example, conducts nuclear business in Japan and around the world through joint ventures with GE. A U.S.-Vietnam 123 agreement would be helpful or even necessary for U.S. participation in Ninh Thuan 2 , depending on the types of components and services involved. This is because certain major reactor components would require Nuclear Regulatory Commission export licenses that cannot be approved without a 123 agreement, and approvals for other components and services that do not require export licenses could be more complicated without a 123 agreement. South Korea has also proposed building a nuclear power plant in Vietnam, for which the two countries are jointly preparing a feasibility study. The proposed South Korean reactors are based on designs licensed from the U.S. firm Combustion Engineering, which combined with Westinghouse in 2000. As a result, Westinghouse now controls the marketing of the design that South Korea plans to use in Vietnam. South Korea's only previous nuclear power plant export project, consisting of four reactors being built in the United Arab Emirates (UAE), is being implemented by a consortium that includes Westinghouse. Westinghouse and other U.S.-based firms are expected to receive 10% of the $20 billion UAE deal. If South Korea replicates that consortium for the proposed Vietnam project, a U.S.-Vietnam 123 agreement would probably be necessary. The UAE project also required a Part 810 technology transfer authorization by the Secretary of Energy. The number of potential U.S. jobs that may result from nuclear power projects in Vietnam is difficult to estimate, but the Barakah project now under construction by a Korean-led consortium in the UAE could provide a model. As noted above, Westinghouse and other U.S. companies are expected to carry out about 10% of the work on Barakah. The Export-Import Bank of the United States in September 2012 approved $2 billion in financing for U.S. equipment and services for Barakah, mostly to be provided by Westinghouse and its U.S. sub-suppliers. "The Barakah project will allow us to maintain about 600 U.S. jobs," Westinghouse said after the Ex-Im Bank financing approval. The Ex-Im Bank estimated that, overall, the $2 billion in financing would "support approximately 5,000 American jobs across 17 states." Items to be supplied by Westinghouse and other U.S. companies include reactor coolant pumps, reactor components, controls, engineering services, and training. The nuclear disaster at the Fukushima Daichi nuclear plant in Japan in March 2011 raised concerns around the globe about the readiness of new nuclear energy countries to have sufficient safety and regulatory infrastructure to prevent such disasters. The accident also raised worries about Vietnam's capacity to administer and regulate a nuclear energy sector. The authorities in Vietnam reacted to the Fukushima disaster by reaffirming Vietnam's commitment to pursuing nuclear power. In general, the situation sparked a global reexamination of emergency preparedness and risk assessment for nuclear power plants. Vietnam's coast has been subject to tsunamis in the past, and one study suggests more investigation is still needed on seismic conditions and tsunami risk.  Also, in climate modeling exercises, Vietnam is often listed as one of the world's most vulnerable countries to the possible effects of climate change, particularly to rising sea levels. The nuclear disaster in Japan also heightened concerns about how to ensure adequate infrastructure, planning, and technical expertise and personnel in new nuclear power states. Vietnam is working closely with the International Atomic Energy Agency to meet all international safety standards and regulatory practices. The IAEA's Integrated Nuclear Infrastructure Review (INIR) mission has visited Vietnam multiple times and has developed milestones on the basis of international standards and expert recommendations. After the latest visit in 2014, the Vietnamese government announced a delay in the estimated start-up date for the first reactors, which experts view as giving Vietnam more time to develop its nuclear regulatory infrastructure and train technical personnel. Vietnam would be the first country in Southeast Asia to operate a nuclear power plant. As of early 2014, it was unclear whether other countries in the region have expressed concerns about Vietnam's nuclear energy plans. It is also unclear to what extent Vietnamese nuclear power planners are considering the energy needs and infrastructure projects of Vietnam's neighbors. Laos, for instance, is building or proposing to build dams for generating hydroelectric power along tributaries and the main stem of the Mekong River, which terminates in Vietnam. Plants such as these could generate power that could be sold to other countries in the region. Vietnam generally has opposed these dams, in part because of their possible negative impacts on the ecology, economies, and food security of downstream communities. Obama Administration officials have stated that the prospect of concluding a nuclear cooperation agreement with the United States spurred Vietnam to strengthen its nonproliferation policies. Vietnam has been a vocal supporter of nuclear disarmament and nonproliferation in international fora, and as a member of the Non-Aligned Movement. Vietnam's Law on Atomic Energy passed in 2008 forbids the development of nuclear weapons and all forms of nuclear proliferation. Vietnam is party to the major nonproliferation treaties (see Table 1 ), including the Nuclear Non-Proliferation Treaty (NPT), which it joined in 1982 as a non-nuclear weapon state. It has been an IAEA member since 1978 and its comprehensive safeguards agreement has been in force since 1990. Vietnam signed the Additional Protocol to its safeguards agreement in 2007, and it entered into force in 2012. Also, in cooperation with the IAEA and South Korea, Vietnam is developing a real-time tracking system for the movement of radiological materials in the country. Vietnam is also a member of the U.S.-led Global Nuclear Energy Partnership (GNEP), now called the International Framework for Nuclear Energy Cooperation (IFNEC). Vietnam has also joined the U.S.-led Global Initiative to Combat Nuclear Terrorism. In a move related to the bilateral nuclear energy agreement signing, in May 2014 Vietnam's government announced that it would participate in the multinational Proliferation Security Initiative (PSI), a U.S.-led group of about 100 countries that was established in 2003 to increase international cooperation in interdicting shipments of weapons of mass destruction (WMD), their delivery systems, and related materials. In the past, Vietnamese officials said they would not join PSI because it operates outside the United Nations system. As part of Vietnam's pledges at Nuclear Security Summits, it has removed all weapons-usable nuclear material from the country. In December 2010, the United States and Vietnam established a legal framework for U.S.-Vietnam cooperation for full conversion of its HEU-fueled research reactor to LEU fuel, and the return of HEU spent fuel from Dalat to Russia under the Department of Energy's Global Threat Reduction Initiative (GTRI). As noted, fresh HEU fuel was removed in 2007. The research reactor has been converted to LEU fuel, and the last shipment of HEU was completed in July 2013. Vietnam continues to develop its export control system. The U.S. State Department's Export Control and Border Security Program provides assistance to Vietnam to strengthen export controls in the country. In 2010, Vietnam issued regulations that would make any trafficking of nuclear materials in the country illegal. When reviewing the proposed agreement with Vietnam, Congress may wish to examine the extent to which Vietnam's export control system can prevent illicit transfers of nuclear materials and technologies. Enrichment and reprocessing (ENR) technology can be used both to make fuel for nuclear reactors or material for nuclear weapons. For the past several years, there has been some debate over whether the United States should ask countries, including Vietnam, to explicitly renounce enrichment and reprocessing as part of a civilian nuclear cooperation agreement. In early August 2010, the Wall Street Journal reported that the United States and Vietnam had discussed a proposed nuclear cooperation agreement that would not specifically commit Vietnam to refrain from enriching uranium. Responding to the Wall Street Journal report, the State Department spokesman said that the United States would welcome a commitment by Vietnam to refrain from pursuing enrichment, but added that such a commitment would be Vietnam's decision. A senior DOE official said in September 2010 that it would be "inappropriate" at this stage to ask Vietnam to forswear its fuel cycle options as part of a nuclear energy cooperation agreement. Vietnamese Atomic Energy Institute Director Vuong Huu Tan has said that Vietnam does not plan to pursue uranium enrichment. A commitment to forgo enrichment is not required for bilateral nuclear cooperation agreements under U.S. law or the Non-Proliferation Treaty (NPT), and most past 123 agreements have not included such a pledge. The recent agreement with the United Arab Emirates included a provision that would preclude enrichment or reprocessing in the UAE, and the United States has pursued similar pledges from other states in the Middle East. However, whether this policy would apply to other regions of the world was the subject of an Obama Administration interagency review from 2010 to 2013. Some Members of Congress and outside experts have argued that including a promise not to build enrichment and reprocessing facilities should be emulated in other agreements. The U.S.-Taiwan 123 agreement submitted to Congress on January 7, 2014, includes such "gold standard" prohibitions on enrichment and reprocessing within Taiwanese territory. Administration officials announced in December 2013 that the internal review had been completed, and there would be no change to U.S. policy. In other words, renouncing a domestic fuel-making capability would not be a prerequisite to concluding a nuclear cooperation agreement for all countries, and each partner country would be considered individually. At the same time, U.S. officials emphasize that while civilian nuclear cooperation agreements are one possible way to discourage additional countries from developing their own fuel-making (enrichment or reprocessing) technology, the United States will continue to pursue other incentives such as multilateral fuel banks to bolster partner countries' confidence in fuel supply. The Nuclear Suppliers Group (NSG) has also tightened restrictions on transfers of these technologies. Assistant Secretary of State Thomas Countryman testified on January 30, 2014: Make no mistake, our policy is to pursue 123 agreements that minimize the further proliferation of ENR technologies worldwide. The United States wants all nations interested in developing civil nuclear power to rely on the international market for fuel services rather than seek indigenous ENR capabilities. These capabilities are expensive and unnecessary, and reliable supply alternatives are available in the global fuel cycle market. The preamble of the agreement with Vietnam includes a political commitment that says Vietnam intends to rely on international markets for its nuclear fuel supply, rather than acquiring sensitive nuclear technologies. In addition, the United States promises to support international markets to ensure a reliable nuclear fuel supply for Vietnam. Although Vietnam apparently does not make a binding legal commitment to forswear ENR in the text of its 123 agreement, neither does the United States grant advance consent for those activities. Article 6 of the agreement specifically prohibits Vietnam from enriching or reprocessing U.S.-obligated nuclear materials —for instance, materials that are transferred from the United States—without specific future U.S. consent. In recent years, overlapping strategic and economic interests have led the United States and Vietnam to improve relations across a wide spectrum of issues. Obama Administration officials identify Vietnam as one of the new strategic partners they are cultivating as part of their "rebalancing" of U.S. priorities toward the Asia-Pacific, a move commonly referred to as the United States' "pivot" to the Pacific. In July 2013, President Obama and his Vietnamese counterpart, President Truong Tan Sang, announced in Washington, DC, a bilateral "comprehensive partnership" that is to provide an "overarching framework" for moving the relationship to a "new phase" in many areas, including science and technology cooperation in the field of nuclear energy. The U.S. embassy statement on the day the nuclear cooperation agreement was signed says that the agreement "reflects the strength and breadth of the U.S.-Vietnam Comprehensive Partnership." The United States and Vietnam share a concern over the rising strength of China, and they have cooperated in opposing China's perceived attempts to assert its claims to disputed waters and islands in the South China Sea. In December 2013, Secretary of State John Kerry in Vietnam announced that the United States would be providing Vietnam with $18 million in assistance, including five fast patrol vessels, to enhance Vietnam's maritime security capacity. The rise in bilateral economic ties also has strengthened the countries' interests in each other. Bilateral trade in 2013 was over $29 billion, nearly a 20-fold increase since the United States extended "normal trade relations" (NTR) treatment to Vietnam in 2001. The United States and Vietnam are 2 of 12 countries negotiating a Trans-Pacific Partnership (TPP) trade agreement. In order for the TPP agreement to go into effect, both houses of Congress would have to pass implementing legislation. The Obama Administration has also increased the priority given to cleaning up sites contaminated by Agent Orange/dioxin used by U.S. troops during the Vietnam War, an issue that several Members of Congress have championed. The U.S.-Vietnam nuclear cooperation agreement has been the end-goal of engagement in the nuclear field since the 2010 Memorandum of Understanding and is seen by many as expanding another bridge in the growing network of links between the two countries. Thus, those who question the direction, extent, or pace of recent improvements in U.S.-Vietnam relations may oppose the 123 agreement. A rejection of the agreement by Congress could have an impact on future U.S.-Vietnamese cooperation, including in the nuclear area, and could be interpreted by the Vietnamese as a symbolic rebuke of the new U.S.-Vietnam comprehensive partnership. The biggest obstacle to the two countries taking a dramatic step forward in their relationship is disagreement over Vietnam's human rights record. For more than a decade and a half, the ruling Vietnamese Communist Party (VCP) appears to have followed a strategy of permitting most forms of personal and religious expression while selectively repressing individuals and organizations that it deems a threat to the party's monopoly on power. For the past several years, according to many observers, repression against dissenters and protestors has worsened. The government increasingly has targeted bloggers and lawyers who represent human rights and religious freedom activists, particularly those linked to a network of pro-democracy activists. Many of the targeted blogs, bloggers, and lawyers have criticized Vietnam's policy toward China or have links to pro-democracy activist groups. As mentioned above, members of the ethnic minority group the Cham say that the Vietnamese government has harassed members who have criticized the planned construction of Vietnam's first two nuclear plants because they would be located in a Cham village. In November 2013, the United Nations General Assembly elected Vietnam to a seat on the United Nations Human Rights Council. That same month, Vietnam's National Assembly ratified new amendments to the country's constitution. Many voices called for lessening the VCP's role in society and policy. However, according to many observers, the final changes did little to weaken the Party's and the government's monopoly on power and legal ability to deny basic freedoms. Some sources argued the changes strengthened the VCP's authority and that new clauses added to protect basic rights were negated by other provisions in the revised constitution. As was true of their predecessors, Obama Administration officials have continuously expressed concerns—including via public criticisms—about human rights in Vietnam. Additionally, the two countries reportedly have often disagreed in the formal human rights dialogue that generally occurs every year. In general, however, bilateral differences over human rights have not prevented the United States and Vietnam from improving the overall relationship. Barring a dramatic downturn in Vietnam's human rights situation, U.S. officials appear to see the matter not as an impediment to short-term cooperation on various issues, but rather as a ceiling on what might be accomplished in the longer term. Over the past five years, criticisms of Vietnam's human rights record, including from Members of Congress, appear to have played a significant role in convincing the Administration to delay or oppose a number of items desired by Hanoi. Additionally, concerns about Vietnam's human rights record are likely to complicate Congress's debate over a TPP agreement, if the current negotiations are successful. It is unclear to what extent the Obama Administration has attempted to link the TPP negotiations directly to Hanoi making changes in its human rights conditions. Analysts offer different opinions about the extent to which such U.S. pressure would affect Vietnam's domestic policies, particularly when many in the Vietnamese polity view expressions of dissent as an existential threat to the current regime. Differences over human rights do not appear to have spilled over into the 123 agreement negotiations between the two governments. Human rights activists and other Vietnam watchers have argued that the United States should not advance bilateral ties with Vietnam in many areas until progress is made on the human rights agenda. During a January 2014 Senate Foreign Relations Committee hearing, some Senators called for the passage of a separate human rights bill in tandem with the U.S.-Vietnam nuclear cooperation agreement. As required by Section 123b of the Atomic Energy Act, the President announced in February 2014 his determination that a nuclear cooperation agreement with Vietnam "will promote, and will not constitute an unreasonable risk to, the common defense and security." The White House transmitted a package of documents to the Senate Foreign Relations Committee and the House Foreign Affairs Committee, to include the text of the agreement itself, a Nonproliferation Assessment statement, the presidential determination, and letters of concurrence by the Secretaries of Energy and State, and the Nuclear Regulatory Commission Chairman. The nuclear cooperation agreement complies with all the terms of the Atomic Energy Act as amended and therefore is a "non-exempt" agreement. This means that it may enter into force after the 90 th day of continuous session (a period of 30 plus 60 days of review) following its submittal to Congress on May 8, 2014, unless a joint resolution disapproving the agreement is enacted by both the House and Senate. Members of Congress may introduce resolutions of disapproval or approval during this time. If no resolution of disapproval is passed into law, then the agreement would automatically be eligible to enter into force after the 90-day review period is concluded. If a resolution of approval is passed before the 90 days have expired, then the agreement could enter into force sooner. Even before the official congressional review period, Members of Congress have weighed in on the debate over the U.S.-Vietnam nuclear cooperation agreement and Section 123 agreements generally. In December 2013, Representatives Ileana Ros-Lehtinen and Brad Sherman introduced a bill ( H.R. 3766 ) that would strengthen congressional approval procedures for agreements that did not include certain nonproliferation standards, including the pledge not to enrich or reprocess. The Senate Foreign Relations Committee held a hearing on January 30, 2014, on Section 123 agreements. Debate during the hearing spent some time on the issues surrounding the Vietnam nuclear cooperation accord. Some Senators said that a human rights bill on Vietnam would need to be passed if a nuclear cooperation agreement was to go forward. Three bills have been introduced to date that would approve the agreement with Vietnam. Senate Foreign Relations Committee Chairman Robert Menendez introduced a resolution that would approve the agreement ( S.J.Res. 36 ) on May 22. This bill was passed by the full Senate on July 31, 2014. On June 9, Senator Majority Leader Harry Reid introduced S.J.Res. 39 and Representative Adam Kinzinger with Ranking Member of the House Foreign Affairs Committee Eliot Engel introduced H.J.Res. 116 . As noted above, the 90 th day of the congressional review period was September 9, 2014. Since the agreement was not disapproved in that time, it may enter into force. Typically, such agreements enter into force after an exchange of diplomatic notes between the two countries.

U.S.-Vietnamese cooperation on nuclear energy and nonproliferation has grown in recent years along with closer bilateral economic, military, and diplomatic ties. In 2010, the two countries signed a Memorandum of Understanding that Obama Administration officials said would be a "stepping stone" to a bilateral nuclear cooperation agreement. This agreement was signed by the two countries on May 6, 2014, and transmitted to Congress for review on May 8. The required congressional review period for this agreement was completed in early September, and the agreement will enter into force after an exchange of diplomatic notes between the two countries. Under the agreement, the United States can license the export of nuclear reactor and research information, material, and equipment to Vietnam. The agreement does not allow for the transfer of restricted data or sensitive nuclear technology, and contains required nonproliferation provisions. The nuclear cooperation agreement complies with all the terms of the Atomic Energy Act as amended and therefore is a "non-exempt" agreement. This means that it may enter into force after a review period of 90 days of continuous session after its submittal to Congress (a period of 30 plus 60 days of review) unless Congress enacts a joint resolution disapproving agreement, or approving the agreement at an earlier date. Senate Foreign Relations Committee Chairman Robert Menendez introduced a resolution that would approve the agreement (S.J.Res. 36) on May 22. This bill was passed by the Senate on July 31, 2014. No equivalent bill was passed by the House. Vietnam would be the first country in Southeast Asia to operate a nuclear power plant. Vietnam has announced a nuclear energy plan that envisions installing several nuclear plants, capable of producing up to 14,800 megawatts of electric power (MWe), by 2030. Nuclear power is projected to provide 20%-30% of the country's electricity by 2050. Significant work remains, however, to develop Vietnam's nuclear energy infrastructure and regulatory framework. Since Vietnam has other commercial partners in the nuclear energy field, a lack of agreement with the United States would not be likely to have a significant impact on its nuclear energy plans. Vietnam's Law on Atomic Energy, passed in 2008, forbids the development of nuclear weapons and all forms of nuclear proliferation. In 2007, Vietnam signed the IAEA Additional Protocol, a significant nonproliferation safeguard for nuclear power, which entered into force in September 2012. Vietnamese officials have said they have no interest in developing domestic enrichment or reprocessing capabilities, which can potentially be used to make fissile material for nuclear weapons, but they have not made a binding commitment not to do so. Vietnam is exploring the possibility of eventually mining domestic uranium reserves. At least four issues were debated during the congressional review period for this agreement: (1) whether the agreement should have included stronger nonproliferation commitments such as a legally binding commitment by Vietnam not to build uranium enrichment and reprocessing facilities; (2) the extent to which Vietnam's human rights record should affect the decision to enter into a nuclear energy agreement; (3) the weight that should be given to the growing strategic relationship between the United States and Vietnam; and (4) the extent to which U.S. companies would benefit from an agreement.

Cypriot President Dimitris Christofias and Turkish Cypriot leader Mehmet Ali Talat have been holding direct negotiations since September 2008, with either the U.N. Secretary-General's Special Advisor for Cyprus Alexander Downer or his deputy Taye-Brook Zerihoun present at the meetings. The two leaders' agenda includes the core issues of governance and power-sharing, property, the European Union, the economy, territorial security, and guarantees, and they are working their way through the issues to identify areas of convergence and divergence. Their aides, George Iacovou and Ozdil Nami, meet to write down the understandings reached and prepare for the leaders' sessions. Christofias, a Greek Cypriot, complained that during negotiations on governance and power sharing Talat was trying to give more power to federal states and create a confederation instead of a federation. Talat denies that he seeks a confederation. The two sides also differ on how a united Cyprus will be created. The Greek Cypriots insist that the Republic of Cyprus will evolve into a federal state, which will be its continuation, while the Turkish Cypriots say that united Cyprus will be a new state. According to leaks of (Greek) Cypriot National Council documents particularly to right-wing media and some statements of officials, the two sides differ about the executive and its power. Greek Cypriots have proposed the election of a president and vice president on the same ticket in a direct election for a six-year term. The president will be a Greek Cypriot and the vice president will be a Turkish Cypriot; they will rotate offices, with the Greek Cypriot holding the presidency for four years and the Turkish Cypriot succeeding him for two years. A council of ministers will be jointly appointed by the president and vice president and be composed of six Greek Cypriots and three Turkish Cypriots. If the council cannot reach decisions unanimously, then a simple majority will rule, provided that it includes at least one Greek Cypriot and one Turkish Cypriot minister. A conflict resolution committee will include the president, vice president, and one minister from each community. The committee will try to reach solutions unanimously. Failing that, it will reach solutions by majority; failing that, the president will decide. Talat has said he has proposed that the executive have two alternating presidents elected by the Senate. He is opposed to a single list of Greek and Turkish candidates to be elected by all of the people because then the Greeks would elect the Turkish candidate. With regard to the issue of property, which is critical for Greek Cypriots who lost properties in the north, Christofias insists that the legal owner must have the right to decide how to deal with his property, while Talat believes that the current inhabitant must have priority and that the issue should be resolved through compensation, exchange, and restitution. On the issue of security guarantees, in November 2008, Cypriot Foreign Minister Markos Kyprianou explained that his government believes the European Union (EU) can offer guarantees to all of its member states and even offer guarantees to third countries. Therefore, he saw no reason for guarantees from third countries (Turkey). Turkish Cypriots and Turkey maintain that the 1960 Treaties of Guarantee and Alliance must be reaffirmed in any settlement because, without guarantees, the Turkish Cypriots would feel insecure due to their history with ethnic violence on the island in the 1960s, and Turkish guarantees should not be lifted until Turkey joins the EU. In general, the Greek Cypriots claim that Talat is not free to negotiate, but serves the will of Turkey, and Talat claims that Christofias is dependent on his anti-settlement coalition partners. Talat admits that the Turkish Cypriots' reliance on Turkey for external relations and economic survival makes him dependent on the mother state, but insists that Ankara is not issuing instructions to him. According to the Secretary-General's Special Advisor for Cyprus Alexander Downer, the two sides have agreed to confidence-building measures, including the crossing of ambulances in emergency cases, a committee on communications and liaison for criminal matters, an advisory board on the preservation of cultural heritage, and a U.N. Development Program project on water-saving. After a two-hear hiatus, 70-year-old Dervis Eroglu made a political comeback in December 2008, when he was elected chairman of the opposition National Unity Party (UBP) in northern Cyprus. He previously had held the post for about 25 years and had served as "prime minister" of northern Cyprus seven times. Eroglu stated that he is not against negotiations with the Greek Cypriots, but that the process should be based on the "reality that there are two equal sovereign states." He added, "Our people are not condemned to unite with the Greek Cypriot side. Our right to separate is just as valid as our right to unite. We feel it is necessary to make alternative plans with the cooperation of Motherland Turkey." Eroglu charged that Talat had made a mistake when he accepted a single sovereignty and single citizenship for Cyprus. In parliamentary elections in the north on April 19, 2009, the UBP won an overwhelming victory of 26 out of 50 seats, Talat's Republican Turkish Party (CTP) in alliance with the United Forces (BG), placed second with 15 seats, the Democratic Party (DP) third with 5 seats, the Communal Democracy Party (TDP) fourth with two seats, and the Freedom and Reform Party (ORP), fifth with two seats. The result has been attributed to popular disenchantment with the slow pace of settlement process, to economic issues, and the government's failure to end the international isolation of the north. A new government is expected to be formed by mid-May. Eroglu and said that he would continue to support negotiations, but wants to name someone to accompany the president at the talks. Talat retains authority to negotiate as long as he is president – until April 2010. However, the Turkish Cypriot parliament will have to vote to refer an agreement to a referendum and that may now be difficult. Turkey will likely to exercise a restraining influence on Eroglu. On April 21, Turkish Prime Minister Recep Tayyip Erdogan said, "It would be wrong for the new government (of northern Cyprus) to end the negotiations or to continue the negotiations on a basis different from the one that has been followed so far.... The process must continue exactly as before.... We will never support a move that would weaken the hand of Talat." Turkish President Abdullah Gul also signaled his support for Talat. Meanwhile, the Democratic Party (DIKO), the main governing partner of President Christofias's Progressive Party of Working People (AKEL), held party elections in March 2009. Hard-line candidates won all three posts contested – deputy leader, vice president, and general secretary; some want their party to withdraw from the coalition. The vote was interpreted as a defeat for party leader and Speaker of the House of Representatives Marios Garoyian, who has been relatively circumspect in his criticism of the President. Christofias may face difficulties in gaining approval for any agreement he may reach with Talat. In November 2008, several incidents occurred in an exclusive economic zone (EEZ) that Cyprus had declared with Egypt, off the south coast of the island. Turkish warships accosted Panamanian-flagged ships with Norwegian oceanographic researchers under contract to the Republic of Cyprus aboard who were conducting a survey for possible oil and gas reserves and forced the ships to cease operations and withdraw. Cyprus claimed that it was exercising its sovereign right to conduct surveys and that Turkey violated international law. Cyprus complained to the U.N. Turkey alleged that the research was being conducted inside its continental shelf and argued that the Greek Cypriots had no right to explore for oil or gas before reaching a settlement with the Turkish Cypriots on the status of the island. In fall 2008, the Cypriot National Guard cancelled its annual Nikiforos exercises and the Turks cancelled their Toros military exercises on Cyprus. These acts conform with an established pattern: exercises occur when no progress is being made or no talks held and they are cancelled when talks are ongoing in order not to disturb a favorable climate. On a visit to Turkey in March 7, Secretary of State Hillary Rodham Clinton said, "the United states continues to support the U.N.-sponsored talks now taking place to achieve a settlement of the Cyprus conflict based on reunification of the island as a bi-zonal, bi-communal federation." Her joint statement with Foreign Minister Ali Babacan also called for "ending the isolation of the Turkish Cypriots" in the context of supporting a settlement. (Greek) Cypriot officials then restated their view that "the so-called isolation of the Turkish Cypriots" is the result of the Turkish occupation. President Barack Obama briefly encountered President Christofias on the sidelines of an European Union-U.S. summit in Prague on April 4. Then on April 6, President Obama addressed Turkish Grand National Assembly (parliament) in Ankara and said, "The United States is willing to offer all the help sought by the parties as they work towards a just and lasting settlement that reunifies Cyprus as a bizonal and bicommunal federation." Also in Prague, Secretary Clinton met Cypriot Foreign Minister Marcos Kyprianou. On April 15, she met Talat at the State Department. Talat said that he had asked the Secretary to support his call for a more active U.N. role, to appoint a special U.S. representative for Cyprus, and to contribute to efforts to lift the isolation of the Turkish Cypriot community. The State Department spokesman said that Clinton had "expressed her support for the efforts of both sides to build on the momentum and achieve a solution as soon as possible." He also said that it was not time to appoint a special coordinator for Cyprus. The Secretary met Kyprianou at the State Department on April 20. On the same day, Vice President Joe Biden met the foreign minister. Some in Cyprus and Greece were dismayed by responses of Philip Gordon, nominee for Assistant Secretary of State for European and Eurasian Affairs, at his Senate Foreign Relations Committee confirmation hearing on March 26. Gordon referred to a "Turkish presence in northern Cyprus" and noted that "there are a number of outside experts and the government of Cyprus who consider it an occupation." The Committee approved Gordon's appointment, but a Senate vote has been delayed due to a hold because of an issue unrelated to Cyprus. The island Republic of Cyprus gained its independence from Great Britain in 1960. The 784,000 Cypriots are 77% of Greek ethnic origin, and 18% of Turkish ethnic origin. (Maronite Christians, Armenians, and others constitute the remainder.) At independence, the Republic's constitution defined elaborate power-sharing arrangements between the two main groups. It required a Greek Cypriot president and a Turkish Cypriot vice president, each elected by his own community. Simultaneously, a Treaty of Guarantee signed by Britain, Greece, and Turkey ensured the new Republic's territorial integrity and a Treaty of Alliance among the Republic, Greece, and Turkey provided for 950 Greek and 650 Turkish soldiers to help defend the island. However, at that time, the two major communities aspired to different futures for Cyprus: most Greek Cypriots favored union of the entire island with Greece ( enosis ), and Turkish Cypriots preferred to partition the island ( taksim ) and unite a Turkish zone with Turkey. Cyprus's success as a new republic lasted from 1960-1963. After President (and Greek Orthodox Archbishop) Makarios III proposed constitutional modifications in favor of the majority Greek Cypriot community in 1963, relations between the two communities deteriorated, with Turkish Cypriots increasingly consolidating into enclaves in larger towns for safety. In 1964, Turkish Cypriots withdrew from most national institutions and began to administer their own affairs. Intercommunal violence occurred in 1963-64, and again in 1967. On both occasions, outside mediation and pressure, including that by the United States, appeared to prevent Turkey from intervening militarily on behalf of the Turkish Cypriots. On March 4, 1964, the U.N. authorized the establishment of the United Nations Peacekeeping Force in Cyprus (UNFICYP) to control the violence and act as a buffer between the two communities. It became operational on March 27 and still carries out its mission today. (See " U.N. Peacekeeping Forces " below for details.) In 1974, the military junta in Athens supported a coup against President Makarios, replacing him with a more hardline supporter of enosis . In July, Turkey, citing the 1960 Treaty of Guarantee as a legal basis for its move, sent troops in two separate actions and, by August 25, took control of more than 36% of the island. This military intervention had many ramifications. Foremost was the widespread dislocation of the Cypriot population and related refugee and property problems. The Athens junta fell, civilian government was restored in Athens and in Nicosia, Greece withdrew from NATO's military command to protest NATO's failure to prevent Turkey's action, and Turkey's civilian government entered an extended period of instability. U.S. relations with all parties, each of which blamed its fate on Washington's lack of support, suffered. After 1974, Turkish Cypriots emphasized a solution that would keep the two communities separate in two sovereign states or two states in a loose confederation. In February 1975, they declared their government the "Turkish Federated State of Cyprus" (TFSC). In 1983, Turkish Cypriot leader Rauf Denktash declared the "Turkish Republic of Northern Cyprus" (TRNC)—a move considered by some to be a unilateral declaration of independence. Only Turkey has recognized the TRNC. Denktash argued that creation of an independent state is a necessary precondition for a federation with the Greek Cypriots. He ruled out a merger with Turkey and pledged cooperation with U.N. settlement efforts. After 1974, U.N. negotiations focused on reconciling the two sides' interests and reestablishing a central government. They foundered on definitions of goals and ways to implement a federal solution. Turkish Cypriots emphasized bizonality and the political equality of the two communities, preferring two nearly autonomous societies with limited contact. Greek Cypriots emphasized the freedoms of movement, property, and settlement throughout the island. The two parties also differed on the means of achieving a federation: Greek Cypriots wanted their internationally recognized national government to devolve power to the Turkish Cypriots, who would then join a Cypriot republic. For the Turkish Cypriots, two entities would join, for the first time, in a new federation. These views could affect resolution of property, citizenship of Turkish settlers, and other legal issues. Since 1974, there have been many unsuccessful rounds of U.N.-sponsored direct and indirect negotiations to achieve a settlement: Agreed that (1) Cyprus will be an independent, nonaligned, bicommunal, federal republic; (2) each administration's control over territory will be determined in light of economic viability, productivity, and property rights; (3) freedom of movement, settlement, and property will be discussed; and (4) powers and functions of the central federal government would safeguard the unity of the country. Cypriot President Spyros Kyprianou (Makarios's successor) and Rauf Denktash agreed to talk on the basis of the 1977 guidelines and address territorial and constitutional issues, giving priority to Varosha (Maras to Turkish Cypriots) and demilitarization, and to eschew union in whole or part with any other country. (Varosha is a formerly prosperous tourist area just north of the U.N. buffer zone. See map at end of report.) After the 1983 declaration of the "TRNC," U.N. representatives conducted proximity or indirect talks on constitutional arrangements, withdrawal of foreign troops, and the status of international treaties and guarantees. After futile informal direct talks, Cypriot President George Vassiliou and Denktash submitted papers that hardened positions. In April 1989, U.N. Secretary-General Javier Perez de Cuellar proposed separate meetings. Denktash balked, but the U.N. believed the parties had agreed to "separate and periodic joint meetings." In June, Perez de Cuellar circulated draft ideas for an agreement. Turkish Cypriots argued that the U.N. had exceeded its good offices role and would accept only a document drafted by the parties. U.N. Security Council Resolution 649, May 13, 1990, reaffirmed the Secretary-General's right to make suggestions. It referred to the federal solution as bicommunal in its constitutional aspects and bizonal in its territorial aspects—the first U.N. reference to bizonality, a key concept for the Turkish Cypriots, who believe that it responds to their desire for separation. In June 1991, Perez de Cuellar called for an international meeting. On August 2, President George H.W. Bush announced that Greece and Turkey had agreed to a U.N. conference on Cyprus. The Secretary-General insisted, however, that the two sides be within range of agreement first. The Greek and Turkish Prime Ministers were unable to find common ground and, on October 8, de Cuellar reported that a conference was not possible. He blamed the failure on Denktash's assertion that each side possessed sovereignty, which U.N. resolutions attribute solely to the Republic. Secretary-General Boutros Boutros-Ghali's April 1992 Report to the Security Council presented a framework for a settlement, which he referred to as a "Set of Ideas." The Secretary-General suggested a bizonal federation of two politically equal communities, possessing one international personality and sovereignty. A bicameral legislature would have a 70:30 ratio of Greek Cypriots to Turkish Cypriots in the lower house and a 50:50 ratio in the upper house. A 7:3 ratio would prevail in the federal executive. Each community would be guaranteed to have a majority of the population and of land in its area. Non-Cypriot forces not foreseen in the 1960 Treaty of Alliance—that is, most Turkish troops—would withdraw. In June, Boutros-Ghali presented what diplomats referred to as a "non-map" of his territorial suggestions. A revised U.N. draft provided for separate referenda in each community within 30 days of an agreement, an 18-month transitional period, withdrawal of Turkish troops, guarantees consistent with Conference on Security and Cooperation in Europe (CSCE) principles, an end of the Greek Cypriot trade embargo of Turkish Cypriots, free movement, a time-table for the return of Greek Cypriot refugees and their property, three constitutions (one for each community and one for the central government), vice-presidential (Turkish Cypriot) veto power, an island-wide referendum on European Community membership, and the return of Varosha and about 30 villages to Greek Cypriots. Turkish Cypriots would receive aid and compensation. Greek Cypriots would get Morphou. Denktash claimed that the territorial proposal would displace 40,000 Turkish Cypriots or about one-quarter of the north's population. Vassiliou estimated that 82,000 Greek Cypriots would be able to return home and that Denktash's 40,000 figure was inflated. On August 21, Boutros-Ghali said that Denktash's territorial ideas were not close to his "non-map," but that Vassiliou was ready to negotiate an agreement based on it. The Secretary-General concluded that an accord was possible if Turkish Cypriots foresaw territorial adjustment in line with his map, which Denktash rejected. U.N. Security Council Resolution 774, August 26, 1992, endorsed the Set of Ideas and non-map. The Secretary-General's November 19 Report implied Denktash's responsibility for the lack of progress. On February 14, 1993, Glafcos Clerides, who accepted the Set of Ideas only "in principle," was elected president of Cyprus. On November 19, 1992, the Secretary-General called for confidence-building measures (CBMs): including a reduction of Turkish troops in exchange for a reduction in defense spending by the Republic of Cyprus; U.N. control of Varosha; contacts between Greek Cypriots and Turkish Cypriots; reduced restrictions on foreign visitors crossing the buffer zone; bicommunal projects; a U.N.-supervised island-wide census; cooperation in U.N. feasibility studies on resettlement and rehabilitation of people to be affected by territorial adjustments. From May 24 to June 1, 1993, Clerides and Denktash discussed opening Varosha and reopening Nicosia Airport, which has been under U.N. control but unused since 1974. Clerides insisted that all of Varosha be handed over, while Denktash balked at that idea and claimed that CBMs would benefit Greek Cypriots more than Turkish Cypriots. U.N. experts later determined that both sides would benefit and the Turkish Cypriots relatively more. On January 28, 1994, Denktash agreed to CBMs in principle. He later argued that a March 21, 1994, U.N. draft of the CBMs unbalanced their equities. Clerides said that he would accept the March 21 text if Denktash would. The Secretary-General's May 30 Report, made known on June 1, insisted that the March draft was not unbalanced. Boutros-Ghali blamed the Turkish Cypriots' lack of political will for the lack of agreement. On May 31, however, Denktash had said that he would accept the CBMs if improvements agreed to after March 21 were incorporated. Clerides would not negotiate beyond the March 21 document. Boutros-Ghali determined that there was sufficient progress to implement CBMs based on the March paper and clarifications, and planned identical letters to each leader expressing his intentions and to request the Security Council to endorse the March 21 paper. Neither side accepted this procedure. On January 4, 1997, Cyprus contracted to purchase S-300 (SA-10) anti-aircraft missiles from Russia. The missiles have a 90-mile range able to reach southern Turkey and were to protect air and naval bases in southern Cyprus that would be used by Greece. On January 20, Turkish President Suleyman Demirel and Denktash reacted by signing a joint defense declaration, stating that any attack on the TRNC would be an attack on Turkey. In October, Turkey conducted exercises in northern Cyprus, including the mock destruction of missile launchers. The air base at Paphos became operational for use by Greek fighters on January 24, 1998, and Greece sent planes there in June. Turkey responded by sending its planes to northern Cyprus. Cypriot troops completed S-300 training in Russia in July with a test-firing. On December 29, 1998, Clerides decided not to deploy the missiles after the EU, United States, Britain, and the U.N. provided an acceptable face-saving or political context for his decision. The key apparently was U.N. Security Council Resolution 1218, December 22, which requested the Secretary-General to work with the two sides on limiting the threat or use of force, reducing tension, building trust, and on efforts to achieve progress toward a settlement. In December 2007, Cyprus formally transferred the S-300 missiles to Greece, where they have been stored on the island of Crete, in exchange for TOR M1 and SUZANA missile systems. In 1997, Secretary-General Annan called for indirect talks followed by open-ended, direct talks between Clerides and Denktash. As goodwill gestures, Turkish Cypriots and Greek Cypriots exchanged visits to holy sites and held bicommunal events and meetings. During joint Greek-Greek Cypriot military exercises, Greek planes did not overfly Cyprus for about six months. Turkish planes did not overfly Cyprus for the same time. (The parties have generally held annual military exercises or made hostile gestures when progress is not being made in the settlement process and exercises have been called off when talks are held or prospects improve.) Clerides and Denktash met under U.N. auspices at Troutbeck, New York, July 9-12, and in Switzerland, August 11-15. Beforehand, Denktash said that he would not sign documents until the European Union (EU) suspended accession negotiations with the (Greek) Cypriot government as the sole representative of Cyprus. He refused to sign a joint declaration at the end of the talks. (See " European Union ," below.) After the December 12, 1997, EU formal decision to begin accession talks with Cyprus, Denktash informed the U.N. that "intercommunal talks have ended," and that he would only participate in talks between states having equal status. The TRNC suspended all bicommunal activities except religious pilgrimages. On April 23, 1998, Denktash and Demirel called for negotiations only between sovereign, equal states and said that the special relationship between Turkey and the TRNC would be enhanced. On June 20, 1999, the G-8 summit of leaders of major industrialized countries and Russia urged the Secretary-General to invite the Cypriot leaders to negotiate without preconditions. On June 29, the Security Council called upon the two leaders to support a comprehensive negotiation with no preconditions, all issues on the table, and to negotiate in good faith until a settlement is reached, with full consideration of all U.N. resolutions and treaties. Another resolution said that the goal is a Cyprus with a single sovereignty that comprises two politically equal communities in a bicommunal, bizonal federation. Annan and his Special Advisor Alvaro de Soto began proximity talks with Clerides and Denktash in December 1999. Five rounds of talks were held through November 2000. U.N. Security Council Resolution 1283, December 15, 1999, reaffirmed all relevant resolutions on Cyprus, without specifying a bizonal, bicommunal federation with a single sovereignty as its goal. Annan's addendum noted "The Government of Turkey has indicated that it concurs with ... the position of the Turkish Cypriot party, namely that the UNFICYP (United Nations Peacekeeping Force in Cyprus) can operate on both sides of the island only on the basis of the consent of both parties ...." The Turkish Cypriots interpreted the wording as a move toward recognition of their state, and the Greek Cypriots were upset with the Turkish Cypriot view. The Cypriot and Greek governments prevented inclusion of a similar addendum to U.N. Security Council Resolution 1303, June 15, 2000. Denktash then linked his attendance at talks to steps proving that UNFICYP needed Turkish Cypriot cooperation. Turkish forces set up a three-man checkpoint outside Strovilia, a small Greek Cypriot village in the no-man's land separating the Turkish Cypriot-administered area and a British base, where UNFICYP forces cross between north and south. The Turkish checkpoint thus blocked UNFICYP access. At the talks in September, Annan said that he had concluded that the equal status of the parties "must and should be recognized" explicitly in a comprehensive settlement. Denktash was pleased, but Clerides boycotted talks until reassured that they would take into account U.N. resolutions that call for a federal solution. On November 8, Annan gave his "assessment" in a diplomatic "non-paper." Media sources reported that he called for one sovereign, indissoluble, common state with a single international legal personality; common state law would overrule regional law; political equality would be defined as effective "participation" in government, not numerically; component states would be to a great extent self-governed; the return of an "appreciable amount of territory" to Greek Cypriots, with as little dislocation of Turkish Cypriots as possible and return of as many Greek Cypriots as possible; and a security regime including an international military force, police, and a political mechanism. Clerides welcomed these views. Denktash rejected them and, at a November 24 "summit" with Turkey's civilian and military leaders, announced his withdrawal from the talks because no progress could be made until two separate states were recognized. Turkey supported his decision. On September 5, 2001, Alvaro de Soto said that the Secretary-General had invited the two leaders to meet with him separately on September 12. Clerides accepted. Denktash did not because, "The necessary foundation has not been established." Denktash proposed a face-to-face meeting with Clerides and, although de Soto did not think it was a good idea, Clerides and Denktash met on December 4 for the first time since August 1997. The two leaders agreed to begin direct talks with no preconditions, all issues on the table, and to continue until a comprehensive settlement is achieved. On December 5, Clerides attended a dinner at Denktash's residence, thereby becoming the first Cypriot president to travel to the north since 1974. Denktash reciprocated by visiting Clerides's home on December 29. On January 16, 2002, Clerides and Denktash agreed to hold intensive peace talks beginning January 21 at Nicosia Airport, a U.N. base. Annan's September 6 Report to the Security Council noted that "the elements of a comprehensive settlement ... exist," and "that the gaps dividing the parties can be bridged." Clerides observed, however, that there appeared to be no way of approaching sovereignty and whether there would be a new state or a continuation of the Republic of Cyprus. On September 16, Denktash proposed Belgium as a model for foreign affairs and Switzerland as a model for domestic affairs. The Secretary-General presented a draft of The Basis for Agreement on a Comprehensive Settlement of the Cyprus Problem, commonly referred to as the Annan Plan, on November 11, 2002. It called for a "new state of affairs," in which the "common state" government's relations with its two politically equal component states would be modeled on the Swiss federal example. It would have a single international legal personality. Component states would participate in foreign and EU relations as in Belgium. Parliament would have two 48-seat houses. Each state would have equal representation in the Senate. Seats in the Chamber of Deputies would be allocated in proportion to population, provided that no state would have less than 25% of the seats. A Presidential Council would have 6 members; the offices of President and Vice President would rotate every 10 months among its members. No more than two consecutive presidents could come from the same state. Greek and Turkish troops could not exceed a four-digit figure (9,999). U.N. peacekeepers would remain as long as the common state, with the concurrence of the component states, decides. Cyprus would be demilitarized. During a three-year transition, the leaders of the two sides would be co-presidents. The 1960 Treaties of Establishment, Guarantee, and Alliance would remain in force. There would be a single Cypriot citizenship and citizenship of a component state; residence in a component state could be limited by citizenship, but such limits would have restrictions. Provisions would be made for return or compensation of property. Turkish Cypriot territory would be reduced to 28.5% of the island. Clerides and Denktash submitted comments. Greek Cypriot concerns included power-sharing, the length of the transition period, insufficient Greek Cypriot repatriation, and the large Turkish settler population. Turkish Cypriots criticized sovereignty provisions, the loss of water resources and territory, which would displace many Turkish Cypriots, and the return of Greek Cypriots to the north. Annan's December 10 revised Plan reduced the number of foreign troops and settlers and increased the number of returning Greek Cypriots, but reduced their numbers moving into Turkish Cypriot territory. He asked both sides to be in Copenhagen during an EU summit. Clerides and his National Council of all Greek Cypriot political party leaders were there, but Denktash went to Ankara for medical care and sent his "foreign minister" in his place. Annan had wanted a Founding Agreement signed by December 12, but this did not take place. Turkish Cypriots demonstrated for EU membership for a reunified island, a settlement based on the U.N. Plan, and Denktash's resignation between November 2002 and February 2003. On January 2, 2003, Recep Tayyip Erdogan, Chairman of the Justice and Development Party that had won the November 2002 parliamentary elections in Turkey, called for heeding the wishes of the people and pointedly said that he did not favor the policy of "the past 30 to 40 years...." Denktash and Clerides held talks from January 15 until mid-February 2003. On February 21, Greece and Turkey began talks on security issues related to Cyprus. Annan presented his third revised plan on February 26. It included a British offer to transfer 45 square miles or almost half of its sovereign base areas on the island: 90% to the Greek Cypriots and 10% to the Turkish Cypriots, if the two sides agreed to the Annan Plan. Revisions allowed Turkish Cypriots to retain the Karpass Peninsula, with Greek Cypriots settling there as well. Turkish Cypriot territory would decrease to 28.2%, and the number of Greek Cypriots returning north would increase to 92,000, but be capped at 21% of that region's population at the end of 15 years, and the number of Turkish settlers allowed to remain on the island would increase. Annan asked Denktash and the newly elected President of Cyprus Tassos Papadopoulos to permit separate, simultaneous referenda on the Plan on March 30. On March 10, 2003, Annan met Papadopoulos and Denktash in The Hague. The next day, Annan announced that he had been unsuccessful. Papadopoulos wished to be sure that gaps in federal legislation and constituent state constitutions would be filled, that Greece and Turkey would commit to security provisions, and that there was time for a campaign on the referendum. He was prepared not to reopen substantive provisions if Denktash did the same. (On November 20, 2003, Papadopoulos asserted that he would not have signed even if Denktash had done so. ) Denktash objected to basic points of the Plan, would not put it to a referendum, and argued that negotiations should begin anew. Annan suggested that negotiations continue until March 28 and that referenda be held on April 6. The parties did not agree. Annan announced that it was not possible to achieve a settlement before Cyprus signed the EU accession treaty on April 16. Annan's April 1 Report said that Denktash "bears prime responsibility" for the failure, a conclusion echoed by U.N. Security Council Resolution 1575, April 14, 2003. On April 18, Annan stated the Plan could be amended, but it "must be accepted as a basis for negotiating first." On April 23, the Turkish Cypriot administration opened border checkpoints. The Cypriot government declared the decision illegal, but facilitated free movement. Residents have since made millions of border crossings with very few incidents. Papadopoulos said that he was ready to negotiate based on the Annan Plan if it were improved to take into account the Treaty of Accession to the EU and to create a more viable and workable solution. Denktash stated "there is nothing to discuss." In his November 12 Report, Annan reiterated that "no purpose would be served" in renewing his mission of good offices unless both Cypriot parties, Greece, and Turkey were ready to finalize negotiations on the basis of his February 2003 Plan and to put the results to referenda shortly thereafter. On January 12, 2004, after meeting with Turkish officials, Denktash admitted, "The Annan Plan is still on the table...." On January 23, the Turkish National Security Council—the country's highest ranking military and civilian leaders—reiterated its determination to reach a solution with the Plan as a reference. On January 24, Prime Minister Erdogan told Annan that Turkey wanted talks to resume to reach an agreement and hold referenda before May 1 (when Cyprus was scheduled to join the EU). Erdogan declared that if the two sides could not fill in all the "blanks," then Turkey would allow Annan to do so if the Greek Cypriots accept that as well. Following talks with Annan in New York, Papadopoulos and Denktash agreed to resume negotiations on February 19 on Cyprus. They failed to agree on revising the Plan in talks held until March 22. On March 17, Denktash said that he would not attend follow-on talks in Switzerland beginning on March 24, and later declared that he would campaign against an accord. "Prime Minister" Mehmet Ali Talat represented northern Cyprus. On March 29, Annan presented a final revised Plan. Changes called for a Presidential Council with six voting members and additional non-voting members to be decided by Parliament to exercise executive power. The offices of President and Vice President would rotate every 20 months. Greek Cypriots displaced in 1974 who return north would be limited to 18% of the population there; Turkish military forces on the island would be reduced to 6,000 over 42 months and further in subsequent years; when Turkey joins the EU, the number falls to 650 Turkish troops and 950 Greek troops. Greek Cypriots would have more property returned. Annan announced on March 31 that the Plan would be put to referenda on April 24. In an emotional speech on April 7, Papadopoulos rejected the Plan for a number of reasons. Among them were doubt about whether the Turkish parliament would ratify the settlement plan; belief that Turkish Cypriots would gain immediate benefits (i.e., the end of the Republic of Cyprus and creation of a United Republic of Cyprus), while the Greek Cypriots would only see gains in the future; restrictions on Greek Cypriot acquisition of property in northern Cyprus and on return of refugees there, and the denial of political rights of (Greek Cypriot) returnees to the north; Greek Cypriot insecurity due to the authorization of even a small number of Turkish troops and increased Turkish guarantor rights; doubt about the economic viability of the Plan and concern about its harm to the Greek Cypriot standard of living; and belief that the island would not really reunify because there would be two states living separately and governmental decision-making procedures could create "paralyzing impasses." Finally, Papadopoulos admitted his preference for a solution after Cyprus's accession to the EU when it would have more leverage over Turkey given Turkey's aspirations to become an EU member. The U.N., EU, and United States criticized Papadopoulos's speech as part of a distortion of and propaganda campaign against the Plan to feed the Greek Cypriots' sense of insecurity, and the three objected to government restrictions on broadcasting views favoring the Plan. Greek Prime Minister Karamanlis half-heartedly endorsed the Plan, saying that positive elements outweighed "difficulties." As noted above, Denktash rejected the Plan, but "Prime Minister" Talat called for a "yes" vote. The Turkish government supported the Plan. The United States and Britain tried to address the guarantee or insecurity issue with a U.N. Security Council resolution to replace UNFICYP with a U.N. Settlement Implementation Mission in Cyprus (UNSIMIC), and other measures. On April 21, Russia vetoed the draft, saying that, while it supported Annan's efforts, the Council should not act before the referenda and that the draft should have been discussed more. (Greek) Cypriot Foreign Minister George Iakovou had previously visited Russia to explain his government's opposition to the Annan Plan. In referenda held on April 24, 76% of Greek Cypriot voters rejected the Plan, while 65% of Turkish Cypriot voters accepted it. Afterwards, Talat urged the international community to end northern Cyprus's isolation by lifting restrictions on trade, travel, sports, and flights in order for it to develop economically and attract foreign investment. He said that he would not seek international recognition of the TRNC because Turkish Cypriots voted for and want reunification of the island. (Greek) Cypriot officials argued that direct flights and exports from the north would not contribute to reunification and that it was the sovereign right of the Republic of Cyprus to determine legal ports of entry for persons, capital, and goods. In his May 28, 2004 Report, Annan described developments leading to the referenda. He said that the Greek Cypriots' vote must be respected, but they need to demonstrate willingness to resolve the Cyprus problem through a bicommunal, bizonal federation and to articulate their concerns about security and implementation of the Plan with "clarity and finality." As a contribution to reunification, he called for the elimination of restrictions that have the effect of isolating the Turkish Cypriots. He concluded, "A solution ... also needs bold and determined political leadership on both sides of the island, as well as in Greece and Turkey, all in place at the same time, ready to negotiate with determination and to convince their people of the need to compromise." He criticized Papadopoulos in particular. On June 7, Papadopoulos wrote to Annan about "inaccuracies" in his Report, which Annan stood by. The Security Council has not endorsed the Report due to Russian objections on behalf of the Greek Cypriots. In his September 24 Report, Annan stated that he still saw no basis for resuming his good offices mission, and that Greek Cypriot and Turkish Cypriot leaders had ceased contacts and signs of mutual distrust had reappeared. Annan asserted that he did not intend to appoint a new Special Advisor on Cyprus (to replace de Soto, who was reassigned). On February 10, 2005, Annan observed that the Turkish side, particularly Erdogan, had indicated a possible readiness to resume talks. Annan urged Papadopoulos to put on paper the changes that he would want to have in the Plan. On March 21, 2005, Papadopoulos asserted, When the Greek Cypriot side gives in writing and in detail the changes it wants to a U.N. settlement plan, then the U.N. Secretary-General will decide if ... 'we are proving our political will for a settlement.' This means that he will have the right alone ... to ... decide if what we are asking for is reasonable, if it provides the basis for the resumption of his initiative.... We will not accept another mediating role of the U.N. Secretary-General. The national issues ... can(not) be ... solved through the mediation of a foreigner.... He added that Cypriots must have a reasonable expectation of success in the next talks, which have to be well prepared. On May 27, Annan again reported little sign of improvement. He maintained that Greek Cypriot litigation against those buying Greek Cypriot property in the north in southern courts and in the European Court of Human Rights against Turkey "poses a serious threat to people-to-people relationships and to the reconciliation process." Implicitly challenging a Greek Cypriot view, Annan asserted that the rotation of Turkish troops and equipment did not imply a "reinforcement" because numbers and types remain unchanged. Under Secretary-General for Political Affairs Kieran Prendergast visited Cyprus, Greece, and Turkey and reported on June 22 that there was neither a level of mutual confidence nor a disposition to compromise and that "launching an intensive new process prematurely would be inadvisable." Papadopoulos reportedly told Prendergast that he wanted to reopen most of the issues in the Annan Plan. On October 26, Papadopoulos said that he wanted a U.N. initiative with more active EU involvement. On November 1, Talat responded that the EU cannot promote a solution because it is not an "unbiased organization" since only the Greek Cypriot side is in the EU. In his November 29 Report, Annan again concluded that time is not ripe to appoint a full-time person to carry out his good offices mission. On January 24, 2006, Turkish Foreign Minister Abdullah Gul presented a 10-point Action Plan (sometimes called the Gul Plan) to the Secretary-General, proposing the opening of Turkish ports, airports, and airspace to Greek Cypriot ships and planes; opening of ports and airports in northern Cyprus; inclusion of Turkish Cypriots in international activities; and special arrangements to include north Cyprus in the EU customs union. It also recommended quadripartite talks among Turkey, Greece, and Turkish and Greek Cypriots. The (Greek) Cypriot government rejected the proposal, saying that it was an attempt by Turkey to evade its EU obligations and upgrade the status of the Turkish Cypriot community, and reiterated proposals concerning the opening of Famagusta (Gazimagusa to Turkish Cypriots). (See " European Union " below.) On February 5, 2006, Papadopoulos reiterated conditions for resuming talks: no mediation, no timetables, and a referendum on a solution. On February 23, Talat responded that there could be no resolution without a deadline and arbitration. On February 28, Annan and Papadopoulos met in Paris. Annan stated that the Greek Cypriot and Turkish Cypriot leaders had agreed to undertake bicommunal discussions at the technical level on a series of issues to benefit all Cypriots, with the aim of restoring trust and preparing for the earliest full resumption of the negotiating process. Annan and Papadopoulos also agreed that it would be beneficial if progress could be made on disengagement of forces, demilitarization of the island, and the complete demining of Cyprus, and on Famagusta. The meeting prompted new disagreements between the parties. On April 26, Talat said that he is ready to start settlement talks from scratch, but that it would be more rational to begin with the Annan Plan. On May 10, Papadopoulos declared that he would never accept the reintroduction of the Annan Plan even with marginal changes." In his May 23, Report, Annan stated that there have been "no tangible indicators of an evolution in the respective positions" of the two sides that had produced the impasse, although they had signaled some willingness to re-engage. On July 3, Papadopoulos and Talat met for the first time since March 2004, on the sidelines of a meeting of the U.N. Committee on Missing Persons. From July 3-9, U.N. Under Secretary-General for Political Affairs Ibrahim Gambari visited Greece, Turkey, and Cyprus. After meeting Papadopoulos and Talat, Gambari presented a joint statement known as the July 8 agreement to begin discussing "issues that affect the day-to-day life of the people and concurrently those that concern substantive issues, both of which will contribute to a comprehensive settlement." Moreover, "to ensure that the 'right atmosphere' prevails for this process to be successful," they agreed that "an end must be put to the so-called 'blame game.'" Technical committees dealing with day-to-day issues were to begin work provided that the two leaders exchanged lists of issues of substance to be studied by expert bicommunal working groups. The two leaders would meet from time to time to instruct the working groups and review work of the technical committees. On July 31, the two sides exchanged lists of issues to be discussed, but they differed on the agenda and procedures. For Talat, technical issues included environmental protections, missing persons, and policing. Essential ones include Turkish troops, property rights, territory, and the government of a (re)united Cyprus. The Turkish Cypriots wanted to pursue both tracks simultaneously, with direct talks between Talat and Papadopoulos on essential issues. For the Greek Cypriots, technical issues reportedly included checkpoints, introduction of the Euro, drug trafficking, money laundering, policing, and movement of persons. Core issues included governance, central bank, Turkish troops, settlers, citizenship, property, and the like. The Greek Cypriots wanted technical committees to prepare the ground for direct talks. As has often been the case when no major efforts are being made to advance an overall settlement, the focus shifted to other issues. On December 29, the Turkish Cypriots began dismantling a footbridge (a metal overpass) at the Ledra Street crossing in Nicosia to facilitate the reopening of the crossing. Greek Cypriots said that reopening did not depend solely on the removal of the footbridge but also on security for those using it. Papadopoulos said that he would take down a defense wall on his side of the street if Turkey withdrew its troops from the vicinity (i.e., to 100 meters from the crossing) and turned the area over to U.N. control or if the walled city of Nicosia is totally demilitarized and police and UNFICYP take over responsibility to police it. He also called for the removal of all symbols, such as Turkish Cypriot flags, that indicate a border checkpoint and not a crossing point. Although the Greek Cypriots removed the wall on March 9, 2007, Papadopoulos reiterated that preconditions must be met for the crossing to open. Talat questioned concerns about security at the crossing and stated that police and not soldiers would be on duty when the crossing is opened. He asserted that demilitarization of the city could only be realized in a comprehensive solution to the Cyprus problem. Similarly, the Turkish Foreign Ministry rejected preconditions. Five other crossing points were in operation, but the pedestrian shopping area of Ledra Street would be the busiest. In January 2007, the government of Cyprus signed an agreement with Lebanon to delimit an exclusive economic zone for oil and gas exploration in the eastern Mediterranean. (In 2005, it had signed a similar agreement with Egypt.) Turkish Cypriots and Turkey argued that, because in their view Greek Cypriots do not represent the entire island and ignore the rights of the Turkish Cypriots, the agreement is not valid. The Turkish Foreign Minister said that Turkey was determined to protect its rights and interests in the eastern Mediterranean, and the Energy Minister of announced that the Turkish Petroleum Corporation (TPAO) planned to start oil exploration in the Mediterranean with seismic studies. On February 15, (Greek) Cyprus began the process of granting exploration and development licenses to international companies, and Turkey called on it not to do so. Few companies expressed interest, perhaps because of the reportedly questionable commercial value of the reserves. Tassos Tzionis and Rasit Pertev, representatives of the Greek Cypriot and Turkish Cypriot leaders, held many meetings with the Secretary-General's Special Representative for Cyprus Michael Moeller on implementation of the July 8 agreement, but they failed to work out modalities for launching working groups and technical committees. According to the Secretary-General's June 4, 2007 Report to the Security Council, the two sides continued to differ on what constitutes day-to-day matters and on mechanisms for resolving disagreements. In an interview with Turkish television, Cypriot Foreign Minister Erato Kozakou-Markoullis said that internal issues would have to be discussed by the leaders of the two communities, but that the Greek Cypriots wanted to discuss the international aspect, i.e., the presence of Turkish troops, the guarantee system, and the security of Turkish Cypriots, with either Turkish Prime Minister Erdogan or the Turkish military forces. She said that the Turkish military forces hold the key, not the Turkish politicians. On September 5, Papadopoulos and Talat met, but achieved no results. Papadopoulos claimed that Talat had attempted to change the parameters of the July 8 agreement by beginning negotiations without committees and lacked the necessary political will to implement the agreement. His spokesman also charged that Talat had tried to revive the Annan Plan, but that Papadopoulos reminded him that the only agreed procedure was now the July 8 accord. Talat said that he had proposed five committees or working groups on the basic aspects of the Cyprus issue and one for EU affairs as well as the resumption of full negotiations in two and a half months with the goal of reaching a solution by the end of 2008. He maintained that the Greek Cypriots were not psychologically ready to start negotiations and that Papadopoulos wanted an unlimited preparation period. In his February inaugural address, the new Cypriot President Dimitris Christofias, a Greek Cypriot, expressed hope to achieve a "just, viable, and functional solution" to the Cyprus problem. He said that he seeks to restore the unity of the island as a federal, bizonal, bicommunal Republic, exclude any rights for military intervention, and provide for the withdrawal of Turkish troops and, ultimately, the demilitarization of the island. He said that the starting point would be implementation of the July 8 agreement. As a candidate, Christofias had maintained that Greek Cypriot refugees must be given the right to choose whether they want to return to their homes under Turkish Cypriot administration and that Turkish settlers cannot become citizens of the Republic. Christofias also reaffirmed that the 2004 Annan Plan is null and void. After Christofias's election, Turkish Cypriot leader Mehmet Ali Talat said, "A solution in Cyprus is possible by the end of 2008...." He also declared that "the goal is to establish a new partnership state in Cyprus, based on the political equality of the two peoples and the equal status of two constituent states." On March 21, Christofias and Talat met and agreed that their advisors, George Iakovou and Ozdil Nami, would establish working groups and technical committees and their agendas. The two leaders also decided to meet in three months to review the work of the committees and groups and use their results to start negotiations under U.N. auspices. In addition, they agreed to reopen the Ledra Street crossing between the northern and southern parts of Nicosia. Iakovou and Nami later decided to set up six working groups on issues related to a comprehensive settlement, including governance and power-sharing, EU matters, security and guarantees, territory, property, and economic matters, as well as seven technical committees to address day-to-day issues of crime, economic and commercial matters, cultural heritage, crisis management, humanitarian matters, health, and environment. On April 3, the Ledra Street crossing reopened for the first time since December 1963. On April 11, the Secretary-General named Taye-Brook Zerihoun of Ethiopia as his Special Representative to Cyprus, head of UNFICYP., and Deputy Special Adviser. On May 23, Christofias and Talat met in Zerihoun's presence to review progress in talks between bicommunal teams of experts (which began work on April 21). In their joint statement, the two leaders reaffirmed their commitment to a bizonal, bicommunal federation with political equality. The partnership will have a federal government with a single international personality as well as Greek- and Turkish-Cypriot constituent states of equal status. On July 2, they met and agreed ins principle on a single national sovereignty and citizenship. On July 25, Christofias and Talat decided to start full-fledged negotiations on September 3. The solution reached would be subject to referenda in the two sides simultaneously. The two leaders also approved confidence-building measures in the areas of the environment, cultural heritage, crisis management, and criminal matters and gave instructions for their full and immediate implementation. In addition, they instructed their representatives to take up the issue of Limnitis/Yesilirmak and other crossings. After ceremonial talks on September 3, substantive negotiations on governance and power-sharing began on September 11. On July 18, U.N. Secretary-General Ban Ki-moon named former Australian Foreign Minister Alexander Downer to be his Special Advisor on Cyprus. On February 16, 2003, Tassos Papadopoulos was elected President of Cyprus as the candidate of several parties: his right-wing Democratic Party (DIKO), the Progressive Party of Working People (AKEL/communist), the United Democratic Union of Cyprus (EDEK/Socialist), and the Greens. AKEL leader Dimitris Christofias, as President (Speaker) of the House, acted for the president when he was absent or incapacitated. The 1960 Constitution reserves the vice presidency for a Turkish Cypriot. In the May 21, 2006, elections for the 56-seat unicameral (Greek) Cypriot House of Representatives, AKEL placed first with 31.16% of the vote and 18 seats (down two from 2001), and the opposition Democratic Rally (DISY) led by Nikos Anastasiadis was second with 30.33% and 18 seats (down one). Papadopoulos's DIKO was third, scoring gains with 17.91% of the vote and 11 seats (up 2). EDEK took 8.91% and 5 seats (up 1); the European Party (EVROKO), 5.73% and 3 seats (up 1); and the Greens, 1.95% and 1 seat. DIKO's gains as well as those of EDEK, EVROKO, and the Greens, which share Papadopoulos's views on a settlement, were seen as an endorsement of his hardline policies. Christofias was reelected Speaker. The three-party (DIKO/AKEL/EDEK) coalition dissolved after AKEL decided on July 8, 2007 to nominate Christofias as a candidate for president in the February 2008 election because it disagreed with the government's handling of the Cyprus (settlement) issue. Four AKEL ministers resigned from the cabinet on July 11; their nonpartisan replacements included former Ambassador to the United States Erato Kozakou-Markoullis as Cyprus's first woman Foreign Minister. On February 24, 2008, Soviet-educated, 61-year-old, Dimitris Christofias was elected to a five-year term as President of Cyprus in a second round of voting with 53.36% of the vote and the backing of his AKEL, DIKO, EDEK, and the United Democrats. Former Foreign Minister Ioannis Cassoulides of DISY placed second with 46.64% of the vote. Ousted President Papadopoulos and several other candidates had been eliminated in the first round of voting on February 17. Both Christofias and Cassoulides campaigned by opposing Papadopoulos's uncompromising policies of toward the Turkish Cypriots and stagnation in settlement efforts. Christofias appointed ministers from AKEL, DIKO, and EDEK, reviving Papadopoulos's coalition. He named Markos Kyprianou of DIKO, a former European Commissioner of Health and Consumer Protection and Member of the European Parliament, and son of former President Spyros Kyprianou, to be foreign minister. DIKO party leader Marios Garoyian was elected Speaker of the House. Rauf Denktash led northern Cyprus from 1975 to 2005. The December 14, 2003, parliamentary elections had produced a tie between supporters and opponents of the Annan Plan in the 50-seat legislature. A coalition of the Republican Turkish Party (CTP) and the Peace and Democracy Movement (BDH) had hoped to oust Denktash as negotiator and achieve a solution based on the Annan Plan by May 2004, when Cyprus was to enter the EU. Instead, a close race produced a coalition government with Mehmet Ali Talat as Prime Minister and Serdar Denktash, Rauf's son and head of the Democrat Party (DP), as Deputy Prime Minister and Foreign Minister. After several members resigned, the government was reduced to a minority and could not legislate. Early parliamentary elections were held on February 20, 2005. With an 80% voter turnout, the CTP took 44.45% of the vote and 24 seats, while the National Unity Party (UBP) won 31.71% and 19 seats, DP won 13.49% and 6 seats, and BDH 5.81% and 1 seat. Talat and Denktash formed a new coalition. On April 17, 2005, Talat had been elected "President" of the TRNC with 55.6% of the vote to 22.7% for UBP'S Dervis Eroglu, in a field of nine. Ferdi Sabit Soyer of the CTP became Prime Minister. On June 25, 2006, mid-term elections for vacancies changed the distribution of seats in parliament to CTP 25, UBP 17, DP 7, and BDH still 1. On September 8, three UBP deputies and one DP deputy resigned from their parties; CTP then ended its coalition with DP. The UBP and DP defectors formed the Freedom and Reform Party (ORP) or Free Party for short, chaired by Turgay Avgi. UBP and DP charged that unethical methods had been used to effect the change, and some suggested that the Justice and Development Party (AKP) ruling party in Turkey had assisted in the defections. Soyer formed a new coalition of CTP and the Free Party; Avgi is Foreign Minister. UBP and DP then boycotted the parliament and, in January 2008, Serdar Denktash and the remaining DP deputies resigned from parliament. The "motherlands," Greece and Turkey, defend and protect their ethnic kin, and their bilateral relations, strained over Aegean Sea issues, have been further harmed because of Cyprus. On November 16, 1993, Greek Prime Minister Andreas Papandreou and (Greek) Cypriot President Clerides agreed to a still-effective joint defense doctrine whereby their governments would decide on the Cyprus issue jointly, Greece would include Cyprus in its defense plan, and any Turkish advance would lead to war between Greece and Turkey. Clerides announced in April 1994 that Greece would provide air cover for Cyprus, while Cypriot bases would refuel Greek Air Force planes, a naval base would be set up, and elite Greek troops would bolster land forces. In July 1999, Greece and Turkey began a dialogue, excluding Cyprus and the Aegean, that has led to many bilateral accords and a rapprochement. In 2004, new Greek Prime Minister Costas Karamanlis said that a resolution of the Cyprus issue should not be a precondition for Turkey joining the EU or for improving Greek-Turkish relations. Some analysts have suggested that Athens has advised Nicosia that its actions must not harm Greece's national interest, defined as diminishing the Turkish threat to Greece by keeping Turkey on the path to EU membership. Therefore, in this view, Athens will tolerate any action by Nicosia in the EU short of the exercise of its veto power against Turkey's EU progress. Meanwhile, Turkish governments had argued for years that the Cyprus problem was not acute because Turkish Cypriot security had been ensured since 1974, and that dialogue was the appropriate channel for resolution. Turks agree that their armed forces should not withdraw from Cyprus until Turkish Cypriots' rights are guaranteed effectively. In a policy shift in 2004, the Turkish government decided that no solution is not a solution and sought U.N. action. Turkey has promised $1.8 billion in aid to the TRNC over three years, from 2007 to 2009. In 2007, it provided approximately $571 million. Some powerful circles in Ankara may create difficulties for Turkish Cypriot leader Talat's efforts to achieve a settlement. Then Chief of the Turkish General Staff General Yasar Buyukanit visited Cyprus on March 29, 2008, and stated, "Our soldiers are here for the security of the Turkish Cypriots and they will continue to be here. Reaching an agreement is not enough alone for withdrawal of (Turkish) soldiers from Cyprus.... We should see how safe Turkish Cypriots are. We should believe they are safe." On April 11, Turkish Land Forces Commander General Ilker Basbug (now Chief of Staff) visited northern Cyprus and asserted that Cyprus is an issue concerning the security of Turkey and the Turkish Republic of Northern Cyprus; therefore, the 1960 Treaties of Guarantee and Alliance should not be diluted. On July 20, 2008, Turkish Prime Minister Recep Tayyip Erdogan extended full support to Talat and said that "a comprehensive solution will be possible in a new partnership where the Turkish Cypriot people and the Turkish Republic of Northern Cyprus will equally be represented as one of the founder states. This new partnership will be built upon such indispensable principles as bizonality, political equality, and Turkey's effective guarantorship." Greek Cypriots do not accept that the TRNC will be a "founder state" or Turkey's guarantorship and see the state as a continuation of the Republic of Cyprus. Cypriot President Christofias requested Secretary General Ban Ki-moon to appeal to Turkey "irrespective of my friend Mehmet Ali Talat's reaction, the key lies with Ankara. This way the Turkish Cypriot side will become more logical on the issues we are discussing on governance...." A customs agreement between Cyprus and the European Community (EC) came into force in 1988. On July 4, 1990, Cyprus applied for EC membership. Turkish Cypriots objected because, by accepting the application, the EC recognized the Republic's government and not their own. Greece's EC membership and Turkey's lack thereof led Turks and Turkish Cypriots to view increased EC/EU involvement with Cyprus as favoring Greek Cypriots to their detriment. The EU was to set a date for Cyprus's accession negotiations in January 1995. The EU preferred a prior settlement of the Cyprus issue, but was willing to begin talks without one. In December 1994, Greece had vetoed an EU-Turkey customs union and some Europeans demanded that the veto be lifted before addressing Cyprus's application for membership in the EU. On March 6, 1995, the EU separately ratified the customs union accord and scheduled accession talks with Cyprus. At Greece's insistence, the Greek Cypriot government of the Republic was the EU's interlocutor. Turkish Cypriots were excluded from accession talks. On July 10, 1997, the European Commission reconfirmed that membership talks with Cyprus would open in 1998. On July 20, 1997, then Turkish Deputy Prime Minister Bulent Ecevit and Turkish Cypriot leader Rauf Denktash issued a joint declaration, noting the July 10 statement and calling for a process of partial integration between Turkey and TRNC to parallel that of Cyprus and the EU. On several occasions, then Greek Deputy Foreign Minister George Papandreou said that Greece would block the EU's eastward expansion (to Poland and the Baltic countries) if Cyprus were not accepted because it is divided. On November 10, 1998, the EU began accession negotiations with Cyprus. On July 10, 1999, Greek Alternate Foreign Minister Yiannos Kranidiotis said that Greece would not object to Turkey's EU membership candidacy if assured that Cyprus's accession would go ahead even without a solution. The EU Helsinki summit's conclusions on December 10, 1999, said, "If no settlement has been achieved by the completion of accession negotiations, the ... decision on accession will be made without the above (i.e., a settlement) being a precondition. In this the Council will take account of all relevant factors." The summit also affirmed Turkey's EU candidacy. In December 2002, the EU concluded accession talks with Cyprus. At the same time, the EU and NATO agreed on EU use of NATO assets, stipulating that Cyprus would not take part in EU military operations conducted using NATO assets once it became an EU member because it is not a member of NATO nor of NATO's Partnership for Peace. This agreement is referred to as Berlin Plus. After Cyprus became an EU member in 2004, however, the EU said that it could not restrict Cyprus's participation in EU operations cooperating with NATO. This led Turkey to veto Cyprus's participation in the EU's discussions with NATO on issues such as terrorism and its participation in an EU police mission in Kosovo, although it did not oppose EU-NATO cooperation there. Turkey's stance also has affected NATO-EU cooperation in Afghanistan. Cyprus signed the Treaty of Accession to the EU on April 16, 2003, to become an EU member on May 1, 2004. An attached Protocol suspends the application of the acquis communautaire (EU rules and legislation) to those areas "in which the government of the Republic of Cyprus does not exercise effective control." On July 14, 2003, the (Greek) Cypriot parliament ratified the Treaty on behalf of the entire island. On June 3, the European Commission had proposed measures to bring northern Cyprus closer to the EU, including €12 million (US$14 million) in aid. It suggested that the Turkish Cypriot Chamber of Commerce certify the movement of goods between Cyprus and the EU (to circumvent a de facto EU embargo on Turkish Cypriot goods that began with a 1994 European Court ruling that certificates of origin and sanitary quality issued by Turkish Cypriot authorities were not valid, in other words requiring Greek Cypriot certificates). The (Greek) Cypriot government authorized the Chamber only to issue certificates of origin, but said that exports required further certification to be done at legal (southern) ports to ensure that EU specifications were met. Denktash accepted the aid, but rejected the trade measures. On November 5, 2003, the Commission's annual report on Turkey's progress toward accession warned that "absence of a settlement on Cyprus could become a serious obstacle to Turkey's EU aspirations," while the December 12 European Council (summit) declaration said that "a settlement would greatly facilitate Turkey's membership aspirations." The EU regretted the Greek Cypriots' rejection of the Annan Plan and congratulated the Turkish Cypriots for their "yes" vote in the April 24, 2004, referenda. EU foreign ministers said that they were "determined to put an end to the isolation of the Turkish Cypriot community and facilitate the reunification of Cyprus by encouraging the economic development of the Turkish Cypriot community." They called on the Commission to submit proposals. "Green Line Regulations," adopted on April 29 and effective on August 23, require Greek Cypriot authorities to end restrictions on EU citizens' travel between the two parts of the island and allow Turkish Cypriots to export more products through the south. On May 1, Cyprus officially joined the EU. EU laws and regulations are suspended in the north. On July 7, 2004, the Commission proposed additional measures to end the Turkish Cypriots' isolation and to help eliminate the economic disparities between the two communities on the island, including €259 million (US$307 million) in aid for 2004-2006 and preferences to allow direct trade between northern Cyprus and EU countries. The (Greek) Cypriot government agreed to the aid but rejected the trade measure as illegally based on an EU provision providing preferential treatment for third parties which, it argued, would allow the TRNC to acquire characteristics of state short of international recognition. The Greek Cypriots also insisted that all trade between the north and Europe be conducted via the south. The Turkish Cypriots viewed the EU aid and trade proposals as indivisible, arguing that aid without trade would not grow their economy and that required use of southern ports would force the north's economy southward and make it smaller over time. In June 2005, the EU held unsuccessful talks to break the stalemate. The Greek Cypriots proposed that Varosha be returned to them with joint operation of the port at Famagusta and a moratorium on the sale of or construction on Greek Cypriot property in the north. They argued that opening northern ports and airports would lead to the development of separate economies and the permanent division of Cyprus. The Turkish Cypriots offered Varosha in return for open ports and airports in the north. In December, a draft European Commission declaration echoed the Greek Cypriot proposal and was opposed by the Turkish Cypriots. On December 17, 2004, the EU had decided to begin accession talks with Turkey on October 3, 2005, welcoming its "decision to sign the Protocol regarding the adaptation of the Ankara Agreement (customs union), taking into account the accession of ten new Member States" (including Cyprus) "prior to the actual start of accession negotiations." On July 30, 2005, Turkey signed the Protocol but simultaneously issued a unilateral declaration, noting that its signature did not amount to recognition of the Republic of Cyprus or prejudice Turkey's rights and obligations emanating from the treaties of 1960. On September 21, the EU declared that Turkey's unilateral declaration had no legal effect on its obligations under the Protocol; called for its full, non-discriminatory implementation, and the removal of all obstacles to the free movement of goods (meaning that Turkey must open its ports and airports to Greek Cypriot ships and planes); stated that the EU will evaluate implementation in 2006 and that failure to implement in full will affect progress of Turkey's accession negotiations with the EU; and noted that recognition of all member states is a component of the accession process and underlined the importance of normalization of relations between Turkey and all EU member states. Cypriot President Papadopoulos expressed satisfaction with the EU declaration's non-linkage of Turkey's recognition of Cyprus to a solution to the Cyprus problem. Turkish Cypriot leader Talat was disappointed that the declaration did not call on the Republic to lift restrictions on the north. The Turkish Foreign Ministry expressed sadness over its one-sidedness and reaffirmed that recognition of Cyprus is "out of the question before a comprehensive settlement." Turkish officials insist that their ports and airports will not open to Cyprus before the isolation of northern Cyprus ends. The EU's Negotiating Framework for Turkey's accession requires Turkey to work toward normalizing relations with Cyprus and to align its position within international organizations (such as NATO) toward membership of EU member states (Cyprus) of those organizations with the policies of the EU and its member states. Cyprus has not applied to join NATO, but Turkey has blocked Cyprus from joining the Treaty on Open Skies, the Wassenaar Arrangement, the Organization of the Black Sea Economic cooperation (BSEC), and the Organization for Economic Cooperation and Development (OECD). Cyprus has vetoed Turkey's participation in the European Defense Agency. On February 24, 2006, the EU Committee of Permanent Representatives (COREPER) approved a financial aid package for northern Cyprus of €139 million (U.S.$165 million) for 2006, decoupled from trade measures. (€120 million scheduled for allocation in 2005 was no longer available.) The European Council adopted the regulation on February 27. The (Greek) Cypriot government welcomed it, but the Turkish Cypriot administration would not accept aid given under Greek Cypriot supervision. Nonetheless, on June 27, the European Commission decided to open an office in the north to administer the aid. (The Council has not adopted the separate regulation on direct trade, and little aid has been disbursed. According to a September 2007, European Commission report, impediments to aid include low absorption capacity of the Turkish Cypriot administration and the propensity of both communities to block projects for political reasons.) On June 12, 2006, Turkey provisionally completed the first and easiest of 35 negotiating chapters, on Science and Research, in the process of joining the EU. However, the EU conclusions that day referred implicitly to Turkey's refusal to open its ports to Cyprus, as required by Turkey's customs union with the EU. The EU asserted that Turkey's failure to "implement its obligations fully will have an impact on the negotiating process" and that, in view of this consideration, "the EU will, if necessary, return to this chapter." The Finnish Foreign Minister, for the Finnish EU Presidency, reportedly called on Turkey to open one or several ports and an airport to (Greek) Cypriot ships and planes, to allow the deserted resort of Varosha to be placed under U.N. administration for a two-year interim period, the port of Famagusta to be open to trade by both sides under EU administration, and for the (Greek) Cypriots to lift their veto on progress in membership negotiations with Turkey. Both sides raised objections. The Turkish Cypriots opposed the arrangement for Varosha and the failure to include the opening of their airport at Ercan (Tymbou to Greek Cypriots) to international flights. The Greek Cypriots wanted Varosha returned to its former Greek Cypriot inhabitants expeditiously and would not discuss opening Tymbou because they believe it would legitimize a separatist Turkish Cypriot state. On November 16, the Finnish Foreign Minister declared that "circumstances" do not permit an agreement during the Finnish Presidency, which ended with 2006. On November 29, the European Commission recommended suspending negotiations on 8 out of 35 chapters (of EU laws and regulations) to be completed before Turkey accedes to the EU. The chapters to be suspended cover policy areas related to Turkey's restrictions on the free movement of goods vis-a-vis Cyprus. The Commission also recommended that no chapter be provisionally closed until Turkey fully implements its commitments regarding Cyprus. The EU Enlargement Commissioner affirmed that accession negotiations would continue at a slower pace. The (Greek) Cypriot government was not pleased with the Commission's recommendation, charging that it did not pressure Turkey to comply with its obligations, and sought to have the EU impose a deadline for compliance. Greek Cypriot officials said that they were not asking for the full interruption of Turkey's accession but for sanctions to be imposed if Turkey failed to meet its obligations. On December 7, Turkey offered to open one port and an airport to traffic from Cyprus for a trial period of one year if the EU backed the goal of reaching a comprehensive settlement on Cyprus in 2007 and reduced the isolation of northern Cyprus by opening Ercan Airport to international traffic. The Finnish Prime Minister said that the Turkish offer was "not enough." On December 11, EU foreign ministers agreed to the Commission's recommendations, but did not set a deadline for Turkey's compliance with the Ankara Protocol. On December 15, the European Council (summit of European leaders) endorsed the foreign ministers' conclusions. On January 1, 2008, Cyprus joined the eurozone. The United Nations has had forces on Cyprus since 1964. As of November 2007, UNFICYP consisted of 858 military personnel and 69 civilian police from 19 countries. It emphasizes liaison, observation, and mediation rather than the interposition of forces. The General Assembly appropriated $54.9 million for UNFICYP for the period from July 1, 2008 to June 30, 2009. The government of Cyprus contributes one-third of the cost and the government of Greece contributes $6.5 million annually. UNFICYP costs not covered by contributions are treated as assessed U.N. expenses. The United States provided an estimated $6.412 million for UNFICYP in FY2008 and the Bush Administration requested $4.54 million for FY2009. The Secretary-General has proposed a budget of $54.9 million for the period from July 1, 2008 to June 30, 2009. It is still under consideration by the General Assembly. Since 1974, the United States has supported U.N. efforts to achieve a settlement on Cyprus. There were sharp divisions between the Ford and Carter Administrations and Congress over Turkey's role on Cyprus from 1974-1978. A congressionally mandated arms embargo against Turkey was in place until September 1978. In general, Congress favored measures to pressure Turkey to withdraw its troops and encourage concessions by Denktash, while successive administrations argued that pressure was counterproductive and preferred diplomacy. Although Members did not propose an alternative to the U.N. talks, some sought a more active U.S. role. In response, President Reagan created the State Department post of Special Cyprus Coordinator, and President Clinton named a Presidential Envoy for Cyprus. The Bush Administration did not name a Presidential Envoy and, since June 2004, the Deputy Assistant Secretary of State for European and Eurasian Affairs has been performing the duties of Special Cyprus Coordinator without the title. On February 14, 2001, Secretary of State Colin Powell affirmed that the Administration "fully supports the ongoing U.N. efforts." The Bush Administration championed the Annan Plan. Special Cyprus Coordinator Thomas Weston openly aided the Turkish Cypriot political opposition before the December 2003 elections to increase the chances of a settlement. At a donors' conference on April 15, 2004, the United States pledged $400 million over four years if the Annan Plan were approved in the April 24, 2004, referenda. Secretary Powell urged all parties to vote "yes" in the referenda. After the referenda, the State Department accused Greek Cypriot leaders of manipulating public opinion by restricting news media and taking other steps to ensure a "no" vote. Weston said that the Department would seek ways to end the isolation of northern Cyprus and to improve its economy. He said that if the Turkish Cypriots were able to move toward economic equality with the Greek Cypriots, then some Greek Cypriot concerns about the cost of a settlement might be removed. Official gestures also were made. For example, Powell referred to "Prime Minister" Talat by his title when they met in New York on May 4, 2004, and U.S. Ambassador to Cyprus visited Talat in the Prime Minister's Office on May 21. However, the State Department continued to consider Talat only the "leader of the Turkish Cypriot community." On May 28, the U.S. Embassy on Cyprus said that a TRNC passport holder seeking to travel to the United States would be eligible for a visa for up to two years. In June, the Administration authorized U.S. government and military personnel to travel directly to northern Cyprus, and Weston visited the TRNC's representatives in New York and Washington. In October, U.S. Transport Security Service agents examined Ercan Airport in northern Cyprus. On February 17, 2005, representatives from 12 U.S. companies and the commercial attache from the U.S. Embassy in Ankara landed at Ercan. The Republic of Cyprus has not designated ports or airports in the north as legal ports of entry and charged that the delegation's, especially the U.S. diplomat's, use of the airport was illegal. On May 31, three members of the U.S. House of Representatives Turkish Study Group landed at Ercan. A State Department spokesman said that the congressional trip did not violate international or U.S. law which the Department maintains applies to U.S. carriers not citizens. There have been no reports of U.S. carriers applying to fly to northern Cyprus. On October 28, Secretary of State Condoleezza Rice met Talat in Washington as part of U.S. efforts to find a solution to the Cyprus issue and to ease the isolation of the Turkish Cypriots in a way that supports reunification. The State Department maintained that there was no change in U.S. policy of non-recognition of the Turkish-Cypriot state and that the United States still wanted both parties to re-engage to find a solution. Talat asked Rice to continue steps to end the isolation of northern Cyprus, with direct flights to Ercan Airport, and to encourage international organizations to do the same. Cypriot President Papadopoulos charged that the meeting promoted "secessionist tensions." On February 15, 2006, U.S. Deputy Assistant Secretary of State for European Affairs Matthew Bryza told a Greek newspaper that President "Papadopoulos must, clearly, finally and in writing, say what changes he wants in the Annan Plan" and that "the ball" is in the President's court. In a subsequent interview on April 2, Bryza said, "we must respect the democratic and clear decision of the Greek Cypriots not to approve the Annan Plan." He added that Turkey must honor its commitment to implement the Protocol for the expansion of its customs union with the EU. In June, Assistant Secretary of State for European and Eurasian Affairs Daniel Fried also said, "Turkey should open its ports to Cypriot ships and airplanes and fulfill its responsibility for expanding the Customs Union agreement (with the European Union) in a way to include the Republic of Cyprus." On July 18-19, Bryza visited Cyprus. Because he was to meet Talat in his official office, Bryza did not meet either Papadopoulos or Foreign Minister Lillikas. Instead, he met Speaker Christofias and Foreign Ministry officials. In the north, he met Talat, "Prime Minister" Soyer, and "Foreign Minister" Denktash. In March 2007, U.S. Ambassador to Cyprus Ronald Schlicher encouraged representatives of the two communities to find a way to complete the work necessary for the reopening of Ledra Street. in order to stimulate broader progress on the basis of the July 8 agreement. U.S. officials repeatedly said that the United States favored implementation of the July 8 agreement. On May 16, Under Secretary of State Nicholas Burns told a Greek-American audience that the 2004 Annan Plan was "a good effort in good faith which the U.S. supported," but "we don't need to return to something that has been tried and failed." He reported that Secretary Rice had encouraged U.N. Secretary-General Ban Ki-moon to appoint a special envoy to Cyprus. The U.S. Embassy in Nicosia welcomed the outcome of the March 2008 Chrisofias-Talat meeting and wished them success in their efforts to reach a comprehensive settlement. The State Department vowed "full support for this constructive dialogue, and for efforts by the United Nations to forge a just and lasting Cyprus settlement." On July 28, the State Department' applauded the agreement to start direct negotiations and said that the United States was ready to support the two leaders and the U.N. process. New U.S. Ambassador to Cyprus Frank Urbancic affirmed this view when presenting his credentials to President Christofias on September 9. On July 9, 2004, the State Department announced that $30.5 million (in reprogrammed funds) would be provided for economic development of northern Cyprus to lessen the cost of reunification. Some Members were concerned that the (Greek) Cypriot government might be bypassed. P.L. 109-102 , November 14, 2005, appropriated $20 million for FY2006 as the Administration requested, providing that the funds should be made available only for scholarships and their administration, bicommunal projects, and measures aimed at reunification and designed to reduce tensions. This restriction pertained in each of the following years and continues in P.L. 111-8 , the Omnibus Appropriations Act, 2009, signed on March 11, 2009, which provides the Administration's requested $11 million in Economic Support Funds (ESF) for Cyprus. S. 695 , the American-Owned Property in Occupied Cyprus Claims Act. To amend the International Claims Settlement Act of 1949 to allow for claims against Turkey by U.S. nationals excluded from property they own in Turkish-occupied Cyprus. Introduced and referred to the Committee on Foreign Relations, February 27, 2007. S.Res. 331 , To express the sense of the Senate that Turkey should end its military occupation of Cyprus, particularly because Turkey's pretext has been refuted by over 13 million crossings of the divide between north and south without incident. Introduced and referred to the Committee on Foreign Relations, September 25, 2007. H.R. 1456 , introduced and referred to the House Committees on Foreign Affairs and on the Judiciary on March 9, 2007, is the same as S. 695 above. H.Res. 405 , expresses strong support for implementation of the Papadopoulos-Talat July 8, 2006 agreement. Introduced and referred to the Committee on Foreign Affairs, May 15, 2007. The Committee agreed to seek consideration under suspension of rules, September 26. The House agreed to a motion to suspend the rules and agree to the resolution, as amended, by a voice vote; motion to reconsider laid on the table and agreed to without exception on October 9. H.Res. 407 , expresses strong support for the Government of Cyprus aimed at opening additional crossing points along the cease-fire line. Introduced and referred to the Committee on Foreign Affairs, May 15, 2007. H.Res. 620 , Introduced and referred to the Committee on Foreign Affairs, August 3, 2007, is the same as S.Res. 331 above. H.Res. 627 , supporting the removal of Turkish occupation troops from the Republic of Cyprus. Introduced and referred to the Committee on Foreign Affairs, August 4, 2007.

Cyprus has been divided since 1974. Greek Cypriots, 76% of the population, live in the southern two-thirds of the island and lead the internationally recognized Republic of Cyprus. Turkish Cypriots, 19% of the populace, live in the "Turkish Republic of Northern Cyprus" (TRNC), recognized only by Turkey, with about 36,000 Turkish troops providing security. United Nations peacekeeping forces (UNFICYP) maintain a buffer zone between the two. Since the late 1970s, the U.N., with U.S. support, has promoted negotiations aimed at reuniting the island as a federal, bicommunal, bizonal republic. The U.N. Secretary-General's April 5, 1992, "Set of Ideas" was a major, but unsuccessful, framework for negotiations for a settlement. Next, both sides accepted U.N. confidence-building measures only in principle and they were not recorded or implemented. The prospect of Cyprus's European Union (EU) accession and its eventual membership intensified and complicated settlement efforts. On November 11, 2002, Secretary-General Kofi Annan submitted a comprehensive settlement Plan, but the two sides did not agree on it. After more negotiations, Annan announced on March 11, 2003 that his efforts had failed. Cyprus signed an accession treaty to join the EU on April 16. The December 14, 2003, Turkish Cypriot parliamentary elections produced a new government determined to reach a settlement. After the U.N. led negotiations between the parties and with Greek and Turkish leaders present, Annan presented a final, revised Plan on March 31, 2004. In referenda on April 24, 76% of Greek Cypriot voters rejected the Plan, while 65% of Turkish Cypriot voters accepted it. Annan blamed President Tassos Papadopoulos, a Greek Cypriot, for the result. Cyprus joined the EU on May 1, 2004. More than two years later, Papadopoulos and Turkish Cypriot leader Mehmet Ali Talat agreed, on July 8, 2006, to discuss "issues that affect day-to-day life" and, concurrently, substantive issues. The accord was not implemented. Dimitris Christofias's election as Cypriot president on February 24, 2008 ended the impasse. On March 21, he and Talat agreed to resume the settlement process, with working groups and technical committees. In September, they began direct negotiations for a solution to the Cyprus issue. Negotiations continue. Some Members of Congress have urged the Administration to be more active, although they have not proposed an alternative to the U.N.-sponsored talks. After the 2004 referenda, the Administration worked to end the isolation of the Turkish Cypriots in order to diminish economic disparities between them and the Greek Cypriots and pave the way for reunification. Some Members questioned this policy. Members are maintaining their interest in Cyprus in the 111th Congress partly due to keen constituent concern. This CRS report will be updated as developments warrant.

Congress has recently demonstrated significant ongoing interest in the issue of "patent assertion entities" (PAEs), which are popularly referred to as "patent trolls." The Leahy-Smith America Invents Act of 2011 (AIA) included an order for further study of PAE litigation, and in March 2013, the House Judiciary Subcommittee on Courts, Intellectual Property and the Internet held a hearing on "abusive patent litigation" and PAEs. Furthermore, in July 2012, both the House and the Senate held hearings regarding patent disputes at the International Trade Commission (ITC), which has seen a surge in patent complaints as federal courts have become less patent holder-friendly after passage of the AIA in 2011 and a landmark Supreme Court ruling in 2006. The much-publicized proliferation of PAEs was among the central factors that prompted the AIA, but at the end of the day, Congress passed a few provisions arguably addressing PAEs while leaving several other PAE-related issues unresolved, apparently in light of lively debate over what, if anything, should be done about them. The PAE business model focuses not on developing or commercializing technologies but on buying and asserting patents against companies that have already begun using them, often after independently developing them without knowledge of the PAE's patent, according to a report by the Federal Trade Commission (FTC). PAEs emerged alongside the burgeoning tech industry around the turn of the 21 st century and gained notoriety with lawsuits claiming exclusive ownership of such ubiquitous technologies as wireless email, digital video streaming, and the interactive web. They have had the attention of Congress, the press, and the public since at least 2006, when a successful PAE suit almost caused the shutdown of BlackBerry wireless service. Such victories in court are rare for PAEs. According to one empirical study, they lose 92% of merits judgments, but few cases make it that far. The vast majority end in settlements because litigation is risky, costly, and disruptive for defendants, and PAEs often offer to settle for amounts well below litigation costs to make the business decision to settle an obvious one. Observers expect that the AIA will reduce the volume of meritless lawsuits, but not dramatically. While the provisions for post-grant examination and transitional scrubbing of business method patents will help with assertions of invalid patents, they do not address the supposed use of valid patents to extract undue royalties from defendants that are either locked in to the patented technology or not infringing the patent at all. Additionally, post-grant examination is not available for patents granted prior to the AIA, and the AIA's restrictions on joinder do not apply in a case brought before the ITC (thus, PAEs could still name multiple parties as respondents in a single ITC complaint even if they have no relation to each other). Reform advocates fear that PAEs impede innovation, undermine the patent system, and wreak havoc on businesses that play a vital role in the American economy. According to one study, PAE activity cost defendants and licensees $29 billion in 2011, a 400% increase over $7 billion in 2005, and the losses are mostly deadweight, with less than 25% flowing to innovation and at least that much going towards legal fees. Another recent study suggests that PAE activity could harm competition to the extent that operating companies use or "sponsor" PAEs as a means of imposing costs on rivals and achieving other anticompetitive ends. Defenders of PAEs argue that they actually promote invention by increasing the liquidity and managing the risk of investments in applied research and invention, as well as by compensating small inventors. PAEs' strongest allies include universities and other non-practicing entities that benefit from having PAEs as buyers for their patents and are not as vulnerable to lawsuits because they ordinarily do not make or sell anything that could be infringing. Other defenders of the status quo raise concerns about unintended consequences and collateral effects of changes to the law. The Federal Trade Commission and numerous scholars suggest that PAE activity does indeed have beneficial effects but that, under current law, these benefits are significantly outweighed by the costs. What remains unclear is the extent of the imbalance between costs and benefits and whether Congress should attempt to rebalance any disparity. In Section 34 of the AIA, Congress instructed the Government Accountability Office to study the costs, benefits, and consequences of litigation by "non-practicing entities" and "patent assertion entities" and report back with findings and recommendations on how to "minimize any negative impact" of such litigation by September 2012; however, as of the date of this report, the study has not yet been released. This report reviews the current debate and controversy surrounding PAEs, examines the reasons for the rise in PAE litigation, and explores the legislative options available to Congress if it decides that PAEs are an issue that should be addressed. Patent law finds its constitutional basis in Article I, Section 8, Clause 8, of the U.S. Constitution and its statutory basis in the Patent Act of 1952. Patents provide the right to exclude others from making, using, selling, or importing claimed inventions for a limited period of time, generally 20 years. Inventors may acquire patents by submitting an application to the U.S. Patent and Trademark Office (PTO), where officials will examine it to determine whether the statutory requirements are met. This process is commonly known as "prosecution." Applications consist of "claims" establishing the metes and bounds of the patent property right, which is typically broader than the specific invention, and a "specification" that describes the claimed invention. The specification must be detailed and concrete enough to enable others to make and use the invention without undue experimentation. Claims must consist of a patentable subject matter—"any new and useful process, machine, manufacture, or any composition of matter, or any new and useful improvement thereof"—rather than abstract ideas or law of nature, and satisfy substantive requirements of novelty, nonobviousness, and utility. The patent holder may enforce its rights by filing infringement suits in federal court against anyone who makes, uses, sells, or imports the patented technology, regardless of whether it was copied or developed independently. Courts presume that patents granted by the PTO are valid, but accused infringers may introduce evidence of invalidity or unenforceability. The patent holder bears the burden of establishing infringement by each alleged infringer. Patent litigation is very expensive; the average suit in which $1 million to $25 million is at stake costs $1.6 million through discovery and $2.8 million through trial. Upon a finding of infringement, a federal court may issue an injunction if doing so seems more equitable than simply awarding monetary damages. The statute also provides for the award of damages "adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer." The U.S. Court of Appeals for the Federal Circuit has national jurisdiction over most patent appeals from the district courts. A patent holder can also enforce its rights by filing a complaint with the International Trade Commission (ITC), which may issue an exclusion order blocking importation of the infringing product into the United States. The ITC is not authorized to issue damages, however. Skyrocketing rates of patent litigation since the turn of the 21 st century have often been tied to the rise of "patent assertion entities" (PAEs), businesses modeled on "purchasing and asserting patents against manufacturers who may be using the technology" rather than developing or commercializing the technologies themselves. They are frequently accused of being classic arbitrageurs, taking advantage of the "large gap between the cost of getting a patent and the value that can be captured with an infringement action" in the information technology (IT) sector. PAEs are frequently referred to as "patent trolls," after the villains of folklore known to lie in wait under bridges they did not build, then emerge from the smog to demand tolls from unsuspecting travelers. The term "troll" is controversial because it is both pejorative and ambiguous, often used imprecisely for any opportunistic or unpopular patent holder. But it is best understood as an epithet for PAEs, which object to the label and argue essentially that the fees they collect are legitimate and needed to fund investment in infrastructure—that if they did not take tolls, bridges would be fewer in number and lower in quality. PAEs seek to license their patents primarily ex post facto —often after defendants have independently invented and begun using a technology allegedly covered by their patents, and frequently only after it has become ubiquitous or standard-essential in an industry. Indeed, the average patent asserted by the most litigious PAEs is not litigated for the first time, or assigned to its final owner, until seven years into its term, according to a study by Professor Michael Risch. By contrast, product firms tend to assert their patents early in the patent term, and Professor Brian J. Love finds that the gap in litigation timing is such that "the average product-company patent has been shelved by its owner before the average NPE patent has even been asserted." PAEs suggest that they simply enforce patent property rights against infringers, but much of the controversy surrounding their activities comes from the impression that they lack valid claims to the royalties they demand and receive. Studies suggest that PAEs rarely prevail on the merits. Their win rate in cases decided on the merits is just 8%, versus 40% for other entities, according to a study by Professors John R. Allison, Mark A. Lemley, and Joshua Walker. But they persist with litigation nonetheless, apparently supported by the licensing fees obtained by posing a credible threat of extended litigation. Contrary to popular belief, however, PAEs do not lose more because their patents are weaker or more likely to be invalid, according to Villanova University Law Professor Michael Risch. In fact, he finds the patents asserted by the most litigious PAEs to be on par with other patents by objective measures of quality and value, and no studies supports the idea that they are especially prone to invalidation, relative to other patents. Rather, PAEs often fail to show infringement, perhaps because they seek and depend upon overly broad constructions of what their patent claims cover. PAEs describe themselves as critical intermediaries. Some claim to offer "department stores" for patents, providing one-stop shopping for licensing and purchase. Others suggest they serve key functions by enabling individual inventors, who generate about 12% of patents, to earn returns despite lacking the resources to enforce or commercialize their patents themselves. No one doubts that an efficient patent system needs intermediaries who reduce transaction costs between those who invent things and those who develop and commercialize them. Many observers note, however, that PAEs "do not seem to operate that way," and that other non-practicing entities (NPEs) serve these functions more efficiently and without "trolling" tactics. PAEs are alleged to be one-of-a-kind in that they are said to speculate on patents—they bet on how much more a patent will be worth in the future, when it is asserted, and focus on high-risk high-yield acquisitions. Other NPEs with licensing-based business models include technology development firms and licensing agents, but PAEs differ from these in that they generally offer licenses only after infringement and lock-in have begun. The FTC explained that while other NPEs transfer technologies that they or their clients invented and developed so that licensees can benefit from not having to develop them in-house, PAEs transfer nothing but a legal right not to be sued for using a technology that the licensee may have already invested in developing on its own, without help from the PAE or its patents. PAEs also diverge from other NPEs that enforce patents because they focus on acquiring patents outright and asserting them on their own behalf, as opposed to providing services and collecting fees or a slice of the litigation award. PAEs have frequently been accused of imposing a "tax on innovation" and undermining or impairing the incentives that patent law aims to create. Yet PAEs have also been defended on the grounds that they actually promote invention by adding liquidity, absorbing some of the risk otherwise borne by investors, and getting more royalties for small inventors. Without a doubt, PAEs both add to and subtract from the incentives of patent law, but the FTC and many experts in the field indicate that they currently do more harm than good to innovation and the patent system. The extent of this imbalance—and whether Congress could or should recalibrate it to "support the beneficial effects, and lessen the detrimental ones"—remains unclear, however. To the extent that PAEs wait to seek licenses until defendants have sunk costs into a product or invested in developing a disputed technology on their own, the FTC suggests that they can deter innovation by raising costs and risks for the companies and investors that actually bring products to market. Investment decisions must factor in the likelihood that PAEs will later emerge and demand royalties or bring costly litigation, directly reducing returns on investment. Faced with lower profit margins and uncertain but potentially significant risk, manufacturers may find that some R&D projects, features, and product improvements are simply not worth doing, even if beneficial to consumers. Similarly, startups and small businesses may have a harder time getting funding from venture capitalists and other investors who anticipate future PAE demands. There are also opportunity costs as productive entities divert funds from R&D to deal with PAEs. In addition to the obvious diversion to pay licensing fees and legal costs, there has also been a shift towards investing in PAEs instead of startups or other ventures. Some investors buy stakes in PAEs to hedge against the limitless risk of being sued by PAEs—strengthening them to deal with the damage they may experience elsewhere. One high-tech entrepreneur explained that "[i]f patent laws continue to be as they are, this is the only way I can see that allows any level of protection." Other investors have simply realized that PAEs offer great returns on investment—better than many startups—and shifted funding in their direction. On the other hand, PAEs argue they actually promote investment in invention. Nathan Myhrvold, CEO of PAE giant Intellectual Ventures, styles his company as pioneering a "capital market for inventions akin to the venture capital market that supports start-ups and the private equity market that revitalizes inefficient companies." The most recognized benefit of PAE activity is increased liquidity and better risk management for investments in applied research and invention. By enlivening a secondary market for patents, PAEs provide an exit option and/or extra revenue stream for a variety of patentees. They absorb and manage the high risk by spreading it across large portfolios of patents and extracting value out of otherwise low-value or dormant patents. Patentees who do not or cannot commercialize in the "primary" market for technology might recoup their costs and perhaps see some returns by selling their patents to PAEs and retaining a cut of future royalties. PAEs suggest this function is especially essential for small inventors and NPEs that would otherwise have a hard time getting any value from their inventions. NPEs that routinely obtain and sell patents in the secondary market—universities in particular—benefit directly from, and in proportion to, PAE activity. The more licensing fees PAEs obtain, the more these inventors earn from their patents, and the greater their incentives to invent. The FTC, however, warns that an increase in the volume of inventions attributable to PAEs should not be taken as a trump card: "Paying inventors only to invent and patent may generate more i n vention and patents , but it may not generate more innovation . Invention is only the first step in a lengthy and expensive development process to bring an innovation to market." PAEs may create disincentives for firms to invest in the rest of the process to turn inventions into products and bring them to market. The more a firm invests in R&D, the more likely it is to be sued by a PAE. And each extra dollar PAEs pay out for patents in the secondary market may deduct from the profits of firms that actually commercialize and make use of patented technologies. James Bessen and Michael J. Meurer have reported that of the $29 billion PAEs cost defendants in 2011, no more than 25% of it flowed back to innovation—the rest they categorize as deadweight loss. In other words, this report calculated that only a fraction of defendant losses go towards the benefits PAEs assert. Empirical research has also raised doubts about how much PAEs actually help small inventors and startups. Another Bessen-Meurer study indicated that less than 2% of losses in wealth caused by PAEs passed through to independent inventors, which according to other studies supply only 29% of PAE patents; 43% come from large firms. PAEs also impose costs upon small- and mid-sized businesses, which comprised 90% of defendants sued by PAEs in 2011 and bore 37% of the direct costs, according to Bessen and Meurer. Experts attribute the proliferation of PAEs over the past 10 to 15 years to the explosion of the information technology (IT) industry and patent law's struggle to adapt to the unique issues presented by this new frontier of innovation. They indicate that the PAE business model is not about licensing patents generally but high-tech patents in particular, including those on software and business methods or processes related to software, as well as computers and electronics. Why do high-tech patents attract and enable PAEs? First, inadvertent infringement is said to be inevitable due to notice failure and the so-called "patent thicket," among other things. Second, uneven bargaining power enables PAEs to negotiate excessive royalties from infringers and undue royalties from non-infringers. The high value that can be extracted from patents that have been plausibly or actually infringed, together with the relatively low cost of acquiring and warehousing them, invites arbitrage. There is virtually universal agreement that "notice failure" in the IT sector has contributed to the rise of PAEs, as well as the rise in patent litigation generally. In an optimal patent regime, patent property rights are clearly defined and easily determined so the world is on notice as to their existence, scope, and ownership. This "notice function" enables people to avoid infringement, negotiate permission to use others' IP, and maximize efficiency, such as by not keeping all inventions as trade secrets or doing R&D on inventions already claimed by someone else. The relative success of the patent system for pharmaceuticals has been linked in part to a manageable volume of clearly defined claims. By contrast, the notice function has broken down in the IT sector. There are two aspects to notice failure: (1) claims have "fuzzy boundaries" that cannot be reliably determined, much less known in advance, without litigation; (2) it is economically infeasible or irrational for defendants to search through existing patents to avoid infringement. Several provisions of §112 are supposed to filter out abstract or ambiguous patents and ensure the world is on notice as to what each patent covers. The FTC and many observers indicate that these requirements have been less stringently applied and enforced in the IT industry than other sectors where notice failure is less of a problem. First, the "definiteness" requirement limits the ambiguity of the patent "claim" language, which establishes the metes and bounds of the patent property right. Claims must "particularly point[] out and distinctly claim[] the subject matter which the applicant regards as his invention." Yet critics say the provision has had no teeth since 2001, when the Federal Circuit replaced a test requiring claims to be "plain on their face" with one under which claims are only invalid for indefiniteness if "insolubly ambiguous" and subject to "no narrowing construction." The test, deemed a "disaster" by some, dramatically widened the "zone of uncertainty which enterprise and experimentation may enter only at the risk of infringement claims." Second, the boundaries set by the patent claims are sharpened by looking at the accompanying disclosures, which according to the FTC should explain what the claims cover in a more detailed and concrete way so as to clarify ambiguities around the outer edges that may exist or arise later. It must include a specific "written description" of the claimed invention and enough explanatory details to "enable" others in the field to make and use it. Here, too, observers assert that IT patents undergo less stringent review than other types of patents, and some suggest that this permits more abstract patents and inventions that exist only on paper. If §112 rules are loosely enforced and ambiguity does not put patents at risk of later invalidation, patentees may have less incentive to write definite claims and concrete, detailed disclosures (because every detail added may cabin their patent property right later). According to commentators, several conditions in the IT sector make it economically and/or practically infeasible or irrational for manufacturers to find and clear all patents incorporated in a given product. They report that, as a result, in most cases, "the first notice of the patent [is] the filing of the lawsuit," at which point it is too late to design around the technology or negotiate a reasonable royalty rate because the producer has become locked in. The leverage this gives to PAEs will be discussed further below. This section explains why it is often said that virtually all IT products inadvertently infringe some patent(s) and why the industry has apparently taken to ignoring patents altogether. Commentators indicate the IT sector is mired in what they call a "patent thicket," meaning a "dense web of overlapping [IP] rights that a company must hack its way through . . . to actually commercialize new technology." According to many observers, the set of potentially relevant patents for any IT product is overwhelming due to both the number of (overlapping and possibly invalid) patents granted in this area and the number of components incorporated in each product. Even for products with relatively few patents to review, commentators indicate that their "fuzzy boundaries" would still make it a futile endeavor, and under the doctrine of willful infringement, a risky one. That doctrine has been criticized for creating perverse disincentives by exposing defendants who looked at patents they are later found to infringe to enhanced damages, adding to the cost, risk, and duration of litigation. If those issues were addressed, a full search would still entail huge costs for marginal returns, insuring against neither infringement nor litigation. Even the most thorough search will leave some stones unturned—those pending at the PTO. Between the application and issuance dates, patent claims cannot be accessed or checked by other firms, which meanwhile might develop and market infringing products. Strategic use of continuation practice to keep patents pending and hidden longer at the PTO has become an increasingly common and criticized practice. Finally, clearing the patent thicket does nothing to prevent weak or baseless suits brought only to extract a settlement from the defendant. Recall that PAEs lose 92% of merits judgments and settle the vast majority of their assertions. These figures may be attributable to uneven bargaining power, which is the subject of the next section. PAEs occupy highly advantageous bargaining positions, and their leverage over defendants has been attributed to an asymmetry of costs and risk that breaks down into three factors: high litigation costs and no way to dispose of weak suits early; the risk of potentially debilitating liability for defendants; and the lack of any major risk or disincentive for PAE plaintiffs to litigate. First, patent litigation is expensive, and there is no quick or affordable way to get rid of a patent suit except to settle. Defendants frequently find settlement the most cost-effective option, even if they are certain that they are not infringing. The AIA provisions increasing the speed and availability of post-grant examination is expected to ameliorate this issue somewhat for invalid patents granted after 2011. Defendants will be able to challenge a patent's validity, but not its scope or the claim of infringement, at a much lower cost than they can in court, where they must overcome a presumption of validity by clear and convincing evidence to get a patent invalidated. Second, where injunctive relief is available to PAEs, what commentators call the "patent holdup" problem arises as PAEs leverage the threat of an injunction in royalty negotiations to "capture far more than the intrinsic value of their invention." Those wielding this power have described it as a "Damocles sword." Patent holdup is said to be particularly acute in the IT sector because products incorporate dozens or even thousands of patented features or components, and the owner of any one of them can keep the entire product off the market. In 2006, the Supreme Court took a step towards fixing the so-called holdup problem with its decision in eBay v. MercExchange , which enabled lower courts to deny injunctive relief to PAEs and issue only monetary damages for infringement. The case overturned a longstanding "general rule" of the Federal Circuit that injunctions issue automatically upon a finding of infringement. Courts now apply a four-factor balancing test that tends to weigh against PAEs. Indeed, few injunctions have been granted in patent infringement cases since eBay . Scholars have raised concerns that PAEs have now shifted their holdup efforts to the International Trade Commission (ITC), a quasi-judicial federal agency that grants "exclusion orders" that stop the import of infringing products into the United States. The ITC has responded to the concerns with data showing that just 8% of post- eBay ITC investigations arose from complaints by PAEs, only one of which obtained an exclusion order. But both sides may be correct if, as the scholars suggest, each of the PAE complaints ensnares entire industries by asserting that industry standards, adopted and incorporated by all manufacturers, infringe their patents. Third, by contrast to their targets, PAEs have nothing to lose and much to gain by litigating aggressively. Unlike most other patentee-plaintiffs, PAEs pursuing infringement suits "do not risk disruption to their core business" because "patent enforcement is their core business." Because PAEs are NPEs that do not make or sell anything, they are not subject to counterclaims that they infringe on defendants' patents. By contrast, when a product firm sues another firm for infringement, the defendant can dig up or acquire a patent that the plaintiff's products might infringe and counterclaim. The resulting dynamic of mutual assured destruction makes bargain power more even, settlement more likely, and litigation far less appealing. Compounding that leverage, the PAE business model creates unusual incentives for PAEs to forge ahead with weak suits (rather than calling it a loss or accepting a lowball settlement) to reinforce their bargaining position with future targets. The ability to extract licensing fees depends upon posing a credible threat of costly litigation. PAEs also have less to lose than other plaintiffs if a patent is invalidated or narrowly construed. Although PAEs lose future revenue when a lucrative patent is invalidated, this cannot deter them from litigating because the whole value of a PAE's patents depends upon its demands being backed by a credible threat of litigation. Additionally, by the time a validity judgment comes down, the PAE will often have already extracted royalties from other defendants, and these licensing and settlement agreements are often one-time, non-refundable deals. The joinder limitations included in the America Invents Act might reduce the leverage PAEs can exert. Section 19 of the AIA restricts the ability to sue multiple unrelated defendants for infringement in the same case or same trial "based solely on allegations that they each have infringed the patent or patents in suit," which had become a common practice among PAEs. PAEs must now incur more costs per defendant they sue and face multiple assessments of validity, each with potential collateral estoppel effect. Commentators have predicted that Section 19 will have an impact but not a tremendously significant one, potentially reducing the number of defendants getting sued while increasing the number of suits filed. But if the threat of litigation that gives force to a PAE's licensing demands becomes less credible because it cannot follow through with suing all firms that refuse to buy a license, then its leverage is reduced. On February 27, 2013, Representatives Peter DeFazio and Jason Chaffetz introduced the Saving High-Tech Innovators from Egregious Legal Disputes (SHIELD) Act of 2013 ( H.R. 845 ), which is intended to make PAEs responsible for paying alleged infringers' court costs and attorney's fees if they lose their infringement case in court. A previous version of the SHIELD Act had been introduced in the 112 th Congress but did not see action. The Patent Act currently provides a court with the power to award reasonable attorney's fees to the prevailing party "in exceptional cases." The SHIELD Act of 2013 would amend the Patent Act by inserting a new Section 285A, which would require a court, in an action involving the validity or infringement of a patent, to award full litigation costs (including reasonable attorney's fees) to the prevailing party asserting that the patent is invalid or not infringed, if the court determines that the party alleging infringement does not meet one or more of the following three conditions: 1. The party is the inventor, joint inventor, or the original assignee of the patent; 2. The party can provide evidence of substantial investment made by the party in the exploitation of the patent through production or sale of an item covered by the patent; or 3. The party is an institution of higher education or is a technology transfer organization whose primary purpose is to facilitate commercialization of technology developed by such institution. Thus, the legislation attempts to specifically target PAE litigants by providing a "negative definition" of a PAE (though it never explicitly uses such term); a party that does not satisfy any one of the conditions listed above would be liable to the alleged infringer for full litigation costs, if the party loses the lawsuit. The SHIELD Act would require the party asserting invalidity or noninfringement to file a motion with the court requesting a judgment that the adverse party does not meet any one of the above conditions. Within 120 days of such motion, the court would need to make a determination as to whether the adverse party meets at least one of these conditions. If the adverse party fails to meet a condition, the party would be required to post a bond in an amount set by the court to cover the alleged infringer's litigation costs, should the court ultimately find that the adverse party's patent is invalid or not infringed. As Representative Chaffetz explained in introducing the bill, "Patent trolls contribute nothing to the economy. No industry is immune to these attacks. Instead of creating jobs and growing the economy, businesses are wasting resources to fight off frivolous lawsuits. This bipartisan legislation will curb future abuse by requiring trolls to bear the financial responsibility for failed claims." Some have criticized the SHIELD Act for not providing additional explanation about the phrase "substantial investment ... in the exploitation of the patent"; they have also pointed out that a PAE could try to meet that particular condition in order to avoid paying the litigation costs: [W]hat does "substantial" mean? Presumably it is intended to ensnare NPEs that decide to make things, but not make enough (or good enough) things. But why should a court get to decide what is enough? And what do we do about start-ups who have patents but have not yet commercialized their invention? Are they trolls, too? And what is to stop NPEs from becoming distributors? They could buy competing products wholesale (perhaps products where they have secured licenses) and sell them. This only makes sense; by being resellers, they can claim that the competition of the infringing product is harming their sales business. Other commentators have questioned how the SHIELD ACT's bond requirement would work in practice: How would the "full costs" amount of the required bonds be determined at the beginning of each, separate suit, when different defendants will employ different defense strategies, and incur different "full costs"? Will the bond amount be the subject of legal opinions of counsel, or of expert opinions? What banks, sureties, or insurance companies would offer to provide SHIELD Act bonds to NPEs? Assuming that some financial institutions would, in fact, offer to provide SHIELD Act bonds, what amount and type of collateral would be required and, more importantly, how would typically asset-free, judgment-proof NPEs provide that collateral? Commentators have suggested a number of legislative avenues to address PAE activity. It bears emphasis that PAE activity has been concentrated in the realm of IT, primarily on patents related to software, the Internet, and electronics. Due to the component-driven and intangible nature of IT, as well as indications that patents are less essential to promoting innovation in IT than in other industries, such as pharmaceuticals, some observers urge Congress to undertake targeted reforms and leave the other realms of the patent system as they are. This could entail distinctions based on type of patent or the industry area, an approach already taken by the SHIELD Act. However, such precision may be precluded, or at least constrained, by an international agreement. Article 27.1 of the Agreement on Trade-Related Aspects of Intellectual Property Rights ("TRIPS"), administered by the World Trade Organization (WTO), requires that patents "be available and patent rights enjoyable without discrimination as to ... the field of technology." But some observers have argued that this provision "does not strictly require a 'single level of IP protection for all technologies or industries.'" In fact, a WTO panel "rejected a strict interpretation of Article 27.1 prohibiting any differentiation between fields of technology," and the "accepted view is that 'the pejorative concept of discrimination must be distinguished from differentiation for legitimate reasons .'" Nevertheless, Congress may need to carefully examine whether any changes it desires to make to the patent system would be inconsistent with its international obligations. Improving notice where it currently fails is a relatively uncontroversial and high-priority goal of some patent reform advocates. The "fuzzy boundaries" of IT patents and the sheer number of them that are granted and incorporated in any given product make it difficult for firms to avoid infringement and, once faced with a PAE assertion, to know whether it is valid without going to court. There are also a number of disincentives and obstacles for product firms to find and clear patents ahead of time. Many scholars believe solving this notice failure would go far towards reducing the negative effects of PAEs while keeping the benefits and making the entire patent system work better. Among the most popular ideas is more robust use of §112's definiteness and disclosure rules to deny (at the PTO) or invalidate (in court) abstract or ambiguous IT patents, which may entail legislatively overruling Federal Circuit standards that permit "substantial ambiguity" in IT patent claims. Of course it is also an option to let the Federal Circuit sort these matters out itself. For definiteness, Congress might consider amendments that point the Federal Circuit to a test that "weeds out claims reasonably susceptible to multiple interpretations," which the FTC says "could reduce ambiguity and improve notice in a broad range of settings." Many observers want a test that weeds out more claims than the "insolubly ambiguous" standard adopted by the Federal Circuit in 2001. Others believe current doctrine is adequate but underenforced. Several reform proposals address the issue of patent applicants keeping claims hidden at the PTO by filing continuations. The most common among them involve reforms of continuation practice, which currently "allows patent owners to hide the true nature of their invention until late in the process" and extend the time during which other companies might unknowingly begin using the patented technology. There have also been many calls for the PTO to make pending applications more open to the outside world so that there are no surprises and more assurance for diligent companies that do search for existing patents. Finally, some scholars propose eliminating what they view as a disincentive for firms to search existing patents in advance. The "willfulness doctrine" is said to boost PAE bargaining power and has the "perverse effect of causing people to try to avoid learning of patents." Congress might consider legislation that would delay the ability to even plead willfulness until there has been a finding of infringement. Proponents argue this would preserve the doctrine's deterrent and punitive functions while improving notice and removing a tool PAEs use to raise defendants' costs and risk, as well as their own bargaining power. The leverage PAEs can exert by threatening an injunction from a federal court has diminished since the Supreme Court decided eBay in 2006, but commentators now indicate that PAEs have replaced it with the "Damocles sword" derived from credibly threatening to get an ITC exclusion order on the import of defendants' products. Congress recently heard testimony urging it to prevent the ITC from issuing exclusion orders for PAEs and is currently considering action to that effect. As noted above, PAEs play a smaller role in the growth of ITC complaints than reformers seem to believe, but it is possible that PAEs have extracted royalties by threatening ITC import bans and rarely needed to actually file. Other procedural changes that shift more of the burdens and costs of litigation onto PAEs could also reduce their bargaining leverage over defendant product companies. Some scholars have called upon Congress to eliminate the presumption of validity, now given to patents out of deference to the PTO. Currently rebuttable only by "clear and convincing evidence," the presumption increases costs for defendants and leverage for PAEs. It might also extend the use of an invalid patent and the number of defendants a PAE can assert it against. Another common suggestion is to change royalty calculation rules, which often provide damages "disproportionate" to the contribution of the infringed patent as a portion or component of the overall product. Critics posit that in the IT sector, "if every patented portion of an invention was licensed at the same rate as the infringed patent, the inventor would face a net loss." The 110 th and 111 th Congresses considered legislation to address this issue, but nothing was passed. Observers indicate that IT interests support such changes due to the many components in each of their products while pharmaceutical, biotechnology, and NPE or PAE interests have opposed it. Congress could consider IT-specific royalty reforms. Many changes proposed by scholars target the practice of sitting on a patent until infringement and/or lock-in to a plausibly infringing technology have occurred and only then notifying targets of the patent and offering them licenses. One idea that has been floated is to decrease the patent period for IT patents, which are quickly outdated yet litigated aggressively through the end of their 20-year terms. A forthcoming study by Brian J. Love shows that it may be that a shorter term would primarily harm PAEs: Product companies predominately enforce their patents soon after they issue and complete their enforcement activities well before their patents expire. NPEs, on the other hand, begin asserting their patents relatively late in the patent term and frequently continue to litigate their patents to the verge of expiration. Indeed, I find that the average product-company patent has been shelved by its owner before the average NPE patent has even been asserted. NPEs account for the majority of suits brought in the final three years of the patent term, and the product firms that litigate late in the term are "a unique group of companies that . . . blur the line between practicing entities and trolls." Love's study also finds that high-tech patents represent an outsized portion of patents litigated in the last three years of their terms, comprising 86% for NPEs and 72% for product firms, even though most 18- or 20-year-old software patents are likely outdated. An alternative to shortening the patent term would involve changes to the maintenance fees that patent holders pay at certain points in the patent term to keep their rights in force. Fees could escalate over the life of the patent or increase with each renewal and apply across the board or just for inactive patents, entities with big portfolios, or IT-related patents. Another possibility is cost- and burden-shifting in the latter half of the patent term. Under other variations, patent owners could face repercussions if they neglect to engage in bona fide use, development, or licensing of their patents for a set number of years. The conditions triggering such effects might be modeled after that for trademark "abandonment" under the Lanham Act: non-use with the intent not to use in the reasonably foreseeable future. Not practicing a patent for a number of years could be prima facie evidence of abandonment that patent owners would have to rebut before any infringement suit could proceed. Evidence of efforts to develop, commercialize, or license the patent would rebut the prima facie assumption as long as they are both bona fide—not taken "merely to reserve a right"—and done in good faith. Ex post licensing would not qualify as a use, and availability through a designated clearinghouse of some kind might be required. As for the effect triggered by the period of non-use, options range from cancellation to the shifting of costs and burdens onto PAEs, diminishing their leverage and increasing their costs. Other ideas include removing the presumption of validity, subjecting plaintiffs to heightened pleading and production requirements, or freezing the patent until the patent owner begins to use it. A leading scholar and a leading PAE have partnered to advocate consideration of another reform: requiring publication of patent assignment and license terms. Mark Lemley of Stanford Law School and Nathan Myhrvold of Intellectual Ventures point out that patents currently exist in an inefficient blind market. The publication requirement would not solve the uncertainty and notice issues, but: [I]t will permit the aggregate record of what companies pay for rights to signal what particular patents are worth and how strong they are, just as derivative financial instruments allow market to evaluate and price other forms of risk. It will help rationalize patent transactions, turning them from secret, one-off negotiations into a real, working market for patents. And by making it clear to courts and the world at large what the normal price is for patent rights, it will make it that much harder for a few unscrupulous patent owners to hold up legitimate innovators, and for established companies to systematically infringe the rights of others. Lemley and Myhrvold anticipate concerns that patent holders would not license their patents if they had to disclose the licenses but suggest that this is a less a problem than people might think, concluding that "[t]he only people who stand to lose from mandatory disclosure of licenses are those who are taking advantage of the current state of ignorance."

Congress has recently demonstrated significant ongoing interest in litigation by "patent assertion entities" (PAEs), which are colloquially known as "patent trolls" and sometimes referred to as "non-practicing entities" (NPEs). The PAE business model focuses not on developing or commercializing patented inventions but on buying and asserting patents, often against firms that have already begun using the claimed technology after developing it independently, unaware of the PAE patent. PAEs include not only freestanding businesses but patent holding subsidiaries, affiliates, and shells of operating companies that want to participate in the PAE industry and/or a new means of countering competitors. The proliferation of PAEs was among the central factors raised in support of the most recent patent reform legislation, the Leahy-Smith America Invents Act of 2011 (AIA). However, the AIA contains relatively few provisions that arguably might impact PAEs, apparently because of lively debate over what, if anything, should be done about them. In the 113th Congress, the Saving High-Tech Innovators from Egregious Legal Disputes (SHIELD) Act of 2013 (H.R. 845) has been introduced in an effort to affect the number of lawsuits filed by PAEs. PAEs emerged alongside the burgeoning tech industry around the turn of the 21st century and gained notoriety with lawsuits claiming exclusive ownership of such ubiquitous technologies as wireless email, digital video streaming, and the interactive web. They have had the attention of Congress, the press, and the public since at least 2006, when a successful PAE suit almost caused the shutdown of BlackBerry wireless service. Such victories in court are rare for PAEs; they lose 92% of merits judgments. But few cases make it that far. The vast majority of defendants settle because patent litigation is risky, disruptive, and expensive, regardless of the merits; and many PAEs set royalty demands strategically well below litigation costs to make the business decision to settle an obvious one. For most PAEs, the costs of litigating and losing are more than offset by the licensing fees they can gain by demonstrating their tenacity to future defendants. According to one estimate, PAEs generated $29 billion in direct costs from defendants and licensees in 2011, a 400% increase over $7 billion in 2005, and some researchers suggest these costs are primarily deadweight, with less than 25% flowing to support innovation and at least that much going towards legal fees. Another study reported that 62% of all patent suits filed in 2012 were brought by PAEs. Critics assert that PAEs undermine the purposes of patent law—promoting innovation by providing incentives to invest in development and commercialization of inventions—and injure companies that play a vital role in the American economy. However, defenders of PAEs argue that they actually promote invention by adding liquidity options, managing risk, and compensating small inventors. The Federal Trade Commission and several leading scholars suggest that these benefits exist but are significantly less than the costs they impose. What remains unclear is the extent of imbalance between costs and benefits and whether Congress could recalibrate it to advance the goals of patent law while avoiding unintended consequences. This report reviews the current debate and controversy surrounding PAEs and their effect on innovation, examines the reasons for the rise in PAE litigation, and explores the legislative options available to Congress if it decides that these are issues that should be addressed.

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 manages coastal and marine organisms and environments. In 1970, Reorganization Plan No. 4 created NOAA in the Department of Commerce. Reorganization Plan No. 4 brought together environmental agencies from within the Department of Commerce, such as the National Weather Service, and from other departments and agencies, such as the Department of the Interior's Bureau of Commercial Fisheries and the National Science Foundation's National Sea Grant Program. The reorganization was intended to unify the nation's environmental activities related to oceanic and atmospheric research and to provide a systematic approach for monitoring, analyzing, and protecting the environment. One of NOAA's main challenges is related to this diverse mission of science, service, and stewardship. A review of research undertaken by the agency found that "the major challenge for NOAA is connecting the pieces of its research program and ensuring research is linked to the broader science needs of the agency." NOAA's administrative structure has evolved into five line offices: the National Ocean Service (NOS); National Marine Fisheries Service (NMFS); Office of Oceanic and Atmospheric Research (OAR); National Weather Service (NWS); and National Environmental Satellite, Data, and Information Service (NESDIS). In addition to NOAA's five line offices, Program Support (PS) provides cross-cutting services for the agency and includes the Office of Marine and Aviation Operations (OMAO), Corporate Services, the Office of Education, and Facilities. The Consolidated and Further Continuing Appropriations Act, 2015 ( P.L. 113-235 ) provided $5.441 billion for NOAA. President Obama has requested $5.975 billion for NOAA's FY2016 budget. This amount is $533.7 million (9.8%) more than the FY2015 enacted appropriation level. On June 3, 2015, the House passed the Commerce, Justice, Science, and Related Agencies Appropriations Act, 2016 ( H.R. 2578 , H.Rept. 114-130 ). The House-passed bill would provide a total of $5.169 billion for NOAA in FY2016. This amount is $271.7 million (5.0%) less than the FY2015-enacted appropriation level and $805.4 million (13.5%) less than the Administration's FY2016 request. On June 16, 2015, the Senate Committee on Appropriations reported the Commerce, Justice, Science, and Related Agencies Appropriations Act, 2016. The Senate committee-reported bill ( S.Rept. 114-66 ) would provide a total of $5.382 billion for NOAA in FY2016. This amount is $59.4 million (1.1%) less than the FY2015-enacted appropriation, $593.1 million (9.9%) less than the Administration's FY2016 request, and $212.3 million (4.1%) more than the level recommended by House-passed bill. In most years, more than 98% of NOAA's discretionary budget is appropriated to the Operations, Research, and Facilities (ORF) and the Procurement, Acquisition, and Construction (PAC) accounts. Over the last decade, PAC funding has grown because of funding increases for satellite acquisition and ORF funding has remained relatively constant (see Figure 1 ). Funding from ORF and PAC is provided across most of NOAA's line offices and Program Support. There also are several smaller specific appropriations accounts. These are listed below and included in Table 1 . Operations, Research, and Facilities (ORF) is NOAA's largest account, and it supports each of the agency's line offices and PS. The account provides funding for operating expenses including maintenance, salaries, benefits, utilities, grants, contracts, and other programmatic services. For FY2016, the Administration has requested $3.413 billion for the ORF account. The request is $211.0 million (6.6%) more than the FY2015 enacted level of $3.202 billion. The House-passed bill would provide $3.150 billion for the NOAA ORF account, which is $52.5 million (1.6%) less than the FY2015 enacted funding level and $263.5 million (7.7%) less than the Administration's FY2016 request. The Senate committee-reported bill would provide a total of $3.243 billion for the NOAA ORF account in FY2016. This amount is $40.3 million (1.3%) more than the FY2015 enacted appropriation, $170.6 million (5.0%) less than the Administration's FY2016 request, and $92.8 million (2.9%) more than the level recommended by the House-passed bill. The Procurement, Acquisition, and Construction (PAC) account provides funding for capital assets and investments such as the purchase of research vessels or the construction of facilities. PAC funding supports most of the agency's line offices, but the bulk of PAC funding (93.4% in FY2015) is appropriated for NESDIS satellite acquisition and construction. The Administration's FY2016 request would fund the PAC account at $2.499 billion, a $319.4 million (14.7%) increase over the FY2015 appropriation of $2.179 billion. The House-passed bill would provide $1.960 billion for the NOAA PAC account, which is $219.2 million (10.1%) less than the FY2015 enacted PAC funding level and $538.6 million (21.6%) less than the Administration's FY2016 request. The Senate committee-reported bill would provide a total of $2.079 billion for the NOAA PAC account in FY2016. This amount is $99.7 million (4.6%) less than the FY2015 enacted appropriation, $419.2 million (16.8%) less than the Administration's FY2016 request, and $119.5 million (6.1%) more than the level recommended by the House-passed bill. The Saltonstall-Kennedy Act of 1954 (15 U.S.C. §713c-3) established a fund to promote U.S. fisheries research and development programs. The Promote and Develop Fishery Products and Research Pertaining to American Fisheries Fund is supported by a permanent appropriation of 30% of the import duties collected by the U.S. Department of Agriculture on fishery-related products. The American Fisheries Promotion Act of 1980 ( P.L. 96-561 ) amended the Saltonstall-Kennedy Act to authorize a competitive grant program for fisheries research and development projects and a national fisheries research and development program. However, most funding has been used to support fisheries management and research efforts conducted by NMFS. For FY2016, NOAA estimates that the Department of Agriculture will transfer a total of $143.7 million to NOAA. NOAA has requested that $13.6 million be used for the Saltonstall-Kennedy grant program. The remaining $130.2 million would be used to offset the appropriations requirements of the ORF account. This amount would be $14.2 million more than the transfer to ORF in FY2015. This transfer is not reflected in the ORF funding levels in Table 1 . The Pacific Coastal Salmon Recovery Fund (PCSRF) account was established under P.L. 106-113 to support West Coast Pacific salmon recovery efforts by providing grants to the states of Washington, Oregon, Idaho, Nevada, California, and Alaska and to federally recognized tribes of the Columbia River and Pacific Coast. Funds are used for projects necessary for the conservation of salmon and steelhead populations that are listed or at risk of being listed as threatened or endangered under the Endangered Species Act (ESA; P.L. 93-205 ). For FY2016, the Administration's request for the PCSRF account is $58.0 million, which would be a 10.8% decrease from the FY2015 funding level of $65.0 million. The House-passed bill would provide $65.0 million for the fund, which is equal to the FY2015 enacted funding level and $7.0 million (12.1%) more than the Administration's FY2016 request. The Senate committee-reported bill would provide a total of $65.0 million for the PCSRF in FY2016. This amount is equal to the FY2015 enacted appropriation, $7.0 million (12.1%) more than the Administration's FY2016 request, and equal to the funding level recommended by the House-passed bill. The Fisheries Finance Program provides long-term financing for the costs of construction or reconstruction of fishing vessels, fisheries facilities, aquacultural facilities, and individual fishing quota for certain fisheries. The program receives annual loan authority from Congress, but it has not required appropriated funds because it has generated a negative subsidy; that is, the credit program generates a positive return of approximately $6.0 million to the government each fiscal year. For FY2016, NOAA also has requested $10.3 million to implement refinancing of the Pacific Coast Groundfish Fishing Capacity Reduction loan as required by the Carl Levin and Howard P. "Buck" McKeon National Defense Authorization Act for Fiscal Year 2015 ( P.L. 113-291 ). Of the $10.3 million, $10 million would cover the estimated loss to the government from the reduced payments received under the new loan terms, and $300,000 would be for the subsidy cost to refinance the loan. NOAA compensates commercial fishermen for lost fishing gear, vessels, and resulting economic losses caused by obstructions related to oil and gas exploration, development, and production in any area of the outer continental shelf. Funding for the Fishermen's Contingency Fund is derived from receipts collected pursuant to the Outer Continental Shelf Lands Act Amendments of 1978 ( P.L. 95-372 ). Total funding is limited to $350,000 per fiscal year and can only be made to the extent authorized in appropriations acts. The Fisheries Disaster Assistance Fund was created to provide assistance for fishery disasters that were declared by the Secretary of Commerce in 2012 and 2013. Fishery disaster assistance is provided under the authority of the Magnuson-Stevens Fishery Conservation and Management Act (MSFCMA; 16 U.S.C. §1861) and the Interjurisdictional Fisheries Act (16 U.S.C. §4107). The fund received an FY2014 appropriation for one-time funding, and annual appropriations for this purpose are not anticipated. All of the five line offices and Program Support are funded by the ORF account, and most of the offices also receive funding from the PAC account. In contrast to funding at the account level, most funding for NOAA's line offices is allocated among programs and activities according to agency authorities and priorities. NOS and NMFS authorities are related to coastal and ocean resource management, whereas NWS and NESDIS generally are related to weather and climate. Oceanic and Atmospheric Research (OAR) is the primary center for research within NOAA. In FY2015, more than 92% of OAR's budget is dedicated to research and development. Program Support provides support to activities across NOAA's line offices. Funding for each line office is provided in Table 2 . The following summaries also include selected appropriations highlights for each line office. The National Ocean Service (NOS) manages and protects coastal ocean and Great Lakes areas, provides navigation products and services, and prepares and responds to natural disasters and emergencies. For FY2016, the Administration has requested $550.8 million for NOS which would be $66.0 million (13.6%) more than the FY2015 enacted appropriation of $484.8 million. The House-passed bill would provide NOS with $466.5 million, $18.3 million (3.8%) less than the FY2015 enacted funding level and $84.3 million (15.3%) less than the Administration's request. The Senate committee-reported bill would provide a total of $501.1 million for NOS in FY2016. This amount is $16.3 million (3.4%) more than the FY2015 enacted appropriation, $49.7 million (9.0%) less than the Administration's FY2016 request, and $34.6 million (7.4%) more than the funding level recommended by the House-passed bill. Most of the requested funding increases for NOS would include programs funded under the authority of the Coastal Zone Management Act (16 U.S.C. §§1451-1464). The Administration has requested $54.1 million for coastal zone management and services, an increase of $12.4 million (29.8%) over the FY2015 enacted appropriation level of $41.7 million. The House-passed bill would fund coastal zone management and services at $40.0 million, a decrease of $1.7 million (4.1%) from the FY2015 enacted funding level and $14.1 million (26.1%) less than the Administration's request. The Senate committee-reported bill would fund coastal zone management and services at $39.6 million, a decrease of $2.1 million (5.1%) from the FY2015 appropriation level, $14.5 million (26.9%) less than the Administration's request, and $0.4 million (1.1%) less than the House-passed bill. The Administration also requested $116.1 million for coastal management grants, an increase of $45.0 million (63.2%) over the FY2015 enacted appropriation level of $71.1 million. The increase would expand funding for regional coastal resilience grants from $5.0 million in FY2015 to $50 million in FY2016. Managing development in high-hazard areas is a key element of most state plans funded under the CZMA, and in 2015, NOAA established the Regional Coastal Resilience Grants program to build community, ecosystem, and economic resilience in coastal areas. The House-passed bill recommends $65.0 million for coastal management grants, a decrease of $6.1 million (8.6%) from the FY2015 enacted funding level and $51.1 million (44.0%) less than the Administration's request. The Senate committee-reported bill would fund coastal zone management grants at $75.0 million, an increase of $3.9 million (5.4%) over the FY2015 appropriation level, $41.1 million (35.4%) less than the Administration's request, and $10.0 million (15.4%) more than the House-passed bill. The Senate Committee on Appropriations would maintain funding for regional coastal resilience grants at $5.0 million. The National Marine Fisheries Service (NMFS) is the lead federal agency for management and conservation of living marine resources and their habitat. The Administration has requested $888.2 million for NMFS, an increase of $66.1 million (8.0%) from the FY2015-enacted funding level of $822.1 million. In addition, the Administration has requested that $130.2 million be transferred into ORF from the Promote and Develop Fishery Products fund. The Administration's request also includes the following accounts that are related to fisheries: $58.0 million for the Pacific Coastal Salmon Recovery Fund; $350,000 for the Fishermen's Contingency Fund; and $10.3 million for the Fisheries Finance Program. The House-passed bill would fund NMFS at $830.7 million, an increase of $8.6 million (1.0%) over the FY2015 enacted appropriation level and $57.5 million (6.5%) less than the Administration's request. The Senate committee-reported bill would provide a total of $830.6 million for NMFS in FY2016. This amount is $8.5 million (1.0%) more than the FY2015 enacted appropriation, $57.6 million (6.5%) less than the Administration's FY2016 request, and $0.1 million less than the House-passed bill. NOAA's Office of Protected Resources supports protection of endangered species and marine mammals under the Endangered Species Act (ESA) and Marine Mammal Protection Act (MMPA; 16 U.S.C. §§1361 et seq.). NOAA proposes a total of $214.2 million for protected resources science and management, an increase of $33.5 million (18.5%) over the FY2015 appropriation of $180.7 million. The NOAA request includes a net increase of $13.2 million for consultation and permitting requirements of the ESA and MMPA, and it includes an increase of $17.0 million for the Species Recovery Grants, which supports states' and tribes' recovery efforts for species listed under the ESA. The House-passed bill recommends $180.2 million for protected species science and management, a decrease of $0.5 million (0.3%) from the FY2015 enacted funding level and $34.0 million (15.9%) less than the Administration's request. The Senate committee-reported bill would fund protected resources science and management at $182.0 million, an increase of $1.3 million (0.7%) over the FY2015 appropriation level, $32.2 million (15.0%) less than the Administration's request, and $1.8 million (1.0%) more than the House-passed bill. Most of the funding for fisheries science and management supports activities related to federal fisheries management under the Magnuson-Stevens Fishery Conservation and Management Act (MSFCMA; 16 U.S.C. §§1801 et seq.). According to NOAA, funding specific to the MSFCMA is approximately $551 million in FY2015. Most of this funding is included in the budget lines under fisheries science and management. The Administration has requested $546.1 million for fisheries science and management, $26.1 million (5.0%) more than the FY2015 enacted appropriation of $520.0 million. The House-passed bill recommends $529.7 million for fisheries science and management, an increase of $9.7 million (1.9%) over the FY2015 enacted funding level and $16.4 million (3.0%) less than the Administration's request. The Senate committee-reported bill would fund fisheries science and management at $529.6 million, an increase of $9.6 million (1.8%) over the FY2015 appropriation level, $16.5 million (3.0%) less than the Administration's request, and nearly the same as the House-passed bill. Oceanic and Atmospheric Research (OAR) is the primary center for research and development within NOAA. OAR conducts research in several major areas: weather and air chemistry; climate research; and ocean, coasts, and the Great Lakes. For FY2016, the Administration has requested $507.0 million for OAR, which would be $60.7 million (13.6%) more than the FY2015 enacted appropriation of $446.3 million. The House-passed bill would fund OAR at $453.1 million, $6.8 million (1.5%) more than the FY2015 appropriation level and $53.9 million (10.6%) less than the Administration's request. The Senate committee-reported bill would fund OAR at $456.1 million, an increase of $9.8 million (2.2%) over the FY2015 enacted appropriation level, $50.9 million (10.0%) less than the Administration's request, and $3.0 million (0.7%) more than the House-passed bill. The mission of OAR's climate research subprogram is to monitor and understand Earth's climate system. The Administration has requested $188.8 million for climate research, $30.8 (19.5%) million more than the FY2015 appropriation level of $158.0 million. Climate research includes funding for laboratories and cooperative institutes, regional climate data and information, and climate competitive research. The House-passed bill recommends $128.0 million for climate research, $30.0 million (19.0%) less than FY2015 enacted funding level and $60.8 million (32.2%) less than the Administration's request. The Senate committee-reported bill would fund climate research at $153.0 million, a decrease of $5 million (3.2%) from the FY2015 appropriation level, $35.8 million (18.9%) less than the Administration's request, and $25.0 million (19.5%) more than the House-passed bill. The objectives of the weather and air chemistry research subprogram are to provide accurate and timely warnings and forecasts of high-impact weather events and the scientific basis for management decisions related to weather, water, and air quality. The Administration has requested $97.3 million for weather and air chemistry research, $6.5 million (7.2%) more than the FY2015 appropriation level of $90.8 million. The House-passed bill recommends $120.5 million for weather and air chemistry research, $29.7 million (32.7%) more than the FY2015 enacted funding level and $23.2 million (23.8%) more than the Administration's request. A large portion of this increase was included in an amendment that would increase funding for weather research by $21.0 million. The additional funding generally supports activities that would be authorized in House-passed H.R. 1581 , the Weather Research and Forecasting Innovation Act of 2015. The Senate committee-reported bill would fund weather and air chemistry at $91.2 million, $0.4 million (0.4%) more than FY2015 appropriation level, $6.1 million (6.4%) less than the Administration's request, and $29.3 million (24.3%) less than the House-passed bill. The NOAA Ocean Acidification Program (OAP) was established by the Federal Ocean Acidification Research and Monitoring Act ( P.L. 111-11 ). OAP coordinates NOAA activities related to monitoring, research, and other efforts consistent with the Strategic Plan for the Research and Monitoring of Ocean Acidification . The Administration has requested $30.0 million for OAP, $21.5 million (253%) more than the FY2015 appropriation level of $8.5 million. The House-passed bill recommends $8.4 million for OAP, a small decrease of $54.0 thousand (0.6%) from the FY2015 enacted funding level and $21.6 million (71.9%) less than the Administration's request. The Senate committee-reported bill would fund OAP at $11.0 million, $2.5 million (29.4%) more than FY2015 appropriation level, $19.0 million (63.3%) less than the Administration's request, and $2.6 million (30.2%) more than the House-passed bill. The National Weather Service (NWS) provides weather, water, and climate forecasts. For FY2016, the Administration has requested $1,098.9 million for NWS, which would be $11.4 million (1.1%) more than FY2015 appropriation of $1,087.5 million. The House-passed bill would provide the NWS with $1,102.9 million, an increase of $15.4 million (1.4%) over the 2015 enacted funding level and $4.0 million (0.4%) more than the Administration's request. The Senate committee-reported bill would provide a total of $1,112.4 million for NWS in FY2016. This amount is $24.9 million (2.3%) more than the FY2015 enacted appropriation, $13.5 million (1.2%) more than the Administration's FY2016 request, and $9.5 million (0.9%) more than the House-passed bill. Generally, ORF and PAC NWS accounts and the main program areas identified in the budget would be funded in FY2016 at similar levels under the Administration's request, the House-passed bill, and the Senate Appropriations Committee-reported bill (see Table 3 ). The NOAA Administrator identified satellite operations as one of the greatest challenges that the agency faces. NESDIS acquires and manages environmental satellites and provides access to global environmental data. These data are used for weather forecasts; warnings of major weather events; environmental monitoring; climate investigations and studies; and search and rescue. For FY2016, the Administration has requested $2,379.6 million for NESDIS, an increase of $156.5 million (7.0%) over the FY2015 enacted appropriation of $2,223.1 million. The House-passed bill recommends $1,987.3 million for NESDIS, $235.8 million (10.6%) less than the FY2015 enacted funding level and $392.3 million (16.5%) less than the Administration's request. The Senate committee-reported bill would provide a total of $2,107.5 million for NESDIS in FY2016. This amount is $115.6 million (5.2%) less than the FY2015 enacted appropriation, $272.1 million (11.4%) less than the Administration's FY2016 request, and $120.2 million (6.0%) more than the House-passed bill. FY2015 funding for NESDIS satellite systems acquisition and construction is 93.4% of NOAA's PAC account funding and 37.4% of NOAA's total appropriation. The Administration's FY2016 request for NESDIS satellite system acquisition and construction is $2,189.3 million, which would be an increase of $154.8 million (7.6%) over the FY2015 appropriation of $2,034.5 million. The House-passed bill recommends $1,802.6 million for NESDIS satellite system acquisition and construction, $231.9 million (11.4%) less than the FY2015 enacted funding level and $386.7 million (17.7%) less than the Administration's request. The Senate committee-reported bill would provide a total of $1,918.4 million for NESDIS satellite system acquisition and construction in FY2016. This amount is $116.1 million (5.7%) less than the FY2015 enacted appropriation, $270.9 million (12.4%) less than the Administration's FY2016 request, and $115.8 million (6.4%) more than the House-passed bill. For FY2016, the Administration has requested $380.0 million for a new program called the Polar Follow-On. The House-passed bill does not include funding for this program, while the Senate Committee-reported bill would provide $135.0 million for it. The Polar Follow-On program would support efforts to ensure the future continuity of NOAA's polar satellite system. Polar-orbiting satellites constantly circle the earth in a north-south orbit. Data from polar-orbiting satellites are the primary input for weather prediction models. Currently, coverage is provided by the NOAA Suomi National Polar orbiting satellite, two defense meteorological satellites, and a European satellite. The Joint Polar Satellite System (JPSS) will replace current coverage with the launch of JPSS-1 in 2017 and JPSS-2 in 2021. JPSS will provide global environmental data such as cloud imagery, sea surface temperature, atmospheric profiles of temperature and moisture, atmospheric ozone concentrations, Arctic sea ice monitoring, search and rescue, and other data and services. The Polar Follow-On would extend operations of the overall polar satellite system (potentially to 2038) and support launch readiness dates for JPSS-3 (2024) and JPSS-4 (2026). According to NOAA, the Polar Follow-On would reduce the risk of a JPSS gap following the launch of JPSS-2. The Administration request, House-passed bill, and Senate Appropriations Committee-reported bill would provide identical funding levels for the following satellite acquisition programs: the Geostationary Operational Environmental Satellite – R (GOES-R) at $871.8 million, which reflects a planned decrease in funding of $109.0 million from the FY2015 enacted level; the JPSS at $808.9 million, which reflects a planned decrease in funding of $82.3 million and a $25.0 million reduction in the amount of planned carryover from FY2016 to FY2017; the JASON-3, a satellite altimetry mission that provides precise measurement of sea surface heights, at $7.5 million, which reflects a planned decrease in funding from $23.2 million in FY2015; and DSCOVR, a satellite that maintains real-time solar wind monitoring to detect space weather events such as geomagnetic storms, at $3.2 million, which reflects a planned decrease in funding from $21.1 million in FY2015. The Administration's request and the House-passed bill would fund the Constellation Observing System for Meteorology, Ionosphere, and Climate (COSMIC-2) at $20 million. This amount is $13.2 million more than the FY2015 enacted funding level of $6.8 million. However, the Senate committee-reported bill would fund COSMIC-2 at $10.1 million. COSMIC-2 would replace the current COSMIC system, which reached its design life in 2011. NOAA's FY2016 request and the House-passed bill would provide $2.5 million of new funding for the Space Weather Follow-On. This program would analyze options for the next space weather satellite because the design life of the DSCOVR spacecraft ends in 2019. The Senate Committee on Appropriations did not fund the space weather follow-on, but it instructed NOAA to submit a report to the committee detailing space weather data needs, options for collecting data, costs of these data, project timelines, and the impact of a space weather gap after 2019. Program Support (PS) provides management and services to most of NOAA's staff and line offices. The Program Support budget category generally is divided into two main areas: the Office of Marine and Aviation Operations (OMAO) and PS, which includes Corporate Services, the Office of Education, and Facilities. For FY2016, the Administration has requested $277.0 million for Corporate Services, the Office of Education, and Facilities, which would be an increase of $29.1 million (11.7%) over the FY2015 appropriation of $247.9 million. The House-passed bill recommends $210.7 million for PS, a decrease of $37.2 million (15.0%) from the FY2015 enacted funding level and $66.3 million (23.9%) less than the Administration's request. The Senate committee-reported bill would provide a total of $250.1 million for PS in FY2016. This amount is $2.2 million (0.9%) more than the FY2015 enacted appropriation, $26.9 million (9.7%) less than the Administration's FY2016 request, and $39.4 million (18.7%) more than the House-passed bill. NOAA requested $16.4 million for the Office of Education, a decrease of $11.2 million (40.6%) from the FY2015 enacted funding level of $27.6 million. The House-passed bill recommends $23.6 million for the NOAA education program, $4.0 million (14.5%) less than the FY2015 enacted funding level, and $7.2 million (43.9%) more than the Administration's request. The Senate committee-reported bill would provide a total of $26.6 million for the Office of Education in FY2016. This amount is $1.0 million (3.6%) less than the FY2015 enacted appropriation, $10.2 million (62.2%) more than the Administration's FY2016 request, and $3.0 million (12.7%) more than the House-passed bill. OMAO manages and operates aircraft and ships used for collecting data in support of NOAA's environmental and scientific mission. For FY2016, the Administration has requested $369.8 million for OMAO, $157.2 million (74.0%) more than the FY2015 appropriation of $212.6 million. The House-passed bill recommends $219.3 million for OMAO, $6.7 million (3.1%) more than the FY2015 enacted funding level and $150.5 million (40.7%) less than the Administration's request. The Senate committee-reported bill would provide a total of $225.1 million for OMAO in FY2016. This amount is $12.5 million (5.9%) more than the FY2015 enacted appropriation, $144.7 million (39.1%) less than the Administration's FY2016 request, and $5.8 million (2.7%) more than the House-passed bill. The House-passed bill and the Senate committee-reported bill do not include NOAA's request for $147.0 million to begin construction of a new oceanographic research vessel. Three amendments were included in the House-passed bill to restrict funding for specific NOAA activities. H.Amdt. 339 would restrict funding to enforce Amendment 40 of the Gulf of Mexico Red Snapper Fishery Management Plan. Red snapper are highly valued by recreational and commercial fishermen. Allocation generally involves the distribution of red snapper among fishing sectors (commercial and recreational) and among groups within a given sector (private and charter recreational fishermen). Historically, the recreational sector including charter and private fishermen landed fish under the same quota. Amendment 40 divides the recreational quota between the federal for-hire component (charter) (42.3%) and the private angling component (57.7%). Some private recreational fishermen claim that the charter component will gain a disproportionate share of the recreational quota under this arrangement. H.Amdt. 346 would restrict funding to further implement coastal and marine spatial planning and ecosystem-based management components of the National Ocean Policy developed under Executive Order 13547. On July 19, 2010, President Obama signed Executive Order 13547, which established a national policy for stewardship of the ocean, coasts, and Great Lakes. The President established the National Ocean Council (NOC) to coordinate and implement the national ocean policy. On April 16, 2013, the NOC released the National Ocean Policy Implementation Plan , which describes specific federal actions needed for enacting the policy. The Administration has presented the National Ocean Policy as a planning framework that operates within existing authorities. Some have questioned whether the Administration's proposal to implement such a policy is a new regulatory program and whether the Administration has the statutory authority to take these actions. Some also have asserted that marine spatial planning and ecosystem-based management may exclude some activities from ocean areas, such as recreational fishing and oil and gas development. H.Amdt. 354 would prohibit the use of funds for NOAA to implement recovery plans for salmon and steelhead populations listed under the ESA if the recovery plans do not address predation by non-native species. Some introduced fish species, such as striped bass and largemouth bass prey on native species such as juvenile salmon. This amendment attempts to encourage managers to address the management of introduced species and their predation on salmon as a factor related to salmon recovery. In his FY2016 budget request, President Obama has asked Congress to provide him with the authority to submit fast-track proposals to reorganize or consolidate federal programs and agencies. One such reorganization proposes to consolidate federal business and trade programs into one department. The Administration asserts that reorganization would create a more efficient and effective department that would promote U.S. competitiveness, exports, business, and jobs. Most Department of Commerce agencies would become part of the new department. NOAA would be incorporated into the Department of the Interior (DOI) to strengthen stewardship and conservation efforts and to enhance scientific resources. No additional information regarding how NOAA and DOI programs might be integrated has been given. A similar proposal for presidential authority and reorganization of federal business and trade programs was made in 2012, but there appeared to be little congressional support for the proposal. There has been a general trend to consolidate budget line items in NOAA's budget. In FY2016, NOAA is proposing to further restructure budget line items by combining program, project, and activity (PPA) lines. The largest changes would be to the NMFS budget. According to NOAA, restructuring would better align the NMFS budget to its programmatic and organizational needs and provide increased transparency and accountability. For example, seven PPAs under the Protected Species Research and Management program areas would be combined into two PPAs–Marine Mammals, Sea Turtles, and Other Species; and ESA Salmon. Also in NMFS, the Fisheries Research and Management subprogram, which currently has 15 PPAs, would be changed to Fisheries Science and Management, which would have 6 PPAs. Consolidating PPAs could make the reprograming of funds among related programs easier for the agency. However, the level of detail and allocation of funds among different activities that currently have distinct PPAs might become more difficult to discern in the NOAA budget justification. For example, Pacific and Atlantic salmon would be combined in one PPA; currently they have separate budget lines. The Senate Committee on Appropriations report to accompany H.R. 2578 ( S.Rept. 114-66 ) would adopt all of the budget structure revisions proposed in the NOAA budget request except for the proposal to consolidate Atlantic and Pacific salmon into a single PPA.

The National Oceanic and Atmospheric Administration (NOAA) conducts scientific research in areas such as ecosystems, climate, global climate change, weather, and oceans; supplies information and data on the oceans and atmosphere; and manages coastal and marine organisms and environments. In 1970, Reorganization Plan No. 4 created NOAA in the Department of Commerce. Reorganization Plan No. 4 brought together environmental agencies from within the Department of Commerce, such as the National Weather Service, and from other departments and agencies, such as the Department of the Interior's Bureau of Commercial Fisheries and the National Science Foundation's National Sea Grant Program. The reorganization was intended to unify the nation's environmental activities related to oceanic and atmospheric management and research and to provide a systematic approach for monitoring, analyzing, and protecting the environment. One of NOAA's main challenges is related to this diverse mission of science, service, and stewardship. A review of research undertaken by the agency found that "the major challenge for NOAA is connecting the pieces of its research program and ensuring research is linked to the broader science needs of the agency." The Consolidated and Further Continuing Appropriations Act of 2015 (P.L. 113-235), provided $5.441 billion for NOAA. President Obama has requested $5.975 billion for NOAA's FY2016 budget. This amount is $533.7 million (9.8%) more than the FY2015 enacted appropriation level. On June 3, 2015, the House passed the Commerce, Justice, Science, and Related Agencies Appropriations Act, 2016 (H.R. 2578). The House-passed bill would provide a total of $5.169 billion for NOAA in FY2016. This amount is $271.7 million (5.0%) less than the FY2015 enacted appropriation level and $805.4 million (13.5%) less than the Administration's FY2016 request. On June 16, 2015, the Senate Committee on Appropriations reported the Commerce, Justice, Science, and Related Agencies Appropriations Act, 2016. The Senate committee-reported bill would provide a total of $5.382 billion for NOAA in FY2016. This amount is $59.4 million (1.1%) less than the FY2015- enacted appropriation, $593.1 million (9.9%) less than the Administration's FY2016 request, and $212.3 million (4.1%) more than the House-passed bill. The following report provides a summary of actions taken by the Administration and Congress to appropriate funding for NOAA in FY2016. The summary compares the FY2015 enacted appropriations, the FY2016 Administration request, the House-passed bill, and the Senate committee-reported bill for NOAA's accounts, line offices, and selected programs. NOAA's two main accounts are Operations, Research, and Facilities (ORF) and Procurement, Acquisition, and Construction (PAC). NOAA's line offices include the National Ocean Service (NOS); National Marine Fisheries Service (NMFS); Office of Oceanic and Atmospheric Research (OAR); National Weather Service (NWS); and National Environmental Satellite, Data, and Information Service (NESDIS). In addition to NOAA's five line offices, Program Support (PS) provides cross-cutting services for the agency and includes the Office of Marine and Aviation Operations (OMAO), Corporate Services, the Office of Education, and Facilities.

An array of budget process reform proposals are put forth each year seeking to refine or modify the existing constitutional requirements, laws, and rules that make up the federal budget process. Some proposals may be designed to alter the budget process, for example attempting to improve transparency or oversight, perhaps by requiring additional information when weighing the merits of a measure. Other proposals may seek to alter the budget process in an effort to produce specific budgetary outcomes, for example by creating enforceable limits on spending or revenue levels. Altering the existing budget process can be achieved in a variety of ways. The House or Senate may adopt or amend a rule, either by agreeing to a freestanding simple resolution or by amending the chamber's standing rules. In addition, the House and Senate might agree to a concurrent resolution creating a rule enforceable in one or both chambers. For example, the annual concurrent budget resolution often includes rule-making provisions altering the congressional budget process. The budget process may also be amended in statue, requiring the signature of the President or the support of the two-thirds of each chamber required to override a veto. Amending the budget process in statute may be accomplished either in the form of freestanding legislation or as a provision in another measure, such as an appropriations bill or a measure to increase the debt limit. The budget process can also be altered more informally though changes in practice. For example, the House majority party leadership has released specific protocols, which although not formally enforceable on the floor, may govern the practices or customs of the chamber. Congress voted on an array of budget process reforms during 2011. In its rules package for the 112 th Congress, the House agreed to several rules changes affecting the congressional budget process, such as a prohibition against certain amendments to general appropriations bills. In addition, the House and Senate voted on a number of changes that were not adopted, including provisions in H.Con.Res. 34 , a budget resolution for FY2012, and H.R. 2560 , the Cut, Cap, and Balance Act of 2011. The Budget Control Act of 2011 (BCA), which was signed into law on August 2, 2011, significantly changed the federal budget process. Among other things, it created statutory discretionary spending limits, and created a Joint Select Committee on Deficit Reduction tasked with developing legislation that would reduce the deficit. Pursuant to the BCA, both the House and Senate voted on an amendment to the Constitution that would require a balanced federal budget. The following section identifies, tracks, and explains current budget process reform proposals reported from committee, or considered on the floor during 2012. The proposals are organized into categories related to the existing budget process. When appropriate, a brief description of the current process is provided. The Budget Act of 1974 provides for the annual adoption of a concurrent resolution on the budget as a mechanism for coordinating subsequent congressional decision making on budgetary matters. It is not a law-it is not signed by the President nor can it be vetoed. Instead, its purpose is to establish a framework within which Congress considers legislation dealing with spending and revenue legislation. The budget resolution includes enforceable levels of overall federal spending and revenue, as well as spending limits for each committee. The method in which the levels included in the budget resolution are enforced is by Members of Congress raising points of order against any subsequent legislation that is being considered on the floor, if it would violate the spending or revenue levels agreed to in the budget resolution. Such points of order, however, may be waived, either by a simple majority in the House or by three-fifths in the Senate. Budget process reform proposals often seek to alter the content, characteristics, or consideration of the budget resolution. Current support for such reform efforts may be strengthened by the fact that the House and Senate did not agree to a budget resolution for FY2011 or FY2012. On January 23, 2012, the House Rules committee held a mark-up and ordered reported H.R. 3575 , the Legally Binding Budget Act of 2011, which would require that the budget resolution be a joint resolution sent to the President for signature. As stated above, the budget resolution is presently a concurrent resolution, considered by both the House and Senate, but not sent to the President for his signature or veto. Instead, the President submits his preferred budgetary levels in his annual budget submission, as required by law, and in addition, he may sign or veto any legislation that Congress enacts implementing budgetary policy. By replacing the concurrent resolution with a joint resolution, H.R. 3575 would grant the President an additional role in setting preferred budgetary levels by granting him a direct role in deliberations on the congressional budget resolution. The new measure, H.R. 3575 , does not appear to alter the enforcement of the budget resolution. Although the measure would create the possibility for the budget resolution to become statute, the spending and revenue levels in the budget resolution would still be enforced by points of order, not by sequestration or any other statutory enforcement mechanism. Points of order, therefore, could still be waived, regardless of the budget resolution being in statute, because of Congress's constitutional authority over its own rules of procedure. H.R. 3575 also provides that in the event the joint budget resolution were vetoed by the President, the levels in the resolution would still be enforceable in the House and Senate in the way that a concurrent budget resolution presently operates. The House Rules Committee reported an amendment to the measure stating that the levels in the resolution would be enforceable in the House and Senate either after enactment, or 15 days after presentment to the President. Congress has the power to initiate rescission legislation that would cancel previously enacted budget authority. The President may propose rescissions, but if Congress does not enact the proposed rescission within 45 calendar days of continuous session after the message is received, the President must make the funds available for obligation. There is no requirement that Congress vote on such a rescission request, but if the rescission is sent pursuant to procedures outlined in the Impoundment Control Act, the recessions may be considered under expedited procedures. Such a rescission request from the President is currently submitted in the form of a special message including specific information about the rescission, such as the amount of the rescission, the account to which the rescission applies, reasons for the rescission, and, to the extent practicable, the estimated fiscal, economic, and budgetary effects of the rescission. Although now defunct, in 1996 the President was given the power of the "line item veto," which empowered him, after signing a bill, to cancel certain types of provisions. This power was ruled unconstitutional by the United States Supreme Court in the case Clinton, et al. v City of New York, et al . , which held that the Line Item Veto Act violated the Presentment Clause of the Constitution. H.R. 3521 , the Expedited Legislative Line-Item Veto and Rescissions Act of 2011, passed the House on February 8, 2012, by a vote of 254-173, after being reported from the House Budget Committee on January 7, 2012, and the House Rules Committee on February 2, 2012. Among other things, the bill seeks, generally, to maintain the President's current ability to request rescissions, and to enhance Congress's ability to take action on such rescissions by including expedited procedures for the consideration of such Presidential requests. The procedures prescribed in H.R. 3521 would expire at the end of 2015 and would apply only to rescissions of discretionary spending. The measure states that within 10 days of enactment of any spending measure, the President may submit a special message proposing rescissions to such measure. H.R. 3521 prescribes the contents of such a message, requiring more information than is required under current law, such as the account, project, or activity within the account, to which the rescission applies. H.R. 3521 allows the President to submit a second a second rescission message related to the same spending measure, but prohibits the message from including any rescissions included in the first package. H.R. 3521 states that if a proposed rescission has not yet been enacted, the President must make the funds proposed to be rescinded available no later than 60 days following the enactment of the original appropriations measure. H.R. 3521 includes expedited procedures for the consideration of such rescission packages in the House and Senate. The procedures provide for automatic discharge of the measure from committee if the committee does not report the package within a specified period. Further, H.R. 3521 would limit House and Senate floor debate and prohibit amendments to the rescission measure. H.R. 3521 requires that any rescissions enacted under this procedure be "dedicated only to reducing the deficit or increasing the surplus." The measure seeks to achieve this by requiring allocations associated with the budget resolution, as well as appropriations subcommittee allocations, to be revised downward to reflect savings achieved from the rescissions. In addition, the enactment of the rescission bill would similarly revise downward the statutory discretionary spending limits to reflect the savings achieved from the rescissions. A baseline is a projection of future federal spending and revenue levels based on current law. It is intended to provide information on future deficits or surpluses and to act as a benchmark for comparing proposed changes to budget policy. As described by the Congressional Budget Office (CBO), The baseline is intended to provide a neutral, nonjudgmental foundation for assessing policy options. It is not "realistic," because tax and spending policies will change over time. Neither is it intended to be a forecast of future budgetary outcomes. Rather, the projections ... reflect CBO's best judgment about how the economy and other factors will affect federal revenues and spending under existing policies. Specific rules for calculating the baseline appear in Section 257 of the Balanced Budget and Emergency Deficit Control Act of 1985. In projecting the baseline, direct spending and receipts are generally assumed to continue at levels specified in existing law. These projections are based upon economic assumptions (e.g., economic growth, inflation, and unemployment) and other technical assumptions (e.g., demographic and workload changes) about future years. Discretionary spending levels are determined annually, so there is no obvious consensus as to what levels of discretionary spending best represent current policy. The level of discretionary spending, however, is assumed to stay constant in inflation-adjusted terms, meaning that the current year's spending level will be adjusted "sequentially and cumulatively" for inflation and other factors. Actual spending and revenue levels are not set by the baseline; they are set by spending and revenue legislation enacted by Congress and the President. While the Office of Management and Budget calculates their own baseline submitted with the President's budget, CBO submits the official congressional baseline to Congress in late January of each year each year as part of the Budget and Economic Outlook report. H.R. 3578 , the Baseline Reform Act of 2012, passed the House on February 3, 2012, by a vote of 235-177, after being marked up by the House Budget Committee on December 7, 2011, and reported from committee on January 30, 2012. The measure proposes to change the calculation of the baseline by removing the inflation adjustment made to discretionary spending. By removing the annual inflation adjustment for discretionary spending from the baseline calculation, nominal dollars stay the same but the purchasing power of discretionary spending would fall as inflation occurs. In addition, by holding the level of spending constant, the spending per person would decrease as the population grows. In the current baseline, the inflation adjustment rule is not in effect because the discretionary spending caps agreed to under the BCA have been incorporated into the baseline calculation for discretionary spending until 2021. The change to the baseline included in H.R. 3578 therefore would not be incorporated until 2022, with the exception of projected spending for "Overseas Contingency Operations," which is not subject to the discretionary spending limits. H.R. 3578 also requires CBO to submit a supplemental projection that assumes the extension of current revenue policy, regardless of such revenue policy being set to expire. Further, the measure requires CBO to submit a Long-Term Budget Outlook for the upcoming year that would cover at least the next 40 years. After a mark up on January 24, 2012, H.R. 3582 , the Pro-Growth Budgeting Act of 2011, was reported by the House Budget Committee on January 30. The bill would amend the 1974 Budget Act to require that CBO, to the extent practicable, prepare a macroeconomic impact analysis of each "major" measure reported from any House or Senate committee. The macroeconomic impact analysis, often referred to as a "dynamic estimate," would cover the 10-year period beginning with the first fiscal year, and the next 3 10-year periods. This information is to be prepared as a supplement, and not a replacement for estimates already required by CBO under Section 402 of the 1974 Budget Act, which requires CBO, to the extent practicable, to prepare for any measure reported from a House or Senate committee an estimate of the costs incurred in carrying out such a bill in the year it is to become effective as well as each of the next four years. Since 2003, House Rules have required a supplementary macroeconomic impact analysis of tax legislation reported by the House Ways and Means Committee (or a reason given for why it cannot be prepared). H.R. 3582 would expand the requirement for a macroeconomic impact analysis to all major measures reported from any House or Senate committee. Section 312(a) of the 1974 Budget Act requires that the enforcement of levels in the budget resolution be determined based on estimates provided by the Budget Committee. This neither requires nor prohibits the use of traditional or dynamic estimates for purposes of such budget enforcement. H.R. 3582 also requires CBO to submit a supplemental projection that assumes the extension of current revenue policy, regardless of such revenue policy being set to expire. Further, the measure requires CBO to submit a Long-Term Budget Outlook for the upcoming year that would cover at least the next 40 years, as also proposed in H.R. 3578 . H.R. 3581 , the Budget and Accounting Transparency Act, was passed by the House on February 7, 2012, by a vote of 245-180 after being was marked up by the House Budget Committee on January 24, 2012, and reported on January 31, 2012. The bill amends the Credit Reform Act and changes the budgetary treatment of Fannie Mae and Freddie Mac, among other things. Most outlays and revenues in the federal budget are measured on a cash-flow basis. In other words, the amounts flowing in and out of the government are recorded in the year when those flows occur. One exception is the treatment of federal loans and federal loan guarantees since enactment of the Federal Credit Reform Act of 1990 (2 USC 661). For federal loans and loan guarantees, only the subsidy costs inherent in those transactions are recorded on budget as outlays in the year that a loan or loan guarantee is made. Neither the amounts of the loan disbursed nor subsequently repaid enters the federal budget as an outlay. The subsidy cost of a federal loan or loan guarantee is calculated as the difference between the net present value of future expected expenses and income. Future expenses and income are discounted using the government's expected borrowing cost. H.R. 3581 modifies the Federal Credit Reform Act by requiring expenses and income to be discounted by a rate that includes a "fair value" risk adjustment, where fair value is defined by Financial Accounting Standards #157. The proposed adjustment is intended to represent the additional compensation (risk premium) that private lenders or insurers would require to take on the risks inherent in the transaction. This change would make the cost of government loans and loan guarantees more comparable to the cost of an equivalent transaction undertaken by private lenders or insurers. According to a 2004 CBO report, Using Treasury rates to discount expected cash flows neglects the cost of market risk and results in the systematic understatement of costs for both direct and guaranteed loans. Using risk-adjusted discount rates, which include the cost of market risk, would correct that understatement and improve the comparability of budgetary costs for credit and other programs. Opponents of H.R. 3581 argue that market risk is not relevant to the federal budget and a fair value adjustment would make loans and loan guarantees appear more costly than an equivalent grant or tax expenditure. A fair value adjustment was statutorily required for the budgetary treatment of the Troubled Asset Relief Program (TARP), and CBO sometimes presents additional information on costs under a fair value adjustment in their evaluations of credit programs. The practical effect of this change would be to increase the costs of federal loan and loan guarantees recorded in the budget, because interest rates on private loans are generally higher than government borrowing rates. CBO estimates that this change would increase recorded subsidy costs by $55 billion in 2012. H.R. 3581 would not change the availability of federal loans or loan guarantees through existing programs, or the interest or other fees paid by borrowers and received by the government. H.R. 3581 contains language that prevents this change from affecting budgetary enforcement rules and adjusts the discretionary spending caps created by the Budget Control Act to accommodate increases in recorded discretionary spending as a result of the subsidy re-estimates. Going forward, the change would affect the scoring of bills to create or modify loan and loan guarantee programs, however, which would affect their treatment under PAYGO rules, for example. According to CBO, the major programs affected by H.R. 3581 would be the Federal Housing Administration's and the Department of Veteran Affairs' mortgage guarantee programs, the Department of Education's student loan programs, the Department of Agriculture's credit programs for rural utilities, and the Small Business Administration's loan and loan guarantee programs. H.R. 3581 maintains the exemptions for the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Resolution Trust Corporation, the Pension Benefit Guaranty Corporation, national flood insurance, the National Insurance Development Fund, federal crop insurance, and the Tennessee Valley Authority from credit-reform accounting. H.R. 3581 would also move Fannie Mae and Freddie Mac on budget for as long as they remain in federal conservatorship. In previous fiscal years, Fannie Mae and Freddie Mac have appeared on budget only through the transfers that they have received from the Treasury Department on a cash flow basis since they were taken into conservatorship. Other provisions of H.R. 3581 would require two studies from CBO and OMB, and require federal agencies to make their budget justifications submitted to any congressional committee available online to the public on the same day. Overall, CBO estimates appropriations equal to $14 million would be required for the next five years across relevant agencies in order to comply with all provisions of H.R. 3581 .

An array of budget process reform proposals are put forth each year seeking to refine or modify the existing constitutional requirements, laws, and rules that make up the federal budget process. This report identifies, tracks, and explains current budget process reform proposals reported from committee or considered on the floor during 2012. The proposals are organized into categories related to the existing budget process. When appropriate, a brief description of the current process is provided. Measures included in this report are H.R. 3575, the Legally Binding Budget Act of 2011; H.R. 3521, the Expedited Legislative Line-Item Veto and Rescission Act of 2011; H.R. 3578, the Baseline Reform Act of 2012; H.R. 3582, the Pro-Growth Budgeting Act of 2011; and H.R. 3581, the Budget and Accounting Transparency Act of 2011.

On October 16, 2008, EPA Administrator Stephen Johnson announced his final approval of a more stringent National Ambient Air Quality Standard (NAAQS) for lead. The publication of the revised standard in the Federal Register , on November 12, 2008, was the final step in a multi-year review process. When the previous standard for lead was promulgated in 1978, lead was a widespread air pollutant. Eighty to ninety percent of it was emitted by the nation's automobiles and trucks, a majority of which ran on leaded gasoline. Leaded gasoline was gradually phased out in the 1970s, 1980s, and early 1990s, and both emissions and concentrations of lead in the air plummeted. Emissions fell more than 98% from 1980 to 2007. Ambient concentrations (the quantity of lead in the air) fell by 94%. As of March 12, 2008, only two areas with a combined population of 4,664 people had air that remained in violation of the 1978 lead NAAQS. These developments led some to suggest that there was no longer a need for an ambient air quality standard for lead. Others, including the independent scientific advisory panel that advises EPA's Administrator, concluded that the 1978 NAAQS was far too lenient, that lead in ambient air still poses a threat to public health, and that the NAAQS needed to be significantly strengthened as the result of the recent review. In promulgating a new standard, the Administrator agreed with his scientific advisers, lowering the standard to 90% below the 1978 standard and setting new requirements for monitoring. This report provides background on NAAQS, the process used to establish them, the factors leading to the reduction in lead emissions, the proposed and final changes to the lead standard and related monitoring requirements, as well as information regarding the potential effects of the revision. NAAQS are standards that apply to ambient (outdoor) air pollutants that exhibit two characteristics: (1) they may reasonably be anticipated to endanger public health or welfare; and (2) their presence in the air results from numerous or diverse mobile or stationary sources. The Clean Air Act provides for two types of NAAQS: primary standards, "the attainment and maintenance of which in the judgment of the [EPA] Administrator ... are requisite to protect the public health," with "an adequate margin of safety"; and secondary standards, necessary to protect public welfare, a broad term that includes damage to crops, vegetation, property, building materials, etc. NAAQS are at the core of the Clean Air Act, even though they do not directly regulate emissions. In essence, they are standards that define what EPA considers to be clean air. Once a NAAQS has been set, EPA uses monitoring data and other information submitted by the states to identify areas that exceed the standard and must, therefore, reduce pollutant concentrations to achieve it. After these "nonattainment" areas are identified (which EPA estimates will occur by January 2012 at the latest for the new lead standard), state and local governments must produce State Implementation Plans outlining the measures they will implement to reduce pollution levels and attain the standards. Lead nonattainment areas will have five years after their designation to actually attain the standard, with a possible extension of five more years. As will be noted in more detail later, most areas of the country do not monitor lead concentrations in ambient air. Thus, in addition to strengthening the lead standard, the Administrator expanded the requirements for lead monitoring. Installing the additional monitors and compiling up to three years of data to determine compliance is the main reason that implementing the new standard is likely to be a lengthy process. In addition to requiring states to submit implementation plans, EPA also acts to control many of the NAAQS pollutants wherever they are emitted, through national standards for products that might emit them (particularly fuels) and through emission standards for new stationary sources (e.g., lead smelters). The Clean Air Act requires the agency to review each NAAQS every five years. That schedule is rarely met, but it often triggers lawsuits that force the agency to undertake a review. In the case of lead, the last review of the NAAQS was completed in 1978. The Missouri Coalition for the Environment and others filed suit against EPA over its failure to complete a review in 2004, and a consent decree established the schedule EPA followed in reviewing the standard. The schedule required EPA to propose any revision of the standard by May 1, 2008, and to promulgate a final decision by October 15, 2008. Reviewing an existing NAAQS is a long process. As a first step, EPA scientists review the scientific literature published since the last NAAQS revision, and summarize it in a report known as a Criteria Document or Integrated Science Assessment. Generally, there are hundreds or thousands of scientific documents reviewed, covering such subjects as environmental concentrations, human exposure, toxicology, animal studies and animal-to-human extrapolation, epidemiology, effects on vegetation and ecosystems, and effects on man-made materials. A second document that EPA prepares, the Staff Paper or Policy Assessment, summarizes the information compiled in the Criteria Document and provides the Administrator with options regarding the indicators, averaging times, statistical form, and numerical level (concentration) of the NAAQS. To ensure that these reviews meet the highest scientific standards, the 1977 amendments to the Clean Air Act required the Administrator to appoint an independent Clean Air Scientific Advisory Committee (CASAC). CASAC has seven members, largely from academia and from private research institutions. In conducting NAAQS reviews, their expertise is supplemented by panels of the nation's leading experts on the health and environmental effects of the specific pollutant or pollutants under review. These panels can be quite large. The 2005-2008 lead review panel had 15 members, in addition to the 7 statutory members of CASAC. CASAC and the public make suggestions regarding the membership of the panels on specific pollutants, with the final selections made by EPA. The panels review the agency's work during NAAQS-setting and NAAQS-revision, rather than conducting their own independent reviews. The pollutants to which NAAQS apply are generally referred to as "criteria" pollutants. Six pollutants are currently identified as criteria pollutants: ozone, particulates, carbon monoxide, sulfur dioxide, nitrogen oxides, and lead. The EPA Administrator can add to this list if she determines that additional pollutants meet the act's criteria (endangerment of public health or welfare, and numerous or diverse sources); she can delete them if she concludes that they no longer do so. Whether lead still met these criteria was one of the issues EPA considered in its review of the standard. The reduction of lead emissions is often described as one of the key successes of the Clean Air Act and of the Environmental Protection Agency. In 1970, emissions of lead totaled 224,100 tons. By 2007, emissions had been reduced more than 99%, to 1,300 tons. Little of that success is attributable to the setting of a NAAQS, however. The agency did not set a NAAQS for lead until 1978 (by which time lead emissions had already declined about 40%), and it established the NAAQS then only as a result of a lawsuit filed by the Natural Resources Defense Council and others. After promulgating the NAAQS, the agency did not identify nonattainment areas until 1991. The great bulk of the lead reductions "occurred prior to 1990," according to EPA. So, in general, the reduction of lead in ambient air did not come about as a result of the 1978 NAAQS, or in the manner prescribed by Title I of the Clean Air Act, wherein nonattainment areas are identified and the states or areas in which they are located submit to EPA State Implementation Plans that identify local and national measures that will be implemented to help such areas reach attainment. Most of the reduction was a side-benefit of other Clean Air Act programs, especially the regulation of emissions from new automobiles, beginning in the 1970s. In order to meet more stringent requirements for emissions of hydrocarbons, nitrogen oxides, and carbon monoxide, which took effect in 1975, the auto industry installed catalytic converters on new cars. Gasoline with lead additives would have fouled the catalytic converters, rendering them useless; so, in anticipation of the converters' widespread adoption, EPA mandated the sale of unleaded fuel in the early 1970s, and eventually banned the use of lead in gasoline entirely. Being a metal, lead remains in the environment even though emissions have declined. Thus, although human exposure to lead has declined, it has not done so by as much as the decrease in emissions would suggest. Furthermore, research conducted since the 1970s suggests that lead has significant health impacts at levels well below those previously considered safe. Current sources of emissions include utility and other boilers, leaded fuel still used in some general aviation airplanes, trace lead contaminants in diesel fuel and gasoline, lubricating oil, iron and steel foundries, primary and secondary lead smelters, hazardous waste incinerators, and about 30 smaller categories of sources. In addition, there continues to be exposure from lead particles in soil or dust re-suspended in the atmosphere as a result of vehicular traffic, construction, agricultural operations, and the wind. As a result of the review it completed in 2008, EPA decided to deal with the remaining issue of lead in ambient air by both strengthening the lead NAAQS and by expanding the network of monitors that are used to measure attainment. The primary (health-based) standard, promulgated in 1978, was 1.5 micrograms per cubic meter (µg/m 3 ) averaged over three months. With the exception of two small areas (one in Montana, one in Missouri), the United States has attained this standard, but the NAAQS review found evidence of health effects at the levels of exposure currently experienced by much of the U.S. population. The Staff Paper reported "significant associations between Pb [lead] exposures and a broad range of health effects," including, in children, neurological effects, notably intellectual attainment, attention, and school performance, with "long-term consequences over a lifetime." The Staff Paper also reported effects on the immune system, with "increased risk for autoimmunity and asthma." In adults, the Staff Paper found associations between lead exposure and "increased risk of adverse cardiovascular outcomes, including increased blood pressure and incidence of hypertension, as well as cardiovascular mortality." Lead exposure also was associated with reduced kidney function, with adverse impacts enhanced in those with diabetes, hypertension, and chronic renal insufficiency. As a result, both EPA staff and the CASAC recommended strengthening the NAAQS. According to the Staff Paper: Staff concludes that it is appropriate for the Administrator to consider an appreciable reduction in the level of the standard, reflecting our judgment that a standard appreciably lower than the current standard could provide an appropriate degree of public health protection and would likely result in important improvements in protecting the health of sensitive groups. We recommend that consideration be given to a range of standard levels from approximately 0.1-0.2 µg/m 3 (particularly in conjunction with a monthly averaging time) down to the lower levels included in the exposure and risk assessment, 0.02 to 0.05 µg/m 3 . CASAC concurred, stating in a January 22, 2008 letter that it "... unanimously affirms EPA staff's recognition of the need to substantially lower the level of the primary NAAQS for Lead, to an upper bound of no higher than 0.2 µg/m 3 ...." The Administrator agreed that the primary NAAQS should be substantially lowered, choosing a level of 0.15 µg/m 3 . The Administrator also proposed two options for revising the averaging time and form used to determine whether an area meets the standard. Instead of the former not-to-be-exceeded form, based on quarterly (3-month) averages of lead concentrations, the proposal would have either revised the current averaging form to clarify that it applies across a three-year span (i.e., to demonstrate attainment, an area would need to show quarterly readings lower than the standard for 12 consecutive quarters); or the proposal would revise the measure to the second highest monthly average in a three-year span. According to agency staff, this latter form would better capture short-term increases in lead exposure, while allowing the average from one bad month (perhaps resulting from unusual meteorological conditions) to be disregarded. The agency noted that "control programs to reduce quarterly mean concentrations may not have the same protective effect as control programs aimed at reducing concentrations in every individual month." CASAC also recommended that consideration be given to changing from the calendar quarter to the monthly averaging time. In making that recommendation, CASAC emphasized support from studies suggesting that blood lead concentrations respond at shorter time scales than would be captured completely by quarterly values. The Administrator chose neither of these options. Instead, the agency will use a rolling three-month average, evaluated over a three-year period: any three-month average exceeding the standard will be considered a violation of the NAAQS. For a nonattainment area to be subsequently redesignated to "attainment," the area would have to have three years of rolling three-month averages that met the standard. This is somewhat more stringent than the previous averaging time (calendar quarters), but not as protective as the second highest monthly average would have been. As shown in Figure 1 , 17 counties have monitors showing nonattainment using the new standard. (By comparison, only portions of two counties violated the old standard.) As will be discussed in more detail below, less than 3% of the nation's counties have active lead monitors. Thus, more counties may be found in nonattainment once the monitoring network is expanded. As part of its current review, EPA also assessed the secondary (public welfare) NAAQS for lead. The secondary standard has been identical to the primary standard. The agency concluded that: A significant number of new studies have been conducted since 1978 that associate lead pollution with adverse effects on organisms and ecosystems. However, there is a lack of evidence linking various effects to specific levels of lead in the air. Lacking such evidence, the Administrator continued the practice of making the secondary standard identical to the primary standard. Besides finding that the 1978 NAAQS was inadequate to protect public health and welfare, EPA's review concluded that "[t]he current monitoring network is inadequate to assess national compliance with the proposed revised lead standards." Only 70 of the roughly 3,000 counties in the United States (2.3%) had active lead monitors in 2008, leaving many areas of the country without any means of determining whether they were in violation of the lead NAAQS. Twenty-four entire states, including some with major sources of lead emissions, had no lead monitors. Under the old (1978) standard, this was not much of an issue. There were, at one time, about 900 lead monitors in operation; but, as lead emissions decreased and as the monitors showed consistent attainment of the standards, many of the monitors were shut down or removed. With a substantially more stringent standard, however, it cannot be assumed that areas without monitors are still in attainment. The locations of monitors and of the major sources of lead emissions are shown in Figure 2 . The figure shows that large sources of emissions in Alaska, Arizona, Arkansas, Florida, Illinois, Indiana, Iowa, Kansas, Michigan, Mississippi, Nebraska, New York, Oklahoma, Tennessee, Texas, Utah, Virginia, Wisconsin, and other states appear to be located more than 100 miles from the nearest ambient monitor. To address this shortfall, EPA proposed—in addition to the revised lead NAAQS—to require monitors near all sources of lead that exceed a threshold of between 200 and 600 kilograms (441 to 1,323 pounds) of emissions per year. The agency also proposed to require a small network of monitors to be placed in urban areas with populations greater than one million to gather information on the general population's exposure to lead in the air. In the final rule, the Administrator chose thresholds different than proposed: he set the source threshold at one ton of emissions rather than 200-600 kilograms, and required monitors in urban areas with populations of 500,000 or more rather than one million. The final choice appeared to have reflected concerns by industry groups, including the Battery Council International, who argued that emphasis should be placed more on exposure-oriented monitoring than on specific sources of emissions. The monitoring decision was challenged by the Natural Resources Defense Council, Missouri Coalition for the Environment Foundation, and two other groups: they petitioned the agency for reconsideration of the monitoring requirements, in January 2009. EPA agreed to a reconsideration in July and proposed changes to the monitoring rule on December 23. In the December proposal, EPA reverted to a 0.5 ton threshold for source-oriented monitors. The agency also proposed eliminating the required monitoring in areas with populations of 500,000 or more, in favor of a network of approximately 80 multi-pollutant monitoring sites known as NCore. The NCore network would include 60 sites located in urban areas and about 20 sites located in rural areas. In all, EPA estimates that the proposal would increase the number of monitors by about 140. The states remain free to install more monitors than EPA requires, but finding the money to do so might be difficult at a time when many of the states are experiencing a shortage of revenues. EPA estimated the initial cost of the network (as required by the 2008 rule) at $4.5 million, and the operational costs at $3.5 million annually. The agency estimated that the December 2009 rule would increase ambient air monitoring costs by an additional $1.8 million. To address these costs (and the costs of new monitoring requirements for other NAAQS pollutants), EPA has requested an additional $15 million in its FY2011 budget. The agency is also requesting an $82.5 million (36%) increase in total budget authority for state and tribal assistance grants in FY2011, in part to support activities related to the implementation of new NAAQS. Perhaps the two largest issues raised during the lead NAAQS review process—whether a NAAQS was still needed, and whether the Administrator's proposed range of standards reflected the scientific advice he received—have been resolved, with little remaining controversy. CASAC and EPA staff both concluded that airborne lead still meets the NAAQS criteria (endangerment of public health or welfare, and numerous or diverse sources). Rather than support the deletion of lead from the list of criteria pollutants, they concluded that lead in ambient air still poses a threat to public health, that the old NAAQS (established in 1978) was far too lenient, and that the 1978 NAAQS needed to be significantly strengthened. The Administrator agreed. A second major issue was whether the proposed range of standards (as opposed to the final, promulgated version) was supported by the available science. The range proposed by the Administrator, while substantially stronger than the 1978 standard, would have allowed him to set a final NAAQS 50% higher (i.e., less stringent) than the least stringent level recommended by both EPA's scientific staff and by the independent CASAC panel. Given uncertainties in the science (particularly the estimated correlation between airborne lead and blood lead levels and the uncertainties in the concentration-response functions—i.e., the effect that changes in blood lead levels have on IQ), the Administrator stated in the May 2008 proposal that his decision would be supported by the science at any point in the proposed range of 0.10 to 0.30 µg/m 3 . His final choice (0.15 µg/m 3 ) fell within the range recommended by EPA staff and CASAC, and, thus, did not provoke controversy. At that level, the standard was supported by the staff's conclusions, which were themselves based on the review of more than 6,000 scientific studies, and by the unanimous conclusions of the 22-member CASAC review panel. There are, of course, some who wanted weaker or stronger standards. In comments on the proposed range, some commenters expressed disappointment that the Administrator did not consider the potential economic impacts in making his choice. These comments were echoed by the Association of Battery Recyclers (ABR), following the Administrator's decision: in press reports, an ABR representative stated that the new standard "potentially threatens the viability of the lead recycling industry." The Clean Air Act does not allow the consideration of costs or economic impacts in the setting of NAAQS, however—a point underlined by the Supreme Court in a unanimous 2001 decision, and repeated by the agency in announcing the final decision. Thus, the Administrator appears to have been on firm ground in rejecting economic arguments. Others, including EPA's Children's Health Protection Advisory Committee (CHPAC), argued for a stronger standard. CHPAC cited evidence that lead exposure at low levels poses even greater harm per unit of lead than does exposure at higher levels, and argued that the standard should be set at 0.02 µg/m 3 , almost an order of magnitude below the Administrator's final choice. Despite that recommendation, criticism was muted in the wake of the Administrator's decision, with most environmental groups expressing support. A typical reaction was that of Dr. John Balbus, a member of CHPAC and the Chief Health Scientist on the staff of the Environmental Defense Fund: "While EPA's own analysis justifies an even lower lead standard, this tenfold reduction will go a long way to protecting children most at risk from airborne lead.... It's refreshing to see the agency follow the science and the advice of its experts in making this decision." Although the Administrator is prohibited from taking costs or economic factors into consideration in setting a NAAQS, the agency generally does prepare a Regulatory Impact Analysis (RIA) for information purposes, and to comply with an executive order. The RIA analyzes in detail the costs and benefits of new or revised NAAQS standards. The agency released an RIA for the final lead standard as part of the final regulatory package, October 16, 2008. The RIA presented a range of both costs and benefits from the new standard, assuming full implementation of control measures in 2016. Both the cost and benefit ranges were large, and EPA stressed that "there are important overall data limitations and uncertainties in these estimates." In general, costs and benefits may be understated, because the study developed estimates only for the 17 counties that currently have monitors showing nonattainment. Until new monitors are installed, the agency has no way of estimating how many additional areas will be affected by the standard, but the RIA emphasizes that "... there may be many more potential nonattainment areas than have been analyzed in this RIA." The cost estimates ranged from $150 million annually in 2016 to as much as $2.8 billion, 19 times as much. The difference is attributable to EPA's inability to demonstrate attainment of the standard in all areas through the application of identified control technologies. The RIA states: For the selected standard of 0.15 µg/m 3 , over 94% of the estimated emission reductions needed for attainment are achieved through application of identified controls, and less than 6% through unspecified emission reductions. Identified point source controls include known measures for known sources that may be implemented to attain the selected standard, whereas the achievement of unspecified emission reductions requires implementation of hypothetical additional measures in areas that would not attain the selected standard following the implementation of identified controls to known sources. The known controls are estimated to cost $130 million to $150 million annually, depending on the discount rate chosen. But the unspecified emission controls are estimated at from $20 million to $3.1 billion annually depending on the methodology used. A key feature of EPA's analysis is that it assumed all emission reductions would come from controls on point source emissions (e.g., smelters, foundries, incinerators, etc.). But, according to the agency, 45% of emissions come from aviation fuel. In October 2006, EPA received a petition from Friends of the Earth to reduce or eliminate lead from aviation gasoline. The agency, in coordination with the Federal Aviation Administration (FAA), is analyzing the petition. The RIA does not address the costs or benefits of such a step. In addition, the agency notes: ...in this RIA we have not accounted for the effect of improvements that tend to occur, such as technology improvement, process changes, efficiency improvements, materials substitution, etc. We believe these typical improvements will tend to result in more cost effective approaches than simply adding extremely expensive pollution controls in many areas by the attainment date of 2016. Many industrial sources of lead emissions emit very small quantities of lead in absolute terms. Our cost modeling shows that some could face significant costs to reduce these low levels of lead, costs which could be prohibitively expensive. Rather than applying additional controls, it may be possible for firms emitting small amounts of Pb [lead] to modify their production processes or other operational parameters, including pollution prevention techniques, which would be more cost effective than adding additional control technology. Such measures might include increasing the enclosure of buildings, increasing air flow in hoods, modifying operation and maintenance procedures, changing feed materials to lower Pb content, measures to suppress dust from tailings piles, etc. The RIA estimates that benefits of the NAAQS will range from $3.7 billion to $6.9 billion annually in 2016—and, thus, that benefits will outweigh costs at all points in the estimated range. The benefits mostly represent the expected increase in lifetime earnings that would result from children under seven years of age avoiding IQ loss due to exposure to lead. The RIA focuses primarily on children's health effects. It does not attempt to estimate the changes in lead-related health effects among adults. Unquantified health effects include: Hypertension Non-fatal coronary heart disease Non-fatal strokes Premature mortality Other cardiovascular diseases Neurobehavioral function Renal effects Reproductive effects Fetal effects from maternal exposure (including diminished IQ). It is beyond the agency's capability, at present, to quantify these effects. Thus, the benefits, just like the costs, are subject to substantial uncertainty. The lead NAAQS was less controversial than the recent NAAQS decisions on ozone and particulate matter, both of which were challenged in the D.C. Circuit Court of Appeals; but, given the importance of its potential health benefits and the uncertainties regarding both the number of areas affected and the means by which areas will reach attainment, implementation of the NAAQS may continue to be of interest to the Congress. An immediate issue is the need for additional funds for monitoring and implementation of the NAAQS. EPA has requested a substantial increase in its FY2011 budget for state and tribal assistance grants, in order to fund both new monitors and the increased state workload involved in implementing the revised NAAQS for lead and other pollutants.

The Administrator of the Environmental Protection Agency (EPA), under a court order to review the National Ambient Air Quality Standard (NAAQS) for lead, announced his decision October 16, 2008, reducing the standard by 90%, from 1.5 micrograms per cubic meter (µg/m3) to 0.15 µg/m3. EPA also promulgated new monitoring requirements at that time, requiring monitors downwind of any source emitting one ton or more of lead per year and in urban areas with populations of 500,000 or more. In January 2009, the Natural Resources Defense Council and three other groups petitioned EPA for a reconsideration of the monitoring requirements. EPA granted the petition and, in December 2009, proposed changes in the monitoring requirements, notably lowering the source-oriented emissions threshold from one ton to 0.50 tons per year. NAAQS are standards for outdoor (ambient) air that are intended to protect public health and welfare from harmful concentrations of pollution. In strengthening the lead standard, the Administrator has concluded that protecting public health and welfare requires much lower concentrations of lead pollution in ambient air than the level previously held to be safe. Lead particles can be inhaled or ingested, and, once in the body, can cause lower IQ and effects on learning, memory, and behavior in children. In adults, lead exposure is linked to increased blood pressure, cardiovascular disease, and decreased kidney function. Regulation of airborne lead is often described as one of the key successes of the Clean Air Act and of the Environmental Protection Agency. In 1970, when lead was widely used as a gasoline additive, emissions of lead nationwide totaled 224,100 tons. Lead was also present then in many consumer products, and thus was emitted to the air from industrial processes and waste incinerators. The phasing out of lead from gasoline, paint, and other products, as well as stricter controls on industrial emissions, reduced lead emissions more than 99%, to 1,300 tons in 2007. The reduction in lead emissions and ambient concentrations led some to suggest that there was no longer a need for an ambient air quality standard for lead. Others, including the Clean Air Scientific Advisory Committee (CASAC), an independent panel of scientists who advise the EPA Administrator, concluded that the old NAAQS (established in 1978) was far too lenient, that lead in ambient air still poses a threat to public health, and that the NAAQS needed to be significantly strengthened. CASAC recommended that the standard be reduced from 1.5 µg/m3 to no higher than 0.2 µg/m3. In promulgating a more stringent NAAQS, the Administrator agreed with the scientists' recommendation, rejecting the argument that the standard is no longer needed. The Administrator's decision followed a multi-year review of the science. To implement the new standard, EPA and the states will first identify nonattainment areas (expected to occur no later than January 2012), following which there will be a 5-10 year-long implementation process in which states and local governments will identify and implement measures to reduce lead in the air. As noted earlier, EPA also promulgated changes to the monitoring requirements for lead as part of the NAAQS decision. As of 2008, at least 24 of the 50 states, including some with major sources of lead emissions, had no lead monitors at all. Under the 2008 regulations, all 101 metropolitan areas with populations greater than 500,000 would be required to have monitors as would the estimated 135 areas that have sources of lead emissions greater than or equal to one ton per year. In December 2009, EPA proposed further changes, lowering the source-oriented emissions threshold from one ton to 0.50 tons per year, while eliminating the urban area monitoring requirement. In place of the latter, lead monitoring would be added to a national network of 80 sites that will monitor multiple pollutants.

Members of Congress have demonstrated their interest in the U.S. Foreign-Trade Zone (FTZ) system through hearings and legislation over the past seven decades. The program may enhance the competitiveness of U.S. businesses, support employment opportunities, and impact U.S. tariff revenues. Balancing these potential gains, others argue that the program may also be trade distorting, and may play a role in misallocating resources in the economy as a whole. This report provides a general perspective on the U.S. FTZ system. It is divided into three parts. As background, the first section discusses free trade zones worldwide. The second section focuses on the U.S. FTZ program—its history, administrative mechanism, structure, growth and industry concentration, and benefits and costs. The third section focuses on current issues for Congress relating to the U.S. FTZ program. Foreign-trade zones (FTZs) are the U.S. version of free trade zones scattered around the world. Zones elsewhere are called by many different names (See Text Box 1 .) Free trade zones are a specific type of restricted access (e.g., fenced-in) industrial park housing concentrations of production facilities and related infrastructure. They are typically located at or near sea, air, or land ports. Free trade zones have become a substantial part of the structure underpinning the global supply chain. Together, these roughly 3,500 zones in 135 countries, including the United States (see Figure 1 ), form a web that frees producers from most customs procedures and offer duty savings, thus facilitating intricate international co-production operations. Although the rules vary by country, the general mechanism that makes them function together in international co-production is that while zones are located inside the geographic boundaries of countries, they are generally declared to be outside of these countries for customs purposes. Thus, components may be shipped into a zone—and sometimes shifted around the world from zone to zone on their way to becoming a finished product—without concern for tariffs, quotas, and detailed customs procedures, until they finally exit the zone system. Only then are tariffs payable, quotas honored, and full customs procedures applicable. (See Text Box 2 for examples of the use of one or more zones in a production chain.) Some analysts argue that free trade zones, in bypassing many of the complexities of individual country tariff assessments and customs procedures, have been one factor facilitating global supply chains. Today, free trade zones employ at least 66 million workers worldwide, including 370,000 in the United States. Most zones are located in developing countries, and most, but not all, of their workers are in manufacturing. Although these workers represent a substantial percentage of the worldwide manufacturing population, their exact share is difficult to estimate. Figure 1 shows worldwide employment apportionment across zones by geographic region in 2006, the most recent data available. It shows that China accounted for more than 60% (40 million) of world employment in zones; the rest of Asia accounted for 22% (15 million); Mexico and Central America for 8% (5.3 million); and the Middle East/North Africa for 3% (1.7 million); while the United States accounted for 0.5% (320,000). Free trade zones around the world are similar in the way they function to facilitate trade. They differ, however, in size, economic development purposes, physical characteristics, government incentives, and the final dispensation of their products. They may represent large shares of the country's manufacturing employment and occupy huge geographic areas, as with special economic zones in China; or they may be small enclaves housing a few businesses. In developing countries with little infrastructure, they may be self-sufficient city-like industrial complexes with housing, dining, and banking, as well as production and/or transport. In developed countries, on the other hand, with extensive infrastructure and modern facilities, they are more narrowly limited to production and/or transport. In the United States, instead of being tied to a specific physical location near port facilities, FTZ designation can quickly and simply be brought to a company, wherever it may be located. All zones typically include streamlined customs procedures and exemption or deferral of tariffs and quotas on stored inventory. Those in developing countries are more likely to have additional incentives such as subsidies, more flexible labor market regulations, and additional tax exemptions. While developing countries typically produce for export, as countries develop, they are increasingly likely to consume ("import") substantial shares of products made in their free trade zones. Elements common to many free trade zones can be seen in Figure 2 , below. They include container ships, which can often hold 1,000 to 1,500 containers each, and their automated loading operations; liquid storage tanks (for oil or chemicals, for example); and facilities for transferring individual containers to trucks or to railroad cars. The growth of zone use over time has resulted from a combination of factors including an initial conceptual design that has stood the test of time; an international mechanism for teaching governments how to establish zones that would attract foreign investors; and major advancements in technology that have supported the globalization of production. Figure 3 shows the rate at which these factors combined to explode zone use in the past 20 years. Modern day zone growth began with an "experiment" in 1959, for reuse of the Shannon, Ireland, airport. Designed as a job creation program, it proved so successful that an entrepreneur from the Shannon project was asked to help promote the concept through the United Nations. As an advisor to the UN Industrial Development Organization (UNIDO), he reportedly both prepared a manual on zone creation and took part in a number of zone-establishing missions in various countries. The United States government reportedly helped spread the concept of world processing zones when, between 1983 and 1995, five U.S. agencies provided loans and investment support for zone development: the U.S. Agency for International Development (USAID); the Overseas Private Investment Corporation (OPIC); the Export-Import Bank; the Department of State; and the Department of Commerce. Technological developments, including a worldwide telephone/computer/data processing network and advancements in container shipping and other types of transportation encouraged and supported the growth of zones worldwide. Other forces responsible for the proliferation of free trade zones, as identified by the OECD, include the increasing emphasis on both export-oriented and foreign direct investment-oriented growth, the transfer of production of labor intensive industries from developed to developing countries, and the growing international division of labor and incidence of global production networks. The U.S. FTZ Program was created by the U.S. Foreign-Trade Zones Act in 1934 (P.L. 73-397, 19 U.S.C. 81[a]-81[u]), in the midst of the Great Depression. It was designed to accelerate U.S. trade in the wake of the restrictive impact of the Smoot-Hawley Tariff Act of 1930, which raised U.S. tariffs on imported goods as high as 53%. It created the FTZ Board, which was given the power to approve applications for zone status. The act, fewer than six pages in length, also entitled each U.S. port of entry to at least one zone, and prescribed physical conditions and standards for each zone, activities permissible in zones, the applicability of all U.S. laws to zones, and requirements for zone operation and recordkeeping. The FTZ program started slowly. By the time the Shannon experiment was underway 25 years later in 1959, it was still quite small. Gradually, several factors accelerated zone use, including both internal changes to the program itself and external world factors. Internally, four major things happened. The first and likely the most significant of these factors was changing the program to allow for manufacturing. When the FTZ Act was passed in 1934, it prohibited manufacturing in zones because some feared it would promote imports of cheaper components to be used in the U.S. manufacturing process. At the time, it was argued that U.S. manufacturers of domestic components would be put at risk. That model, however, failed to attract many users. Then, in 1950, Congress amended the FTZ Act to permit manufacturing in zones. Two years later, in 1952, the FTZ Board took that amendment one step further and issued new regulations, which allowed FTZ sites to be designated at a company's facility. It was a way to take zones to the businesses. Additional FTZ growth was encouraged by two U.S. Treasury Department administrative decisions in 1980 and 1982. These clarified that manufacturers need not pay duty on either value-added or brokerage or transportation fees connected with imported goods. External factors that accelerated FTZ use by U.S and foreign multinational corporations included (1) increased international price competition that led U.S. businesses to seek new ways of saving costs; (2) greater education of businesses in the ways in which they could save money through zone use; and (3) advancements in technology which made cooperative global production possible. Today, the bulk of U.S. FTZ activity occurs in manufacturing operations. The zone can be brought directly to a company's facility, and may be used for manufacturing or warehousing. Across the United States, there were 174 FTZs active during the year, with a total of 276 active manufacturing/production operations. See Table A-1 for a summary of zone and subzone activity. All states have at least one zone. Hence, every state has some involvement in the zone system in which foreign and domestic status inputs are combined to make other products. The majority of inputs into zones are of domestic origin (58% or $429 billion) with the remaining inputs (42% or $304 billion) coming from foreign sources. The zone system accounts for 13% of all foreign goods entering the United States and employs roughly 370,000 workers, representing about 3% of U.S. manufacturing workers in 2012—most but not all FTZ employees are in manufacturing. See Text Box A-1 for details on how FTZs function in terms of moving goods into and out of zones. Between 1993 and 2012, total foreign and domestic zone inputs (in current dollars) increased more than six-fold (from $104 billion to $732 billion). Much of that increase was due to inflation in the price of crude oil over those 19 years. Figures 5 and 6, examine the contributions of foreign and domestic inputs, and figures 7 and 8 examine the contributions of foreign inputs alone, to zone output. From these graphs, several additional observations can be made about zone usage and industry concentration between 1993 and 2012. More U.S. FTZ inputs are produced in the United States than are imported. Figure 5 shows that FTZs are primarily places where smaller shares of foreign inputs (light blue bars) are combined with larger shares of domestic inputs (dark blue bars). Most U.S. FTZ outputs are consumed in the United States . This is in contrast to export processing zones which predominate in developing countries, and from which most outputs are exported. Figure 6 shows that most of zone output enters the U.S. domestic market (dark blue bars). Only a small share of it is exported (light blue bars). U.S. employment in zones ( Figure 5 , orange line) has remained relatively steady since 1993. It rose somewhat during the early 1990s when substantial numbers of labor-intensive auto production companies moved into zones, and has leveled off since then for several reasons, including the following: First, since 1997, FTZs have been used increasingly by petrochemical companies making capital-intensive gasoline, diesel, kerosene, and jet fuels (which benefit from tariff-free storage) and petrochemicals (which benefit from the inverted tariff structure). Second, high levels of inflation in crude oil prices, combined with some increase in productivity, have helped to raise the current value of zone output, while increasing employment slightly. The major foreign input into zones is crude oil. Figure 7 shows the current shares of inputs in 2012, by major sector. It shows that crude oil accounts for 72% of all foreign products brought into zones; auto components account for 7%; and other industries, led by consumer electronics and machinery, account for the remaining 21%. The incentive for importing crude oil into zones is to save money on the inverted tariff structure applying to the small share of petrochemicals refined from the crude oil. There are no inverted tariff benefits from the refining of gasoline, diesel, kerosene, and jet fuel, which account for most of the output from crude oil. When foreign oil inputs are deflated to constant dollars, the real (as compared with current) dollar value of foreign inputs into zones shrinks dramatically. Figure 8 compares the value of foreign inputs into zones in current 1993 dollars, in current 2012 dollars, and in 2012 data deflated to constant 1993 dollars. It shows that in 1993, $27 billion in foreign inputs entered FTZs (first bar). In 2012, the value of those inputs into FTZs was $303 billion. However, once the effect of rising crude oil prices has been netted out, that figure falls to $100 billion in constant 1993 dollars. FTZs primarily benefit some manufacturing firms and potentially could benefit the economy as a whole with their savings possibilities. Savings from tariff reduction, administrative efficiencies, tax benefits, and duty deferral may help U.S. corporations maintain operations in the United States, and may attract foreign producers to establish manufacturing facilities in the United States. In turn, this could help communities hold onto their manufacturing bases and secondary service sector support systems and the jobs that go with them. Consumers may benefit from any cost savings that may be passed along. Federal, state, and local tax revenues may benefit from increased activity that the FTZs may generate. Balancing these benefits of zone use are four potential costs to the U.S. economy. First, granting tariff reductions on imported components might disadvantage domestic producers of competing components whose products would otherwise be somewhat protected by the tariffs. Second, if certain producers in an industry obtain zone status to save production costs, this could put other domestic producers of the final products in the same industry at a competitive disadvantage. Third, the tariff benefits companies enjoy by operating in FTZs can also result in some loss or deferral of tariff revenue for the United States, although U.S. tariffs are generally low and represent a very small share of government revenue. Finally, some economists might argue that FTZs result in a market distortion—a misallocation of resources to benefit a small number of businesses, especially oil companies. This issue is explored in greater detail in the " Current FTZ and Worldwide Zone-Related Issues for Congress " section. FTZ regulations try to avoid potential "costs" of the FTZ program through the FTZ application procedures. The application process, administered by the FTZ Board, is explained in greater detail later in this section. Specific benefits of zones for individual corporations producing in zones come from the law itself and the regulations implementing it. Costs come from administrative requirements involved in applying for and achieving zone status, monitoring of zones by the Customs and Border Protection, and reporting requirements by the U.S. FTZ Board. There are no precise estimates of the actual market value of the potential costs and benefits of FTZs in the United States or trade zones worldwide. Text Box 3 describes seven potential benefits for companies using FTZs. Most of the financial benefits come from three of the seven sources: duty reduction on inverted tariff situations, customs inventory control efficiencies, and duty exemption on exports. Other benefits include duty deferral, drawback elimination, tax savings, quota storage, and zone-to-zone transfer. Overall profits from FTZ use result from the combination of tiny savings per unit and high volume production. Duty R eduction on I nverted T ariff S ituations. Of all FTZ benefits, "duty reduction on inverted tariff situations" is generally the one most heavily used by businesses. It likely accounts for more than 50% of the total money saved from zone use, according to the FTZ Board. Duty reduction on imports results because FTZ users can typically choose to pay either the tariff level that applies to the imported components, or that which applies to the finished goods. Savings can be considerable. A new Volkswagen production plant in Chattanooga, TN, that recently won FTZ status estimated that it could save $1.9 million, or $13 per car in inverted tariff savings, on producing 150,000 cars annually. In the oil industry, most inverted tariff benefits accrue to just a small sector—the petrochemical industry, which accounts for about 15% to 17% of total refinery yield. Due to the potential impact on domestic suppliers, prior FTZ Board authorization is required for these types of savings. There are no independent estimates of the cost savings derived from the FTZs. Customs and Inventory E fficiencies. Customs and inventory efficiencies, especially those obtained through "bundling" of entries (which are reports of individual shipments of goods entering or leaving zones), are another significant source of savings for FTZ users. In addition to time and paperwork savings, "bundling" allows an importer to file an entry for an entire week and pay a single merchandise processing fee (up to $485) instead of a separate entry and merchandise processing fee for each shipment. In this way, large-operation zone users can cut their processing fees by about 90%. The National Association of Foreign Trade Zones (NAFTZ) estimates that FTZs handle more than 10% of U.S. imports each year in terms of dollar value, but account for less than 1% of the actual number of import filings made with Customs and Border Protection (CBP), because of "bundling." For a large company with 10 warehouses across the United States, each with several hundred deliveries per week, for example, bundling efficiencies could mean a reduction in processing fees from roughly "$2 million a year to about $25,000 per year." Duty Exemption. Merchandise can be re-exported from a zone without the payment of duties, providing another significant source of savings to U.S. exporters. In addition, no duty is payable on goods that are imported into zones and ultimately consumed, scrapped, or destroyed in the zone. For example, damaged packages or broken bottles can be removed from shipments of packaged or bottled goods. According to the FTZ Board, the costs of FTZ use, and the "red tape" involved in order to take advantage of zone opportunities, can be substantial. Therefore, companies need to weigh carefully potential costs and benefits of zone use before applying for FTZ status. There are startup costs and maintenance costs. Because of this, according to an FTZ trade interest group, FTZs work best when a company can potentially see a return of 100% to 200% on investment in zone use. If the investment return is smaller, it may not be worth the startup and continuing costs. Startup costs include (1) the application process (detailed in the next section); (2) background checks for importers; (3) a physical security system—usually a fenced-in system with locks, guards, and cameras; (4) an inventory control system and related software to track the movement of products (which must be in place before CBP officially activates the operation); and (5) consultants, for those who prefer their assistance in setting up and managing a zone. Maintenance costs after full zone status is in effect include (1) greater oversight by CBP officials; (2) at least one full-time person to manage a zone; (3) a "bond" payment, which is held by the government as a guarantee against potential tariffs owed on products in FTZs; and (4) annual fees by grantees for zone use. The FTZ Act requires zone grantees to operate zones as public utilities, but grantees are able to charge zone users for costs associated with managing the zone. Fees for zone users range from several thousand dollars up to $10,000 or more a year. Several U.S. agencies are involved in administering the FTZ program. The FTZ Board is responsible for the establishment, maintenance, and administration of zones under the FTZ Act. The FTZ Board consists of two members: the Secretary of Commerce and the Secretary of the Treasury. The Secretary of Commerce is the chairman and executive officer, and appoints the executive secretary (chief operating officer) of the FTZ Board, who is supported by a professional staff of seven. The Secretary of the Treasury's responsibilities relate to the protection of the revenue as well as tariff and trade policy considerations. The Department of Homeland Security's Customs and Border Protection (CBP) acts as an advisor to the FTZ Board and is responsible for direct oversight of zone activity and ensuring compliance with the FTZ Act and all laws and regulations pertaining to zone use. CBP is responsible for activating FTZs, securing them, controlling dutiable merchandise moving into and out of them, and protecting and collecting the revenue. CBP is also responsible for ensuring that there is no evasion or violation of U.S. laws and regulations governing imported and exported merchandise, and ensuring that the zones program is free from terrorist activity. To this end, CBP, which is not normally onsite at the zones, must sign off on every shipment into and out of a zone. CBP also provides audits and compliance reviews of zone activity, including oversight of safeguards for checking container seals and other security measures. Homeland Security's Bureau of Immigration and Customs Enforcement (ICE) is involved in a voluntary partnership with companies in FTZs to combat unlawful employment, although the same immigration and labor laws apply in FTZs as in any other U.S. location. Other agencies involved in the oversight of zone shipments include the Department of Agriculture and the U.S. Food and Drug Administration. The FTZ Board does not own or operate any zones. Rather, it provides grants of authority to applicants to establish, operate, and maintain zones. Once a zone has been established, the organization that applied for the zone is known as the "grantee." Grantees are public or private corporations that manage a zone locally. They provide and maintain facilities in connection with the zone according to regulations established by the FTZ Board. Under FTZ regulations, they are required to operate the zones as public utilities, with fair and reasonable rates, make annual reports to the FTZ Board on their activities, and provide uniform treatment under like conditions to zone users. On February 28, 2012, the U.S. FTZ Board published in the Federal Register the first major set of revisions to U.S. FTZ regulations since 1991. They were issued in part as a continuing response to congressional oversight and issues identified by the House Ways and Means Committee in 1989. While the new regulations address a variety of issues, they were designed primarily to streamline the application process for manufacturers and distributors who want to operate in an FTZ or establish a subzone. Currently, a company can obtain FTZ designation for its facility in as little as 30 days, although up to a five-month process may be required in certain circumstances. The five-month process is still a significant reduction from the 10 to 12 months that would have been required in the past. The revised regulations also reduce the timeline for applications for production authority from 12 months to 4 months (120 days), in part by reducing the amount of information required in many instances. If issues are raised by concerned parties during the 120-day application process, the applicant must then follow a lengthier in-depth procedure, similar to what was required in the past. Major differences between old and new procedures are summarized in Text Box 4 (below). Current zone-related issues for Congress reflect the supply-chain role of free trade zones in a complex, increasingly integrated world. Congressional issues have both U.S. and worldwide aspects. Domestic issues include whether FTZs represent a misallocation of U.S. resources; whether data relating to zone use are sufficient; and the extent to which U.S. FTZ zone use affects U.S. employment and the competitiveness of U.S. firms. Internationally, congressional issues relate to the effectiveness of trade zones worldwide as a tool for economic development and global competitiveness and U.S. influence on worker rights issues in zones around the world through trade policy. As noted above, the U.S. FTZ system was established in the 1930s with the goal of spurring U.S. commerce in the wake of the Great Depression and the high tariff regime established by the Smoot-Hawley Tariff Act. Today, U.S. tariff levels are among the lowest in the world and U.S. commerce is highly connected with the global economy. Given the changes that have occurred since its passage, Congress may choose to consider whether the FTZ system today still fulfills the original intent of the FTZ Act and furthermore, if it remains the best vehicle through which to do so. From a theoretical standpoint, efficiencies that reduce the cost of production increase productivity and benefit the overall economy—more is produced with less. When the FTZ system provides such gains in productivity to U.S. firms, the U.S. economy benefits. A problem may arise, however, to the extent that these FTZ benefits are not available to all U.S. producers. As with any system that confers specific benefits to some but not all producers in an economy, the FTZ system may cause a misallocation of productive resources. These potential distortions could be avoided by simply providing FTZ benefits to all U.S. firms. Though only a fraction of U.S. firms utilize the FTZ system, no firms are excluded from applying for FTZ status and hence the benefits are technically available to all U.S. firms. In reality, this may not be the case. As mentioned above, given the high startup costs associated with FTZ use, the system is most likely to benefit large firms with a high volume of production. The FTZ Board has tried to address some of these concerns regarding the accessibility of the program by simplifying its application procedure. If the ultimate goal is a greater reduction in U.S. tariffs, FTZs provide one, if not the most efficient, way to do so. Tariffs themselves can cause a misallocation of resources, and though economic theory would suggest the U.S. economy benefits when tariffs are eliminated, such action may be politically infeasible. Companies in import-sensitive industries may be negatively impacted by the reduction of tariffs and may have a strong incentive to maintain tariff protection. The FTZ system and its application process, which allows for public comment, provides a mechanism by which tariffs are, in effect, lowered only in industries without strong domestic opposition. Given that tariff rates in the United States are not equal across products, it is unclear whether lowering one specific tariff line would create more or less distortion. Congress could more efficiently provide tariff free access to the U.S. market by an across the board cut of tariff rates, which would guarantee equal access by all U.S. firms. Such broad-based tariff reductions have typically occurred in the United States through multilateral trade liberalization negotiations in the World Trade Organization (WTO). Like the specific tariff benefits, one could also argue that the logistical benefits provided by FTZ use create distortions. FTZ users benefit from more streamlined customs procedures and lower merchandise processing fees, while those outside zones do not. Again, the question arises as to whether the program is truly accessible. Merchandise processing fees are based on a percentage of the total import value, but are subject to a cap. Larger importers would reach that cap more quickly and have a stronger incentive to pay the upfront costs of establishing an FTZ. Broader customs reform applicable to all importers could provide similar benefits without the risk of distortions. But, given the background checks and heightened security associated with operating an FTZ, providing all firms with the logistical benefits of FTZ use may not be feasible. CBP has discussed permitting importers to file one entry form per month, regardless of whether the company has FTZ status, as part of a "simplified summary" process. However, this proposal has reportedly run into logistical problems relating to the actual implementation of such a system across the broad spectrum of U.S. importers. Even if the vast majority of importers are deemed to be low risk, the sheer number of total importers means that even a small percent of high risk companies would involve a huge resource burden to ensure compliance. Ensuring the safety and security of U.S. imports in a cost-effective manner, while also facilitating timely trade, remains an ongoing challenge. Every shipment into and out of foreign-trade zones must be authorized by CBP. The documents that a company submits to CBP include the classification, country of origin, and the value of the merchandise. While this information is provided to CBP for every shipment and used by CBP to maintain oversight of the zone activity, this level of information is not publicly available. Public reports tracking the identity of products moving into and out of zones are incomplete, although two agencies publish data relating to FTZs. The Commerce Department (Bureau of the Census) publishes data on imports (foreign products) entered into zones. The U.S. FTZ Board publishes data on both foreign and domestic products entered into zones, and final products leaving zones for U.S. consumption and for export, respectively. The two agencies produce some estimates of zone use from different sources using different methods. While their final estimates are reasonably close on certain measurements, other data pertaining to FTZ use are lacking for both groups. (See Table 1 , which compares data from the two sources and identifies missing data.) Missing data, more importantly than slightly inconsistent data, can complicate policy recommendations. The FTZ Board collects its data from zone users and publishes in its Annual Report to Congress summary data on "foreign" and "domestic status" inputs into FTZs later shipped to the United States or exported to places abroad. It also publishes more detailed industry-level data, specifically for foreign status inputs. The Census Bureau collects its data from importers and exporters, tracking the movement of products into or out of the United States in general. For FTZs in particular, Census publishes detailed data by Harmonized Tariff Schedule (HTS) codes on imports into FTZs and bonded warehouses, along with data on import charges owed on these imports. While Census does not regularly publish data by HTS code on merchandise that leaves FTZs for consumption in the United States, or for export, these data may be obtained upon special request. Neither the FTZ Board nor the Census Bureau collects or publishes industry-specific data on (1) domestic inputs into zones; (2) goods transferred from zone to zone; (3) value added in zones; or (4) the relationship between the actual character of goods entering and goods exiting FTZs. These data are reported by companies to CBP and are used for protecting the revenue, ensuring compliance with U.S. laws and regulations, and ensuring the secure movement of merchandise in the United States. However, they are not available publicly for other uses. Security issues relating to imports are a continuing concern for CBP. The agency undertakes periodic reviews of companies, including companies bringing goods into and out of FTZs, along with the products they transport and process. CBP has reportedly developed a complex targeting system in its continuing effort to balance competing goals of facilitating trade, providing port security, and collecting trade revenues. Compared to products that are imported for consumption directly into the United States, FTZs incorporate additional screening and security measures. Unlike other imports, companies must apply to CBP to use a zone. Part of that process, known as "activation," includes a background check on key employees, a review of the security of the facility, and assessing the integrity of the inventory control and recordkeeping system. A company must also produce a detailed procedures manual explaining how all merchandise is handled at every stage of its movement through the zone. The storage of merchandise in a zone exposes that merchandise to audit and inspection for the length of time that it remains within the zone, often significantly longer than if it had been entered and cleared into commerce upon arrival at a U.S. port. In 2007, the Senate Finance Committee requested the Government Accountability Office (GAO) to undertake a review of trade and security concerns related to CBP's "in-bond cargo" system. Shipments to, from, and between zones are one portion of the in-bond system, and these concerns relate to the in-bond system in general, not exclusively to the FTZ process. The GAO's findings concluded that although the in-bond system is designed to facilitate the flow of trade, CBP cannot assess the extent of the program's use because it collects little information on in-bond shipments and performs limited analysis of data that it does collect. GAO further concluded that limited information on in-bond cargo "impedes CBP efforts to manage security risks and ensure proper targeting of inspections." As a result, some higher risk cargo may not be identified for inspection, and scarce inspection resources may be used for some lower-risk cargo. CBP is taking steps to automate the in-bond system to address the concerns. While concerns have been raised regarding the in-bond shipment process, similar concerns have not applied directly to the FTZ process. The movement of goods into and out of U.S. zones is automated and available for security and tracking purposes. Another security assessment involving zones globally was undertaken by an international inter-governmental group, the Financial Action Task Force (FATF)/Organization for Economic Cooperation and Development (OECD). Its findings are reported in Money Laundering Vulnerabilities of Free Trade Zones , a report released in March of 2010. Two of its case studies identified smuggling and tax evasion activities involving a U.S. company and a U.S. FTZ, respectively. Final recommendations in the report did not differentiate between those for zones in the world at large and those relating to U.S. FTZs. However, they focused, among other things, on the factors which could remedy weaknesses in both groups, including (1) improvement in systems relating to the collection, quality, and international exchange of trade data; (2) greater use of electronic customs filing and reporting systems with universally compatible data fields; and (3) licensing, regulating, and monitoring of entities acting as customs brokers and persons operating bonded warehouses. Proponents of FTZs continually point to their job-creating and trade-creating potential. FTZs employ 320,000 mostly manufacturing workers in the United States. This represents less than 3% of total U.S. manufacturing employment. Nevertheless, factors affecting U.S. employment in small ways are of interest to Congress. Since 1979, the number of manufacturing jobs in the United States has declined by nearly 40%, while output has more than doubled. Most analysts agree that two factors have contributed to this decline: (1) productivity gains in domestic operations; and (2) movement of U.S. manufacturing facilities abroad due to lower operating costs. Considerable debate, however, persists over which of these factors has had a greater influence, and how to improve the situation. FTZ trade groups argue that FTZ operations can encourage job retention and job growth. More broadly, advocates argue that FTZ use enhances the global competiveness of firms located in the United States. They argue that importers can, in some cases, save production and transportation costs by setting up new final assembly operations in U.S. FTZs or by gaining FTZ designation for existing plants. For example, in the automotive industry, Nissan estimates that annual FTZ benefits, net of the additional costs of operating an FTZ site, can be as much as $8.3 million a year. The company argues that without the FTZ benefits it might move U.S. production to other countries, though such a decision would likely also depend on a number of other factors, perhaps more significant than FTZ status. As with the ongoing debate regarding the drop in manufacturing employment, determining whether any specific action causes net job growth or loss is challenging, particularly because these actions often have direct as well as indirect effects. As noted above (see " Growth of Free Trade Zones Worldwide "), the United States has been involved in promoting free trade zones worldwide through a number of different avenues. Some might argue that world export processing zones and a focus on exports do not necessarily contribute to economic development. Economists argue that export-led growth works best as a development tool when the world economy is growing quickly. They point out that it works less well when world economic growth (led by consumers in developed, high-import countries) slows. In such a case, export-led growth can be cyclical and destabilizing. Therefore, developing a domestic economy that depends more on domestic consumer demand adds an element of stability that could benefit developing countries over the long run. Others may argue that an initial lack of strong domestic demand is precisely why countries may benefit from a focus on exports in the early stages of development. The specific goods a developing country is most efficient in producing may be not be demanded domestically or not at the scale necessary to achieve maximum efficiency. Hence, some argue that economic development may occur much faster with export processing zones than without them. In addition to the tariff benefits, the infrastructure components of zones attract foreign investment that might not otherwise occur. The challenge, however, as growth begins, is for a country to (1) continually diversify into producing higher value-added goods; (2) find ways to continually upgrade the skills of the workforce to produce those goods; and (3) encourage domestic consumption of some of the goods produced in zones. Countries that have followed this model by government planning toward this goal have been most successful. Some economists also argue that it would be more efficient and less market distorting to work within the WTO to eliminate tariffs worldwide to help promote international economic development than to continue to promote export processing zones. While this may be true, history has shown that the process of eliminating tariffs is very slow, and while this would solve the issue of differing tariffs across countries, it does not speak to the infrastructure and customs simplification benefits of free trade zones in developing countries. Some may argue that a greater focus in the WTO and other international organizations on trade capacity building and ensuring that developing countries have the means to process, track, and transport traded goods could help with this ongoing challenge. The Doha Development Agenda, the current round of multilateral talks in the WTO, has included negotiations on potential disciplines in trade facilitation and capacity building, although the overall Doha Agenda has been stalled in recent years. Congress has an impact on worker rights in trade zones worldwide through U.S. trade preference laws and free trade agreements. Trade preference laws traditionally require, among other things, that as a condition of continued eligibility for trade benefits, countries must be taking steps to afford their workers "internationally recognized worker rights." Almost all U.S. free trade agreements include language pledging to uphold a similar list of worker rights, and all but three of the agreements include language stating that Parties agree not to "waive or derogate from" their statutes or regulations in order to attract trade with and/or investment by the other Party. However, there may be a grey area on the applicability of the trade preference program and free trade agreement provisions to free trade zones, at least under some free trade agreements. While the United States has suspended trade preferences to certain countries because of labor violations, the applicability of labor provisions in free trade agreements specifically to trade zones in other countries has never been tested under dispute resolution procedures. Depending on laws of a specific country, zones could be an unclear area for labor requirements under free trade zones. One U.S. free trade agreement partner country, Jordan, in the past, permitted relaxed labor standards in its free trade zones. The fact that Jordan had different labor standards in its free trade zones than in other parts of its country came to light in 2006, when a watchdog organization, the National Labor Committee, published a report documenting problematical labor conditions in Jordan's free trade zones. The case was eventually handled through discussions between U.S. and Jordanian labor representatives, and Jordan took a number of steps to eliminate the problems. Since this case was handled informally, it did not establish a precedent to address labor standards in the free trade zones of countries with which the United States has free trade agreements. Whether the issue of labor standards in free trade zones will be addressed in future trade agreements is not known. International organizations have issued guidelines addressing labor issues in free trade zones, to varying degrees. For example, WTO rules and good practices on export policy do not address the issue of worker rights specifically. At the 1996 WTO Singapore Ministerial, the WTO member countries voted to renew their commitment to the observance of internationally recognized core labor standards and named the ILO as the "competent body" to set and deal with these standards. OECD Guidelines for Multinational Enterprises include labor guidelines. However, they do not mention export processing zones or free trade zones specifically. The ILO has issued a number of reports on working conditions in export processing zones. None of them, however, is up-to-date in showing where specific country laws allow different labor standards in free trade zones. In a 2008 report, the ILO examined labor practices by multinational corporations in countries covered by free trade agreements. It found that such corporations unevenly implement their individual labor codes of conduct. It found that while labor conditions are sometimes better inside zones than in other sectors of the economy, poor working conditions in terms of overtime, occupational health and safety, wages, and freedom of association remain in many zones. From time to time, concerns have arisen within the trade community about the future of free trade zones, including U.S. FTZs. Will they disappear with continuing trade liberalization and continuing reductions in tariffs? The future role of zones in the global manufacturing supply chain largely depends on many as yet unknown and undetermined factors. For example, after the 1993 North American Free Trade Agreement (NAFTA) led to ultimate tariff elimination for trade among the United States, Mexico, and Canada, questions arose as to whether maquiladoras along the U.S.-Mexican border would diminish in importance, and entire FTA partner countries would become, in essence vast "free trade zones" for trade with each other. Data since then, however, show that free trade zone use has remained popular in developing and developed countries alike because of its diverse benefits, and that, in fact, there are currently at least 3,700 firms employing at least 1.2 million workers in zones in Mexico. More than 15 years after these questions were voiced, export processing zones have continued to expand in terms of countries hosting them, corporations investing in them, and workers being hired to labor in them. Between 1997 and 2006, the number of free trade zones worldwide quadrupled, and the number of workers employed in them tripled. For FTZs in the United States, the direction of growth is the same as for world export processing zones, but the expansion has been more modest, with relatively little growth in employment. Between 1997 and 2012, the overall increase in zone use, along with the particular expansion by the oil sector, has resulted in a decrease in the number of firms using zones, (from 3,600 to 3,200). However, it has also resulted in an increase in employment (from 310,000 to 370,000) and a nearly four-fold increase in the current dollar value of merchandise received/shipped. (See Table A-2 .) Reasons previously identified by the OECD as supporting the growth of world export processing zones as policy tools could continue: (1) the increasing emphasis on export-oriented growth; (2) the increasing emphasis on foreign direct investment-oriented growth; (3) the transfer of production of labor intensive industries from developed to developing countries; and (4) the growing international division of labor and incidence of global production networks. Major factors which, in the future, could increase the use of free trade zones around the world, including U.S. FTZs, are (1) continuing improvements in technology, which will extend recent advancements in communication tools, computer capabilities, and the transport industry; (2) advancements and improvements in security monitoring; (3) new efficiencies for zone users including advancements in automated, electronic tracking of goods and services traded internationally; and (4) external trends. Possible external trends that could give a significant boost to U.S. FTZs, specifically, could include those events or forces that would encourage a return of basic manufacturing to the United States and a boost to U.S. exports. If all trade barriers and security issues were eliminated between all countries, exports and imports could move as easily among countries as between U.S. states. As a result, the need for the zones worldwide would be greatly diminished. However, as long as international tariff and non-tariff barriers remain, along with the need for heightened security to deal with issues such as terrorism and money laundering, the U.S. FTZ system and other zone programs abroad are likely to continue and even, possibly, expand.

U.S. foreign-trade zones (FTZs) are geographic areas declared to be outside the normal customs territory of the United States. This means that, for foreign merchandise entering FTZs and re-exported as different products, customs procedures are streamlined and tariffs do not apply. For products intended for U.S. consumption, full customs procedures are applied and duties are payable when they exit the FTZ. In 1934, in the midst of the Great Depression, Congress passed the U.S. Foreign-Trade Zones Act. It was designed to expedite and encourage international trade while promoting domestic activity and investment. The U.S. FTZ program offers a variety of customs benefits to businesses which combine foreign and domestic merchandise in FTZs. Similar types of "zones" exist in 135 countries, employing about 66 million workers worldwide. Though some aspects differ, all have streamlined customs procedures and no duties applicable on components and raw materials combined in zones and then exported. Use of the zones can facilitate cooperative international production for a substantial share of the global supply chain. U.S. FTZs can affect the competitiveness of U.S. companies by allowing savings through (1) duty reduction on "inverted tariff structures" (where tariffs are higher on imported components than on finished products); (2) customs and inventory efficiencies; and (3) duty exemption on goods exported from, or consumed, scrapped, or destroyed in, a zone. Though difficult to achieve, other possible alternatives, such as broad-based tariff reductions through multilateral negotiations, and overall customs reform might provide some of the same competitive advantages as zone use in a more efficient manner, while also ensuring that all importers have equal access. Zone activity represents a significant share of U.S. trade. In 2012, over 13% of foreign goods entered the United States through FTZs or bonded warehouses—72% of them as crude oil. Most shipments arriving through FTZs were consumed in the United States; the rest were exported. Crude oil byproducts such as gasoline, diesel, jet fuel, kerosene, and petrochemicals dominate FTZ output. Other key products include autos, consumer electronics, and machinery. U.S. zone activity occurs primarily in FTZ manufacturing operations. Administration of the U.S. FTZ system is overseen by the Secretaries of Commerce and the Treasury, who constitute the U.S. FTZ Board. The Board is responsible for the establishment of zones, the authorization of specific production activity, and the general oversight of zones. It also appoints an Executive Secretary, who oversees the Board's staff. Homeland Security's Customs and Border Protection (CBP) directly oversees FTZs. It activates the zones and secures and controls dutiable merchandise moving into and out of them. CBP oversight also includes both protection of U.S. tariff revenue and protection from illegal activity through screening, targeting, and inspections. In 2012, the U.S. FTZ Board issued new regulations. They focused primarily on streamlining the application procedures and shortening, generally from a year to four months, the time for FTZ approval for manufacturing. Congressional Interest Congress has demonstrated a continuing interest in U.S. Foreign Trade Zones (FTZs), as they (1) may help to maintain U.S. employment opportunities and the competitiveness of U.S. producers; (2) encompass a portion of U.S. trade; and (3) affect U.S. tariff revenue. U.S. FTZs account for less than one-half of 1% of all world zone workers and a small share of the U.S. workforce. However, most of this employment is in manufacturing, which has lost a significant share of its workers over the past several decades. Today, every state has at least one FTZ, and many have numerous manufacturing operations. Current issues for Congress relating to the U.S. FTZ program may include (1) whether U.S. FTZs encourage a misallocation of U.S. resources; (2) data availability issues; (3) security concerns; and (4) the U.S. employment and global competitiveness impact of FTZs. Broader considerations relating to the world zone network include (5) the effectiveness of trade zones worldwide as a tool for economic development; and (6) trade zones worldwide and worker rights.

The House Committee on Appropriations Subcommittee on Military Quality of Life and Veterans Affairs and Related Agencies reported its draft of the appropriations bill on May 15, 2006 ( H.R. 5385 , H.Rept. 109-464 ), recommending a total Fiscal Year appropriation of $136.9 billion. The Rules Committee reported H.Res. 821 , providing for one hour of general debate and leaving the bill open to general amendments, on May 18. The resolution passed on May 19, when the House began debate. Several Members offered amendments, though none was adopted, and raised points of order before the bill passed by the Yeas and Nays 395-0 (Roll No. 176). The Senate received the bill and referred it to the Committee on Appropriations. The Committee reported H.R. 5385 with an amendment in the nature of a substitute favorably on July 20 ( S.Rept. 109-286 ). It was then placed on the Legislative Calendar under General Orders (Calendar No. 525). The Senate considered the bill on November 13 and 14, passing it by voice vote after floor amendment to the bill and title. Nevertheless, the measure, along with most of the other regular appropriations bills, did not conference before the 109 th Congress ended. Only the appropriations for the Departments of Defense and Homeland Security were enacted for Fiscal Year 2007, with the remaining functions of the federal government being sustained by a series of continuing resolutions. Representative Duncan Hunter introduced (by request) the draft National Defense Authorization Act to the House on April 6, 2006. After referral to the Committee on Armed Services, the bill was reported (amended) to the House on May 5 ( H.Rept. 109-452 ). The chamber considered the bill on May 10-11, 2006, and after amending it, considered recommitting it with instructions to Armed Services. Recommittal failed on a recorded vote 202-220 (Roll no. 144). The House then passed the measure 396-31 (Roll no. 145). Senator John Warner reported the Senate Committee on Armed Services bill ( S. 2766 ) and its accompanying report ( S.Rept. 109-254 ) to the Senate on May 9, 2006. Additional views were filed simultaneously. The measure was placed on the Senate Legislative Calendar under General Orders (Calendar No. 426). The measure was laid before the Senate on June 12, debated, amended, and passed on June 22 by a Yea-Nay vote of 96-0 (Record Vote No. 186). H.R. 5122 was received on May 15 and placed on the Legislative Calendar under General Orders (Calendar No. 431). On June 22, the Senate struck all after the Enacting Clause and substituted the language of S. 2766 amended, passing the amended measure by Unanimous Consent and requesting a conference. The House disagreed to the Senate amendment on September 7 and agreed to a conference. The conference began on September 12, 2006. The Conference Report ( H.Rept. 109-702 ) was filed in the House on September 29, 2006, and agreed the same day by the Yeas and Nays: 398-23 (Roll no. 510). The Senate agreed the report by Unanimous Consent on the following day. The bill was presented to the President on October 5. The bill became law on October 17, 2006 ( P.L. 109-364 ). Several items in the House version of H.R. 5385 lie within the jurisdiction of the Senate Committee on Appropriations Subcommittee on Defense. These include basic allowance for housing (military personnel account), facilities, sustainment, restoration, and modernization (operations and maintenance account), and defense-related agencies. Appropriations for these activities are therefore included in the Senate's defense appropriation bill. Nevertheless, they are included in the tables appended to this report. H.R. 5631 was introduced in the House on June 16, 2006, and passed on June 20 by a vote of 407-19 ( H.Rept. 109-504 , Roll no. 305). Referred to the Senate Committee on Appropriations, it was reported out on July 25 with an amendment in the form of a substitute ( S.Rept. 109-292 ) and was placed on the Legislative Calendar under General Orders (Calendar No. 532). The Senate agreed to the committee substitute by Unanimous Consent on August 1. The Senate debated and amended the bill between August 1 and 3 and continued on September 5 through 7, passing it with amendment on a Yea-Nay vote of 98-0 (Record Vote No. 239) and requesting a conference. The House appointed conferees on September 21, and the Conference Report ( H.Rept. 109-676 ) was filed on September 25, 2006. The House agreed to the report by the Yeas and Nays: 394-22 (Roll no. 486). The Senate agreed to the conference report on September 29 by a Yeas and Nays vote of 100-0 (Record Vote No. 261). Presented to the President, he signed the bill on the same day ( P.L. 109-289 ). In the absence of an annual appropriation, Fiscal Year 2007 funding for all of the accounts included in the House version of H.R. 5385 has been sustained by a series of continuing resolutions. Div. B of H.R. 5631 ( P.L. 109-289 ), the Department of Defense Appropriations Act for Fiscal Year 2007, continued appropriations for a variety of activities, including those covered by H.R. 5385 , from the beginning of Fiscal Year 2007 through November 16, 2006, using various formulas. In general, these equated to the lowest of the House-passed, Senate-passed, or last-enacted funding levels. H.J.Res. 100 ( P.L. 109-369 ) continued appropriations through December 18, 2006. H.J.Res. 102 ( P.L. 109-383 ) continued appropriations through February 15, 2007. H.J.Res. 20 ( P.L. 110-5 ) was passed by the 110 th Congress and enacted on February 15, 2007. It incorporated the previous continuing resolutions, continuing them, with some modification to military construction and veterans benefits, through the end of Fiscal Year 2007 (September 30, 2007). Additional information on H.J.Res. 20 is included later in this report. Additional information regarding the recent history of and practices regarding continuing resolutions can be found in CRS Report RL30343, Continuing Resolutions: Latest Action and Brief Overview of Recent Practices , by [author name scrubbed], and CRS Report RL32614, Duration of Continuing Resolutions in Recent Years , by [author name scrubbed]. As part of his Fiscal Year 2008 Budget Request, President George W. Bush included a recommendation for an additional $93.4 billion emergency supplemental appropriation to support the Global War on Terror (GWOT). As stated in the Fiscal Year 2008 Budget Appendix (Additional FY2007 and FY2008 Proposals), military construction funds included would be "used to build urgent facilities needed for the Global War on Terror, including buildings, perimeter fences and barriers, secure fuel facilities, and roads to improve the force protection and safety of U.S. military forces. The funds will also be used to construct theater-located operations facilities needed to improve the capabilities of combat forces. In addition, the funds will cover the cost of housing, maintenance, and training infrastructure needed to support an expansion of Army and Marine Corps ground combat forces." This supplemental request would add $1.38 billion to the FY2007 Army military construction account, $412.5 million to the FY2007 Navy and Marine Corps military construction account, and $60.2 million to the FY2007 Air Force military construction account. Supplementary budget documentation forwarded by DOD broke down the funding along three main functional topics. "Continuing the Fight," "Reconstituting the Force," and "Enhancing Ground Forces." Military construction was included in the first and the last of these. Under "Continuing the Fight," DOD indicated that approximately $980.0 million would be devoted to the construction and improvement of facilities in Iraq and Afghanistan in direct support of ground force military operations. The Navy would spend $85.1 million for facilities in Djibouti and at Naval Station Guantanamo, Cuba, and the Air Force would use $60.2 million to improve airfield facilities in Afghanistan. Approximately $100 million of military construction under "Enhancing Ground Forces"is intended to accelerate the transition of existing Army and Marine units into two Brigade Combat Teams (Army) and a single Regimental Combat Team (Marine). The remaining construction funding, approximately $729 million, would build housing and maintenance and training facilities for 92,000 new troops to be added to Army and Marine end strength by the end of 2012. During the first session of the 109 th Congress, the Committee on Appropriations reorganized its subcommittee structure and realigned subcommittee jurisdictions. In the resulting redistribution of subcommittee responsibilities, the Subcommittees on Veterans Affairs, Housing and Urban Development (VA-HUD) and Military Construction were eliminated and some of their responsibilities were assigned to a new Subcommittee on Military Quality of Life and Veterans Affairs and Related Agencies. The new subcommittee was given jurisdiction for appropriations to the following accounts: Department of Defense (DOD) : Military Construction, Army, Navy (including Marine Corps), Air Force, Defense-wide, and Guard and Reserve Forces, Facilities Sustainment, Restoration and Modernization, Army, Navy (including Marine Corps), Air Force, and Guard and Reserve Forces, Chemical Demilitarization Construction, Defense-wide Military Family Housing Construction and Operation and Maintenance, Army, Navy (including Marine Corps), Air Force, and Defense-wide Family Housing Improvement Fund, Military Unaccompanied Housing Improvement Fund, Homeowners Assistance Fund, Basic Allowance for Housing, Army, Navy (including Marine Corps), Air Force, and Guard and Reserve Forces, Environmental Restoration Accounts, Base Realignment and Closure Account, NATO Security Investment Program, Defense Health Program Account. Department of Veterans Affairs.Related Agencies : American Battle Monuments Commission, Armed Forces Retirement Home, Cemeterial Expenses, Army (DOD), Court of Appeals for Veterans Claims. At the same time, the Senate Committee on Appropriations dissolved its Subcommittee on Veterans Affairs, Housing and Urban Development and transferred its responsibilities for Veterans Affairs, the American Battle Monuments Commission, Cemeterial Expenses, Army (Arlington National Cemetery), the Court of Appeals for Veterans Claims, and the Selective Service Commission to the former Subcommittee on Military Construction, which retained its responsibility for military construction appropriations. The reconstituted organization was renamed the Subcommittee on Military Construction and Veterans Affairs. After negotiating the differing jurisdictions between the two subcommittees, House and Senate appropriators agreed that legislation considered would include appropriations to all of the accounts within the jurisdiction of the former Military Construction subcommittees and those related to the Department of Veterans Affairs and the related agencies. When considering appropriations for odd-numbered fiscal years (e.g., 2007, 2009, etc.), the legislation add the appropriations accounts specific to the jurisdiction of the House subcommittee. With the opening of the 110 th Congress, the House and Senate brought the responsibilities of their appropriations subcommittees more closely into alignment. On the House side, this resulted in a new alignment of jurisdictions and the renaming of several subcommittees. The non-construction quality-of-life defense appropriations, including Facilities Sustainment, Restoration, and Modernization, Basic Allowance for Housing, Environmental Restoration, and the Defense Health Program returned to the jurisdiction of the Subcommittee on Defense. The former Subcommittee on Military Quality of Life, Veterans Affairs, and Related Agencies became the Subcommittee on Military Construction, Veterans Affairs, and Related Agencies, mirroring its counterpart in the Senate. H.R. 5385 considered funding for the Defense Health Program (DHP) in FY2007, the medical and health care programs of the Department of Defense. The bill's DHP funding, which included Operation & Maintenance, Procurement and Research, Development, Test, and Evaluation activities associated with military health care, would have totaled approximately $21 million. The DHP figure included funds for military medical facilities and contracts with Tricare civilian health care providers, which provide medical care to some 8 million military personnel, their dependents, retirees and their dependents. Differences between amounts approved by the House were Senate are relatively small; the House approved $21.065 million; the Senate, $21.409 million. Actions to implement recommendations to realign or close a number of defense installations throughout the United States began during FY2006. Originally drafted by the Department of Defense and modified by the independent nine-member BRAC Commission (officially known as the Defense Base Closure and Realignment Commission of 2005), the list of actions will close 25 major military bases, realign another 24, and carry out some 765 other actions before the statutory deadline of September 2011, according to the Department of Defense. The 2005 round marked the fifth time that a commission took part in determining which military installations are to be closed or significantly reduced in scope. The first, the Base Realignment and Closure Commission, was chartered by, and reported its recommendations to, the Secretary of Defense. All subsequent commissions were created by Congress in the Defense Base Closure and Realignment Act of 1990, as amended. Three subsequent rounds (in 1991, 1993, and 1995) were authorized by Congress in the original legislation. The 2005 round was authorized in an amendment to the original law incorporated into the National Defense Authorization Act for Fiscal Year 2002. Several BRAC-related issues arose during the formulation and consideration of the list of recommendations, as indicated below. The appropriation request for FY2007 was split between two BRAC Accounts, one labeled the 1990 account and the other the 2005 account. The BRAC 1990 account is the consolidation of what had been four separate accounts, one for each of the previous BRAC rounds. Because all of the recommended BRAC actions from those rounds were completed in 2001, the BRAC 1990 account is devoted to funding the continuing environmental remediation required on the federal property deemed excess during those rounds but not yet conveyed to non-DOD ownership. There was $246 million appropriated to the 1990 account for FY2005, and $252.2 million was enacted for FY2006. For FY2007, the President requested $191.2 million, while the House Committee on Appropriations recommended $216.2 million. The Senate Committee on Appropriations endorsed the President's request for $191.2 million. The BRAC 2005 account funds the many realignment and closure actions, to include the movement of units and equipment, the construction of new infrastructure at receiving installations, and the realignment and closure of property deemed excess in the current BRAC round. In addition, DOD has incorporated into the BRAC 2005 account funding for construction to accommodate units being redeployed to the United States and its territories from garrisons located overseas—primarily in Germany and the Republic of Korea. DOD refers to this worldwide redeployment as the Integrated Global Presence and Basing Strategy, or IGPBS, and has identified its associated military construction in budget justification documents using that acronym. BRAC appropriations in previous rounds rose rapidly during the first two or three years in order to initiate needed military construction. Appropriations then stabilized and fell off as units and functions were moved to new locations and surplus properties were relinquished. Continuing appropriations, as mentioned above, have been dedicated primarily to environmental remediation of remaining problematic real property for which title remains with DOD. Congress appropriated $1.59 billion to the BRAC 2005 account for FY2006. The President requested $5.6 billion for FY2007. If DOD follows its historic pattern, this request is likely to be repeated for FY2008 before falling off to perhaps half that for FY2009. The House Committee on Appropriations recommended a $5.3 billion appropriation for FY2007, while the Senate Committee on Appropriations recommended $5.2 billion. Because Congress did not pass a military construction appropriation for Fiscal Year 2007, BRAC had to be funded under the various continuing resolutions. The final non-emergency appropriation action for Fiscal Year 2007 was H.J.Res. 20 , a year-long continuing resolution that incorporated the two previous short-term continuing resolutions and extended their appropriations through the end of the fiscal year, September 20, 2007. Though Sec. 101 of the continuing resolution specified that funding was to be provided at the levels specified in the applicable Fiscal Year 2006 appropriations acts, exceptions were made for certain accounts. This is reflected in the tables in Appendix A . Unit and function movements associated with BRAC and IGPBS will significantly increase the populations in and around some military installations. For example, the 2005 BRAC Commission estimated that Aberdeen Proving Ground and Ft. Meade in Maryland are expected to gain more than 1,800 and 10,000 military, civilian, and contractor positions, respectively. Ft. Belvoir, Virginia, is calculated to gain more than 21,000 direct and indirect positions. Several other installations, such as Ft. Bliss in Texas and Ft. Sill in Oklahoma, are also preparing for significant additions to the personnel stationed there. Local jurisdictions in the vicinity of gaining installations have expressed concern that they may have difficulty creating the infrastructure needed to support such large-scale changes in population. One such issue concerns the provision of primary and secondary education for the children of families being moved into the various areas. Some school boards have expressed concern that the process for providing federal impact aid, which subsidizes the maintenance and operation of local education institutions adversely affected by federal government activity such as maintaining a military installation, may not be received in time to construct and staff new school facilities before these new students arrive. A detailed discussion of impact aid in the BRAC context can be found in CRS Report RL33137, Military Base Closures and the Impact Aid Program for Education , by [author name scrubbed]. In 2001, the Department of Defense estimated its existing recapitalization rate at 192 years. This meant that, on average, the Department was funding military construction at a rate that would replace its real property inventory every 192 years. At that time, the Department established a recapitalization goal of 67 years. In testimony to Congress on February 15, 2006, the Hon. Philip Grone, the Deputy Undersecretary of Defense for Installations and Environment, stated that the Fiscal Year 2007 budget request would support a recapitalization cycle of 72 years, indicating an acceleration of construction that is approaching, but has not yet reached, its goal. The NSIP constitutes the United States contribution to the common North American Treaty Organization (NATO) infrastructure fund. Traditionally, these common alliance funds have constructed facilities such as petroleum pipelines, roads, communications networks, and the like that are employed in the defense of the NATO alliance. Since the end of the Cold War, the military focus of the North Atlantic Alliance has shifted from the defense member states in Western Europe to the potential for "out-of-area" operations in areas such as the Balkans and Central Asia. In its report to the House ( H.Rept. 109-464 ), the Committee on Appropriations recommended $201.0 million for the NSIP, noting that the "Committee expects projects will be prioritized with the highest priority given to NATO on-going missions such as those in Iraq and Afghanistan." The President requested $221.0 million for the NSIP for FY2007, while the House approved $201.0 million. The Senate approved an appropriation of $206.0 million. Language in the John Warner National Defense Authorization Act for Fiscal Year 2007 ( H.R. 5122 , P.L. 109-364 ) provided for the termination of the Special Inspector General for Iraq Reconstruction (SIGIR). The House-passed version of the bill contained no provision regarding the operation of the SIGIR. During floor debate of the Senate's national defense authorization bill ( S. 2766 ), Senator Russell D. Feingold proposed an amendment that would extend the investigative, auditing, and reporting authorities of the SIGIR to cover "any funds appropriated or otherwise made available for fiscal year 2006 for the reconstruction of Iraq, regardless of how such funds may be designated." The measure was agreed by voice vote on June 15, 2006, and incorporated into the bill as Sec. 1054. It became part of H.R. 5122 when the Senate amended that bill by substituting the language of S. 2766 on June 22. The section read as follows: SEC. 1054. STRENGTHENING THE SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION. For purposes of discharging the duties of the Special Inspector General for Iraq Reconstruction under subsection (f) of section 3001 of the Emergency Supplemental Appropriations Act for Defense and for the Reconstruction of Iraq and Afghanistan, 2004 (5 U.S.C. 8G note), and for purposes of determining the date of termination of the Office of the Special Inspector General under subsection (o) of such section, any funds appropriated or otherwise made available for fiscal year 2006 for the reconstruction of Iraq, regardless of how such funds may be designated, shall be treated as amounts appropriated or otherwise made available for the Iraq Relief and Reconstruction Fund. Conference on the authorization bill began on September 12, and the conference report ( H.Rept. 109-702 ) was filed on September 29. Sec. 1054, as entered into the Congressional Record, now read: SEC. 1054. MODIFICATION OF AUTHORITIES RELATING TO THE SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION. (a) Duties—For purposes of carrying out the duties of the Special Inspector General for Iraq Reconstruction under section 3001(f) of the Emergency Supplemental Appropriations Act for Defense and for the Reconstruction of Iraq and Afghanistan, 2004 (Public Law 108-106; 117 Stat. 1235 et seq.; 5 U.S.C. App., note to section 8G of Public Law 95-452), any United States funds appropriated or otherwise made available for fiscal year 2006 for the reconstruction of Iraq, irrespective of the designation of such funds, shall be deemed to be amounts appropriated or otherwise made available to the Iraq Relief and Reconstruction Fund. (b) Termination—Section 3001(o) of the Emergency Supplemental Appropriations Act for Defense and for the Reconstruction of Iraq and Afghanistan, 2004 (Public Law 108-106; 117 Stat. 1238; 5 U.S.C. App., note to section 8G of Public Law 95-452) is amended to read as follows: '(o) Termination - The Office of the Inspector General shall terminate on October 1, 2007, with transition operations authorized to continue through December 31, 2007.'. By way of explanation, the accompanying Joint Explanatory Statement read: The Senate amendment contained a provision (sec. 1054) that would expand the authority of the Special Inspector General for Iraq Reconstruction (SIGIR) by considering any funds appropriated or made available in the Emergency Supplemental Appropriations Act for Defense, the Global War on Terror, and Hurricane Recovery, 2006 (Public Law 109-234) for relief and reconstruction in Iraq as part of the Iraqi Relief and Reconstruction Fund (IRRF), and under the jurisdiction of the SIGIR, regardless of the source of the funds. The House bill contained no similar provision. The House recedes with an amendment that would clarify that the additional SIGIR jurisdiction is limited to U.S. funds and would provide a sunset date of October 1, 2007, for the Office of the SIGIR, with transition operations authorized to continue through December 31, 2007. The conferees support the comprehensive audit efforts of the SIGIR and believe the office continues to perform a critical function as long as significant resources flow to Iraq reconstruction and until a transition plan is in place to return to regular order. The conferees direct the SIGIR, jointly with the Inspectors General of the Departments of State and Defense and the Inspector General of the U.S. Agency for International Development (USAID), to develop and submit such a transition plan to Congress by April 1, 2007. The plan should ensure maintenance and accountability of all accumulated records and minimal, if any, disruption in the ability to oversee reconstruction funding or other U.S. assistance to Iraq. The plan should include a process and time line for transfer of open audits and investigations to the appropriate Departments of Defense, State or USAID office and should consider various contingency scenarios which may impact the transition time line. The conferees recognize that a significant change in the assumptions underlying this provision, such as a major new commitment of U.S. funds for Iraq reconstruction, would require changes to the transition plan and time line. The conference report was agreed by the House by the Yeas and Nays: 398-23 (Roll no. 510) on September 29, 2006. The Senate agreed to the report by Unanimous Consent on the following day. The bill was presented to the President on October 5 and became law on October 17, 2006 ( P.L. 109-364 ). The Joint Explanatory Statement notwithstanding, Senators Susan M. Collins and Joseph I. Lieberman appeared in a press conference on November 14, 2006, to state, in part: COLLINS: How did the termination provision ... get put in? That's a very good question. We are both conferees—were conferees. And, speaking for myself, what I thought was the last version of the bill did not include that provision. But I think it's important that however it got in there—and it certainly did not originate on the Senate side—that it's important that we correct the problem, go forward, and extend the life of the office... LIEBERMAN: Yes. I'd just add, also as a conferee, that we didn't see this in the last version that we saw. We checked after this became public, and I don't believe that the leaders of the committee on the Senate side or their staff knew it was in there.... Senator Collins had introduced an amendment to the military construction appropriations bill then under consideration on the Senate floor. This provision stated: On page 82, between lines 19 and 20, insert the following: Sec. 126. Section 3001(o) of the Emergency Supplemental Appropriations Act for Defense and for the Reconstruction of Iraq and Afghanistan, 2004 (Public Law 108-106; 117 Stat. 1238; 5 U.S.C. App., note to section 8G of Public Law 95-452), as amended by section 1054(b) of the John Warner National Defense Authorization Act for Fiscal Year 2007 (Public Law 109-364), is amended to read as follows: "(o) Termination.—(1)(A) The Office of the Inspector General shall terminate 10 months after 80 percent of the funds appropriated or otherwise made available to the Iraq Relief and Reconstruction Fund have been expended. "(B) For purposes of calculating the termination of the Office of the Inspector General under this subsection, any United States funds appropriated or otherwise made available for fiscal year 2006 for the reconstruction of Iraq, irrespective of the designation of such funds, shall be deemed to be amounts appropriated or otherwise made available to the Iraq Relief and Reconstruction Fund. "(2) The Special Inspector General for Iraq Reconstruction shall, prior to the termination of the Office of the Special Inspector General under paragraph (1), prepare a final forensic audit report on all funds deemed to be amounts appropriated or otherwise made available to the Iraq Relief and Reconstruction Fund.". The amendment was agreed to in the Senate by voice vote, and the bill passed as amended on November 14, 2006. In Title IV of its bill, the House Committee on Appropriations recommended an additional $507 million for military construction accounts for "projects supporting contingency operations related to the global war on terrorism" (see Table 3 ). These funds were intended for "projects related to urgent transformation efforts, as well as projects directly supporting operations in the theater and those that will enhance training in urban operations and close quarters combat." Each of these appropriations was addressed in a separate paragraph under Title IV, and each was designated an emergency appropriation by language stating that "the amount under this heading is designated as making appropriations for contingency operations related to the global war on terrorism pursuant to section 402 of H.Con.Res. 376 (109 th Congress), the concurrent resolution on the budget for FY2007." This language would have constituted legislation within a general appropriations bill by changing the existing concurrent resolution. It therefore violated Clause 2(b) of Rule XXI of the House Rules. Representative Jeb Hensarling, of Texas, raised a point of order against each of these paragraphs and was sustained by the Chair. The Senate Committee on Appropriations included in its defense appropriation recommendation $50 billion in additional appropriations to fund the global war on terrorism for the first several months of Fiscal Year 2007. Of this, $897 million was recommended as an addition to the recommended basic allowance for housing for Army active and reserve component members, as noted in Table 4 . Federal policy toward veterans recognizes the importance of their service to the nation and the effect that service may have on their subsequent civilian lives. 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 dependents and beneficiaries. The three primary organizations in VA that work together to accomplish this mission are the Veterans Benefits Administration (VBA), the Veterans Health Administration (VHA), and the National Cemetery Administration (NCA). The benefits provided include compensation for disabilities sustained or worsened as a result of active duty military service; pensions for totally disabled, poor war veterans; cash payments for certain categories of dependents and/or survivors; education, training, rehabilitation, and job placement services to assist veterans upon their return to civilian life; loan guarantees to help them obtain homes; free medical care for conditions sustained during military service as well as medical care for other conditions, much of which is provided free to low income veterans; life insurance to enhance financial security for their dependents; and burial assistance, flags, grave-sites, and headstones when they die. The budget submitted by the Administration in February 2006 calls for funding VA at a level of $77.9 billion dollars for FY2007 (see Table 6 ). This would be an increase of $6.5 billion, or 9.0%, over the FY2006 total including the supplemental appropriations. The most recent supplemental ( P.L. 109-234 ) added FY2006 funds for construction of a replacement for the VA Medical Center in New Orleans. The Senate passed its version of the budget resolution for FY2007 ( S.Con.Res. 83 ) on March 16, 2006, and the House passed H.Con.Res. 376 on May 18, 2006. The overall budget function 700 for veterans benefits and services addressed in the budget resolution is broader than just the VA and includes money that will be appropriated in other bills for other departments as well. The House-passed version recommends $74.6 billion in new budget authority for veterans benefits and services. The Senate version was amended on the floor to increase the total to $74.8 billion for the veterans budget function. The House Appropriations Committee approved its appropriations bill ( H.R. 5385 ) including about the same amount as requested for VA on May 10, 2006. The bill, as passed by the House on May 19, 2006, would provide a total of $77.9 billion for the VA budget with $36.5 billion of the bill's $94.7 billion 302(b) allocation going for VA discretionary spending. The Senate Appropriations Committee approved the bill with the same totals on July 20, 2006. On January 31, 2007, the House approved H.J.Res. 20 , a continuing resolution to provide funding for FY2007. Eligibility requirements and benefit levels for VA cash benefits are specified in law. Since spending for these programs is mandatory as noted above, the amounts requested in the budget are based on projected caseloads. While the total number of veterans is declining, the number receiving benefits is increasing. VA entitlement spending (outlays), mostly service-connected compensation, pensions, and readjustment (primarily education) payments, rose from $31.2 billion in FY2004 to $38.1 billion in FY2005 and is projected at $38.2 billion in FY2007. In addition to the increased number of beneficiaries, much of the projected increases in recent years result from cost-of-living adjustments for compensation benefits and from liberalizations to the Montgomery GI Bill, the primary education program. The Veterans Health Administration (VHA) is a direct service provider of primary care, specialized care, and related medical and social support services to veterans through an integrated health care system. In FY2005, VHA operated 156 hospitals, 135 nursing homes, 43 residential rehabilitation treatment centers, and 711 community-based outpatient clinics (CBOCs). VHA also pays for care provided to veterans by independent providers and practitioners on a fee basis under certain circumstances. Inpatient and outpatient care is provided in the private sector to eligible dependents of veterans under the Civilian Health and Medical Program of the Department of Veterans Affairs (CHAMPVA). In addition, VHA provides grants for construction of state-owned nursing homes and domiciliary facilities, and collaborates with the Department of Defense (DOD) in sharing health care resources and services. The President's FY2007 budget proposal to Congress requested $32.7 billion for VHA, a 11.3% increase over the FY2006 enacted amount of $29.3 billion, and a 10% increase over the FY2005 enacted amount of $29.7 billion. As in previous budget proposals, the President's FY2007 budget request also includes a set of legislative proposals. The Administration is requesting authorization from Congress to assess an annual enrollment fee of $250 for all Priority 7 and 8 veterans, increase the veterans' share of pharmaceutical co-payments from $8 to $15 (for each 30-day prescription) for all enrolled veterans in Priority Groups 7 and 8, and bill veterans receiving treatment for nonservice-connected conditions for the entire co-payment amount. The House passed its version of the Military Construction, Military Quality of Life, and Veterans Affairs Appropriations bill (MIL-CON-QUAL-appropriations bill) for FY2007 ( H.R. 5385 , H.Rept. 109-464 ) on May 19, 2006. H.R. 5385 provides $32.7 billion for the Veterans Health Administration (VHA) for FY2007, about the same amount as the President's request. This includes $25.4 billion for medical services, a $2.6 billion (11.6%) increase over the FY2006 enacted amount and $100 million less than the President's requested amount of $25.5 billion. The MIL-CON-QUAL-appropriations bill also includes $3.3 billion for medical administration, a $100 million increase over the President's request; $3.6 billion for medical facilities; and $412 million for medical and prosthetic research, a $13.0 million increase over the Administration's request. The House-passed bill does not include any provisions that would give VA the authority to implement fee increases as requested by the Administration's budget proposal for VHA for FY2007 On July 20, 2006, the Senate Committee on Appropriations reported out of committee its version of the Military Construction and Veterans Affairs and Related Agencies Appropriations bill (MIL-CON-VA-appropriations bill) for FY2007 ( H.R. 5385 , H.Rept. 109-286 ). H.R. 5385 , as amended, provides $32.7 billion for VHA for FY2007, about the same as the House-passed amount and the President's request. This amount includes $28.7 billion for medical services, a 26.0% increase over the FY2006 enacted amount, and a 13.0% increase over the House-passed amount. Although it appears that the Committee-recommended amount is significantly higher than the President's request ($25.5 billion) and the House-passed amount ($25.4 billion), it should be noted that the Committee combined the medical administration account into the medical services account. The MIL-CON-VA-appropriations bill also includes $3.6 billion for medical facilities, and $412 million for medical and prosthetic research. The Senate Appropriations Committee reported bill does not include any provisions that would give VA the authority to implement fee increases as requested by the Administration's budget proposal for VHA for FY2007. The third continuing resolution ( H.J.Res. 102 , P.L. 109-383 ) extended funding for VHA through February 15, 2007. Section 136 of H.J.Res. 102 provided VA with the authority to transfer up to $684 million into the medical services account from other non-medical care accounts. Since the beginning of FY2007, VA has been using unobligated balances carried over from FY2006 to bridge the approximately $250 million per month shortfall in the VHA accounts. During Senate floor consideration of the FY2007 Department of Defense Appropriations Act ( H.R. 5631 ), controversy erupted about the adequacy of funding for the Defense and Veterans Brain Injury Center, a center that coordinates treatment and research for traumatic brain injuries affecting active-duty military, their dependents and veterans provided. Concerned about traumatic and other brain injuries in Iraq and Afghanistan due to Improvised Explosive Device (IED) attacks, Congress increased DOD's funding request for this program in FY2006, and commissioned an extensive report due October 6, 2006. In FY2007, the final funding level for this program will be set in the conference version of the Military Construction, Military Quality of Life, Veterans Affairs & related agencies bill ( H.R. 5385 ). Despite the controversy about the funding level for this particular program, military personnel are entitled to full medical coverage under the TRICARE program. The Defense and Veterans Brain Injury Center is funded within the "Blast Injury Prevention, Mitigation and Treatment" program, and received $10.7 million of the $19.6 million appropriated in FY2006. Last year, Congress increased DOD's request for blast injury from $7 million to $19.6 million, including monies for both treatment and R&D, all provided within the appropriation for Defense Health. In FY2007, DOD again proposed $7 million for the Blast Injury Prevention, Mitigation and Treatment program including $4.9 million for the Defense and Veterans Brain Injury Center. On September 6, 2007, the Senate unanimously adopted an amendment to the FY2007 DOD Appropriations bill ( H.R. 5631 ) offered by Senators Allen and Durbin (SA4883) that made $19 million available for the Defense and Veterans Brain Injury Center from monies for the Defense Health Program. The House did not change DOD's request for $7 million for the Blast Injury Prevention, Mitigation and Treatment program and funded the program in a different bill, the Military Construction, Military Quality of Life and Veterans Affairs appropriations bill ( H.R. 5385 ). In FY2007, the appropriation conferees for the FY2007 Military Construction, Military Quality of Life and Veterans Affairs appropriation bills ( H.R. 5385 ) will need to resolve differences in funding for the Blast Injury Prevention, Mitigation and Treatment program, and the amount of that funding that will go to Defense and Veterans Brain Injury Center. For a more detailed discussion of the VA medical care budget, see CRS Report RL33409, Veterans ' Medical Care: FY2007 Appropriations , by [author name scrubbed]. 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 military cemetery memorials in foreign countries. The Commission maintains 24 military memorial cemeteries and 25 monuments, memorials, and markers in 15 countries, including three memorials on U.S. soil. The ABMC was responsible for the planning and construction of the World War II Memorial on the Mall in Washington, DC. Though the National Park Service assumed responsibility for the operation and maintenance of the Memorial at its dedication, the ABMC retains a fiduciary responsibility for the remaining public contributions given for its construction. The ABMC has undertaken the construction of an Interpretive Center at the Normandy American Cemetery, Normandy, France, to commemorate the World War II Allied invasion of France on June 6, 1944, and the subsequent land battles in Europe. The Commission is scheduled to open the facility on June 6, 2007. The U.S. Court of Appeals for Veterans Claims was established by the Veterans' Judicial Review Act of 1988. 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 Department of Veterans Affairs (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 Department of Veterans Affairs 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. The Court's major operational initiative is its transition to an electronic case filing system, which is also funded through this appropriation. 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 account 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 appropriation is not drawn from the general treasury, but rather comes from a special trust fund that is maintained through gifts, bequests, and a $0.50 per month assessment on the pay of active duty enlisted military personnel and warrant officers. 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. Four hundred fourteen of the 583 residents then occupying the facility were transferred to the Washington, DC, location immediately after the storm. Appendix A. Consolidated Funding Tables 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). 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/ Commission on Review of Overseas Military Facility Structure of the United States (Overseas Basing Commission) http://www.obc.gov/ CRS Appropriations Products Guide http://www.crs.gov/ products/ appropriations/ apppage.shtml CRS Multimedia Library http://www.crs.gov/ products/ multimedia/ multimedialibrary.shtml 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/

The structure of the Committees on Appropriations were changed at the beginning of the 109th Congress, altering jurisdictions over the appropriations covered in this report, including military construction, military housing allowances, military installation maintenance and operation, the Department of Veterans Affairs, and other veteran-related agencies, rested in the House Committee on Appropriations with the new Subcommittee on Military Quality of Life and Veterans Affairs. In the Senate Committee on Appropriations, jurisdiction for military construction, the Department of Veterans Affairs, and other veteran-related agencies were vested in the Subcommittee on Military Construction and Veterans Affairs, while military housing allowances and military installation maintenance and operation are the responsibility of the Subcommittee on Defense. At the opening of the 110th Congress, the House subcommittee structure was again adjusted, returning some non-construction defense activities to the Subcommittee on Defense. Authorization jurisdictions lie with the two Committees on the Armed Services and Committees on Veterans Affairs. Key issues in congressional action to date include: Military Construction: The changing structure of the Army, the redeployment of troops from overseas garrisons to domestic bases, and implementation of the current BRAC round have drawn committee attention during the appropriation process. To fund the activities included in the military construction and family housing portion of this bill, the President requested $16.7 billion, the House appropriated $15.9 billion, and the Senate Committee on Appropriations recommended $16.3 billion. Veteran Benefits: Entitlement spending is rising as the number of beneficiaries is increasing, education benefits are being augmented, and annual cost of living adjustments are being granted. Benefits such as disability compensation, pensions, and education are mandatory payments and constitute more than half ($37.2 and $41.4 billion, respectively) of the VA appropriation of approximately $71 billion for FY2006 and almost $78 billion proposed for FY2007. Veteran Medical Care: The Administration has again requested legislative changes to increase certain co-payments and other cost sharing fees for veterans in lower priority categories. The House passed version of H.R. 5385 provides $32.7 billion for the Veterans Health Administration (VHA) for FY2007, about the same amount as the President's request. On July 20, 2006, the Senate Committee on Appropriations reported out of committee its version of H.R. 5385. H.R. 5385, as amended, provides $32.7 billion for VHA for FY2007, almost equivalent to the House-passed amount and the President's request. The House-passed bill and the Senate Appropriations Committee-reported bill do not include any provisions that would give VA the authority to implement fee increases.

The complex humanitarian emergency has emerged as a category of crisis that can be defined in different ways. For example, it can be viewed according to the situation on the ground—scale and intensity of population dislocation, destruction of social networks/community and infrastructure, insecurity of civilians and noncombatants, and human rights abuses; by the complexity of the response needed to address these problems; or by the multi-causal factors that may have contributed to the escalation of conflict in the first place. Beginning in the 1990s, crisis operations increased in war-torn countries and regions throughout the world along with the numbers of those providing relief, primarily humanitarian organizations and international actors. Multinational military forces also served a greater peacekeeping role in these internal wars. The media added a new measure of influence to the response to such crises in the form of greater access and live reporting. Population displacement is often a significant consequence in crises resulting from conflict. This may occur within the affected country or because people flee to countries in close proximity. In these situations the plight of the refugee is one critical element of population movement; the internally displaced person (IDP) is another. The displaced require particular protection, the basis of which may be found in international humanitarian law, and sustained emergency assistance, which is usually provided by U.N. system agencies, governments, international entities, and non-governmental organizations (NGOs). In many protracted civil conflicts, where groups within a country are fighting and in the absence of a political solution, the course agreed on by the international community might be to provide humanitarian assistance to the victims. This assistance may last for many years. Refugees and IDPs may be stranded in camps, urban areas, or informal settlements and separated from their homes for long periods. Conducting a humanitarian operation in an area of conflict often means that access to populations in need and the distribution of emergency relief supplies is hampered by security concerns, not only for those needing assistance but for humanitarian personnel as well. Thus, providing humanitarian and refugee assistance is increasingly complicated and expensive—sources of funding, civil-military relations and operations, human rights concerns, aid worker security, protection, and access are just some of the central issues facing the aid community. The ongoing conflicts in and around Syria and Iraq demonstrate some of these challenges. In addition, natural disasters affect millions of people each year who require prolonged and urgent assistance. The event may be sudden (like the 2010 earthquake in Haiti, the 2013 typhoon in the Philippines, or the 2014 earthquake in Nepal) or protracted (like drought conditions in the Horn of Africa and southern Africa, food insecurity in the Sahel, and the possible long-term effects of climate change). Responses to natural disasters are typically multilateral and less likely to be hindered by the politics at hand, although the situation in Burma following the May 2008 cyclone demonstrated the opposite. The United States is a major contributor to relief efforts in international crises and disaster situations. Key relief-related policy issues likely to be of concern in the 114 th Congress include budget priorities, levels of funding, sources of other support available worldwide, and the ways in which operational assistance is delivered. Congress has consistently supported humanitarian efforts as a means of responding to natural disasters (such as floods and earthquakes) and man-made crises (such as war) in the short term, mitigating humanitarian impacts, and promoting a U.S. presence. From FY2008 to FY2012, the U.S. government contributed more than $4 billion annually to disaster relief worldwide. In FY2013, the U.S. contribution was more than $5.6 billion, and in FY2014 this number rose to $6.4 billion. The recent increases largely reflect humanitarian needs related to the crisis in Syria. Humanitarian assistance generally receives strong bipartisan congressional support. Congress has given the President broad authority in this area. The Foreign Assistance Act of 1961 (P.L. 87-195), as amended, authorizes the United States to participate in disaster relief efforts and gives the President great flexibility to respond to disasters with a wide range of government-funded humanitarian assistance. In 1993, President Clinton designated for the first time the Administrator of the U.S. Agency for International Development (USAID) as the Special Coordinator for International Disaster Assistance. In this capacity the Administrator coordinates the U.S. government's response to both natural and man-made disasters. The Administrator also calls upon federal agencies to provide assistance; contracts with and funds private voluntary agencies to provide humanitarian assistance; and coordinates the U.S. response with that of other countries. The very nature of humanitarian emergencies—the need to respond quickly in order to save lives and provide relief—has resulted in a broad definition of humanitarian assistance, on both a policy and operational level. While humanitarian assistance is assumed to address urgent food, shelter, and medical needs, the agencies within the U.S. government providing this support expand or contract the definition in response to circumstances. The legislation governing humanitarian or disaster assistance leaves the decision on the type of assistance required to the President. U.S. humanitarian assistance in disasters and international crises is broad and far-reaching: it covers many elements directly concerned with the provision of relief and strategies for strengthening how people survive over time. Congress broadly defines humanitarian activities in an effort to enable the U.S. response to be as flexible as possible to adapt to humanitarian needs. In practice, the provision of humanitarian assistance is typically case and time specific. In general, humanitarian assistance is exempt from the regulations implementing various types of foreign aid sanctions. The Foreign Assistance Act of 1961, as amended (P.L. 87-195), allows the President to provide disaster assistance, "notwithstanding any other provision of this or any other Act," which would otherwise prohibit or restrict aid to selected countries. For example, a country may generally receive humanitarian assistance even in instances when other types of aid are prohibited because of a coup, default in debts, non-compliance with international treaty obligations, or the many other situations that can trigger restrictions on foreign assistance. Categories of humanitarian assistance can be broken down into several main elements including relief and rehabilitation, food assistance, refugee programs, and logistical and operational support. USAID, the State Department, and the Department of Defense provide humanitarian assistance and cover a mix of these activities as described below. USAID is the central U.S. agency charged with coordinating U.S. government and private sector foreign assistance. The Office of Foreign Disaster Assistance (OFDA), within USAID's Bureau for Democracy, Conflict, and Humanitarian Assistance (DCHA), provides non-food humanitarian assistance during international crises and disasters and can respond immediately with relief materials and personnel, many of whom are often already in the field. OFDA was established in 1964 to coordinate U.S. government emergency assistance in what had previously been an ad hoc U.S. response to international disasters. OFDA provides some assistance through its own personnel, but the bulk of its activities are carried out through grants to United Nations (U.N.) agencies, other international organizations (IOs), international governmental and non-governmental organizations (NGOs), and private or religious voluntary organizations (PVOs). OFDA also coordinates with the U.S. embassy or USAID mission in the affected country, the government of the country suffering the disaster, and other governments. Funding for USAID/OFDA is authorized and appropriated in annual Foreign Operations legislation. A response to a disaster generally begins with the U.S. ambassador or chief of mission responding to a request from the affected country's government for assistance. OFDA has use of up to $50,000 (through Disaster Assistance Authority) immediately available, which it releases to the USAID mission or U.S. embassy, generally within 24 hours. This money is then provided to the local Red Cross/Red Crescent or a similar local disaster response organization, or it may be used to buy relief supplies or hire personnel locally. The United States also begins working with the affected government through the ambassador to determine what, if any, additional aid may be needed. USAID/OFDA can respond immediately with cash, relief materials, and personnel to any kind of disaster, whether man-made or natural. The President has the authority to set the terms and conditions of the aid provided. As a general rule, assistance provided by USAID/OFDA lasts about 90 days, although the agency may continue monitoring and mitigation projects for a longer period. Some USAID/OFDA personnel are located in various countries around the world and can move quickly to a disaster area. OFDA also has Disaster Assistance Response Teams (DARTs), groups of experts that can be brought together quickly to respond to different types of disasters. These groups may be sent to the area in anticipation of a disaster, such as a tropical storm or flood that has been predicted by the weather service. Once a DART is deployed, a Washington, DC-based Response Management Team (RMT) is also activated. Under the legislation governing disaster assistance, the President is authorized to borrow up to $50 million in any fiscal year from any other economic assistance account if funding within the USAID/OFDA budget is inadequate. Generally, this money is borrowed from programs already planned for countries within the region. These borrowed funds may be repaid through passage by Congress of a supplemental appropriation. USAID regional bureaus may also reprogram their projects within the disaster region in response to local needs, or they may transfer funds to USAID/OFDA to carry out disaster related programs. USAID/OFDA can also request the use of facilities, equipment, or personnel from other agencies as needed. For example, U.S. weather prediction facilities and satellites may be used to track storms, droughts, or floods. Centers for Disease Control and Prevention specialists are relied upon for identifying and responding to outbreaks of disease. The Food for Peace Act (FFPA), often referred to as P.L. 480, is the main legislative vehicle that authorizes foreign food assistance. Funding for FFPA programs is authorized in annual Agriculture appropriations bills. One of the components of FFPA is Title II, Emergency and Private Assistance, which provides for the donation of U.S. agricultural commodities to meet emergency and nonemergency food needs in foreign countries. Title II provides food as grant aid that does not need to be repaid and is the primary disaster aid channel for U.S. food aid. Title II is administered by USAID. The legislation gives the USAID Administrator wide authority to provide food aid and contains a "notwithstanding clause" that allows food aid to be provided despite prohibitions in other legislation. Commodities may be made available for direct distribution to the needy, or for sale, barter, or other disposition, according to the determination of the Administrator. The United States is by far the largest international contributor of emergency food aid in disaster situations. In recent years, most emergency food aid has been provided to victims of complex humanitarian emergencies, helping people displaced by warfare and unable to grow or obtain food in their traditional way. Crisis conditions often last many years. Food aid programs generally target the most vulnerable populations, including children, pregnant and nursing mothers, the elderly, sick and handicapped, and those identified as malnourished. Title II grant food aid is mostly provided for humanitarian relief but may also be used for development-oriented purposes through governments, intergovernmental entities, PVOs, and multilateral organizations, such as the U.N. World Food Program (WFP). As with other USAID/OFDA aid, food aid may be prepositioned in regions that are vulnerable to disaster, or diverted from a less pressing food aid program in a nearby country that would be replenished later. Food aid that is not prepositioned or diverted from nearby countries may take several months to reach a disaster site. Fifty percent of U.S. food aid tonnage must be shipped on U.S. flagged vessels. Development professionals have long raised concerns about the efficiency and effectiveness of U.S. food assistance. In the FY2014 budget, the Administration proposed changes in U.S. food aid programs that would substantially alter the way in which the United States provides international food assistance. In the FY2014 appropriations legislation, Congress did not adopt the proposed reforms to food aid programs. In addition to the Food for Peace program, Section 416 (b) of the Agricultural Act of 1949 provides for the donation of surplus U.S. agricultural commodities held by the Commodity Credit Corporation to needy countries, including those suffering from disasters. This program is managed by the Department of Agriculture. The Office of Civilian-Military Cooperation (CMC), which operates within USAID's Bureau for Democracy, Conflict, and Humanitarian Assistance (DCHA), was established in November 2011. Previously named the Office of Military Affairs (OMA), CMC is an operational link established to improve USAID's coordination of humanitarian assistance with the U.S. military. It works to align defense and development policies, plans, and programs to leverage the capabilities of each agency to achieve better development outcomes. Senior USAID staff are assigned to the five geographic Combatant Commands and help assess development needs. Joint exercises with the military are ongoing training in preparation for future disasters. Training for both the military's civil affairs officers and USAID workers is also intended to increase knowledge and cooperation, and capacity at the operational level. The OMA is also a contact point between NGOs and the military, and allows each to benefit from the other's operational experience while at the same time contributing to the administration and delivery of humanitarian assistance. The Office of Transition Initiatives (OTI) provides post-disaster transition assistance, which includes mainly short-term peace and democratization projects with some attention to humanitarian elements (e.g., community projects such as housing, electricity, water) but not emergency relief. OTI funding is often provided during the early recovery phase of a humanitarian emergency or disaster. Additionally, the Office of Conflict Management and Mitigation (CMM) provides transition assistance towards development through early intervention in the causes and consequences of conflict. There are three funds managed by USAID that can be used for disaster assistance and that are focused on specific issues—Displaced Children and Orphans Fund (DCOF), the Leahy War Victims Fund (LWVF), and the Victims of Torture Fund (VOT). They are coordinated by DCHA through funds reserved by Congress each year. The Bureau of Population, Refugees and Migration (PRM) deals with problems of refugees worldwide, conflict victims, and populations of concern to the U.N. High Commissioner for Refugees (UNHCR), often including internally displaced persons (IDPs). Humanitarian assistance includes a range of services from basic needs to community services to tolerance building and dialogue initiatives. Key issues addressed by PRM include protection (refugees, asylum issues, identification, returns, tracing activities) and quick impact, small community projects. Refugee funds are provided as cash grants to international governmental and NGO refugee organizations. These include U.N. agencies such as UNHCR and the U.N. Children's Fund (UNICEF), and international organizations such as the International Committee of the Red Cross (ICRC). The Emergency Refugee and Migration Assistance Fund (ERMA) is a contingency fund that remains available until spent and is replenished as needed by Congress. P.L. 103-236 sets the maximum amount of money that can be in this account at $100 million, although appropriations have been made that exceed this amount. Established in 1962, ERMA gives the President wide latitude in responding to refugee emergencies. Refugees are defined as those fleeing their homeland due to persecution on account of their religion, race, political opinion, or social or ethnic group. The law contains a "notwithstanding clause" that waives prohibitions against providing aid contained in any other legislation. The legislation establishing ERMA places certain requirements on the President. The President must publish a Presidential Determination in the Federal Register and keep the appropriate congressional committees informed of drawdowns. Refugee emergencies lasting more than a year are incorporated into the regular budget of the Migration and Refugee Assistance (MRA) account through PRM. Both ERMA and MRA are authorized in Department of State legislation and appropriated in Foreign Operations legislation. The Department of Defense (DOD) provides support to stabilize emergency situations, including the transport and provision of food, shelter and supplies, logistical support, search and rescue, medical evacuations, and refugee assistance. This includes the provision of 2,300 calorie low-cost humanitarian daily rations to alleviate hunger after foreign disasters. The incremental costs for all DOD humanitarian assistance for both natural and man-made disasters are funded through the Overseas Humanitarian, Disaster, and Civic Action (OHDACA) account in annual DOD appropriations. The Defense Security Cooperation Agency (DSCA) is the central DOD agency that synchronizes global security cooperation programs, funding, and efforts across the Office of the Secretary of Defense (OSD), Joint Staff, State Department, Combatant Commands, the services, and U.S. civilian industry. Under DSCA oversight, the Office of Humanitarian Assistance, Disaster Relief and Mine Action (HDM) manages DOD humanitarian assistance programs funded with OHDACA appropriations in all Geographic Combatant Commands. This includes humanitarian projects, transportation of DOD and privately donated humanitarian material, humanitarian mine action programs, and foreign disaster relief. DOD provides assistance in humanitarian emergencies under several provisions in law. The primary authority is found in Section 2561 (formerly Section 2551) of Title 10, U.S. Code, which allows the use of appropriated funds "for the purpose of providing transportation of humanitarian relief and for other humanitarian purposes worldwide." The Secretary of State determines when this provision should be used and requests DOD to respond to a disaster with specific assistance such as helicopter transport, provision of temporary water supplies, or road and bridge repair. DOD response time depends upon what is being requested and how long it takes to get personnel and equipment to the site of the emergency. If possible, military personnel join USAID's OFDA assessment team to help determine the type of aid that can be provided by DOD. Under this provision, DOD generally limits its service activities to those that stabilize the emergency situation, such as road or bridge repair, but generally does not undertake projects that include rebuilding. The law requires an annual report to Congress on the use of funds. Title 10 also contains a section that helps private voluntary agencies transport donated humanitarian goods to disaster sites. Section 402, the Denton program, named after former Member of Congress Jeremiah Denton, authorizes shipment of privately donated humanitarian goods on U.S. military aircraft on a space-available basis. The donated goods must be certified as appropriate for the disaster by USAID's OFDA and can be bumped from the transport if other U.S. government aid must be transported. Donated goods can also be shipped on commercial vessels, using Section 2561 funds. Section 506 (a) (1) of the Foreign Assistance Act of 1961 allows the drawdown of military equipment to a limit of $100 million in any fiscal year if the President determines that an unforeseen emergency exists that requires immediate military assistance and the requirement cannot be met under any other provision. Before this provision can be used the President must notify the Speaker of the House and the Senate Foreign Relations Committee in writing by issuing a Presidential Directive explaining and justifying the need for the equipment being used. This request is handled by the Department of State and the National Security Council. Although its primary purpose is not focused on disaster and emergency response activities, another subset of DOD Humanitarian Assistance, known as Humanitarian and Civic Assistance (HCA) activities, is authorized under Section 401 of Title 10, U.S. Code. Under regulations prescribed by the Secretary of Defense, humanitarian and civic assistance activities are authorized in conjunction with authorized military operations of the Armed Forces in a country if it is determined that the activities would (1) promote the security interests of both the United States and the country in which the activities are to be carried out, and (2) promote the specific operational readiness skills of the members of the Armed Forces who participate in the activity. HCA activities under Title 10 U.S.C. Section 401 authority are separate from HA programs managed by DSCA and placed under direct oversight of Secretary of Defense. Congress plays a key role in funding U.S. humanitarian assistance. The global humanitarian accounts (MRA, ERMA, IDA, and P.L. 480) have generally been approved by Congress at the requested level. At times, however, the amount of disaster assistance provided during a fiscal year exceeds the amount appropriated by Congress. Congress has provided the President with the authority to borrow up to $50 million from economic assistance accounts in the foreign aid program. In some cases, particularly when disasters occur during the appropriations process, congressional amendments reimbursing a particular agency for a specific disaster may become part of the next year's appropriation for that agency. Congress is also generally supportive of supplemental appropriations that reimburse agencies for their expenditures, either to replenish the emergency accounts or other accounts that have been used to provide assistance. When there is difficulty in passing supplemental legislation, the debate is generally over non-disaster items, such as long-term reconstruction aid for the devastated area, or non-germane amendments added to the legislation rather than opposition to disaster assistance funding itself. Humanitarian assistance is intended to save lives and meet basic human needs in the wake of natural disasters and conflicts. Humanitarian assistance funding appropriated through State, Foreign Operations, and Related Programs from FY2008 through FY2015 is provided by account and year in the table and graph below. In FY2014, funding for the IDA and MRA accounts increased by approximately 15% each from FY2013. This enabled some carryover to meet urgent needs in FY2015. Three main issues impact or potentially impact levels of funding: The increasing number of humanitarian crises that require U.S. support . The United States remains a major contributor to relief efforts in international crises and disaster situations. The number of humanitarian crises due to conflict or natural disasters remains high, and the funding data for U.S. humanitarian assistance reflects a steady increase in support to meet humanitarian needs worldwide reaching nearly $6.4 billion in FY2014. Humanitarian assistance has increased as a portion of the foreign operations budget since FY2013, mainly as a result of Level 3 (L3) crises (the U.N. classification for the most severe, large-scale humanitarian crises), which currently include Syria, South Sudan, and Iraq. Use of funds designated as Overseas Contingency Operations (OCO) . Beginning in FY2012, Congress designated a portion of foreign assistance funds as OCO. The designation is intended to identify extraordinary and temporary costs that should not be considered part of an agency's base budget, and do not count toward annual budget caps. In some ways, the OCO designation has replaced the use of supplemental funds that were common for funding humanitarian assistance prior to FY2011. Food aid reform. The Obama Administration's FY2014 budget request proposed food aid that would have substantially altered both the funding stream and implementation practices of U.S. food assistance. The request proposed shifting some funding for the Food for Peace programs, currently funded through the Agriculture appropriations subcommittee, into humanitarian assistance accounts, funded through State-Foreign Operations appropriations. Although Congress did not adopt the proposed reforms to food aid programs in the FY2014 appropriations legislation, food aid reform remains an issue that may well resurface. The Administration's FY2016 budget request for global humanitarian accounts totals $5.6 billion. The request includes $1.74 billion for IDA, of which $931 million is for the core IDA account ($690 million is for OFDA and $241 million is for emergency food assistance) and $810 million is for IDA-OCO to address the humanitarian impact of the crises in Syria and Iraq (including $325 million for OFDA and $485 million for emergency food assistance). A significant portion of the IDA-OCO funding will support neighboring countries hosting refugees from Syria and Iraq, including Jordan and Lebanon. The budget request asks for $2.45 billion for MRA, of which $1.63 billion will fund contributions to key international humanitarian organizations and NGO partners to address pressing humanitarian needs overseas and to resettle refugees in the United States, and $819 million will be for MRA-OCO for humanitarian needs related to Syrian and Iraqi displacement. The request also includes $50 million for ERMA to enable the President to provide humanitarian assistance for unexpected and urgent refugee and migration needs worldwide, and $1.4 billion for the Food for Peace program. The United States responds with varying amounts of relief and recovery assistance, typically in coordination with its international partners. The sheer number of players in the field, representing a range of actors and interests, creates a complicated coordination challenge and often contributes to duplication of efforts or competition over the same sources of money and projects. Those involved may include, for example, numerous U.N. agencies, other international organizations (IOs), bilateral and multilateral donors, and non-governmental organizations (NGOs). International actors provide relief either through financial contributions to the government of the affected country or to NGOs, or by directly providing in-kind support in the form of relief supplies and emergency personnel. Local, regional, and national authorities may also have a role in the provision of assistance, law enforcement, and access control. It is important to note that local aid organizations may be critical because they often know the terrain, the available resources, and the community, whereas the international community may bring to bear greater resources and coordinating capacity. Relief operations are often daunting in terms of the demands of those in need—from life-saving action required to the provision of food and shelter under harsh physical conditions. In addition, the humanitarian response system has many moving parts. The United Nations works with a wide number and variety of aid organizations and donors. Within the U.N. system, in addition to the Office for the Coordination of Humanitarian Affairs (OCHA), the World Food Program (WFP), the World Health Organization (WHO), the U.N. Children's Fund (UNICEF), the U.N. High Commissioner for Refugees (UNHCR), and the U.N. Development Program (UNDP) all contribute to efforts to respond to a crisis. OCHA also coordinates with IOs such as the International Committee of the Red Cross (ICRC) and the International Organization for Migration (IOM), and a wide range of NGOs, many of which are implementing partners and provide much of the operational support on the ground. In addition, other internationals—governments, militaries, intergovernmental entities such as the European Union—are often part of the response network. A key determinant in the response to humanitarian emergencies is level of prior planning, including the identification of responders—local, national, or international—and their level of preparedness. Furthermore, it is widely recognized that in many crises, it is the people who are least able to help themselves—those who are poor and those who have few, if any, options to live elsewhere—who are most affected. Experts continue to emphasize the importance of drawing on lessons learned from responses to previous crises and disasters. Some of the ongoing challenges include communication between the government, aid agencies, and the public; coordination among emergency responders; civil-military cooperation and division of duties; and the planning and logistics involved in providing aid to less accessible, often more insecure, areas. Members of the 114 th Congress may take the following issues into account when considering U.S. humanitarian assistance activities worldwide. Finding the resources to sustain U.S. funding or pledges to humanitarian crises may be difficult in light of domestic budget constraints. When disasters require immediate emergency relief, the Administration may fund pledges by depleting most global humanitarian accounts. In order to respond to future humanitarian crises, however, these resources would need to be replenished. If not replenished, U.S. capacity to respond to other emergencies could be affected. In recent years, the United States has moved away from annual supplemental funding to replenish humanitarian or other accounts. Instead, it has increased levels of funding during the regular appropriations process. While Congress may be reluctant to allocate funds for disasters before they happen, some experts have argued there are negative impacts of relying too heavily on post-disaster supplemental funding. For example, budget uncertainty may result in program cuts, delays in decision making, and disruptions in service. Humanitarian programs may incur greater expense in restarting activities that had to be cut back due to insufficient funding earlier in the year. This in turn may raise questions about the credibility and reliability of the United States as a partner in the provision of humanitarian assistance. Congress has an interest in the cost and effectiveness of foreign affairs activities, including humanitarian assistance, that promote U.S. interests overseas. Both Congress and the Administration encourage other countries to provide disaster assistance and to turn pledges into actual commitments. Often it is not easy to measure the precise contributions made by various countries and organizations, or to compare them to U.S. assistance. It is not always evident whether figures listing donor amounts represent pledges of support or more specific obligations. Pledges made by governments do not always result in actual contributions. Some offers of assistance are not accepted for various reasons. It also cannot be assumed that the funds committed to relief actually represent new contributions, since the money may previously have been allocated elsewhere. Moreover, it is not readily apparent how the actual cost of the humanitarian emergency might be shared among international donors. Comparing U.S. and international aid is also difficult because of the often dramatically different forms the assistance takes (relief items versus cash, for instance). Given the protracted nature of many modern crises, some donors face "donor fatigue." or a reluctance to continue providing funds for a seemingly endless need. Some Members of Congress may feel that the U.S. provides a disproportionate share of assistance in some situations and should step back to let others play a larger role. Other Members may believe that the United States has an obligation to lead such efforts, or see a foreign policy benefit for doing so. Finding a balance between burdensharing on the one hand and an effective U.S. response on the other can negatively impact relief operations during emergencies when immediate funds are required for a response and are not forthcoming. Some experts are concerned about funding priorities and the ongoing need for resources for other disaster areas. Some Members of Congress have raised concerns about transparency of donor contributions, allocation of monies, and monitoring of assistance projects. For example, the United Nations continues to address concerns about its financial tracking and reporting system. In responding to international disasters, many contributions are also made directly to IOs and NGOs, which could raise the same questions about transparency requirements. Moreover, while conditions and time limits have been proposed by Congress as a means of ensuring greater accountability, they can also add pressure for organizations to spend contributed funds quickly, sometimes leading to unnecessary spending, waste, and duplicated efforts. Many also argue that restrictions on use of funds often do not allow flexibility to adapt projects to better meet the changing needs on the ground. Since the 1990s, limitations on the operating environment of humanitarian agencies have been a topic of intense debate and discussion. A number of reports have highlighted increased incidences of insecurity and attacks on humanitarian staff. While a more consistent and expanded response by the international community to humanitarian crises over the past two decades has meant that a greater number of aid workers are operating in crisis areas, most security incidents tend to be concentrated in a limited number of high-profile contexts. At the same time, other reports indicate that the ability of aid workers to access populations at risk has decreased over time. This could in part be due to operations taking place in a greater number of conflict areas, but other factors may include the actions of multiple non-state actors or the role of sovereign governments in denying access. Furthermore, some experts stress that humanitarian agencies need to be able to operate independently of external military and political agendas but may not be able to do so. One reason that humanitarian workers may be less secure than in the past is that they are often not viewed as neutral. For example, some contend that, increasingly, the lines are blurred between humanitarian and other actors, such as the military, in the delivery of humanitarian assistance, the inclusion of humanitarian response in counter-insurgency operations, and the incorporation of humanitarian action within integrated U.N. missions. Adherence to international humanitarian law and the traditional humanitarian principles of impartiality, neutrality, and independence are often cited as the underpinnings of the provision of humanitarian assistance, but their application may vary by organization mandate and situation. The security of the environment in which humanitarian organizations are operating is complicated not only by the specific crisis itself, but the ways in which humanitarian actors define their roles and responsibilities. A growing number of humanitarian workers have been put at great risk or lost their lives in providing humanitarian assistance. The degree to which a security force protects humanitarian relief workers and parties to the conflict will have some bearing on who is in charge, the security measures taken and provided, and the perception of whether the humanitarian community has taken sides in the conflict. Security and access are serious concerns and remain key priorities within the humanitarian community. The provision of humanitarian assistance raises the potential for unexpected consequences. First, it is important to examine whether humanitarian assistance is going to those for whom it is intended. Evaluating and tracking provision of supplies is difficult during a conflict and impossible to completely control. Second, there is the role of the NGO, including its mission and sources of funding, in what has become a major independent enterprise in conflict areas. There is the potential for misuse, intended or unintended, which may require closer analysis of the performance of providers. Third, there is the question raised by some experts as to whether the provision of humanitarian assistance is helpful—particularly in cases where there is no consensus on how or when to intervene but only on the need to demonstrate action. Some question whether humanitarian assistance in some instances actually prolongs conflict. A related issue concerns an interest on the part of many Members of Congress in the labeling or "branding" of U.S. humanitarian aid delivered to areas of conflict so that recipients are aware of its origin. The U.S. government tries to balance the desire to maintain visibility as a contributor of humanitarian assistance with concerns for the security of aid recipients and implementing partners who could become possible targets of attacks. Finding appropriate ways for the United States to leverage its political objectives without politicizing humanitarian aid remains a significant challenge. There has been some debate about whether the United States receives adequate political benefit from its humanitarian assistance efforts and whether those who receive assistance remain unaware of its origins, or assume it is from a foreign government other than the United States. Syria is a case in point where some Members of Congress and observers have argued that the United States should begin to more aggressively brand U.S. aid to enhance local perceptions that the people of the United States stand in solidarity with Syrians. Humanitarian groups argue that strategic objectives such as winning hearts and minds potentially compromise the neutrality of humanitarian assistance in general. Others contend that a targeted attack on a U.S.-labeled humanitarian organization could jeopardize broader humanitarian efforts and perhaps funding. It is often unclear whether raising awareness of U.S. humanitarian assistance would do much to change local perceptions in conflict areas. More broadly, political considerations play a role in the way assistance is given and to whom. While the images of human suffering portrayed by the media only reinforce the need to do something, humanitarian assistance carries some weight as an instrument of "neutral" intervention in crises and is the most flexible policy tool that can be quickly brought to bear in a crisis. It can buy time and keep options open, and it may be an avenue to achieve minimal consensus on an international response. Sometimes humanitarian assistance can also expand beyond its immediate function. It may provide the means to maintain some form of contact with a country/region, or mitigate tensions over policy towards a region within the U.S. government or with and among its allies. Sometimes humanitarian assistance is expanded beyond its immediate function to avert a crisis, to provide support to allies, and to maintain a presence in the region. How it is used and whether it becomes more of a strategic, policy tool depends upon the situation, what other governments are doing, and the degree to which the United States has further interest in the region. Providing humanitarian assistance also raises questions about implications for future action. On the one hand, if the United States decides to reduce its humanitarian support, would this diminish U.S. standing among its allies or affect its interests in other ways? On the other hand, since the President has a great deal of flexibility over U.S. involvement, once commitment to a humanitarian effort is made, does this make the long-term U.S. participation in reconstruction and political solutions more likely? Regardless, it is clear that as crises proliferate, the level and sources of U.S. humanitarian assistance will inevitably have an important impact not only on the relief operation itself, but on broader foreign policy goals.

The majority of humanitarian emergencies worldwide stem from natural disasters or from conflicts. Congress has consistently supported humanitarian efforts as a means of saving lives, promoting stability, and furthering U.S. foreign policy objectives. Intervention results in varying amounts of relief and recovery assistance and can have an important impact not only on the relief operation itself but on broader foreign policy issues. In the 114th Congress, international humanitarian and refugee assistance is expected to continue to have a strong measure of bipartisan interest, with key policy issues focused on budget priorities, levels and types of funding, the sources of other support available worldwide, and the ways in which operational assistance is delivered. Factors that may impact decision-making include the type of humanitarian assistance required, the impact of conflict and refugee flows on stability in the region in question, and the role of neighboring countries in contributing to the relief effort. Examples of issues likely to remain of congressional interest include competing aid and budget priorities, reimbursing U.S. government agencies for their expenditures (to replenish the emergency accounts or other accounts that have been used to provide assistance), and civilian and military coordination, including the evolving role of the Department of Defense in humanitarian assistance. Other priorities may include an examination of the disparity between numbers of internally displaced persons and refugees worldwide and the available funding for these groups; physical access to and protection of refugees and other vulnerable populations in addition to the protection of human rights; programs to address gender based violence; and the creation of durable solutions for displaced populations. The President can provide emergency humanitarian assistance through several sources whose funding is authorized and appropriated by Congress. These are funds currently appropriated to the U.S. Agency for International Development's (USAID's) Office of Foreign Disaster Assistance (OFDA) through the International Disaster and Famine Assistance (IDA) account; U.S. Department of Agriculture food aid programs under Title II of the Food for Peace Act; the State Department's Bureau of Population, Refugees, and Migration (PRM) through the Migration and Refugee Assistance (MRA) and the U.S. Emergency Refugee and Migration Assistance Fund (ERMA) accounts; and funds appropriated to the Department of Defense, Overseas Humanitarian and Disaster and Civic Aid (OHDACA) account. In addition, the President has the authority to draw down defense equipment and direct military personnel to respond to disasters and provide space-available transportation on military aircraft and ships to private donors who wish to transport humanitarian goods and equipment in response to a disaster. Finally, the President can request other government agencies to assist within their capabilities. In FY2015, estimated funding for global humanitarian accounts is $6.4 billion. The Administration's FY2016 budget request for global humanitarian accounts is $5.6 billion, but the decrease assumes carryover balances from FY2015 will be available to meet projected needs for humanitarian responses. This report examines U.S. humanitarian assistance in international crises and disaster situations. It considers the sources and types of U.S. government aid, the response mechanisms of key U.S. agencies and departments, and possible issues for Congress—including competing aid and budget priorities, burdensharing and donor-fatigue, the transparency and efficacy of U.S. humanitarian assistance, consequences of such assistance, and potential links to broader U.S. foreign policy goals. This report will be updated as events warrant.

In a criminal law context, bail is most often thought of as the posting of security to ensure the presence of an accused at subsequent judicial proceedings—that is, "to obtain the release of (oneself or another) by providing security for future appearance." The term itself is less frequently used now, however, due in part to the practice of release on personal recognizance, which consists of permitting an individual to pledge his word, rather than his property, for his future appearance. Moreover, today, an individual's release pending subsequent criminal proceedings is often predicated on conditions other than, or in addition to, the posting of an appearance bond, secured or unsecured. As a consequence, rather than speaking of bail, existing federal law refers to release or detention pending trial, to release or detention pending sentencing or appeal, and to release or detention of a material witness. This is an overview of federal law in each of these areas, as well as in the area of extradition from the United States to another country. An individual released prior to trial remains free under the same conditions throughout the trial until conviction or acquittal, subject to modification or revocation by the court. For that reason, the term pretrial release is understood to include all pre-conviction release, both before and during trial. Under existing federal law, an individual arrested under federal authority must be brought before a magistrate or judge without unnecessary delay. Any federal or state judge or federal or state magistrate may qualify. The magistrate judge may order an individual accused of a federal crime either released or detained prior to trial and conviction. The law affords the judge or magistrate four options, which it places in descending order of preference. First, he may release the accused on personal recognizance or under an unsecured appearance bond, subject only to the condition that the accused commit no subsequent federal, state, or local crime and that he submit a sample for DNA analysis. Second, he may release the accused subject to certain additional conditions. Third, he may order the accused detained for bail revocation, parole revocation, probation revocation, or deportation proceedings. Fourth, he may order the accused detained prior to trial. If the magistrate or judge does not initially release the accused on personal recognizance or conditions, a hearing on the release of the accused must be held "immediately" upon the individual's first appearance before the judge or magistrate. The accused or the government may request that the hearing be postponed for up to five days—up to only three days when the postponement is granted at the government's behest. The accused is entitled to assistance of counsel at the hearing and to the appointment of counsel if necessary. The accused may testify at the hearing and present and cross-examine witnesses. Evidence may be introduced at the hearing without deference to the rules that apply at a criminal trial. The decision to release an accused on personal recognizance or unsecured appearance bond rests upon a determination that the accused poses no risk of flight and no risk of danger to the community or any of its inhabitants. The decision requires consideration of four factors: (1) "the nature and circumstances of the offense … ; (2) the weight of the evidence against the person; (3) the history and characteristics of the person … ; and (4) the nature and seriousness of the danger to any person or the community that would be posed by the person's release…" If the judge or magistrate concludes that personal recognizance or an unsecured appearance bond is insufficient to overcome the risk of flight or to community or individual safety, he may condition the individual's release on a refrain from criminal activity, collection of a DNA sample, and the least restrictive combination of 14 conditions. Under the appropriate circumstances, the "community" whose safety is the focus of the judge's or magistrate's inquiry need not be limited geographically to either the district or even the United States. The 14 statutory conditions are third-party supervision; seeking or maintaining employment; meeting education requirements; observing residency, travel, or associational restrictions;* avoiding contact with victims or witnesses;* maintaining regular reporting requirements;* obeying a curfew;* adhering to firearms limitations;* avoiding alcohol or controlled-substance abuse; undergoing medical treatment; entering into a personally secured appearance agreement; executing a bail bond; submitting to afterhours incarceration; and complying with any other court-imposed condition. Section 3142 requires the judge or magistrate to impose electronic monitoring and several of these conditions (noted with an asterisk above) when the accused is ineligible for release on personal recognizance or an unsecured bond and is charged with one of several sex-related offenses against children. Several defendants have successfully challenged this mandatory requirement on Due Process Clause or Excessive Bail Clause grounds. Notwithstanding the explicit conditions that seem to contemplate requiring an accused to post security for his release or face detention, Section 3142 provides that "the judicial officer may not impose a financial condition that results in the pretrial detention of the person." The courts have resolved the apparent conflict by essentially construing the provision to apply when the financial condition is not calculated to result in pretrial detention but is a collateral consequence of the court's determination of the amount necessary for safety and to prevent flight. As the Ninth Circuit explained: Several other circuits have addressed the apparent violation of §3142(c)(2) that arises when, as in Fidler's case, a defendant is granted pretrial bail, but is unable to comply with a financial condition, resulting in his detention. It may appear that detention in such circumstances always contravenes the statute. We agree, however, with our sister circuits that have concluded that this is not so. These cases establish that the de facto detention of a defendant under these circumstances does not violate §3142(c)(2) if the record shows that the detention is not based solely on the defendant's inability to meet the financial condition, but rather on the district court's determination that the amount of the bond is necessary to reasonably assure the defendant's attendance at trial or the safety of the community. This is because, under those circumstances, the defendant's detention is not because he cannot raise the money, but because without the money, the risk of flight [or danger to others] is too great. The accused, however, may have to overcome the statutory rebuttable presumption of flight or dangerousness to secure his release on personal recognizance or an unsecured appearance bond. A rebuttable presumption attaches under either of two circumstances. The first occurs when, following a hearing, the judge finds probable cause to believe that the accused has committed one of the serious crimes classified as either (1) a 10-year drug offense; (2) an offense involving possession of a firearm in furtherance of a crime of violence or serious drug offense; (3) a 10-year federal crime of terrorism; (4) a 20-year human trafficking offense; or (5) a designated sex offense committed against a child. The second set of circumstances giving rise to a rebuttable presumption occurs when, following a hearing, the judge finds probable cause to believe that the accused previously committed a qualifying offense, much like those just described, while on bail, and for which he was convicted or released from imprisonment within the last five years. "[T]he presumption reflects Congress' substantive judgment that particular classes of offenders should ordinarily be detained prior to trial." An accused must present some rebuttal evidence, no matter how slight, in order to the escape the presumption. Nevertheless, the prosecution bears the ultimate burden of establishing that no series of conditions is sufficient to negate the risk of the accused's flight or dangerousness—by a preponderance of the evidence in the case of flight and by clear and convincing evidence in the case of dangerousness. Unless he holds the accused for revocation or deportation proceedings, the judge or magistrate may decline to release the accused on conditions only if he finds that no condition or series of conditions will provide reasonable assurance against flight or dangerousness. The third option available to the judge or magistrate if the accused poses a flight or safety risk is to order him detained for up to 10 days to allow for a transfer of custody for purposes of bail, probation or parole, or deportation revocation proceedings. Otherwise applicable bail provisions come into play if the accused has not been transferred within the 10-day deadline. Finally, having exhausted the other options—release of personal recognizance, release under conditions, and release for other proceedings—the judge or magistrate may order the accused detained prior to trial. Although pretrial detention is the least statutorily favored alternative in the federal pretrial bail scheme, 72.7% of those accused of federal crimes and presented to a federal judge or magistrate are detained prior to trial. The judge or magistrate may order pretrial detention upon determining, after a hearing, that no combination of conditions will be sufficient to protect against the risk of flight or threat to safety. The government has the option of petitioning for pretrial detention under two circumstances. The first consists of instances in which the accused is charged with one or more designated serious federal offenses, that themselves create a rebuttable presumption that no set of conditions will guarantee public safety or prevent the flight of the accused. The second consists of instances in which the defendant poses a serious safety or flight risk, regardless of the crime with which he is charged. Offense- D riven D etention . The government may seek pretrial detention when the accused is charged with any of nine categories of federal crime: (1) crimes of violence; (2) sex trafficking involving a child or the use of force, fraud, or coercion; (3) federal crimes of terrorism with a maximum term of imprisonment of 10 years or more; (4) offenses punishable by death or one punishable by life imprisonment; (5) controlled-substance offenses with a maximum term of imprisonment of 10 years or more; (6) felonies, if the accused has previously been convicted of two or more of such crimes of violence, crimes of terrorism, capital offenses, controlled substance violations, or their equivalents under state law; (7) nonviolent felonies committed against a child; (8) felonies involving the use of firearms, explosives, or other dangerous weapons; and (9) failure to register as a sex offender. The categories obviously overlap and reinforce each other. For example, many of the federal crimes of terrorism are also crimes punishable by life imprisonment or death. In some instances the apparent duplication provides clarification. Absent a separate specific category, crimes of violence might not be understood to include felonies involving the use of firearms, explosives, or other dangerous weapons, as was often the case prior to creation of the explicit firearm category. By the same token, listing offenses punishable by death or life imprisonment makes it clear that espionage is covered without the necessity of inquiring whether a particular offense in fact involved the risk of violence, which would qualify it as a crime of violence. Section 3156 provides still further clarification. It defines "crimes of violence" for purposes of Section 3142 and several other provisions of the bail chapter to mean not only a crime with a violent element and a crime that involves the risk of violence, but also various federal sex offenses including interstate prostitution and possession or distribution of child pornography—that is, any felony under chapter 109A (sexual abuse), 110 (sexual exploitation of children), or 117 (interstate travel of illicit sexual purposes). Risk- D riven D etention . The judge or magistrate may also order pretrial detention when the accused is charged with other offenses, but the judge or magistrate finds, after a hearing, that the accused poses a serious risk of flight or obstruction of justice. Section 3142 dictates what the judge or magistrate must include within his release or detention order. Release orders, whether issued following a detention hearing or upon conditional release without such a hearing, provide the accused with written notification of the conditions of his release, the consequences of violating a condition of release, and of the prohibitions on obstruction of justice. Detention orders contain written findings and justifications. They also direct custodial authorities to hold the accused apart from other detainees to the extent possible, to permit him to consult with his attorney, and to deliver him up for subsequent judicial proceedings. After the issuance of an order, the court is free (1) to amend a release or detention order; (2) to reopen the detention hearing to consider newly discovered information or changed circumstances; or (3) to permit an accused under a detention order to assist in the preparation of his defense or to be temporarily released for other compelling reasons. Release orders and detention orders are final orders for appellate purposes, and either the government or the accused may appeal them. Federal law treats bail following conviction but prior to sentencing in one of three ways depending upon the crime of conviction. First, a defendant may not be detained prior to sentencing for an offense for which the U.S. Sentencing Guidelines do not recommend a sentence of imprisonment. Second, when the defendant has been convicted of a capital offense, a 10-year federal crime of terrorism, a 10-year controlled substance offense, a crime of violence, or a violation of 18 U.S.C. §1591 (commercial sex trafficking), the defendant must be detained unless the court finds that the defendant is not likely to flee or pose a safety concern, and either that a motion for acquittal or a new trial is likely to be granted, or that the prosecution has recommended no sentence of imprisonment be imposed, or that exceptional reasons exist for granting bail. Third, in any other case, the defendant must be detained, unless the court concludes that the defendant is unlikely to flee or pose a safety concern if released conditionally or on his own recognizance. When a defendant appeals following conviction, the judge or magistrate may release him on condition or recognizance, if the judicial official is convinced that the defendant poses neither a flight risk nor a safety concern and that his appeal raises substantial questions that offer the prospect of success. "A question is substantial if the defendant can demonstrate that it is 'fairly debatable' or is 'debatable among jurists of reason.'" An additional requirement applies when the defendant has been sentenced to prison upon conviction for a capital offense, a 10-year federal crime of terrorism, a 10-year controlled substance offense, or a crime of violence. In such cases, bail is available only under exceptional circumstances. The circumstances considered exceptional have been variously described as uncommon, unusual, unique, and rare. When the government alone appeals, the pretrial bail provisions of Section 3142 apply, unless the government is simply appealing the sentence imposed. When the government appeals the sentence imposed, the defendant must be detained if he has been sentenced to a term of imprisonment; otherwise, Section 3142 applies. A number of consequences flow from an individual's failure to appear or to honor the conditions imposed upon his release. He may be prosecuted for contempt of court; he may be prosecuted separately for failure to appear; his release order may be revoked or amended; security pledged for his compliance may be forfeited; he may be subject to arrest by his surety; and he may be prosecuted for any crimes that constituted a violation of his bail conditions. It is a separate federal crime to fail to appear for required judicial proceedings or for service of sentence. "To establish a violation of 18 U.S.C. §3146, the government ordinarily must prove that the defendant (1) was released pursuant to Title 18, Chapter 207 of the U.S. Code, (2) was required to appear in court, (3) knew he was required to appear, (4) failed to appear as required, and (5) was willful in his failure to appear." An individual enjoys an affirmative defense if he fails to appear through no fault of his own. An individual who fails to appear for his supervised release revocation hearing is liable only if he was released on bail in anticipation of the hearing. The penalty for violation of Section 3146, which ranges from imprisonment for not more than one year to imprisonment for not more than 10 years, is calibrated to reflect the seriousness of the underlying offense. When an individual is convicted for failure to appear for a supervised release revocation hearing, the sentence for violation of Section 3146 is governed by the offense with respect to which supervised release was granted. An individual who violates a condition of his release on bail may also be prosecuted for contempt of court. When an individual commits a crime while on bail, federal law provides an additional penalty: "A person convicted of an offense committed while released under this chapter shall be sentenced, in addition to the sentence prescribed for the offense, to (1) a term of imprisonment of not more than ten years if the offense is a felony; or (2) a term of imprisonment of not more than one year if the offense is a misdemeanor." The lower federal appellate courts have held that the penalty enhancement under Section 3147 may be imposed based on a failure to appear in violation of Section 3146. It may also be imposed when the post-bail offense was a continuation of the offense that occasioned the individual's original release on bail. Faced with failure to comply with a condition of release, the judge or magistrate may amend an individual's release order amending existing conditions or adding new ones. The judge or magistrate may also order revocation of the release order and detention of the individual after a hearing, if he finds either probable cause to believe that the individual has committed a new offense or by clear and convincing evidence that the individual has breached some other condition of his release. The new detention order must be premised on a finding that the individual is unlikely to abide by the conditions imposed for his release or that there is no combination of conditions sufficient to guard against the individual's flight or danger to the public or any member of the public. A finding of probable cause that the individual has committed a new offense triggers a presumption that no combination of conditions will dispel concerns for public safety. The judge or magistrate may order any bail bond or other security forfeited, if the individual fails to appear at judicial proceedings as required or fails to appear to begin service of his sentence. The court must do so if he fails to abide by any condition imposed for his release. The prosecution begins the process with a motion to enforce. If the surety returns the individual to the custody of the court, or if not contrary to interests of justice, the court may set aside, mitigate, or remit the forfeiture or may exonerate the surety and release the bail. A surety on an appearance bond is entitled to notice and to be heard on any material amendment to the conditions of release. The U.S. Probation and Pretrial Service Office conducts preliminary investigations and otherwise assists the courts in their administration of federal bail law. Its officers enjoy statutory authority to provide judges and magistrates with information relevant to initial bail determinations; prepare reports relevant for the review of release and detention orders; supervise bailees released into its custody; operate halfway houses, treatment facilities, and the like for those released on bail; inform the court and prosecutors of release order violations; advise the court on the availability of third-party custodians; help bailees secure employment, medical, legal, and social services; prepare reports on supervision of pretrial detainees; prepare reports on the bail system; prepare pretrial diversion reports for prosecutors; contract for the performance of its responsibilities; supervise and report on prisoners conditionally released following hospitalization for mental disease or defect; carry firearms; provide services for juveniles; and perform other functions assigned to it by the bail laws. Federal law authorizes the arrest and detention or bail of individuals with evidence material to the prosecution of a federal offense. With limited variations, federal bail laws apply to material witnesses arrested under Section 3144. Thus, arrested material witnesses are entitled to the assistance of counsel during bail proceedings and to the appointment of an attorney when they are unable to retain private counsel. Release is generally favored; if not, release with conditions or limitations is preferred, and finally as a last option detention is permitted. An accused is released on his word (personal recognizance) or bond unless the court finds such assurances insufficient to guarantee his subsequent appearance or to ensure public or individual safety. A material witness, however, need only satisfy the appearance standard. A material witness who is unable to do so is released under such conditions or limitations as the court finds adequate to ensure his later appearance to testify. If neither word nor bond nor conditions will suffice, the witness may be detained. The factors a court may consider in determining whether a material witness is likely to remain available include his deposition, character, health, and community ties. Federal bail laws make no mention of bail in extradition cases. The federal courts instead adhere to the doctrine announced by the Supreme Court over a century ago that "bail should not ordinarily be granted in cases of foreign extradition" except under "special circumstances." The doctrine has withstood constitutional challenge. There is no precise definition of what constitutes "special circumstances"; the category is reserved for those extraordinary characteristics of a case which the court feels merit the designation. In addition, the individual must establish that if released, he will not flee or pose a danger and may be made subject to whatever relevant conditions the court deems to impose.

This is an overview of the federal law of bail. Bail is the release of an individual following his arrest upon his promise—secured or unsecured; conditioned or unconditioned—to appear at subsequent judicial criminal proceedings. An accused may be denied bail if he is unable to satisfy the conditions set for his release. He may also be denied bail if the committing judge or magistrate concludes that no amount of security or any set of conditions will suffice to ensure public safety or the individual's later appearance in court. The federal bail statute layers the committing judge's or magistrate's bail options after arrest and before trial. He may release the individual upon his promise to return—that is, on personal recognizance or under an unsecured appearance bond. Alternatively, the judge or magistrate may condition the individual's release on the least restrictive possible combination of individual or statutory conditions. The statute, however, creates a presumption against release when the individual has been charged with a serious drug, firearms, or terrorist offense. In the case of these and other serious offenses, the judge or magistrate may deny release on bail if he decides, after a hearing, that no set of conditions will guarantee public safety or the individual's return to court. The judge or magistrate may also deny the individual bail in order to transfer him for bail, parole, or supervised release revocation proceedings. Bail is available to a more limited extent after the individual has been convicted and is awaiting a pending appeal. Federal law also authorizes the arrest, bail, or detention of individuals with evidence material to the prosecution of a federal offense. With limited variations, federal bail laws apply to arrested material witnesses. Although not specifically mentioned in the federal bail statute, bail is available in extradition cases under a long-standing Supreme Court precedent which holds that "bail should not ordinarily be granted in cases of foreign extradition" except under "special circumstances." This report is an abridged version of CRS Report R40221, Bail: An Overview of Federal Criminal Law, by [author name scrubbed]—without footnotes, appendixes, most of the citations to authority, and some of the discussion found in the longer report.

Research published by the Kaiser Family Foundation (KFF) indicates that two-thirds of parents say they are "very" concerned that children in this country are being exposed to too much inappropriate content in the media, and a substantial proportion think sex (55%) and violence (43%) in the media contribute "a lot" to young people's behavior. Thirty-two percent of parents cite TV as the medium that concerns them the most, but the proportion who cite the Internet has increased over the past two years from 16% to 21%. Sixty-six percent of parents say they favor government regulations to limit the amount of sex and violence on TV during the early evening hours, a proportion that is virtually unchanged from 2004. Although exposure to inappropriate material has long been a concern to parents, only since the Telecommunications Act of 1996 has there been a nationwide effort to provide parents with a tool to control their children's television viewing—the V-chip. The V-chip, which reads an electronic code transmitted with the television signal (cable or broadcast), is used in conjunction with a television programming rating system. Using a remote control, parents can enter a password and then program into the television set which ratings are acceptable and which are unacceptable. The chip automatically blocks the display of any programs deemed unacceptable; use of the V-chip by parents is entirely optional. Since January 1, 2000, all new television sets with a picture screen 13 inches or greater sold in the United States have been required to be equipped with the V-chip. Additionally, some companies also offer devices that can work with non-V-chip TV sets. The initial ratings system was developed during 1996 and 1997, but encountered criticism from within Congress as well as from groups such as the National Parent-Teacher Association. In response to those concerns, an expanded ratings system was adopted on July 10, 1997, and went into effect October 1, 1997. The first step in implementing the mandate of the law was to create a ratings system for television programs, analogous to the one developed and adopted for movies by the Motion Picture Association of America (MPAA) in 1968. The law urged the television industry to develop a voluntary ratings system acceptable to the FCC, and the rules for transmitting the rating, within one year of enactment. The ratings system is intended to convey information regarding sexual, violent or other indecent material about which parents should be informed before it is displayed to children, provided that nothing in the law should be construed to authorize any rating of video programming on the basis of its political or religious content. After initial opposition, media and entertainment industry executives met with then-President Clinton on February 29, 1996, and agreed to develop the ratings system because of political pressure to do so. Many in the television industry were opposed to the V-chip, fearing that it would reduce viewership and reduce advertising revenues. They also questioned whether it violated the First Amendment. Industry executives said they would not challenge the law immediately, but left the option open should they deem it necessary. Beginning in March 1996, a group of television industry executives under the leadership of Jack Valenti, then-president of the MPAA (and a leader in creating the movie ratings), met to develop a TV ratings system. On December 19, 1996, the group proposed six age-based ratings (TV-Y, TV-Y7, TV-G, TV-PG, TV-14 and TV-M), including text explanations of what each represented in terms of program content. In January 1997, the ratings began appearing in the upper left-hand corner of TV screens for 15 seconds at the beginning of programs, and were published in some television guides. Thus, the ratings system was used even before V-chips were installed in new TV sets. Ratings are assigned to shows by the TV Parental Guidelines Monitoring Board. The board has a chairman and six members each from the broadcast television industry, the cable industry, and the program production community. The chairman also selects five non-industry members from the advocacy community, for a total of 24 members. News shows and sports programming are not rated. Local broadcast affiliates may override the rating given a particular show and assign it another rating. Critics of the initial ratings system argued that the ratings provided no information on why a particular program received a certain rating. Some advocated an "S-V-L" system (sex, violence, language) to indicate with letters why a program received a particular rating, possibly with a numeric indicator or jointly with an age-based rating. Another alternative was the Home Box Office/Showtime system of 10 ratings such as MV (mild violence), V (violence), and GV (graphic violence). In response to the criticism, most of the television industry agreed to a revised ratings system (see box, below) on July 10, 1997, that went into effect October 1, 1997. The revised ratings system added designators to indicate whether a program received a particular rating because of sex (S), violence (V), language (L), or suggestive dialogue (D). A designator for fantasy violence (FV) was added for children's programming in the TV-Y7 category. On March 12, 1998, the FCC approved the revised ratings system, along with V-chip technical standards, and the effective date for installing them. The Appendix contains a description of the industry's revised TV ratings system. In May 1999, the FCC created a V-chip Task Force, chaired by then-Commissioner Gloria Tristani. Among other things, the task force was charged with ensuring that the blocking technology was available and that ratings were being transmitted ("encoded") with TV programs; educating parents about V-chip; and gathering information on the availability, usage, and effectiveness of the V-chip. The task force issued several reports and surveys. A February 2000 task force survey found that most broadcast, cable, and premium cable networks, and syndicators, were transmitting ratings ("encoding") and those that were not either planned to do so in the near future or were exempt sports or news networks. Of the major broadcast and cable networks, only NBC and Black Entertainment Television do not use the S-V-L-D indicators, using the original ratings system instead. On April 25, 2007, the FCC released a report on the "presentation of violent programming and its impact on children." In the report, the FCC— found that on balance, research provides strong evidence that exposure to violence in the media can increase aggressive behavior in children, at least in the short term; noted that although viewer-initiated blocking and mandatory ratings would impose lesser burdens on protected speech, skepticism remains that they will fully serve the government's interests in promoting parental supervision and protecting the well-being of minors; stated that the V-chip is of limited effectiveness in protecting children from violent television content; observed that cable operator-provided advanced parental controls do not appear to be available on a sufficient number of cable-connected television sets to be considered an effective solution at this time; stated that further action to enable viewer-initiated blocking of violent television content would serve the government's interests in protecting the well-being of children and facilitating parental supervision and would be reasonably likely to be upheld as constitutional; found that studies and surveys demonstrate that the voluntary TV ratings system is of limited effectiveness in protecting children from violent television content; stated that Congress could develop an appropriate definition of excessively violent programming, but such language needs to be narrowly tailored and in conformance with judicial precedent; suggested that industry could on its own initiative commit itself to reducing the amount of excessively violent programming viewed by children (e.g., broadcasters could adopt a family hour at the beginning of prime time, during which they decline to air violent content); observed that multichannel video programming providers (MVPDs) could provide consumers greater choice in how they purchase their programming so that they could avoid violent programming. (e.g., an a la carte regime would enable viewers to buy their television channels individually or in smaller bundles); and found that Congress could implement a time channeling solution and/or mandate some other form of consumer choice in obtaining video programming, such as the provision by MVPDs of video channels provided on family tiers or on an a la carte basis (e.g., channel blocking and reimbursement). On March 2, 2009, the FCC adopted and released a Notice of Inquiry (NOI) to implement the Child Safe Viewing Act of 2007. The Child Safe Viewing Act directed the FCC to initiate a proceeding within 90 days after the date of enactment to examine "the existence and availability of advanced blocking technologies that are compatible with various communications devices or platforms." Congress defined "advanced blocking technologies" as "technologies that can improve or enhance the ability of a parent to protect his or her child from any indecent or objectionable video or audio programming, as determined by such parent, that is transmitted through the use of wire, wireless, or radio communications." Congress's intent in adopting the act was to spur the development of the "next generation of parental control technology." In conducting this proceeding, the FCC will examine blocking technologies that may be appropriate across a wide variety of distribution platforms and devices, can filter language based upon information in closed captioning, can operate independently of pre-assigned ratings, and may be effective in enhancing a parent's ability to protect his or her child from indecent or objectionable programming, as determined by the parent. The NOI covered not only broadcast, cable, and satellite television, but also wireless devices, non-networked devices, and Internet content. The FCC released its report based on the NOI on August 29, 2009. In the report, the FCC concluded that a market exists for advanced blocking technologies and other parental empowerment tools, although data is lacking in certain key areas, such as awareness and usage levels, which warrant further study. Educational programs to increase awareness of parental control technologies have the potential to accelerate the rate of development, deployment, and adoption of these technologies. Parental control technologies vary greatly among media platforms, and even among different providers within the same media platform, with respect to various criteria. While there are technologies in existence for each media platform, there is not currently a universal parental control technology that works across media platforms. To explore these issues and how to maximize benefits and minimize harms to children, the FCC issued a second NOI exploring these issues and others relating to protecting children and empowering parents in the digital age on October 23, 2009. In the second NOI, the FCC asked to what extent children were using electronic media, the benefits and risks this presents, and the ways in which parents, teachers, and children can help reap the benefits while minimizing the risks of using these technologies. The FCC also recognized that a wealth of academic research and studies exist on these issues and asked commenters to identify additional data and studies, and to indicate where further study is needed. The NOI additionally seeks comment about the effectiveness of media literacy efforts in enabling children to enjoy the benefits of media while minimizing the potential harms. The NOI recognizes that other federal agencies are addressing similar issues, at least with respect to online safety, and asks what the FCC can do to assist with these efforts. No report has been released as a result of this NOI, but since the beginning of 2011, there have been renewed discussions at the FCC over possibly updating the ratings system using this proceeding as a vehicle. There was no legislative action on the V-Chip in the 111 th Congress and no legislative action thus far in the 112 th Congress. On December 2, 2008, then-President Bush signed into law the "Child Safe Viewing Act of 2007." This law was originally introduced by Senator Mark Pryor and, as discussed above, requires the FCC to examine the existence and availability of advanced blocking technologies that parents could use across a variety of communications devices or platforms. The Senate and the House of Representatives each held one hearing on issues related to the V-Chip during the 110 th Congress: The Senate Committee on Commerce, Science, and Transportation held a hearing, "Impact of Media Violence on Children," on June 26, 2007. The hearing focused on issues related to the impact of violent television programming on children, including issues raised by the FCC report, "Violent Television Programming And Its Impact On Children." The House Committee on Energy and Commerce Subcommittee on Telecommunications and the Internet held a hearing, "Images Kids See on the Screen," on June 22, 2007. The hearing included discussion of advertising for junk food aimed at children and on the inability of the V-chip to screen out undesirable advertising. From 1998 through 2007, the Kaiser Family Foundation (KFF) conducted research into the impact of media violence on children and the effectiveness of the V-chip and television ratings as tools for parents to control access to undesirable television content. In the Foundation's most recent report, published in June 2007, two-thirds of parents say they are "very" concerned that children in this country are being exposed to too much inappropriate content in the media, and a substantial proportion think sex (55%) and violence (43%) in the media contribute "a lot" to young people's behavior. Thirty-two percent of parents cite TV as the medium that concerns them the most, but the proportion who cite the Internet has increased over the past two years from 16% to 21%. Sixty-six percent of parents say they favor government regulations to limit the amount of sex and violence on TV during the early evening hours, a proportion that is virtually unchanged from 2004. Overall, the parents interviewed for the study stated that they were more concerned about inappropriate content on TV than in other media: 32% said TV concerned them most, compared to 21% who said the Internet, 9% movies, 7% music, and 8% video games. Half (50%) of all parents said they have used the TV ratings to help guide their children's viewing, including slightly more than one in four (28%) who said they use them "often." Furthermore, the study revealed that while use of the V-chip has increased substantially since 2001, when 7% of all parents said they used it, it remains modest at just 15% of all parents, or about four in 10 (42%) of those who have a V-chip in their television and know it. Nearly two-thirds (61%) of parents who have used the V-chip said they found it "very" useful. Other significant findings reported included: After being read arguments on both sides of the issue, nearly two-thirds of parents (63%) said they favored new regulations to limit the amount of sex and violence in TV shows during the early evening hours, when children were most likely to be watching (35% are opposed). A majority (55%) of parents said ratings should be displayed more prominently and 57% said they would rather keep the current rating systems than switch to a single rating for TV, movies, video games, and music (34% favor the single rating). When read the competing arguments for subjecting cable TV to the same content standards as broadcasters, half of all parents (52%) said that cable should be treated the same, while 43% said it should not. Most parents who have used the TV ratings said they found them either "very" (38%) or "somewhat" (50%) useful. About half (52%) of all parents said most TV shows are rated accurately, while about four in ten (39%) said most are not. Many parents do not understand what the various ratings guidelines mean. For example, 28% of parents of young children (2-6 years old) knew what the rating TV-Y7 meant (directed to children age 7 and older) while 13% thought it meant the opposite (directed to children under 7); and only 12% knew that the rating FV ("fantasy violence") is related to violent content, while 8% thought it meant "family viewing." In releasing the survey results, Vicky Rideout, vice president and director of the Kaiser Family Foundation's Program for the Study of Entertainment Media and Health, commented, "While many parents have used the ratings or the V-chip, too many still don't know what the ratings mean or even that their TV includes a V-chip." A number of groups conducted research and published opinion pieces questioning the usefulness and/or legality of the V-chip and the ratings system after the 1996 Telecommunications Act was enacted (e.g., the Progress and Freedom Foundation, the American Civil Liberties Union, Cato Institute, Morality in Media). Since that time, opposition has waned and even the controversies over inappropriate content being broadcast live did not renew it. Further, while the V-chip and the ratings system can block objectionable or indecent programming when used in tandem, since the incidents were broadcast "live" and did not have ratings that would have blocked them, neither the V-chip nor the ratings system would have been effective in either case. Therefore, some could claim that the V-chip and the ratings system, while useful tools in many cases, remain unreliable tools for parents because they cannot guarantee all objectionable content will be blocked. In the Child Safe Viewing Act, Congress addressed most of the issues that have been raised by various interest groups about the V-chip. However, the issue that appears not to be able to be addressed through legislation, which is to educate parents and make them aware of the tools available to them, still remains. According the 2004 KFF Study, parents also indicated that they would like to see the ratings displayed more prominently to make it easier to notice them. Such findings are consistent with a lack of wide-spread usage or even awareness of the V-chip. Specifically, as noted above, the 2004 KFF study indicated that even after years of being available, only 42% of parents who have a V-chip and are aware of it actually use it. However, of the parents that had used the V-chip, 89% found it "somewhat" to "very" useful. Those figures would indicate that increased knowledge of the V-chip would substantially increase parents' perceptions of control over their children's television viewing. One of the easiest approaches to increasing the use of the V-chip may likely be to step up parental awareness programs through, for example, public service announcements on television, educational materials on the FCC website, and possibly public service advertisements in print media. Additionally, such educational materials could be made available on congressional member websites for constituents to download. Such actions would not require any new legislation or additional work by the ratings board or related entities; however, some initially may require funding. "The Perils of Mandatory Parental Controls and Restrictive Defaults," Progress and Freedom Foundation, April 2008, http://www.pff.org/issues-pubs/pops/pop15.4defaultdanger.pdf . "Parents, Media, and Public Policy: A Kaiser Family Foundation Survey," Kaiser Family Foundation, Fall 2004, http://www.kff.org/entmedia/entmedia092304pkg.cfm . "V-chip Frequently Asked Questions," Children Now, http://www.childrennow.org/media/vchip/vchip-faq.html . "Summary of Focus Group Research on Media Ratings Systems," A Study Commissioned by PSV Ratings, Inc., Spring 2003, http://www.independentratings.org/Parents_Views.pdf . Federal Communications Commission V-chip Information, http://www.fcc.gov/vchip/ .

To assist parents in supervising the television viewing habits of their children, the Communications Act of 1934 (as amended by the Telecommunications Act of 1996) requires that, as of January 1, 2000, new television sets with screens 13 inches or larger sold in the United States be equipped with a "V-chip" to control access to programming that parents find objectionable. Use of the V-chip is optional. In March 1998, the Federal Communications Commission (FCC) adopted the industry-developed ratings system to be used in conjunction with the V-chip. Congress and the FCC have continued monitoring implementation of the V-chip. Some are concerned that it is not effective in curbing the amount of TV violence viewed by children and want further legislation. On August 31, 2009, the FCC released a report implementing the Child Safe Viewing Act of 2007. In the act, Congress had directed the FCC to examine "the existence and availability of advanced blocking technologies that are compatible with various communications devices or platforms." Congress defined "advanced blocking technologies" as "technologies that can improve or enhance the ability of a parent to protect his or her child from any indecent or objectionable video or audio programming, as determined by such parent, that is transmitted through the use of wire, wireless, or radio communications." Congress's intent in adopting the act was to spur the development of the "next generation of parental control technology." In a second inquiry issued in October 2009, the FCC is addressing additional issues it was unable to fully address based on its first inquiry. There has been no action related to the V-Chip in the 112th Congress.

The environmental, economic, and societal impacts of the surface mining practice termed mountaintop removal mining have attracted considerable attention. This type of surface mining occurs in an area of approximately 12 million acres located in portions of Kentucky, West Virginia, Virginia, Tennessee, Pennsylvania, and Ohio. As its name suggests, mountaintop removal mining involves removing the top of a mountain in order to recover the coal seams contained in the mountain. Explosives are used to break the mountain's rock, and massive earth-moving equipment, often including equipment called draglines, removes the spoil (i.e., the dirt and rock that composed the mountaintop over or between the coal seams). While federal law calls for excess spoil to be placed back in the mined areas—returning the lands to their approximate original contour (AOC)—that result ordinarily cannot be accomplished with mountaintop removal mining because broken rock takes up more volume than did the rock prior to mining and because there are stability concerns with the spoil pile. Mountaintop removal creates an immense quantity of excess spoil, which is typically placed in valley fills on the sides of the former mountains. One consequence is that streams flowing through the valleys are buried. All types of surface and underground coal mining in Appalachia generate excess spoil fills due to the increased volume of broken rock, limitations on the steepness and height to which broken rock may be placed to achieve a stable slope, and the steep topography of the region. Large mines may be surrounded by several valley fills. Depending on the local topography and the profile of those valleys, a single fill may be over 1,000 feet wide and over a mile long. While mountaintop removal mining has been practiced in some form since the 1960s, it became a prevalent coal mining technique in parts of central Appalachia during the 1990s for several reasons. First, as the demand for electricity increased, so has the demand for the relatively clean-burning, low-sulfur coal found in Appalachia. Second, coal supplies near the surface have been significantly depleted. Third is the development of large surface mining equipment (draglines) capable of moving over 100 cubic yards of earth in a single scoop. Data from the U.S. Energy Information Administration (EIA) indicate that the amount of coal produced at mines with mountaintop removal mining permits in Central Appalachia has decreased by 62% since 2008, declining from about 53.2 million short tons in 2008 to approximately 20.2 million short tons in 2014. The number of mountaintop removal permits has decreased by 37%, from 51 active permits in 2008 to 32 in 2014. Analysis of the EIA data shows different trends in different states. Mountaintop removal coal mining declined in West Virginia and Kentucky by 60% and 75%, respectively, during the 2008-2014 period, while production at mountaintop removal mines in Virginia increased by 24%. For many years, excess spoil from coal mining was generally placed in the extreme headwaters of streams, affecting primarily ephemeral streams that flow intermittently only in direct response to precipitation in the immediate watershed. Because smaller upstream disposal sites are exhausted and because of the increase in mountaintop removal mining activity, today the volume of a single stream fill can be as much as 250 million cubic yards. As a result, streams are eliminated, stream chemistry is harmed by pollutants in the mining overburden, and downstream aquatic life is impaired. EPA estimated that from 1992 to 2010 almost 1,200 miles of Appalachian streams were buried by surface coal mining practices. The cumulative effects of such surface coal mining operations include deforestation, which has been linked to harm in aquatic communities; accelerated sediment and nutrient transport; and increased algal production, as well as possible human health impacts. Regulation of valley fills associated with mountaintop removal mining is primarily under the authority of two federal statutes, the Surface Mining Control and Reclamation Act (SMCRA, 30 U.S.C. §1201) and the Clean Water Act (CWA, 33 U.S.C. §1252), and involves several federal and state agencies. The two laws provide for separate regulatory programs with different purposes and different permitting requirements and procedures. For example, the CWA focuses primarily on regulating discharges into waters of the United States, while SMCRA regulates a broad range of environmental and other impacts of surface coal mining and reclamation operations. SMCRA addresses the necessary approvals for surface mining operations, as well as inspection and enforcement of mine sites until reclamation responsibilities are completed and all performance bonds are released. SMCRA permits may be issued by the Office of Surface Mining, Reclamation and Enforcement (OSM), U.S. Department of the Interior, or by qualified states, only if it has been shown that the proposed mining activities will satisfy general performance standards applicable to all surface coal mining operations. Among those standards, SMCRA addresses disturbances at the mine site and in associated offsite areas, as well as the quality and quantity of water in surface and ground water systems both during and after surface coal mining operations. While SMCRA generally requires that surface-mined areas be reclaimed so that they closely resemble the general surface configuration of the land prior to mining (i.e., AOC), the law and OSM regulations allow a variance from AOC for mountaintop removal mining operations under certain conditions. The CWA prohibits the discharge of any pollutant from any point source into the waters of the United States, except in compliance with a permit issued under one of the two permit programs established by the statute. The two permit programs are the National Pollutant Discharge Elimination System (NPDES) program, administered by the Environmental Protection Agency (EPA) under CWA Section 402, and the dredge and fill permit program administered by the U.S. Army Corps of Engineers (Corps) under CWA Section 404. Mountaintop removal mining and other surface coal mining operations typically require both types of permits—a Section 404 permit for the discharge of mining overburden into waters of the United States, and a Section 402 permit for discharges from sediment ponds, on-site coal preparation facilities, and stormwater discharges from the mine site. The two permit programs employ different regulatory approaches and criteria. The NPDES program focuses primarily (but not exclusively) on discharges from industrial operations and sewage treatment plants. Section 402 permits must include limitations on the quantities, rates, and concentrations of pollutants, called effluent limitations, that reflect treatment with available pollution control technology and any more stringent limitations necessary to meet state-established water quality standards for the receiving water. The standard for issuance of a Section 402 permit is compliance with pollutant limitation and control provisions in the CWA. The Corps and EPA have complementary roles in implementing the Section 404 permit program. Under Section 404, the Corps issues permits for the discharge of dredged or fill material, using a set of environmental guidelines promulgated by EPA in conjunction with the Corps. These guidelines are intended to provide a comprehensive means of evaluating whether any discharge of fill is environmentally acceptable. The standard for issuance of a 404 permit is consideration of the full public interest by balancing the favorable impacts of a proposed activity against the detrimental impacts to reflect the national concerns for both the protection and utilization of important resources. This balancing test of probable impacts involves many factors, including conservation, economics, flood hazards, land use, navigation, energy and mineral needs, and, in general, the needs and welfare of the people. The Corps has considerable discretion, and the weight of each factor changes with each permit application, depending on the factor's importance and relevance to the particular proposal. However, a discharge is categorically prohibited if it would significantly degrade water quality. In addition, no discharge may be allowed if there is a less environmentally damaging practicable alternative. Where there is no other alternative, the discharge may be allowed if the applicant has taken all practicable steps to minimize the amount of material discharged and to compensate for unavoidable impacts through mitigation. Section 404 permits consist of two basic types: Individual permits for a particular site and nationwide (general) permits for categories of discharges that are similar in nature and have no more than minimal adverse impacts, individually and cumulatively, on the waters of the United States. If the discharge may have more than minimal impacts, an individual permit is required. Nationwide permits cover approximately 74,000 activities annually (about 90% of total Corps permits) and involve less regulatory burden and time than authorization by individual permits. Disposal of excess overburden associated with mountaintop removal mining has generally been permitted under Nationwide Permit 21 (NWP 21), which authorizes discharges from surface coal mining activities that result in no more than minimal impacts (site-specifically and cumulatively) to the aquatic environment. The use of NWP 21 in conjunction with mountaintop removal mining in the Appalachian region has been controversial and has been challenged in litigation. The Obama Administration recently added new environmental restrictions on the use of NWP21 generally, while permanently prohibiting its use to authorize discharges to construct valleys fills, such as occurs in the Appalachian region (these developments are discussed below). The U.S. Fish and Wildlife Service (FWS) also has responsibilities relevant to mountaintop removal mining. FWS implements and enforces the Endangered Species Act (35 U.S.C. §1531) and the Fish and Wildlife Coordination Act (16 U.S.C. §661), and under both laws, agencies proposing projects affecting U.S. waters are required to consult with FWS to ensure that fish and wildlife conservation and impacts on threatened or endangered species are considered. Coordination with FWS is required for both SMCRA and CWA permits. Because of the increase in valley fill disposal of mountaintop removal mining overburden in areas of Appalachia, the practice has drawn public attention and criticism. Critics say that, as a result of valley fills, streams and the aquatic and wildlife habitat that they support are destroyed by tons of rocks and dirt. Flow regimes are altered, increasing the likelihood and severity of floods, and the water quality downstream from fills also is significantly degraded. In addition, mountaintop removal can crack the walls and foundations of nearby homes; cause dust, noise, and vibration from blasting; collapse drinking water wells; and destroy nearby streams for fishing, hiking, swimming, or aesthetic pleasure. It also has forced the relocation of whole communities. Environmental groups argue that the practice of authorizing valley fills under Section 404 is unlawful because mining overburden is waste material which pollutes and destroys waterways, and impacts are far more than minimal, which is the standard for coverage by a nationwide permit. The mining industry argues that mountaintop removal mining is essential to conducting surface coal mining in Appalachia. The poor stability of the soil surrounding coal deposits in this region makes it impossible to mine the coal using underground mining techniques. Waste disposal in valley fills is a necessary part of that activity because of the steep topography of the region, and they assert that mountaintop removal mining would not be economic or feasible if producers were restricted from using valleys for the disposal of mining overburden. Requiring Section 402 permits for these activities would effectively prohibit a broad range of mining which has been allowed by long-standing practice, they say. Critics have been using litigation to challenge the practice. In a number of cases discussed here, environmental groups have been successful at the federal district court level in challenging issuance of permits for mountaintop removal mining projects, but each has been later overturned on appeal. Nonetheless, the criticisms also have prompted some regulatory changes, also discussed below. In 1998, a West Virginia citizen group sued the state of West Virginia and the Corps for failure to prevent or enforce against environmental violations caused by mountaintop removal practices. The principal claim under SMCRA was that the state was failing to enforce OSM's 1983 buffer zone rule, which protects intermittent and perennial streams from disturbance by coal mining activities. In addition, the lawsuit asserted that the Corps had been granting permits that allowed disposal of waste in waters of the United States through permits under the nationwide permit program that have greater than minimal adverse effects, individually and cumulatively, which plaintiffs argued is contrary to the CWA. Some of the claims were settled when the federal agencies agreed to complete a Programmatic Environmental Impact Statement (PEIS) on the effects of mountaintop removal mining. The Corps also agreed that proposed valley fills in West Virginia in watersheds of at least 250 acres must be permitted by individual, not nationwide, permits. The remaining claims were addressed in a 1999 ruling which held that disposal of mining spoil in valley streams violates federal and state mining rules and the CWA. Under the ruling, mining spoil was reclassified from "dredge and fill material," requiring a CWA Section 404 permit, to "waste material" that is subject to CWA Section 402 permit requirements, thus raising the regulatory hurdles for disposing of mining waste. Upon appeal, the district court ruling was overturned in a decision that dealt with jurisdiction and state sovereignty issues. The court held that the stream buffer regulation at issue was, in fact, a matter of state law, not federal law and, thus, the case should not have been brought in federal court. The Clinton Administration had sided with the industry by appealing the district court's finding that mountaintop removal mining must be regulated under CWA Section 402, but it concurred with the related finding, supported by environmental groups, that the activity violates stream buffer zone requirements under SMCRA. In 2002, the Supreme Court declined to hear a challenge to the Fourth Circuit decision. In 2005, the Corps, EPA, and other federal agencies released a final PEIS on the impacts of mountaintop removal mining and valley fills, as promised in the 1999 partial settlement of Bragg . It identified three alternatives for improving coordination of regulatory efforts to limit the negative impacts of mountaintop removal mining. Under the preferred alternative, OSM, the Corps, EPA, and state agencies would determine the size, number, and location of valley fills for a proposed operation, under a joint permit application integrating the CWA and SMCRA programs. The Corps would make case-by-case determinations whether a project would be covered under NWP 21 or under an individual Section 404 permit. More than 70,000 public comments were submitted on the draft PEIS. Industry groups favored continued use of general permit authorizations, while environmental groups said that the preferred alternative failed to place adequate limits on mountaintop removal mining and valley filling. A number of comments were critical that all of the alternatives were process alternatives, and none would minimize the environmental impacts from valley fills. The agencies responded that the alternatives were appropriate for a programmatic EIS and that they would provide increased environmental protection. The agencies also said that a number of changes to agency rules, policy, and guidelines would follow. Controversies also arose following a proposal by EPA and the Corps in 2000 to revise a portion of the regulations that implement CWA Section 404. The agencies proposed to redefine the terms "fill material" and "discharge of fill material." One result of the proposal would be regulatory definitions more consistent with the Administration's position in the then-ongoing Bragg litigation, namely its view that regulating mountaintop removal mining under CWA Section 404 is not inconsistent with that act. This proposal was not finalized before the Clinton Administration left office but was finalized in May 2002 by the Bush Administration, substantially as proposed in 2000. The revision was intended to clarify the regulatory definition of fill material—which determines whether the activity is subject to Section 404 permit requirements or more stringent Section 402 requirements—by replacing two separate and inconsistent definitions with a single, common definition to conform with long-standing Corps and EPA practice in regulating surface mining activities. According to the Clinton and Bush Administrations, the previous definitional differences had led to considerable confusion, as reflected in part in the Bragg and other lawsuits, but the changes were not driven solely by concerns over regulating mountaintop removal mining practices. Environmental groups continue to contend that the disposal practice is unlawful under the Clean Water Act, and that the revised EPA and Corps rules allow for inadequate regulation of disposal activities, including coal mining waste. Following issuance of the revised rule, the Senate Environment and Public Works Committee held an oversight hearing in the 107 th Congress to examine the rule, receiving testimony from Administration, mining industry, and public witnesses. Legislation intended to reverse the 2002 rule has been introduced in Congress since then (see " Congressional Actions " below). The 2003 draft PEIS called for OSM to make changes to its stream buffer zone rule to improve consistency with the Clean Water Act, and OSM proposed changes to that rule in 2004. However, OSM subsequently decided to prepare a new PEIS and to draft a revised rule, both of which were released in 2007. OSM issued a final revised buffer zone rule in December 2008. As described by OSM, the final rule required that surface coal mining operations be designed to minimize the amount of spoil placed outside the mined-out area, thus minimizing the amount of land disturbed. It also required that, to the extent possible, surface coal mining and reclamation operations be designed to avoid disturbance of perennial or intermittent streams and the surface of lands within 100 feet of those streams. If avoidance is not reasonably possible, the rule required that the permit applicant develop and analyze a range of reasonably possible alternatives and select the one that would have the least overall adverse impact on fish, wildlife, and related environmental values. According to OSM, the final rule did not mandate avoiding placement of coal mine waste in or within 100 feet of perennial or intermittent streams in all cases, because "there is sometimes no viable alternative to the construction of coal mine waste disposal facilities in perennial or intermittent streams and their buffer zones, in which case avoidance is not reasonably possible." The 2008 revised rule eliminated the provision in the 1983 stream buffer zone rule that had required a finding that the proposed activity would not cause or contribute to a violation of state or federal water quality standards. In doing so, OSM said that the previous language more closely resembled the CWA than the underlying provisions of SMCRA. Because the SMCRA rule did not substitute for or supersede the CWA, mine operators still must comply with the requirements of that law. Both industry and environmental groups said that the final rule did little to change the existing practice of disposing excess mountaintop removal mining spoil into valleys and streams. In fact, OSM stated that a key purpose of the rule was to reduce confusion about the 1983 rule and to conform the regulation to historic practice of federal and state authorities. Environmental groups said that the final rule would actually reduce environmental protection for streams by making it easier for coal mine operators to obtain exemptions from the stream buffer zone requirement, thus increasing destructive mining activities in and around streams; a coalition of these groups filed a lawsuit challenging the rule. In 2009 the Obama Administration requested that the federal court hearing this case vacate the 2008 stream buffer zone rule and remand it to the department, in order to return immediately to the more stringent 1983 rule until a replacement rule can be adopted. The Administration argued that the 2008 rule did not adequately protect water quality and stream habitat. The court rejected the Administration's request, leaving the 2008 rule in place. However, litigation over the rule continued. In February 2014, the same federal court ruled that the 2008 rule had been issued without necessary consultation with federal wildlife agencies (under the Endangered Species Act). The court vacated the 2008 rule, which has been under review by OSM for modification since 2009, and in December 2014, OSM withdrew it. Withdrawal of the rule was expected to have little impact, because most states did not implement it due to the litigation, but controversies over OSM's revisions continued (see discussion below, " Revising the Stream Buffer Zone Rule "). In other litigation challenging authorization of a specific mountaintop removal mining operation in Kentucky (rather than the general practice), a federal district court ruled in 2002 that the disposal of waste from mountaintop removal mining into U.S. waters is not allowed under Section 404, and the court permanently enjoined the Corps from issuing Section 404 permits for the disposal of mountaintop removal mining overburden where the purpose is solely to dispose of waste. In January 2003, a federal court of appeals ruled that the district court's action was too broad and lifted the injunction prohibiting the Corps from issuing Section 404 permits for disposal of mountaintop removal mining waste. In 2007, individual permits for four mountaintop removal mining operations in West Virginia were overturned by a federal district court. The court found that the probable impacts of the valley fills would be significant and adverse, that the mitigation plans for each permit were not sufficient to compensate for those adverse impacts, and that the Corps inadequately evaluated the cumulative impacts of the projects. The Corps appealed the court's orders, and in February 2009, the court of appeals reversed and vacated the district court's actions. The court found that the Corps had not acted arbitrarily or capriciously in its evaluation of the projects' impacts, and it found the Corps' proposed mitigation plans sufficient for purposes of complying with the National Environmental Policy Act (NEPA). One judge on the panel wrote in dissent that in his view the Corps had failed to establish that the projects will have no significant adverse environmental impact, and thus the agency had not satisfied the requirements of NEPA. While this case was pending, uncertainty over its outcome had effectively blocked the Corps from issuing Section 404 permits in Appalachia. Thus, the ruling by the court of appeals allowed for resumption of permitting activities in the region. Environmental advocacy groups have continued to pursue legal challenges to permits for individual surface coal mining projects in Appalachia, especially for mines located in West Virginia and Kentucky. Since 2003, citizen groups also have filed lawsuits seeking generally to halt the Corps' use of Nationwide Permit 21 for mountaintop removal mining operations. In one such case, a federal district court ruled that NWP 21 violates the Clean Water Act by authorizing activities that have more than minimal adverse environmental effects. The court enjoined the Corps from using NWP 21 to authorize new mountaintop removal mining in southern West Virginia and ordered the Corps to revoke previous authorization for 11 operations. On appeal, the judgment of the district court and the injunction against NWP 21 were vacated when the court of appeals found that the Corps had complied with the Clean Water Act when it promulgated NWP 21. In another case, a U.S. district court ruled that, when the Corps issued NWP 21, its analysis of cumulative impacts was inadequate and its reliance on compensatory mitigation in determining the environmental impacts of valley fills was arbitrary and capricious. The court again enjoined the Corps from using NWP 21 to authorize mountaintop removal mining activities in the Southern District of West Virginia. The decision requires that mining operations operating under NWP 21 be halted in West Virginia and Kentucky, but mining companies can seek individual permits from the Corps or appeal the decision. A Kentucky court disagreed with the district court's ruling in 2011 and allowed its continued use in that state. A federal appeals court overturned the Kentucky court's 2011 ruling and invalidated the use of NWP 21, finding that the Corps' environmental review procedures for NWP 21 were inadequate. Although this ruling dealt with the text of NWP 21 as issued in 2007 (which was re-issued with additional protections in 2012), environmental groups applauded the court's criticism of the Corps' actions. As described next, in 2009, the Obama Administration announced a series of administrative actions regarding surface coal mining operations in Appalachia, including use of Nationwide Permit 21. The Obama Administration joined the debate over mountaintop removal mining. Early in 2009, EPA began reviewing CWA Section 404 permit applications for surface coal mining operations in the Appalachian states, many of which had been on hold for months in light of the litigation on which the U.S. Court of Appeals for the Fourth Circuit ruled in February 2009, Ohio Valley Environmental Coalition v. Aracoma Coal (see above, " Other Litigation "). Following that ruling, EPA Administrator Lisa Jackson announced that, under its CWA authority to comment on 404 permit applications pending at the Corps and its authority to oversee issuance of Section 402 permits by states, EPA would review pending surface coal mining permit requests in Appalachia to ensure protection of the environment. On June 11, 2009, officials of EPA, the Corps, and the Department of the Interior signed a Memorandum of Understanding (MOU) and Interagency Action Plan (IAP) outlining a series of administrative actions to reduce the harmful environmental impacts of surface coal mining in Appalachia. The plan includes a series of near-term and longer-term actions that emphasize specific steps, improved coordination, and greater transparency of decisions. Many of the Administration's actions have been highly controversial, resulting in substantial congressional criticism. Some have been challenged successfully in court by industry companies and groups, and other legal challenges continue. Also on June 11, 2009, EPA and the Corps signed a specific agreement detailing criteria to be used to coordinate and expedite review of pending permit applications for surface coal mining operations in Appalachia (including but not limited to mountaintop removal mining projects). Based on its authority to evaluate 404 permit applications, EPA identified 79 projects for additional environmental review. EPA and the Corps developed a joint Enhanced Coordination Procedure (ECP) for evaluation of the permits. Of the 79 projects, 49 were located in Kentucky, 23 in West Virginia, 6 in Ohio, and 1 in Tennessee. EPA stated that each of the 79 projects, as proposed, is likely to result in significant harm to water quality, either individually or cumulatively. Under the coordination process, the Corps was responsible for beginning discussions with EPA and the mining companies to reduce anticipated environmental effects, and generally the individual reviews were expected to be completed within 60 days of notification by the Corps. As of September 2011, 50 of the 79 permit applications had been withdrawn without prejudice by the applicants, and the Corps had issued permits for eight. EPA had sent recommendation letters for two others, and the 60-day review had begun for one more. The remaining 18 (all located in Kentucky and West Virginia) were pending, awaiting additional information from the applicant prior to Corps notification to begin the formal EPA review. Coal industry groups and coal state officials contended that the ECP process resulted in costly delay in issuance of permits. They challenged the process in federal court, arguing that EPA and the Corps had violated the CWA by transferring regulatory authority from the Corps to EPA and effectively expanding the agency's veto power over permit decisions and also violated the Administrative Procedure Act by substantially changing permitting procedures without initiating a formal rulemaking. Further, they challenged the screening process used to determine whether pending permits should be subject to the ECP (called the Multi-Criteria Integrated Resource Assessment, or MCIR Assessment), as well as guidance used by EPA to evaluate the permit applications (discussed below, " EPA Guidance on Permitting "). EPA defended the ECP, saying that the additional coordination between the two agencies resulted in surface coal mining projects with reduced environmental, water quality, and human health effects, consistent with requirements of the CWA. In October 2011, the federal district court struck down the ECP and the MCIR Assessment as an unlawful transfer of legal authority from the Corps to EPA. Following the ruling, the Corps and EPA issued memoranda to clarify the roles of both agencies moving forward. While the specific ECP was set aside, the memoranda stated, the Corps would continue to process applications—including the 21 pending under the vacated ECP process—in accordance with permitting regulations, and EPA Regions should continue collaborating with the Corps to review proposed 404 permits. OSM's 2008 stream buffer zone rule (discussed above) also was addressed in the June 2009 MOU and IAP. As described above, the Department of the Interior had asked a federal court to vacate the revised rule issued by the Bush Administration in 2008, saying that the rule did not adequately protect water quality and stream habitat. OSM officials had hoped to return to using the more stringent 1983 rule until, in the longer term, a replacement rule can be developed. The court rejected this request, thus leaving the 2008 rule in place. However, OSM officials also stated that because of litigation over the 2008 revisions, states were never directed to amend their programs to conform with the revisions—thus, most states are still operating under the 1983 rule. In any event, as described previously, in February 2014 a federal court vacated the 2008 rule, because of OSM's failure to consult with federal wildlife agencies, so the question of applicability of that rule appears moot. In November 2009, OSM identified a broad set of regulatory options that it was considering for revisions to the 2008 rule, ranging from formally reinstating the 1983 rule with small conforming changes, to requiring stricter buffer zone requirements for mountaintop removal mining operations on steep slopes. OSM officials began work to develop a new rule and an accompanying draft environmental impact statement (EIS). The revised rule would apply nationwide, not just in Appalachia. OSM's efforts to revise the rule have been criticized, based on concerns about potential economic impacts of the rule and the quality of work on its EIS. However, OSM officials and environmental advocacy groups contended that a new rule is needed to protect waterways from surface mining operations. OSM missed several self-imposed dates for releasing draft revised rules and an EIS, but finally announced both on July 16, 2015. As indicated since 2009, the proposal—now called the Stream Protection Rule—would apply to coal mining activities nationwide. It is broader in scope than the existing stream buffer zone rules, because it deals with the whole mine permit area and outside the permit area, not just the stream buffer zone. The proposed rule retains the core of the current rules in many respects, including basic elements of the 1983 stream buffer zone rule. It is not the most environmentally stringent of all of the options evaluated by OSM before releasing the proposed rule. However, it includes provisions that would be more stringent than current rules, such as new requirements for baseline data collection to determine the impacts of proposed mining operations, more specificity on reclamation plans, and more specificity on measures to protect fish and wildlife from adverse impacts of mining. OSM's efforts to revise the 2008 rule have been controversial and have been criticized in Congress, which has considered legislation to require states to implement the 2008 rule and delay OSM's development of a revised rule (see " Congressional Actions "). Initial reactions to the 2015 proposed rule by stakeholder groups varied. Mining industry groups have been very critical, while environmental groups that have generally supported strengthening SMCRA regulations contend that the rule should be stronger to provide more protection to streams. OSM issued a final environmental impact statement for the rule on November 16, 2016, meaning that a final rule could be issued soon. If a final rule is not issued by the Obama Administration before the new A dministration takes office in January 2017, or if a final rule were overturned by legislative or presidential action in the 115 th Congress, the current rules (i.e., the 1983 stream buffer zone rules) would remain in place, unless or until new rules or guidance was issued. As noted previously, disposal of excess overburden associated with mountaintop removal mining has generally been permitted by the Corps under Nationwide Permit 21 (NWP 21), which authorizes surface coal mining discharges with no more than minimal impacts to the aquatic environment. As part of the MOU and IAP, in July 2009, the Corps published a two-part proposal concerning the use of NWP 21 to authorize mountaintop removal mining activities. First, the Corps proposed permanent modification of this NWP to prohibit its use in conjunction with surface coal mining activities in the Appalachian region. Second, because modification of the NWP is a long-term process, the Corps also proposed to temporarily suspend NWP 21 for surface coal mining activities in the Appalachian region in order to quickly halt the use of NWP 21 in the region. Surface coal mining activities in other regions would not be affected. The proposed suspension and modification would mean that surface coal mining activities in Appalachia would need to be evaluated through the Corps' detailed individual permit review process, rather than under a streamlined nationwide permit. The Corps explained its reason in the proposal: [T]he Corps now believes that impacts of these activities on jurisdictional waters of the United States, particularly cumulative impacts, would be more appropriately evaluated through the individual permit process, which entails increased public and agency involvement, including an opportunity for public comment on individual projects. Subsequently, in June 2010, the Corps acted to suspend use of NWP 21 in the Appalachian region immediately (the second part of the July 2009 proposal) as an interim measure while continuing to evaluate permanent modification or suspension of the permit. According to the Corps' announcement, NWP 21 activities in the affected region that had been verified by the Corps prior to June 18, 2010, would continue to be authorized until March 18, 2012, unless modified on a case-by-case basis. The Corps estimated that the immediate suspension would affect approximately six operations that at the time were seeking to use NWP 21; they would then have to submit applications for individual permits to authorize their activities. In 2012, the Corps reissued all of the existing nationwide permits, with modification of a number of them, including NWP 21. The previous version of NWP 21, issued in 2007, did not have any acreage or linear foot limits and relied on permit conditions and pre-construction notification reviews to reduce adverse impacts on the aquatic environment. The Corps determined that this approach had not adequately protected against loss of aquatic resources; thus the reissued permit added a ½-acre and 300-linear foot limit for the loss of stream beds when NWP 21 is used. Further, the reissued permit strictly prohibited use of NWP 21 to authorize discharges of dredged or fill material into U.S. waters to construct valley fills associated with surface coal mining. Throughout the Administration's review of activities that began in 2009, mining industry representatives have vigorously criticized EPA's actions and questioned what criteria are being used for permit reviews, saying that the agencies are needlessly delaying important projects, thus negatively affecting both jobs and the nation's energy security. The mining industry, environmental advocates, and elected officials in the affected region all had been asking for greater clarity. EPA and the Corps committed to issue guidance to strengthen environmental review of surface coal mining permits and operations and to clarify applicable criteria. In 2010, EPA released a 31-page interim guidance memorandum to clarify the agency's tightened requirements for surface coal mining in Appalachia. The guidance would be applied as a framework for EPA's approval of all pending and future reviews for permits to dispose of coal mining waste—through CWA Section 404 permits—and other types of discharges from Appalachian surface coal mining that are authorized by Section 402/NPDES permits. According to EPA, the guidance is not intended to bring a complete halt to mountaintop removal mining, but it should force the industry to adopt a practice of minimal or zero filling of valleys with mining debris. In addition to applying the guidance to reviewing 404 permits, since late 2010, EPA has cited the scientific evidence in the guidance in comments and some objections to proposed NPDES permits for coal mining projects in Kentucky and West Virginia. Among other items, the document set strict numeric limits on conductivity levels in waters affected by mining activities and valley fills. Conductivity is a measure of the level of salinity in water, which is expressed as microSiemens per centimenter, or µS/cm. As conductivity levels rise, fish, amphibians, mussels, and other aquatic organisms can be adversely affected. In the guidance (and in its ongoing review of pending Section 404 and 402 permit applications), EPA refers to increasing scientific recognition of a strong relationship between elevated total dissolved solids and conductivity levels in Appalachian streams and adverse impacts to aquatic life in streams and rivers below surface coal mining operations. Based on its review of recent scientific literature, EPA has concluded that, as a general matter, where conductivity levels will exceed 500 µS/cm in central Appalachia, there is a reasonable potential that aquatic biota will be adversely affected and applicable water quality standards will be violated, thus establishing this as a likely upper limit to be allowed in permits. Environmental groups support EPA's use of conductivity to assess water quality impacts of coal mining, but industry groups have been highly critical, asserting that the science linking conductivity to water quality impairment is uncertain and that acceptable numeric levels are arbitrary. While the 2010 interim guidance was effective immediately, EPA also sought public comment to inform possible future changes to the guidance. Conductivity, and its use in assessing coal mining impacts on water quality, has become a focus of debate and public comment. The EPA interim guidance also referenced two draft reports produced by EPA's Office of Research and Development that were used, together with peer-reviewed science, in preparing the guidance. The first draft report assessed the state of the science on the environmental impacts of mountaintop mines and valley fills on streams in Central Appalachia. The second developed a conductivity benchmark value that is intended to protect the biological integrity of aquatic life in waters in the region. At EPA's request, the agency's Science Advisory Board (SAB) conducted evaluations of the EPA scientific documents, in view of the reports' likely importance to regulatory actions. The panel agreed with EPA's overall conclusions that there is strong evidence for a causal relationship between mountaintop removal mining/valley fills and harm to downstream water quality and to biological impacts on organisms that live in and on the bottom of streams. The panel also concluded that there is clear evidence that valley fills are associated with increased levels of dissolved ions (measured as conductivity) in downstream waters and that these increased levels of conductivity are associated with changes in the composition of stream biological communities. For both reports, the SAB panel made a number of recommendations to strengthen both the supportive and the cautionary aspects of its comments on the EPA draft documents. For example, the conductivity report derives a benchmark that is intended to avoid the extinction of native species exposed to mountaintop removal mining/valley fills in Appalachian streams. The SAB panel stated that because the complete loss of a genus is an extreme ecological effect, it may be appropriate to develop a more appropriate endpoint recognizing less severe, but still significant, effects that occur at lower exposure levels. A consequence of doing so could be EPA's adoption of a more protective conductivity benchmark than contained in the April 2010 guidance described above and application beyond Appalachian mountaintop mines, at least in areas where sufficient data exist. At the same time, the SAB told EPA that the reports need to be clarified to emphasize that both conductivity and total dissolved solids (both referring to an increase in salinity in otherwise dilute freshwater) are "coarse" indicators of water quality, because of confounding factors such as the presence of other elements, and should not be used exclusively as surrogates for water quality. Thus, the SAB supported conductivity along with other field-based tests and cautioned that EPA should not over-rely on conductivity tests; the agency needs to weigh a variety of environmental factors in its assessments. Based on the SAB reviews, EPA released final versions of the two scientific reports in 2011. The 2010 interim guidance was very controversial. Environmental advocates defend EPA's implementation of the guidance as a way to protect streams from the harmful effects of surface coal mining in Appalachia. But industry and some states oppose EPA's efforts. Lawsuits were brought by the states of Kentucky and West Virginia, and were consolidated with the litigation brought by coal companies and trade associations over the ECP process ( National Mining Association v. Jackson , discussed above). They argued that the conductivity benchmark is set below background levels for some healthy streams in the region, making it too difficult to achieve. The lawsuits also argued that the guidance is an attempt to write new rules without following the notice-and-comment requirements of the Administrative Procedure Act. EPA released final guidance to improve the agency's review of Appalachian surface coal mining operations in 2011. The final document retains the same numeric limits on conductivity as in the interim guidance. However, EPA officials describe the final guidance as including considerable flexibility, based on considering public comments and experience in implementing the interim guidance since 2010. For example, the final guidance reflects the SAB's recommendations that the specific conductivity limits not be used outside waters of West Virginia and Kentucky, until the limits can be scientifically verified as applicable to other waters. Further, the final guidance acknowledges that at sites where the strict conductivity limits cannot be attained, EPA may recommend alternative permit conditions such as limits on individual ions, specifying particular best management practices for mining project design to minimize harmful impacts, or allowing for offsets in some circumstances. Environmental groups endorsed the final guidance, saying that it is key to strengthening permitting processes. Industry groups continue to argue that EPA has unlawfully expanded its statutory authority and infringed on the role of states. In 2012, a federal judge issued summary judgment for mining industry and state plaintiffs who had challenged EPA's use of the guidance. The court rejected the government's arguments that the guidance is a nonbinding document to help EPA assess whether a mine's actions would violate CWA standards. Instead, the district court agreed with plaintiffs' contentions that the guidance is being implemented as binding and having a practical effect on the permitting process for new Appalachian surface coal mining projects. Further, the court concluded that the guidance impermissibly sets a conductivity criterion for water quality standards, overstepping authority that the CWA assigns to states. The government appealed both this ruling and the same court's 2011 invalidation of the ECP process, described above. In 2014, both rulings were overturned in a ruling by a federal appeals court. Regarding the ECP, the court rejected plaintiffs' arguments that EPA overstepped its authority by coordinating with the Corps throughout the permit process. Further, the court dismissed plaintiffs' challenge to the conductivity guidance, on the basis that it is not a final agency action subject to judicial review because it did not add new obligations or have enforcement or other legal consequences for regulated entities. That is, the guidance itself does not represent an order compelling the regulated entity to do anything. Following the ruling, some industry sources said that it effectively declares the guidance as being completely voluntary, meaning that states and industry could ignore the guidance if they wish to do so. The court also said that, if a future permit were denied based on noncompliance with the guidance, the applicant could then seek judicial review, since that would be a final agency action. In addition to directing EPA to issue the environmental guidelines used by the Corps to evaluate permit applications (CWA Section 404(b)), Section 404 also authorizes EPA to prohibit or otherwise restrict the specification by the Corps of a site for the discharge of dredged or fill material, if the agency determines that the activity will have an unacceptable adverse effect on water supplies, fish, wildlife, or recreational areas. EPA has used this veto authority, under Section 404(c), only 13 times since 1972. None of the previous vetoes involved a surface coal mining or mountaintop removal mining project. In January 2011, the agency reached a determination to veto a permit for a mountaintop removal mining operation in West Virginia. According to EPA, the Spruce No. 1 mine in Logan County, West Virginia, as proposed, would be one of the largest surface mining operations ever authorized in Appalachia, and waste disposal from the mine would bury over 7 miles of streams, directly impact 2,278 acres of forestland, and degrade water quality in streams adjacent to the mine. The Corps issued a permit for the project in 2007, but it was subsequently delayed by litigation and has been operating on a limited scale since then. EPA acknowledges that the project has been modified in order to reduce impacts, but the veto determination is based on the agency's conclusion that the project could result in unacceptable adverse impacts to wildlife and fishery resources. Some of the water quality problems cited in EPA's veto of the permit are from increased loads of pollutants that the project would discharge—particularly selenium and total dissolved solids—which contribute to increased stream conductivity, the same adverse impact cited by EPA in the permitting guidance document discussed above. EPA's veto of the permit has been very controversial, in part because it involved cancelling a permit previously issued by the Corps. Coal industry groups and organizations representing manufacturing and other sectors have been highly critical of EPA's actions, many saying that to revoke an existing permit creates huge uncertainty about whether water quality permits would be rescinded in the future, producing a ripple effect beyond the coal industry. The owner of the site, the Mingo Logan Coal Company, challenged EPA's action in federal court, even before the veto was finalized. EPA argued that the veto, while highly unusual, is justified because the project involves unacceptable environmental impacts. The agency said that it is not currently reviewing any other previously authorized Appalachian surface coal mining project pursuant to Section 404(c). In 2012, a federal district court agreed with the industry petitioners and concluded that the CWA does not give EPA the power to render a permit invalid once it has been issued by the Corps. Although the language of 404(c) is "awkwardly written and extremely unclear," the court found EPA's view that it has such authority an unreasonable interpretation of the statute. Thus, it overturned the veto. However, in 2013, a federal appeals court disagreed and reversed the district court's ruling, thus upholding EPA's authority to retroactively veto Section 404 permits. The appellate court said that the statute "imposes no temporal limit on the [EPA] Administrator's authority to withdraw the Corps' specification ' whenever ' he makes a determination that the statutory 'unacceptable adverse effect' will occur." The mining company involved in the veto case, coal industry groups, and others, including several states, petitioned the Supreme Court to review and reverse the appellate ruling; the Court denied the petitions for review. Viewed broadly, the Obama Administration's combined actions on mountaintop removal mining displease both industry and environmental advocates. The additional scrutiny of permits, more stringent requirements, and EPA's veto of a previously authorized project have angered the coal industry and many of its supporters. At the same time, while environmental groups support the veto and EPA's steps to restrict the practice, many favor tougher requirements or even total rejection of mountaintop removal mining in Appalachia. The Obama Administration's record when federal courts have reviewed its stepped-up actions involving Appalachian surface mining is somewhat mixed. Several Administration initiatives were rejected by federal district courts, but those rulings were later overturned on appeal. As described above, a federal court ruled that OSM exceeded its authority in seeking to revise the stream buffer rule without complete administrative procedures, but the same court vacated the 2008 rule that OSM is seeking to rewrite. A court also ruled that EPA exceeded its authority by using the Enhanced Coordination Process (the ECP) and developing its 2011 permitting guidance, but these rulings were overturned on appeal. EPA's veto of the Spruce No. 1 mine permit also was reversed by a court, but then was overturned on appeal. The Supreme Court declined to review that ruling, thus leaving the veto in place. Congressional interest in these issues also has been evident and has increased substantially recently. Bills dealing with several of the topics discussed above—the regulatory definition of "fill material," EPA's veto of a surface coal mine project, OSM's stream buffer rule, and mountaintop removal mining generally—have been introduced, and hearings have been held. In the 113 th Congress (as in several prior Congresses), legislation to reverse the 2002 revised regulations that define "fill material," discussed previously, was introduced ( H.R. 1837 , the Clean Water Protection Act). This bill would sharply restrict mountaintop removal mining by excluding from the definition of "fill material" any pollutant that is discharged into water primarily for the purpose of disposing of waste. This provision would allow pollutant discharges that replace portions of the waters of the United States with dry land or which change the bottom elevation of a water body for any purpose to be considered fill material. But it rejects the view reflected in the 2002 regulations that some discharges for purposes of waste disposal (including mine overburden) should be allowable within the definition of fill. Separate legislation that would codify the current regulatory definition of fill material was approved by a House committee in July 2014 ( H.R. 5077 ). The 113 th Congress also twice included a provision barring the Corps from developing or implementing revised regulations concerning definitions of "fill material" or "discharge of fill material" in appropriations legislation, although the Corps has not begun work on revisions or indicated any intention to do so. The provision was included as part of the Consolidated Appropriations Act, 2014 ( P.L. 113-76 ) and also the Consolidated and Further Continuing Appropriations Act, 2015 ( P.L. 113-235 ) and the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ). On several occasions, proposals have been considered in appropriations bills to restrict EPA's and the Corps' activities concerning mountaintop removal mining. However, none of these provisions has been enacted. As noted above, EPA's 2011 veto of a Section 404 permit for the Spruce No. 1 mine in West Virginia has been very controversial, including in Congress. In the 111 th and 112 th Congresses, legislation was introduced to delete Section 404(c) from the CWA, thus removing EPA's authority to veto permits for projects. In addition, other bills were introduced that were intended to address the veto of the Spruce No. 1 mine project, including proposals to bar EPA from using the 404(c) authority "after the fact," that is, after the Corps has issued a 404 permit; to set deadlines for EPA's 404(c) authority; and to clarify procedures for elevating 404 permitting decisions to higher level agency and department officials. Following the court of appeals ruling in 2013 that upheld EPA's authority to retroactively veto a 404 permit (discussed above), legislation was introduced in the 113 th Congress to prohibit EPA from vetoing a project retroactively, that is, from using the 404(c) authority after the Corps has issued a permit ( H.R. 524 and S. 830 ). A third bill that would limit 404(c) actions also was introduced ( S. 2156 ); it would bar EPA from issuing retroactive vetoes and also would invalidate any previous veto that occurred after a permit issuance, such as that of the Spruce No. 1 mine. A fourth bill ( H.R. 4854 ) was essentially a companion bill to H.R. 524 ; it would prohibit EPA from issuing preemptive vetoes, before the Corps has rendered a permit decision. EPA recently initiated administrative steps to preemptively veto a copper mine site in Alaska, the Pebble deposit, but has not reached a final decision to do so; H.R. 4854 was considered a response to EPA's pending actions in that case. The House Transportation and Infrastructure Committee approved H.R. 524 in April 2014 and approved H.R. 4854 in July 2014. No further action occurred. In the 114 th Congress, bills were introduced seeking to clarify or restrict EPA's 404(c) veto authority, including limiting vetoes to up to the time of permit issuance by the Corps (i.e., bar retroactive vetoes). These bills were S. 55 / S. 234 , H.R. 896 , and H.R. 1203 . The House Transportation Subcommittee on Water Resources and Environment held oversight hearings on these issues in 2011, and the House Oversight and Government Reform Subcommittee on Regulatory Affairs held similar hearings in 2011 and 2012. OSM's efforts to revise the 2008 stream buffer zone rule also have been controversial. The House Natural Resources Committee held a number of hearings since the 112 th Congress to air concerns that the expected rewrite of the rule would have harmful job impacts on surface coal mining. Committee leaders criticized OSM's lengthy efforts to revise the 2008 rule as costly and wasteful. In 2014, the House passed legislation ( H.R. 2824 ) to limit the authority of the Secretary of the Interior to issue a revised rule for at least five years and to require states to implement the 2008 stream buffer zone rule—now withdrawn by OSM—thus seeking to preempt any states that have adopted separate stream buffer protection requirements. Legislation in the 114 th Congress, H.R. 1644 / S. 1458 , would prevent OSM from releasing a revised stream buffer rule pending a study by the National Research Council on economic and scientific data in the rule. The House passed H.R. 1644 in January 2016, but there was no further action. Also in the 114 th Congress, legislation intended to put a partial moratorium on mountaintop removal mining, pending health effects studies, was introduced ( H.R. 912 ). This bill would require the Department of Health and Human Services to investigate links between mountaintop removal mining and human health impacts. Until completion of such research and a determination that mountaintop removal mining does not present health risk to residents in nearby communities, there would be a moratorium on new mountaintop removal mining permits issued by the Corps, EPA, or the Secretary of the Interior, as well as expansion of existing permits. Similar legislation was introduced in the 113 th Congress. The Obama Administration did not present formal views on legislation in the 114 th Congress that would have affected CWA permitting or SMCRA, but the Administration did issue a statement of opposition to one appropriations bill, H.R. 2822 , expressing concerns with restrictions in that bill on several EPA and OSM initiatives.

Mountaintop removal mining involves removing the top of a mountain in order to recover the coal seams contained there. This practice occurs in six Appalachian states (Kentucky, West Virginia, Virginia, Tennessee, Pennsylvania, and Ohio). It creates an immense quantity of excess spoil (dirt and rock that previously composed the mountaintop), which is typically placed in valley fills on the sides of the former mountains, burying streams that flow through the valleys. Mountaintop removal mining is regulated under several laws, including the Clean Water Act (CWA) and the Surface Mining Control and Reclamation Act (SMCRA). Critics say that, as a result of valley fills from mountaintop removal mining, stream water quality and the aquatic and wildlife habitat that streams support are destroyed by tons of rocks and dirt. The mining industry argues that mountaintop removal mining is essential to conducting surface coal mining in Appalachia and that it would not be economically feasible there if operators were barred from using valleys for the disposal of mining overburden. Critics have used litigation to challenge the practice. Environmental groups have been successful at the federal district court level in challenging some permits for mountaintop removal mining projects, only to be later overturned on appeal. Nonetheless, the criticisms have prompted some regulatory changes. In 2009, officials of the Environmental Protection Agency (EPA), the U.S. Army Corps of Engineers (Corps), and the Department of the Interior signed a Memorandum of Understanding outlining a series of administrative actions under these laws to reduce the harmful environmental impacts of surface coal mining in Appalachia. The plan included a series of actions that emphasize specific steps, improved coordination, and greater transparency of decisions to be implemented through regulatory proposals, guidance documents, and review of applications for permits to authorize surface coal mining operations in Appalachia. Viewed broadly, the Administration's combined actions displease both industry and environmental advocates. The additional scrutiny of permits and more stringent requirements have angered the coal industry and many of its supporters. Controversy also was generated by EPA's 2011 veto of a CWA permit that had been issued by the Corps for a surface coal mining project in West Virginia. At the same time, while environmental groups support EPA's steps to restrict the practice, many favor tougher requirements or even total rejection of mountaintop removal mining in Appalachia. The enhanced permit review procedures and EPA guidance on factors used in evaluating water quality impacts of Appalachian surface mining permits were challenged in court, but they were upheld by a federal appellate court. EPA's veto of the West Virginia mine permit was overturned by a federal court, but that ruling was reversed on appeal and the Supreme Court declined to review the case. Several bills to clarify and restrict EPA's veto authority were introduced in the 113th Congress. Legislation to restrict EPA's veto authority also was introduced in the 114th Congress (S. 55/S. 234, H.R. 896, and H.R. 1203). This report provides background on regulatory requirements, controversies and legal challenges to mountaintop removal mining, and recent Administration actions, including a Stream Protection Rule proposed by the Office of Surface Mining in July 2015. Attention to EPA's veto of the West Virginia mining permit and other federal agency actions has increased in Congress. Congressional interest in these issues is discussed, including legislation seeking to restrict the practice of mountaintop removal mining and other legislation intended to block the Obama Administration's regulatory actions.

When awarding franchises for the use of public rights of way to offer cable television service, many local jurisdictions have required the cable companies to set aside some of their channel capacity for public access, educational, or governmental (collectively, PEG) use and to provide financial support for those PEG access channels. These channels are perhaps best known for carrying local city council meetings, but they generally provide a significantly broader array of governmental, educational, community, religious, and political programming. Today, subscribers to more than 1,500 U.S. cable systems have access to PEG channels. PEG channels are not mandated by federal law. But the Cable Communications Policy Act of 1984 ( P.L. 98-549 ) amended the Communications Act to explicitly allow franchising authorities to require cable operators to set aside channel capacity for PEG use and to provide adequate facilities or financial support for those channels. These PEG provisions have been a primary vehicle for fostering in cable systems the long-standing U.S. media policy goal of localism. The environment for PEG channels has been roiled by a number of public policy and budgetary changes at the federal, state, and local level and by technological changes in cable networks. More than 100 PEG access centers—which provide community groups and individuals free access to video production facilities and equipment, training, and programming time—have closed since 2005, and others are threatened by severe funding cuts. Without the programming produced at PEG access centers, PEG channels may not be able to continue operations. At the same time, some subscribers now have greater difficulty accessing PEG programming. Not all PEG access centers and PEG channels are facing this bleak environment, however; many continue to have stable funding sources. American Community Television, an organization that advocates on behalf of PEG access centers, estimates that the more than 1,500 PEG access centers in the United States manage upwards of 5,000 cable television PEG channels. Each week these channels carry 20,000 hours of new programs from local governments, schools, health and jobs organizations, social services agencies, and local residents. Although these estimates are provided by PEG advocates and may be inflated, there is no question that PEG channels provide a very substantial amount of local programming. The PEG channels vastly outnumber the 354 public broadcast television stations, but the audiences for virtually all PEG channels are quite small. Most PEG access centers have a paid staff of just one or two people, relying heavily on volunteers; one-third have annual budgets (operating and capital) of less than $100,000. According to a recent survey, PEG Access Centers in at least 100 communities across the United States have been closed since 2005.... Hundreds more PEG Access Centers in six states affected by state franchising laws may be forced to close or experience serious threats to financial and in-kind support over the next three years. These closures appear to be related to three developments that are reducing funding for some PEG access channels. In the past few years, 21 states have enacted laws allowing cable systems to obtain statewide franchises. These state laws were motivated by the desire to ease broad geographic market entry into the cable television market by Verizon and AT&T by allowing them to obtain a single statewide franchise rather than having to negotiate many local franchises. To provide incumbent cable systems with competitive parity, many of the laws also allowed the incumbents to obtain statewide franchises or replaced certain local franchise requirements with less stringent statewide requirements. Some of these laws have abrogated or phased out PEG provisions in existing local franchise agreements that required the franchisees to set aside channels, provide financial or in-kind support, or provide studio facilities —or cable companies have interpreted the laws to allow them to reduce or eliminate PEG support. Some of the provisions now being abrogated or phased out required cable operators to provide hook-ups, facilities, or services without charge to schools, fire stations, and other governmental locations; their elimination will force the local jurisdictions to bear the associated costs or reduce services. The Federal Communications Commission (FCC) initiated a rulemaking proceeding in the mid-2000s to implement Section 621(a)(1) of the Communications Act, which prohibits franchising authorities from unreasonably refusing to award competitive franchises for the provision of cable services. The FCC determined that some local franchise authorities (LFAs) had set overly burdensome requirements for PEG support and concluded that LFAs could require cable systems to provide "satisfactory or sufficient" PEG support but not "significant" support. Section 622(b) of the Communications Act caps the total franchise fees that a local jurisdiction may impose on cable operators at 5% of gross cable revenues, subject to certain exceptions. The FCC concluded that any PEG-related assessment that is not a capital cost must be subtracted from the 5% statutory franchise fee cap, defining capital costs as "those costs incurred in or associated with the construction of PEG access facilities," but excluding "payments in support of the use of PEG access facilities," which "are considered franchise fees and are subject to the 5 percent cap." This limit on how much funding a local franchising authority can require of a cable system was applied to incumbent cable companies as well as to new competitors. PEG supporters claim this interpretation represents a misreading of Congressional intent and has created uncertainty about what constitutes capital costs, reducing PEG-related funding by cable companies. Historically, many jurisdictions imposed a franchise fee of 5% of gross cable revenues on franchisees and then used a portion of those revenues to support PEG operations. But some local jurisdictions that have long provided such support for PEG operations are facing budget shortfalls that are forcing them to reduce their PEG funding. This appears to be happening more frequently in those local jurisdictions that, as a result of state laws, no longer have franchising authority. According to the ACD/Benton Survey, almost half of the survey respondents providing financial data reported a decrease in funding between 2005 and 2010 and 20% of the respondents that receive in-kind support from their cable operators reported reductions in that support. At the same time, many PEG access centers and channels have not been affected by these changes. Fifty-five percent of the respondents in a PEG access benchmarking study performed in 2010 said their public access funding had increased over the past two years, while 36% said that it had remained the same or gone down. Those access centers that receive a fixed percentage of their local cable companies' cable revenues are enjoying increased funding as overall cable revenues continue to increase; others have benefited from funding escalators in their franchise agreements. Systematic data do not exist on the funding and financial strength of PEG access centers. It appears, however, that while many access centers continue to enjoy stable funding sources, a sizeable portion are facing abrupt and significant funding reductions that may challenge their existence. Requirements in franchise agreements to provide PEG access channels impose two types of costs on cable systems: the direct costs of providing facilities and/or financial support for PEG centers and the opportunity costs of allocating channels to noncommercial PEG entities when those channels could generate revenues if put to commercial use. Although no data have been collected to estimate how substantial these direct and opportunity costs are, they clearly are not negligible. Cable systems therefore have the incentive to minimize the amount of their system capacity allocated to PEG channels and the level of outlays they must make in support of PEG channels. Cable service providers subject to the PEG provisions in the Communications Act include traditional cable operators, such as Comcast and Time Warner, as well as landline telecommunications firms that have recently entered the multichannel video programming distribution (MVPD) market, such as AT&T and Verizon. These telecommunications firms, like traditional cable operators, use the public rights of way. AT&T continues to assert that its video service is not a cable service and should not be subject to cable franchise agreements. On July 26, 2007, the U.S. District Court for Connecticut found that AT&T's service is a cable service subject to cable franchising and on July 10, 2008, that court confirmed the decision, which had been appealed by AT&T. On March 5, 2010, however, the Second Circuit of the U.S. Court of Appeals vacated the district court decision as moot because, prior to that decision, the Connecticut legislature enacted a new Video Franchise Act that "unambiguously required AT&T to obtain a video franchise before providing video service in the state," thus leaving the federal district court without jurisdiction. Cable service providers are making significant technological changes to their networks that are changing the way they provide PEG channels to end users. Traditional cable providers are migrating in stages from analog to digital transmission of their programming, so not all programming has yet been shifted to digital transmission. During the transition, operators are offering popular channels in both formats—that is, providing both a digital channel and an analog channel—but the operators prefer not to tie up their network capacity for both digital and analog transmission of less popular programming. Therefore, many cable operators have chosen to provide the lightly viewed PEG channels only on digital tiers that require a subscriber with an analog television set to obtain a set-top box with a digital-to-analog converter for reception. Some cable operators are providing these set-top boxes to subscribers for free during the digital transition, but others are charging. When operators have taken the latter course, some PEG advocates and local jurisdictions have objected that this places subscribers in the position of having to pay for the set-top box or not receive PEG programming. These parties claim this is inconsistent with the terms of local franchise agreements and the intent of Section 623(b)(7)(A)(ii) of the Communications Act that cable operators must make a basic tier of programming (including any PEG channels required by the franchise authority) available to all subscribers at a low price. These groups have petitioned the FCC to issue a declaratory ruling that PEG channels must be carried on the basic service tier and treated equally with other basic service tier channels. AT&T and others in the cable industry have filed comments opposing those petitions. To date, the FCC has not issued any declaratory rulings in response to these petitions. AT&T has introduced its U-verse service, which provides multi-channel video service using Internet Protocol (IP) technology and a network architecture that does not "broadcast" the signals of all the program networks to the end user, but rather allows the subscriber to use a set-top box to "call up" the desired video stream from a single centralized hub in each metropolitan area, where the video file is stored. AT&T says it would be prohibitively expensive to use this architecture for the many PEG access channels in a metropolitan area and therefore has chosen to offer PEG programming in a different fashion that is more akin to the way it handles Internet traffic. It has created a separate platform for PEG, placing the PEG programming for all jurisdictions in a metropolitan area on a single channel (99). PEG viewers must go to channel 99, pull down a menu that identifies each of the local jurisdictions, select the desired jurisdiction to get a menu that identifies all the PEG programming for that jurisdiction, and then select the particular program. In addition to the time required to do this, and the particular difficulty for visually impaired viewers, the programming cannot be recorded on a DVR and picture quality is impaired. Some PEG advocates and local jurisdictions claim AT&T is offering PEG programming in an inferior and discriminatory fashion that does not meet the requirements of local franchise agreements or the Communications Act. For example, the Alliance for Community Media and other parties filed a petition with the FCC asking it to make a declaratory ruling that, among other things, "AT&T's systematic discrimination against PEG programming in terms of accessibility, functionality, and signal quality violates Sections 611, 623, and 624(e) of the Communications Act and FCC rules and policies." AT&T responded that U-verse is not a cable service subject to those requirements, but that in any case it meets all those requirements and would be required to deploy its IP network inefficiently in order to meet requirements developed for traditional cable architecture. The FCC has not yet issued a ruling on the petition. PEG access channel requirements do not apply to direct broadcast satellite (DBS) systems (DirecTV and DISH Network). Although DBS providers compete with cable operators in the MVPD market, DBS is a satellite service, not a cable service, does not require the use of public rights of way, and is not subject to cable franchising requirements. By federal law, if a satellite operator chooses to offer its subscribers local broadcast television station signals in a local market it must provide the signals of all full-power broadcast stations in that market, but it need not offer PEG channels, which are cable channels, not broadcast channels. With the development of the Internet, it is possible to distribute PEG programming online, where it would not consume scarce cable capacity for which there is commercial demand. Indeed, many PEG access centers already distribute their programming online. But Internet access is not universal and therefore relying upon the Internet to replace rather than extend cable distribution of PEG programming might not be consistent with the long-standing public policy goal of fostering localism. Moreover, use of the Internet for distribution does not eliminate the problem of funding PEG program production. There are four key sections in the Communications Act relating to PEG access channels. Section 611, which is entitled "Cable Channels for Public, Educational, or Governmental Use," allows a franchising authority to establish requirements in a franchise with respect to the designation or use of channel capacity for PEG use (but only to the extent provided in this section); require that channel capacity be designated for PEG use and to establish rules and procedures for the use of the channel capacity so designated; and enforce any requirement in any franchise regarding the provision or use of such channel capacity. Such enforcement includes the authority to enforce any provisions of the franchise for services, facilities, or equipment proposed by the cable operator which relate to PEG use of channel capacity, whether or not required by the franchising authority. Section 621, entitled "General Franchise Requirements," includes the instruction that, in awarding a franchise, the franchising authority may require adequate assurance that the cable operator will provide adequate PEG access channel capacity, facilities, or financial support. Section 622, entitled "Franchise Fees," sets a cap on the franchise fee that a franchising authority may charge at 5% of the cable operator's gross revenues, but explicitly states that the term "franchise fee" does not include (1) in the case of a franchise in effect in October 1984, payments that are required to be made by the cable operator during the terms of such franchise for, or in support of the use of, PEG access facilities, or (2) in the case of any franchise granted subsequently, capital costs that are required by the franchise to be incurred by the cable operator for PEG access channels. Thus, franchise authorities may impose certain PEG costs on a cable provider over and above the 5% franchise fee limit. Section 623(b), entitled "Establishment of Basic Service Tier Rate Regulations," includes the instruction that each cable operator provide its subscribers a separately available basic service tier to which subscription is required for access to any other tier of service. That basic service tier—which is subject to price regulation by the franchising authority if the FCC has not made the determination that the cable provider faces effective competition—must include any PEG access programming required by the franchise of the cable system to be provided to subscribers. In the 112 th Congress, Representatives Baldwin and LaTourette introduced the Community Access Preservation (CAP) Act, H.R. 1746 , which sought to mitigate the impact of provisions in state franchising laws that may reduce resources and support for PEG access centers and also to sustain consumer access to PEG channels. Under that bill: If a state enacted a law affecting the number of channels a franchising authority may require a cable operator to designate for PEG use, a local government subdivision could require the cable company to provide the greater of the number of channels the operator was providing in that subdivision prior to enactment of the state law or up to three channels. If a state enacted a law affecting cable system franchising requirements relating to support for PEG use of a cable system, a cable operator would owe to any local government subdivision in which the operator provides cable service an amount to be determined by the subdivision but not to exceed the greatest of: (a) the amount of support provided in the last calendar year ending before the effective date of the state legislation; (b) the average annual amount of support provided over the term of the franchise under which the cable operator was operating before the effective date of the state law; (c) the amount of support that the cable operator is required to provide to the subdivision under the state law; or (d) an amount of support equal to 2% of the gross revenues of the cable operator from the operation of the cable system to provide cable services in the subdivision. The forms of support for PEG use include all cash payments, in-kind support, and free services that the operator provides to the subdivision for PEG use of the cable system. This amount would be adjusted for inflation using the Gross National Product Price Index. Support provided to any subdivision had to be dedicated to PEG use of channel capacity. The definition of "franchise fee" in Section 602(g)(2)(A) and (B) of the Communications Act was modified to explicitly exclude for any cable franchise , not just for those franchises in effect on October 30, 1984, payments that are required by the franchise to be made by the cable operator for, or in support of the use of, PEG access facilities. Since franchise fees are subject to a statutory cap of 5% of gross cable revenues, this exclusion would allow local jurisdictions to impose PEG-related fees in addition to a 5% franchise fee. The cable operator had to carry the PEG signals from their point of origin to subscribers without material degradation and without altering or removing content or data. This provision would prohibit the cable operator from eliminating closed captioning or lessening other capabilities. The cable operator had to provide the PEG signals to, and make them viewable by, every subscriber, without additional service or equipment charge. This would prohibit a cable operator from migrating PEG channels to a digital tier while continuing to offer commercial channels on an analog tier and then charging analog customers for a set-top box to obtain the PEG channels. The cable operator had to provide to the local government subdivision, free of charge, any transmission services and the use of transmission facilities that are necessary to carry the PEG signals to end users. Some cable operators had begun to charge local jurisdictions for such transmission service and facilities; this provision was intended to end that practice. Local government subdivisions, as well as states, were given the authority to enforce the provisions outlined above. A local government subdivision could not impose additional PEG-related requirements on a cable system unless that subdivision was the franchising authority at the time the requirements were imposed or the state law authorized the subdivision to impose such requirements. The FCC had to submit within 180 days of enactment of the CAP Act a report containing an analysis of the impact of state franchising laws on PEG use of cable systems; an analysis of the impact of the conversion from analog to digital transmission technologies on PEG use of cable systems; recommendations for changes to this section of law required to preserve and advance localism and PEG use of advanced communications systems, including broadband systems; and recommendations for changes to this section of law, after cable systems have converted to a fully digital delivery system, relating to requirements for the accessibility of PEG channel capacity and the placement of such channel capacity, except that the recommendations could not include allowing cable operators to impose additional charges on subscribers with respect to the quality, availability, functionality, or placement of that channel capacity. The definition of cable service in Section 602(6) of the Communications Act was modified by inserting the following words in italics : 'the term "cable service" means, regardless of the technology or transmission protocol used in the provision of service, (A) the one-way transmission to subscribers of (i) video programming, or (ii) other programming service, and (B) subscriber interaction, if any, which is required for the selection or use of such video programming or other programming service." This was intended to include AT&T's U-verse service in the definition of cable service. As will be explained below in the discussion of specific issues, the National Cable & Telecommunications Association (NCTA) opposed the bill. PEG advocates supported the bill. It is difficult to quantify the impact of the various public policy, budgetary, and technological changes on the PEG environment because limited systematic data exist relating to PEG channels. Comprehensive data are not available on the portion of PEG financial support for capital and operating costs that currently comes from fees on cable companies, in-kind contributions from cable companies, payments from the general revenues of local jurisdictions, private contributions, foundation grants, or other sources—though the cable companies have generally been the primary funders and local jurisdictions the second largest funders. In its rulemaking proceeding, the FCC made no attempt to measure the extent to which existing cable franchisees or franchise applicants were required to pay PEG operating expenses or offer in-kind services; it cited limited anecdotal evidence of a handful of local jurisdictions seeking to impose onerous requirements. Neither the FCC nor stakeholders (cable companies or PEG advocates) have attempted to construct estimates of the likely scale of cutbacks in funding from cable companies as state laws take effect and from local jurisdictions as tight budgetary conditions prevail. As a result, it is difficult to project the aggregate impact of the funding cuts that PEG access centers are experiencing or are likely to experience, although it is possible to identify cases in which such cuts have resulted in closings. Neither the cable industry nor the FCC has quantified the opportunity costs associated with setting aside channels for PEG use. Cable companies would receive some revenues from commercial use of those channels, but given that most cable networks offer hundreds of channels and that the marginal channels attract very small audiences, the opportunity costs associated with PEG channels, though not negligible, are likely to be small. Consumer welfare losses also are likely to be small since the foregone commercial channels would attract few viewers. Although it is difficult to measure the intensity of demand for services for which there is no price, some viewers appear to attach a high value to PEG programming. (Indeed, these viewers might choose cable service over satellite service precisely because they cannot receive PEG channels over satellite.) Moreover, Congress has long viewed local programming as having public benefits that should be fostered. There is evidence, however, that the various public policy and budgetary changes, especially the elimination of requirements for cable companies to support PEG channels, are threatening the financial viability of PEG access centers in the affected states. Section 602(10) of the Communications Act defines "franchising authority" to mean any governmental entity empowered by federal, state, or local law to grant a franchise. As recently as five years ago, most states left cable franchising authority entirely to local jurisdictions (local franchising authorities or LFAs). About 10 states had some role in the franchising process, but many of these just reviewed locally negotiated agreements. Since 2006, 21 states—Texas, Virginia, Indiana, Kansas, North Carolina, South Carolina, New Jersey, California, Michigan, Missouri, Florida, Iowa, Georgia, Nevada, Ohio, Illinois, Wisconsin, Connecticut, Tennessee, Louisiana, and Idaho—have enacted laws establishing statewide cable franchises. Most of these laws were enacted in 2006 and 2007, though their impact often was felt later since some provisions did not take effect immediately. These state laws were motivated by the desire to ease broad geographic market entry by Verizon, AT&T, and others by allowing them to obtain a single statewide franchise rather than having to negotiate many local franchises. To provide incumbent cable systems with competitive parity, many of the laws also allow incumbents to obtain statewide franchises upon the expiration of their local franchise agreements or to replace certain local franchise requirements with less stringent statewide requirements. There are great differences among the state laws and their impact on the requirements for cable company provision of PEG channel capacity and PEG financial and technical support varies significantly. Most significant from the PEG perspective, a number of state laws in effect have sunset provisions for PEG support for both incumbent cable companies and new entrants, as shown in Table 1 . Other state laws set caps on, but do not eliminate, the PEG support requirements that can be imposed on cable operators. For example, the Texas law sets a cap of 1% of gross cable revenues and the Virginia law sets a cap of 1.5% of gross cable revenues. Sometimes a state law does not end PEG financial support requirements, but eliminates a particular type of support that PEG access centers have heavily relied upon for their operations. For example, in California, there is a process for local jurisdictions to continue to require cable systems to pay a PEG fee of up to 1% of the franchisee's gross revenues, but those jurisdictions cannot require the franchisee to provide PEG studios, institutional networks, or other non-cash support. PEG advocates claim that Time Warner, Charter, and Comcast have discontinued providing studios in a number of communities in California and as a result 51 communities have closed access centers. However, in some of these communities (for example, Long Beach), consortiums of local arts organizations and foundations, working with the local PEG advocates, were able to reopen access centers. Similarly, based on state laws that affected PEG requirements, some cable operators that were operating PEG channels in Indiana and Illinois have closed their PEG access centers, on as little as 30 days' notice. Some states laws have placed minimum programming requirements on PEG channels even as they have eliminated or set caps on cable company PEG support requirements. For example, in Georgia, Texas, and Michigan, PEG channels are required to provide at least eight hours of non-repeat programming content daily, but Georgia has eliminated PEG support requirements and both Texas and Michigan have capped support requirements. In Texas, Time Warner stopped airing San Antonio Public Access because the channel could no longer meet the 8-hour non-repeat daily programming requirement. More broadly, LFAs and PEG advocates claim that the new laws, as interpreted by new entrants and incumbent cable companies, have resulted in limitations on the PEG fees that localities can impose on franchisees, the elimination of free access to video equipment and television studio space previously provided to PEG programmers by franchisees, the elimination of cable company staff was previously provided to operate the access centers where PEG programming is produced, degradation of PEG signal quality rendering it no longer comparable to that of commercial channels, and inferior channel placement for PEG channels. As a result, some PEG advocates and local governments claim that statewide requirements fail to meet the needs of their local communities. They say this is of particular concern because there is wide variation among communities regarding what PEG programming should be made available and how it should be delivered. Systematic data are not available on how much PEG support—in cash, facilities, equipment, services, personnel, etc.—has been reduced as a result of the state laws—and how much additional reduction will occur as local franchise agreements expire and as the 2012 sunset dates in various state laws are reached. But these state laws clearly have and will continue to have very major impacts on PEG support. It is unlikely that alternative sources, such as private donations and foundation grants, will be able to generate enough funds in the near term to replace the loss in cable company support, and thus some state laws may potentially have an existential impact on PEG access centers and channels. As noted above, two provisions in the CAP Act legislation introduced in the 112 th Congress were intended to explicitly address the impact of the state bills. One provided that, if a state limits the number of channels a franchising authority may require a cable operator to designate for PEG use, a local government subdivision could require a cable company to provide the greater of the number of channels the operator was providing in that subdivision prior to enactment of the state law or up to three channels. The other provision would have entitled local governments to require a cable operator to provide PEG support even if a state enacted a law eliminating or restricting such requirements. The provision would have set a cap on the amount that could be required and would have required that those funds be dedicated to PEG use of channel capacity. The cable industry opposed the provisions in the CAP Act that would have allowed local jurisdictions to impose PEG requirements beyond those set under state law or in statewide franchise agreements. NCTA claimed the CAP Act would increase cable company costs and lead to higher cable rates, and that since these requirements would not have applied to satellite operators the cable companies would have been placed at a competitive disadvantage. It also stated that the CAP Act would have allowed a local government subdivision to "trump the decisions made by the state franchising authority." NCTA incorrectly claimed, however, that the CAP Act would have allowed local franchising authorities to impose "unlimited PEG-related costs." In 2007, the FCC adopted rules and provided guidance that set restrictions on the process and requirements that local franchising authorities may employ when considering franchise applications from potential new cable service providers (such as telephone companies) and incumbents. The FCC based its actions on Section 621(a)(1) of the Communications Act, which prohibits franchising authorities from unreasonably refusing to award competitive franchises for the provision of cable services. The stated intent of the orders was to foster the ability of competitors to gain entry into video service markets and to enhance broadband development. The FCC argued that, under the current rules, competitors attempting to enter new markets faced unreasonable regulatory obstacles. In reaching its conclusions and constructing the specific rules constraining LFA requirements, the FCC admitted that for some of the allegedly restrictive requirements "few parties provided specific details." It referred to only a single incident to support its conclusion that disputes involving LFA-mandated contributions in support of PEG services and equipment were impeding video deployment and may have been leading to unreasonable refusal to award competitive franchises. It relied on statutory construction, rather than empirical evidence, when concluding that "adequate PEG access channel capacity, facilities, and financial support" means "satisfactory or sufficient" rather than "significant" support, and gives LFAs the freedom to establish their own PEG requirements "provided that the non-capital costs of such requirements are offset from the cable operator's franchise fee payments." That is, any PEG-related assessment imposed on the cable operator that is not a capital cost must be subtracted from the 5% fee cap, rather than imposed over and above the 5% fee. In its decision upholding the FCC's First Report and Order, the Sixth Circuit Court of Appeals found, based on the legislative history of the Cable Act, that costs relating to PEG equipment should be considered capital costs as long as they were incurred in or associated with the construction of PEG access facilities. Since Section 622(g)(2)(C) of the Communications Act only excludes PEG-related capital costs from the 5% fee cap for agreements in effect after October 30, 1984, the FCC's reliance on statutory construction seems straight-forward. But PEG advocates and the two FCC commissioners who dissented from the orders argue that the 1984 Cable Act permits a broader interpretation of what may be required from franchisees over and above the 5% franchise fee. They point to legislative history, including the House report accompanying the Cable Act, which states that the franchise fee does not include "any franchise requirements for the provision of services, facilities or equipment." They claim that the reference to "services" suggests that cable franchisees can be required to pay for non-capital PEG-related franchise requirements over and above a 5% franchise fee. Since the Communications Act does not define capital costs or service costs, PEG advocates and LFAs claim they are left with a large degree of uncertainty about what assessments LFAs may impose on cable franchisees over and above the franchise fee. Historically, many franchise agreements have required cable franchisees to pay for non-capital PEG-related costs, including salaries, training, travel expenses, rent, and some maintenance expenses. Going forward, cable franchisees that are required to pay a 5% franchise fee probably will be able to deduct these PEG costs from the franchise fees they pay LFAs. It is difficult to measure the impact that the FCC rules have had on PEG funding and on the financial viability of PEG access centers because neither the FCC, nor the PEG community, nor the cable industry has collected data on the levels and stability of PEG funding sources that might shed light on the impact, if any, of the FCC rules. For example, how common had it been for LFAs to require cable franchisees to make payments, over and above the 5% franchise fee, for PEG operations (as opposed to PEG capital costs)? In those cases, what are the realistic alternative funding options available for operating costs? To what extent, if at all, are private donations and foundation grants feasible options? If these options might be feasible in the long-run, but not short-run, how would PEG access centers stay afloat during the interim period? The CAP Act introduced in the 112 th Congress would have removed the distinction between capital and non-capital cost funding requirements and overruled the funding limitations in the FCC rules, setting higher caps on the amount of PEG funding a local jurisdiction could require. It explicitly would have allowed a local jurisdiction to continue to require a cable operator to provide PEG support, over and above any mandated franchise fee, up to the limits set in the bill. NCTA opposed these CAP Act provisions overruling the FCC rules, claiming they would have increased cable company costs and thus put upward pressure on cable rates and would have placed cable companies at a competitive disadvantage with satellite operators, which do not have PEG requirements. AT&T offers its U-verse multichannel video programming distribution service using an all-Internet Protocol (IP) technology platform. It is building out an optical fiber network to neighborhood nodes and using the existing copper connections already in place from those nodes to subscribers' premises. (Each neighborhood node serves several hundred end user customers.) This is a less capital-intensive alternative to the fiber-to-the-premises network being deployed by Verizon in its FiOS network. As copper has less capacity than fiber, the AT&T network does not simultaneously "broadcast" the signals of multiple video channels all the way to the customer premises, as cable companies do and as Verizon does with its FiOS network. Rather, it employs IP technology that allows the subscriber to use the set-top box to "call up" the particular video stream it desires from a centralized place where the video file is stored—the video hub office serving the designated market area (DMA) in which the subscriber is located or, if that video stream has already been requested by a neighbor served by the same neighborhood node, that neighborhood node. The major constraint on the AT&T U-verse network is the capacity of the copper loop. Currently, U-verse can provide at most two high-definition channels to a household simultaneously, and for many customers it can offer only a single high-definition channel at a time. To attain the level of audio and video signal compression needed to offer service, AT&T must encode the program signals using MPEG-4 compression methods. (MPEG-4 is an industry standard.) The content that AT&T receives from programmers is not encoded in MPEG-4 and therefore must be recoded. Each additional video stream (which appears as a "channel" to a subscriber) imposes two categories of incremental costs on AT&T: the cost of additional equipment to encode the programming and the cost of additional dedicated capacity on an AT&T server at a national or DMA hub to store the video stream. For programming that is provided in a continuing, changing flow—such as the programming of a cable or broadcast channel or a PEG channel—each additional video stream requires dedicated encoding equipment to recode the ongoing stream. For programming that is received once and then stored—such as the program library used for video-on-demand "channels"—there is no need for dedicated encoding equipment. Encoding equipment used for one video on demand program can be re-used for another video-on-demand program. Thus the incremental equipment cost associated with an additional video-on-demand program selection is lower than that associated with a cable or broadcast network or PEG channel. AT&T claims that the incremental encoding and server capacity costs associated with an ongoing video stream, such as that required for a cable or broadcast network or for a PEG channel, is approximately $200,000. In a large metropolitan area, with many local jurisdictions, each of which currently has several PEG channels, the upfront incremental cost of offering multiple PEG channels thus could be several million dollars. AT&T therefore has chosen not to make PEG programming available to subscribers in the same fashion that it makes commercial programming available. Instead, it treats PEG content the same way it treats Internet traffic. It has created a separate platform for PEG, with a single channel, channel 99, at which subscribers can find PEG programming, just as they have one channel for Internet access. The PEG content is not encoded in MPEG-4. Rather, the subscriber goes to channel 99 and pulls down a menu that identifies each of the local jurisdictions in the subscriber's DMA and, after clicking on the desired jurisdiction, gets a menu that identifies all the PEG programs for that jurisdiction, for the subscriber to choose from. The selected program is then downloaded to the user's set top box. PEG advocates claim there are a number of problems with this system. The subscriber may experience substantial delay—it can take a minute or more to first go to channel 99 and then navigate two drop-down menus—in getting to (and then away from) the chosen PEG program; the program (and the PEG channel) is not available in the same seamless fashion as non-PEG programming and channels. The PEG programming is not shown on AT&T's program guide; there is no way for the subscriber to know what programming is on a PEG channel without going to the channel. The AT&T PEG platform has not been fully accessible to hearing-impaired and visually-impaired viewers. It appears that AT&T has worked with Microsoft to better accommodate closed captioning for the hearing-impaired, but it continues to be difficult for the visually-impaired to perform the channel navigation required to get to and from PEG channels. AT&T PEG platform does not provide the capability to record the programming on a DVR. The picture quality on the AT&T PEG platform is inferior to that on AT&T's commercial channels; PEG is transmitted at a lower resolution and the picture may stutter when displaying rapid motion, as in a sports program. By requiring the PEG programmers to deliver their signals to a DMA-wide geographic area, rather than the local jurisdiction, those programmers may be liable for additional costs associated with the broader distribution of copyrighted materials. On January 30, 2009, a group of PEG advocates filed a petition with the FCC seeking a declaratory ruling that AT&T's method of delivering PEG channels over its U-verse system is contrary to the Communications Act and FCC rules. Citing a lack of FCC action on the petition, the PEG advocates filed another petition in September 2010, but to date the Commission has not acted on the petitions. In July 2011, American Community Television announced that PEG advocates asked eight state attorneys general to investigate PEG inaccessibility for the blind and visually impaired over AT&T's U-verse service. American Community Television also has called for the FCC to condition approval of the proposed AT&T/T-Mobile merger on the fulfillment of specific PEG commitments, analogous to the PEG conditions (discussed in the previous section of this report) that were part of the FCC order approving the transfer of broadcast licenses in the Comcast-NBC Universal merger. AT&T has filed detailed comments opposing the petitions for declaratory ruling. It explains that its IP network architecture is fundamentally different from the architectures used by the cable companies and Verizon, and contends that it is inappropriate to require it to deploy its network inefficiently in order to meet requirements conceived for traditional cable architecture. It argues that, even though its U-verse service is not a cable service and therefore not subject to the PEG requirements in the Communications Act and in FCC rules, the U-verse service nevertheless fully meets all those requirements. It also claims that its provision of PEG access offers subscribers three benefits: subscribers can view the PEG programming of all the local jurisdictions in their DMA, not just the programming of their specific community; channel 99 is an easy-to-remember, prime channel location; and PEG programming will be in a digital format that can easily be used for the Web, which enables communities to more easily provide the same content over the Internet. AT&T and its critics in the PEG community have constructed, and made available online, dueling videos that purport to show, respectively, the virtues and the vices of AT&T's U-verse provision of PEG programming. AT&T's video is available at http://uverseonline.att.net/uverse/peg ; its critics' video is available at http://www.youtube.com/watch?v=dlJ6Wtk1cqc . The CAP Act introduced in the 112 th Congress did not directly address these issues relating to PEG accessibility on AT&T's U-verse service, although the provision requiring cable companies to carry signals for PEG use from the point of origin of the signals to subscribers without material degradation and without altering or removing content or data provided, with the clarification that cable service is defined without regard to technology or transmission protocol, would have provided a statutory basis for ensuring that the PEG channels provided by AT&T included closed captioning for the hearing impaired. An institutional network is a communications system capable of transmitting video, voice, and/or data signals over optical fiber, coaxial cable, or both, among governmental, educational, and possibly other nonresidential users. Many local governments have required cable operators to construct and maintain, or in some fashion provide support for, an institutional network as a condition for the initial grant, transfer, or renewal of a cable franchise. Section 611(b) of the Communications Act allows a franchising authority to require a cable franchisee to set aside channel capacity on an institutional network constructed or operated by the cable operator for educational or governmental use. In the past, when cable systems typically were designed only to transmit television programming one way from cable operators to residential users, cable operators generally dedicated a limited number of channels to governmental and educational use or constructed stand-alone cable systems for that purpose. Today, cable systems routinely are constructed as hybrid fiber/coaxial cable networks with sufficient capacity and two-way capabilities to accommodate I-net requirements in a single integrated system. In some recent franchise agreements, local governments have obtained a number of "dark" optical fibers in addition to, or in lieu of, channel capacity, and are furnishing the end-user electronic equipment necessary to "light" the fibers themselves—providing vast amounts of broadband capacity at low cost. These new generation I-nets can support a broad range of uses, including high-speed Internet and intranet access; large-file uploads and downloads; program and data sharing within and among city departments and offices; geographic information system mapping (including graphic, tax, zoning, utility, right of way, legal, and other information in a single database that is searchable from any location); video conferencing; distance learning; vocational training; medical imaging; traffic control; environmental monitoring; management of water, sewer, and electric utilities; remote meter reading; video arraignments and depositions; video surveillance and security; emergency services; advanced library services and cataloguing; computer assisted design and computer assisted manufacturing; city-side or area-wide PBX-like 4-digit dialing; and direct access to long distance providers, avoiding local access charges. According to a fact sheet on I-nets prepared by the Baller Herbst Law Group, which represents many state municipal leagues and local governments on communications and utilities issues, the National Association of Telecommunications Officers and Advisors (NATOA) conducted a survey, to which 48 communities with I-nets responded, that found that in 56% of these communities, the cable operator built all or most of the I-net; in 13%, a telephone company built all or most of the I-net; and in 44% the local government itself built all or substantial components of the I-net. In 44% of those communities, the cable operator owns and maintains all or a portion of the I-net; in 19% a telephone company does so; and in 67% the local government owns and maintains all or a portion of the I-net. 25% of the responding communities share operations with a cable company and 19% share operations with a telephone company or electric utility. The new statewide franchising laws tend not to require new entrants to provide I-nets in their areas of operation if the incumbent cable company has already provided these facilities and there is no identified need to construct redundant networks. Some of these laws also would reduce or eliminate the I-net requirements in existing local franchise agreements or require the jurisdiction to pay the incremental cable network costs associated with providing the I-net. When the Alliance for Community Media performed an online survey of its members and NATOA members from around the country in May 2008 to assess the impact of statewide laws, it sought information on how the laws affected educational and governmental access channels and I-nets as well as public access channels. Of the 204 respondents, 26% reported a loss of or reduction in public cable drops in schools, libraries, and other public centers and 41% reported a loss of or reduction to services to I-nets that connect PEG facilities to schools and government institutions. These survey results must be viewed with some caution, however. The survey was not scientifically performed; PEG programmers or local officials who have experienced reductions in support likely would have had a greater incentive to participate in the online survey. Cable providers' I-net requirements may also have been clouded by the recent FCC orders which created ambiguity about what constitutes capital costs (and, therefore, what can be charged over and above the 5% franchise fee).

The environment for public, educational, and governmental (PEG) cable channels has been roiled by public policy and budgetary changes at the federal, state, and local levels and by technological changes in cable networks. More than 100 PEG access centers—which provide community groups and individuals free access to video production facilities and equipment, training, and programming time—have closed since 2005, and more may close when provisions in recently enacted state laws that eliminate requirements for cable companies to provide funding support take effect. Many PEG access centers, however, continue to have stable funding sources. When awarding franchises for the use of public rights of way to offer cable television service, many local jurisdictions required the cable companies to set aside some of their channel capacity for PEG use and to provide financial support for those PEG access channels. Those channels are not mandated by federal law. But the Cable Communications Policy Act of 1984 amended the Communications Act to explicitly allow franchising authorities to require cable operators to set aside channel capacity for PEG use and to provide adequate facilities or financial support for those channels. These PEG provisions have been a primary vehicle for fostering in cable systems the long-standing U.S. media policy goal of localism. Several recent developments are affecting the amount of financial support from cable providers and local governments for the PEG channels. In recent years, 21 states have enacted laws allowing cable systems to obtain statewide franchises. Some of these laws have abrogated or phased out PEG-related provisions in local franchise agreements requiring the franchisees to set aside channels, provide financial support, or provide studio facilities. In addition, the Federal Communications Commission (FCC) has adopted rules that may limit the amount of PEG financial support for non-capital costs that local franchise authorities can require of cable providers. Also, some local jurisdictions that have funded PEG operations are now facing budget deficits that are leading them to reduce or eliminate their PEG funding. Driven by technological changes, some cable operators have begun to offer PEG channels in a fashion that may reduce consumer access to, and the quality of, those channels, and may raise consumer costs to obtain PEG channels. As traditional cable providers are migrating from analog to digital transmission of programming, some subscribers must obtain set-top boxes to receive PEG programming. AT&T's U-verse service uses a different platform for PEG channels than for commercial channels. It is more difficult for subscribers, especially the visually impaired, to access the PEG channels, and PEG programming cannot be recorded on a DVR, leading some to claim the service does not meet requirements in franchise agreements or in the Communications Act. AT&T responds that it meets all requirements and it is inappropriate to require it to deploy its network inefficiently to meet rules developed for traditional cable architecture. One bill introduced in the 112th Congress, the Community Access Preservation (CAP) Act (H.R. 1746), would have allowed local jurisdictions in states that pass state franchise laws to require cable companies to provide PEG support equal to the greater of the amount required under the state law, the historical support required prior to enactment of the state law, or 2% of the gross cable revenues of the cable operator. That PEG support would not have been included in the statutory cap on franchise fees of 5% of revenues. The bill would have prohibited cable operators from charging subscribers for set-top boxes needed to receive PEG channels that are migrated from analog to digital tiers. The cable industry opposed the bill, claiming it would raise costs and rates and place cable operators at a competitive disadvantage with satellite television operators.

Economic growth and expanded global trade have led to substantial increases in goods movement over the past few decades. The growth in freight transportation demand, along with growing passenger-side demand, has caused congestion in many parts of the transportation system, making freight movements slower and less reliable. Because the condition and performance of freight infrastructure play a considerable role in the efficiency of the freight system, federal support of freight infrastructure investment is likely to be of significant congressional concern in the reauthorization of the surface transportation program. The program is currently authorized by the Moving Ahead for Progress in the 21st Century Act (MAP-21; P.L. 112-141 ) as extended to May 31, 2015, in the Highway and Transportation Funding Act of 2014 ( P.L. 113-159 ). There is significant disagreement about the best way to accomplish improvements in freight system infrastructure. Among the most important areas of disagreement are how to raise new funds for investment, the magnitude of the amounts required, how to set priorities, and the role of the federal government in the planning process. To some extent, these disagreements emerge from the diversity and complexity of the freight system itself, including its modal organization (truck, rail, water, air, and pipeline), the different levels of public and private ownership and involvement by mode, and competition among different regions of the country. The reauthorization of MAP-21 predominantly concerns highway funding. Consequently, the focus of this report is on truck freight and that portion of the rail industry that transports truck trailers and containers (intermodal freight). This report does not deal with operational issues that also may be of interest during reauthorization, such as hours of service and hazardous material transport safety. Moreover, this report does not discuss environmental issues associated with freight movements such as carbon emissions and climate change, air pollution emissions, and noise. The freight transportation system is a complex network of different types of transportation, known as modes, that carries everything from coal to small packages. It handles domestic shipments of a few miles as well as international shipments of thousands of miles. Rail carries the largest share of domestic freight measured in ton-miles, but only a small proportion by value ( Table 1 ), reflecting the fact that major rail cargos such as coal and grain have low ratios of value to weight. Trucks carry far more freight by value but less by ton-miles, as the average truck shipment travels a much shorter distance than the average rail shipment. Air transportation is a relatively minor mode for domestic shipments because it is expensive to ship goods by air. The proportions for international shipments to and from the United States are quite different than those for domestic shipments, with about three-quarters of goods, measured by weight, arriving or departing by ship. Measured by value, nearly one-fourth of U.S. international freight moves by air. Trucks run over a four-million-mile system of highways and streets. Of this, approximately 209,000 miles has been designated by the Federal Highway Administration (FHWA) as the "National Truck Network," a network of highways able to accommodate large trucks. This network includes the Interstate Highway System, which extends approximately 47,000 miles, plus principal arterial highways designated by the states. Trucks account for about 9% of vehicle miles traveled on the entire U.S. road system, but 15% of vehicle miles on Interstates and 24% on rural Interstates. The railroad sector is dominated by seven large railroads, or Class I carriers, that generally focus on long-distance moves. The Class I railroads are complemented by more than 500 short line and regional railroads (Class II and III) that tend to haul freight shorter distances, provide connections between the Class I networks, or connect the Class I network and ports. For the most part, railroad infrastructure, including track and associated structures and the land they occupy, is owned by the carriers themselves. The U.S. railroad network consists of approximately 140,000 miles of railroad, of which approximately 94,000 miles could be considered transcontinental or mainline railroad and 46,000 miles could be considered regional or local railroad. In some places, freight trains share space with intercity and commuter passenger trains. Although trucks and railroads often compete for shippers' business, they also may work together to complete freight movements. This is especially true in the case of long-distance movements. Railroads have established large intermodal yards designed for easy transfer of containers between trucks and trains at locations such as Edgerton, KS (BNSF) and North Baltimore, OH (CSX). In the face of high operating costs and a lack of drivers willing to undertake week-long trips, many truck lines now pick up freight from a shipper's premises, carry it to an intermodal terminal for transfer to a train, and then collect it at another intermodal terminal for delivery to its final destination. International shipments of containerized goods often move by rail between ports and inland terminals, with a truck connection to and from the rail terminal. This is why, as indicated in Table 1 , freight shipments moved by a combination of truck and rail tend to travel greater distances than goods moved by either mode singularly. Over the last decade, intermodal traffic has increased by nearly 30% (measured by the number of containers and truck trailers moved by railroads), making it the fastest- growing freight segment. While international trade growth traditionally has been the driver of intermodal growth, in recent years the number of domestic intermodal shipments has risen to nearly match the number of international shipments to and from the United States. Tonnage carried by trucks as a single mode has increased 14% over the last decade while rail tonnage carried as a single mode has increased by 7%. By 2040, U.S. DOT is forecasting that truck tonnage will increase by 43%, rail tonnage by 37%, and multimodal tonnage (of which intermodal is a subset) by 125%. Since 2011, the volume of coal carried by railroads, their most important revenue source, has declined significantly, while crude oil and drilling sand have suddenly become significant commodities for rail. The expansion of the Panama Canal, expected to be completed in early 2016, will allow the passage of container ships almost three times the current maximum capacity. The project may draw more Asian cargo through East or Gulf Coast ports at the expense of West Coast ports, but this is uncertain. Similarly, the enlarged canal could lead more grain grown in the Mississippi Valley to be shipped to Gulf Coast ports by barge for export to Asia rather than being shipped to West Coast ports by rail. The development of trade patterns will depend in part on the Canal's tolls and U.S. railroad rates. The arrival of larger container ships at Gulf Coast and East Coast ports could also exacerbate a persistent problem with moving trucks through port terminal gates efficiently. Growth in freight and passenger transportation demand has brought an increase in truck and rail congestion. This congestion is particularly pronounced in major urban areas that contain important freight hubs such as ports, airports, border crossings, and rail yards. As identified by the U.S. Department of Transportation (DOT), the 25 most congested segments for trucks are generally urban Interstate highway interchanges (see Appendix ). Six of the 25 most congested segments are in Houston and three are in Chicago. A trucking industry study estimates that 89% of the total costs of congestion for trucks are concentrated on 12% of Interstate highway mileage. Figure 1 depicts congestion on the highway system in the Southeast in 2011 during peak periods and how performance may deteriorate by 2040 without new capacity or operational improvements. Freight rail congestion has been episodic over the last couple of decades and has been caused by poor weather, demand surges, and railroad mergers. Currently, a boom in movements of crude oil from North Dakota, combined with a bumper harvest in 2014 and a residual backlog of shipments stemming from the severe winter of 2013-2014, is causing delays in rail service in the Upper Midwest. The railroad loading most of North Dakota's rail freight said it would spend $265 million in the state in 2014 to add parallel track segments. Both Class I railroads serving the state have blamed railroad congestion in Chicago, the crossroads of the North American rail system, as an underlying cause of current service issues (see text box). Local bottlenecks can take months if not years to resolve and may have effects across the entire rail network. Significant increases in train traffic on some lines have prompted upgrades to warning devices at grade crossings or interest in grade separation projects. Railroads seek changes to the environmental permitting process to expedite expansion projects. At land border crossings and seaports, congestion is less a matter of infrastructure constraints than staffing flexibility at customs booths and terminal gates. Truckers would like to see Customs and Border Protection better adjust staffing to accommodate daily peak crossing times at land border points of entry. Port terminal operators seek flexibility from longshoremen to extend truck gate hours to nights and weekends without charging premium rates. Long lines of trucks at some port terminals are also due to the bunching of port calls by steamship operators and their deployment of larger container ships. The prevalence of independent truckers, typically paid by the trip to the port, frustrates coordinated information processing and the truckers' ability to influence the situation. "U.S. port efficiency is among the lowest of world trading partners," according to one U.S. railroad. West Coast port inefficiencies are of particular concern for two of the nation's most valuable commodities exported in containers to Asia—chilled beef and pork. If more Asia-bound ships call at alternative ports in Canada, Mexico, or on the U.S. Atlantic Coast and reduce calls at U.S. Pacific Coast ports, chilled meat exports cannot easily be diverted to these ports because of their time sensitivity. There is no federal freight transportation program per se . Instead, the federal government promotes freight transportation through several programs that are designed to support both passenger and freight mobility. The most important of these are four of the five "core" programs of the federal-aid highway program, which collectively account for roughly 90% of highway spending authorized by MAP-21 and extension legislation. The four are the National Highway Performance Program ($22 billion authorized for FY2014); the Surface Transportation Program ($10 billion); the Highway Safety Improvement Program ($2.4 billion); and the Congestion Mitigation and Air Quality Program (CMAQ; $2.2 billion). The fifth core program, the Transportation Alternatives Program ($0.8 billion), is primarily aimed at supporting nonmotorized transportation. Because highway and bridge improvements benefit both freight and passenger mobility, it is impossible to say how much funding primarily benefits freight movement. Although there is no discrete freight transportation program, there are certain programs and provisions within programs that specifically pertain to freight projects. For example, under current law, if a project can be demonstrated to make an improvement to the efficient movement of freight, then DOT is authorized to allow a higher federal share of funding. For such projects on the Interstate Highway System the maximum federal share is 95%, more than the typical 90%, and for non-Interstate projects the maximum share is 90%, more than the typical 80%. Moreover, many types of freight infrastructure improvements are eligible uses of federal highway funds. For example, truck parking and certain surface transportation improvements in and around ports are eligible for Surface Transportation Program funding, and CMAQ funds may be used for advanced truck stop electrification systems if they contribute to attainment of an air quality standard. In addition to the core programs, MAP-21 also authorized two other small programs that have the potential to benefit freight movement. These are the Railway-Highway Crossings program and the Projects of National and Regional Significance (PNRS) program. The Railway-Highway Crossings Program, authorized at $220 million in both FY2013 and FY2014, provides funding to reduce hazards at public railway-highway crossings, potentially improving the movement of freight by rail and road. The PNRS program was originally authorized (with all funding earmarked) in the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU; P.L. 109-59 , Section 1301). It is intended to provide funding for high-cost projects with large nonlocal benefits, including highways, public transportation, rail facilities providing benefits to highway users, and intermodal facilities. The PNRS program was authorized in MAP-21 for a general fund appropriation of $500 million in FY2013 only. The appropriations committees, however, did not appropriate these funds. Instead, appropriators have continued to fund the Transportation Investment Generating Economic Recovery (TIGER) program, which provides grants on a competitive basis for a wide range of transportation projects that "will have a significant impact on the nation, a metropolitan area, or a region," as PNRS also was intended to do. Eligible projects include highways, public transportation, passenger and freight rail transportation projects, and port infrastructure investments. In FY2014, a single grant could be no more than $200 million, but had to be at least $10 million (or at least $1 million for projects in a rural area). Unlike most of the surface transportation program, funding for the TIGER program comes from the general fund of the U.S. Treasury, not the highway trust fund. Moreover, the program was not enacted as part of surface transportation authorization legislation. Instead, the TIGER program was created as part of the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ) and has been funded in six subsequent appropriations bills. Funding was $1.5 billion in FY2009, $600 million in FY2010, $527 million in FY2011, $500 million in FY2012, $474 million in FY2013 (after an across-the-board rescission and sequestration), $600 million in FY2014, and $500 million in FY2015. Arguably, the most nationally significant freight project funded by PNRS and TIGER is the Chicago Region Environmental and Transportation Efficiency Program (CREATE, see box). Other examples of freight-related projects supported by the TIGER program include: a $105 million FY2009 grant for the Crescent Corridor Intermodal Freight Rail Project (Tennessee and Alabama); a $98 million FY2009 grant for the National Gateway Freight Rail Corridor (Ohio, Pennsylvania, West Virginia, and Maryland); an $18.5 million FY2011 grant to the South Jersey Port Corporation for the repair of the DelAir railroad bridge; a $6.4 million FY2012 grant to the Tulsa Port of Catoosa, OK, to renovate the main dock of one of the largest ports on the inland waterway system; and a $1.5 million FY2013 grant to the Port of Garibaldi, OR, to rebuild a wharf and to improve port-highway intermodal access. The federal government supports surface transportation projects mostly through grant-based funding programs like the core highway programs and the TIGER program. Financing initiatives, on the other hand, are arrangements which rely primarily on borrowing. The federal government supports freight infrastructure financing arrangements mainly through direct loans and by means of tax preferences for certain types of bonds. The Transportation Infrastructure Finance and Innovation Act (TIFIA) program provides loans for highway projects, public or private freight rail facilities providing intermodal transfer, infrastructure providing access to intermodal freight facilities, and surface transportation improvements facilitating intermodal transfers or improved access at port terminals. As of February 23, 2015, according to DOT, TIFIA financing for all types of freight and non-freight projects amounted to $21.2 billion, with assistance provided to 50 projects costing a total of $77.1 billion. One of these projects, receiving a $341 million TIFIA loan, is the Port of Miami Tunnel, which opened August 3, 2014, to improve truck access to and from the port. MAP-21 greatly enlarged TIFIA by increasing its funding from $122 million annually to $750 million in FY2013 and $1 billion in FY2014. Funding was continued at the level of $1 billion annualized in the Highway and Transportation Funding Act of 2014. Because the government expects most of the loans to be repaid, the program's funding need only cover the subsidy cost of credit assistance and administrative costs. According to the Federal Credit Reform Act of 1990, Title V of the Omnibus Budget Reconciliation Act of 1990 ( P.L. 101-508 ), the subsidy cost is "the estimated long-term cost to the government of a direct loan or a loan guarantee, calculated on a net present value basis, excluding administrative costs" (Section 502(5)(A)). Consequently, the loan capacity of the TIFIA program is much larger than the budget authority available. A typical rule of thumb is that the average subsidy cost of a loan is 10%, meaning that $1 million of budget authority can provide $10 million of loan capacity. DOT estimated that after administrative costs and application of the obligation limitation it would have about $1.6 billion in total for credit subsidy support in FY2013 and FY2014. Assuming an average subsidy cost of 10%, this provided DOT with the capacity to lend about $16 billion. The Rail Rehabilitation and Improvement Financing (RRIF) program provides loans and loan guarantees through the Federal Railroad Administration (FRA) up to a total of $35 billion of unpaid principal, with $7 billion reserved for Class II and III railroads. Direct loans can be up to 100% of a project's cost and for a maximum term of 35 years. Interest is charged at the U.S. Treasury rate of a similar maturity. Eligible borrowers are state and local governments, government-sponsored authorities and corporations, railroads, joint ventures that include at least one railroad, freight rail shippers served by one railroad wanting to connect a facility to a second railroad, and interstate compacts. Eligible projects include buying or improving rail facilities and equipment, refinancing debt for such purposes, and developing new rail or intermodal facilities; operating expenses are not eligible. The RRIF does not receive an appropriation from Congress, but allows project sponsors to pay the subsidy cost (termed the "credit risk premium"). FRA evaluates applications for RRIF assistance by eligibility and the ability to repay a loan in terms of the applicant's creditworthiness and the value of collateral offered to secure the loan. These factors determine the credit risk premium. Since 2002, there have been 33 loan agreements totaling $1.7 billion. Loans for freight railroads have ranged in size from $234 million, made to the Dakota Minnesota and Eastern Railroad in 2004, to $56,000, made in 2011 to C&J Railroad. Most loans have been made to Class II and Class III freight operators that likely would be unable to obtain loans with comparable interest rates in the private market. Loans are typically relatively small; while the mean size of a loan is $52 million, the median is $17 million. Another source of financing for surface transportation projects, including freight projects, is state infrastructure banks (SIBs). Most of these were created in response to a federal-state infrastructure bank program originally established in surface transportation law in 1995 ( P.L. 104-59 ). According to a survey, by 2012, 32 states had established a federally authorized SIB. Although the authority to create a SIB in cooperation with the federal government still exists, MAP-21 failed to extend the authority to capitalize a SIB by using some of a state's apportioned and allocated federal highway and transit funds. In general, state infrastructure banks have not been very significant participants in financing surface transportation projects. Survey results indicate that between 1995 and 2012 federal and nonfederal SIBs entered into about 1,100 agreements worth a total of $9 billion, an average of about $8 million per agreement. About 71% of the projects helped by SIBs were highway projects, which accounted for 88% of the value of all projects supported by SIBs. Water, port, rail, and pipeline projects accounted for about 8% of the loans and 4% of the value of loan agreements. The availability of debt finance from other sources (particularly the municipal bond market) and the commitment of federal monies to traditionally funded projects may explain why SIBs have not had a more significant role in transportation investment. Debt financing typically involves selling bonds that must be repaid over time, with repayment coming from project revenues, such as tolls, or general government revenues. The federal government supports debt financing in a number of ways. Most importantly, the federal government allows state and local governments to issue bonds for public projects in which the interest paid to investors is exempt from federal tax. A special type of state and local government bond backed by future federal-aid highway grant funding is known as a Grant Anticipation Revenue Vehicle or GARVEE. In some cases in which there are significant private project benefits, a tax-exempt Private Activity Bond can be issued. The Secretary of Transportation must approve the use of Private Activity Bonds for qualified highway or surface freight transfer facilities and the aggregate amount allocated must not exceed $15 billion. As of January 14, 2015, $11.9 billion of the $15 billion had been allocated. Along with TIFIA, Private Activity Bonds have been important for the creation of public private partnerships in infrastructure investment, some of which have sponsored freight-related projects. One such project is a rail-truck transfer hub in Joliet, IL, near Chicago. The federal government has also authorized tax-credit bonds that provide the investor a federal tax credit or the bond issuer a direct payment. Build America Bonds, authorized by ARRA, were tax credit bonds that could be issued through December 31, 2010, for a wide range of infrastructure projects, including highways and ports. These bonds offered a tax credit equal to 35% of the amount of interest paid by the state or local government issuer or a direct payment to the issuer in an amount equal to 35% of the interest payable to investors. Because of the relatively high subsidy rate, BABs proved very popular. From April 2009 through December 31, 2010, there were 2,275 BAB issues in the total amount of $181 billion. The level of funding approved in MAP-21 reauthorization will be a key issue for surface transportation infrastructure generally, and freight infrastructure specifically. The federal share of highway capital spending since 2000 has typically been in the 40% to 45% range. In 2010, the most recent year for which comprehensive data are available, capital spending on highways by all levels of government was about $100 billion, of which about $44 billion (44%) was provided by the federal government. Of the federal share, $11.9 billion was provided by ARRA. FHWA estimates that to maintain the existing condition and performance of the highway system from 2011 through 2030 would require annual expenditure of between $65.3 and $86.3 billion (2010 dollars), depending on the rate of growth in vehicle miles traveled (VMT). This is between 14% and 35% less than was spent in 2010, although these differences drop to 2% and 26% if ARRA spending is excluded. To improve the condition and performance of the highway systems by implementing all cost-beneficial investments would require spending, FHWA estimates, between $123.7 and $145.9 billion annually (2010 dollars). An intermediate improvement scenario, assuming the implementation of investments with a cost-benefit ratio of at least 1.5, would require spending between $93.9 and $111.9 billion annually (in 2010 dollars). There is currently no public analysis of the conditions and performance of the national freight network. MAP-21 requires DOT to publish one every two years beginning in 2014. According to DOT, the first freight conditions and performance report will be released in the spring of 2015. Based on this type of research, freight transportation interest groups typically point to a gap between current and future infrastructure needs and current spending levels, a gap they believe will affect the county's economic competitiveness. For example, the National Association of Manufacturers argues that "the United States is stuck in a decade-long period of decline in overall infrastructure capital spending that will eventually harm job creation, future productivity and global competitiveness." To make up for this they argue "a more focused and results-driven effort that expands and sustains higher levels of investment from all public and private infrastructure sources would have positive short- and long-term economic returns." Stakeholder groups frequently raise the uncertainty of federal funding for freight projects as a concern. The view that there should be much greater government spending, particularly by the federal government, is not unanimous. Some of those appointed to a congressionally mandated commission looking at surface transportation issues argued that the extent of underfunding is exaggerated. The dissenters, including then-U.S. Secretary of Transportation Mary Peters, argued that "a failure to properly align supply and demand, not a failure to generate sufficient tax revenues, is the essential policy failure" in transportation infrastructure provision. A key ingredient of change, in their view, should be market-based reforms of highway systems allowing for much greater reliance on pricing (such as tolling rates that fluctuate with demand) and private sector participation. Moreover, they argue that the federal role ought to be reduced and refocused in order to allow innovation at the state and local level. Integrally related to the cost and performance of highway infrastructure is the weight of vehicles allowed to travel on them. Federal truck weight limits apply only to Interstate highways. Federal truck size regulations apply to the National Truck Network as indicated above. No major changes to truck size and weight provisions were included in MAP-21, but a new study and compilation of current state laws was required. The DOT study, expected to be issued in 2015, is going to evaluate several heavier or larger truck configurations. Among these are increasing the weight limit on five-axle trucks (commonly known as "18-wheelers") from 80,000 to 88,000 lbs., adding a sixth-axle and increasing allowable weight to either 91,000 lbs. or 97,000 lbs., and increasing the length of double 28-foot trailers ("pup" trailers) pulled by a single truck to 33 feet each. Large trucking firms generally support either weight or size increases (depending on the type of freight they carry) while smaller trucking firms (with less financial means to reconfigure their equipment), railroads, and highway safety groups have generally opposed both changes. While the level of infrastructure spending is important, the way in which priorities are set is also important. One frequent claim is that freight projects do poorly in the public planning processes of state departments of transportation and metropolitan planning organizations, the government entities that are largely responsible for deciding which public projects get built, because the general public values improvements to passenger travel more highly than improvement of freight movements. Planners in the public sector also can be uncomfortable advocating for projects with direct benefits to the private sector. Additionally, as the National Freight Advisory Committee claimed recently, freight projects may lose out "because their benefits spread nationally or regionally, beyond the boundaries of the funding entity." Addressing major freight bottlenecks with federal grants could be difficult politically because it would entail allocating large sums to relatively few, narrowly defined geographic areas. For example, according to the American Trucking Associations, just 5% of the U.S. road system carries 75% of the nation's truck traffic. Moreover, about 85% of the volume of containerized imports and exports is handled by 10 ports. In some cases, local planners may not fully appreciate that the competitiveness of local producers or manufacturers is most negatively affected by an infrastructure constraint outside their jurisdiction. A competitive discretionary program theoretically could fund the most valuable projects. One model of such a program is the federal New Starts program, which funds public transportation construction projects through a competitive process intended to direct significant funding to the best projects. However, this is done at considerable time and cost in developing and evaluating projects. Another discretionary program, the TIGER program, evaluates and funds projects much more quickly, but it has been criticized for accepting applications after the deadline, advancing low-scoring projects, and changing the evaluation of lower rated projects to "highly recommended" after they were chosen for funding. A 2014 GAO study noted that "an absence of documentation of such decisions can give rise to challenges to the integrity of the evaluation process and the rationale for the decisions made." An alternative way of setting priorities would be for Congress to create a program that distributes funds for freight projects by formula. The formula could give weight to whichever factors Congress considers most important. Spending eligibilities could be written to narrowly circumscribe project selection by state departments of transportation and metropolitan planning organizations (MPOs). Historically, however, funding formulas for federal surface transportation projects have distributed funding widely and allowed these funds to be used on a broad array of projects at the discretion of states and localities. Consequently, formula programs have not been well suited to funding large projects that might have the biggest national and regional benefits. The important role of multi-modal transportation in freight movement creates a particular challenge in setting spending priorities. Federal programs are typically focused on a single mode, making it difficult to support multi-modal projects, which are common in freight infrastructure. Eligibility rules also have tended to exclude local roads (known as intermodal connectors) that provide access between freight facilities, such as ports, airports, and rail terminals, and the main highway system. A further barrier to a multi-modal freight program could be the source of funds. If funding is provided only from taxes paid by highway users, there may be objection to expenditures that benefit entities such as railroads and water carriers that have not paid the taxes. Funding a freight program with user fees, rather than taxes paid only by highway users might address such objections. The federal government can also influence project prioritization through the planning processes of state departments of transportation and MPOs. MAP-21 made several changes to federal planning requirements in the area of freight, including provisions related to performance management. Among other things, MAP-21 required DOT to identify no more than 30,000 centerline miles of highway segments most critical to freight transport (a "Primary Freight Network," or PFN), the purpose being to assist states in prioritizing resources. DOT has issued for comment a draft PFN. DOT has indicated that the arbitrary mileage restriction for the PFN may limit its usefulness, and there have been suggestions that the mileage limit be lifted or abolished all together. MAP-21 also directed DOT to encourage each state to establish a freight advisory committee including industry representatives to develop a state freight plan. DOT is required to publish a national freight strategic plan by October 1, 2015. MAP-21 also required states to incorporate a performance-based approach to transportation planning in support of national goals. Performance targets are to be set by each state in coordination with MPOs. In its statewide plan, each state must include an evaluation of progress toward achieving its performance targets. Also required in each state's transportation improvement program is a description of how its investment priorities will help achieve the stated performance targets. Many of MAP-21's freight provisions have yet to be fully implemented; thus it is too soon to know if they will have a positive effect on the freight transportation system. However, freight planning and performance measures are placing greater emphasis on data collection (see Freight Data Needs). The revenues flowing into the highway trust fund that provide the bulk of the money for the existing highway and transit programs are insufficient to maintain the current level of spending. Greater federal funding for freight transportation infrastructure would require either reducing funding for other programs or generating new revenues. The main options in reauthorization to generate more funding for freight infrastructure would be to raise the federal fuels tax, to institute other freight-specific user fees, or to develop alternative financing mechanisms such as a National Infrastructure Bank and public-private partnerships (P3s). Another option might be to regularly fund highway programs with general funds. Advantages of raising the federal fuels tax in the short-to-medium term include the relatively large sums of money it generates, its low costs to change and administer, and its positive effects on economic efficiency. A one-cent-per-gallon increase in the fuels tax generates about $1.5 billion per year for the highway trust fund. A number of interest groups, including the American Trucking Associations and the Truckload Carriers Association, have expressed a willingness to support an increase in the federal fuels tax to fund surface transportation infrastructure investment. A study conducted by FHWA in 2000 concluded that federal motor fuel tax rates provided heavier freight trucks a cross-subsidy from lighter freight trucks and automobiles. But opposition to raising the fuels tax is widespread, and the Obama Administration has stated it does not support raising the fuels tax. Greater use of tolling could fund investment to relieve freight bottlenecks, such as road widening, bridge replacements, truck-only lanes, and new highways. Although the decisions to implement facility-specific charges and the institutional arrangements needed to support them are taken at the state and local level, there are some ways Congress might encourage such projects. For example, federal restrictions on highway tolls could be lessened or eliminated. Trucking groups have been particularly wary of proposals to fund highway construction through tolls, as they worry that toll rates could shift some costs from passenger vehicles to trucks. There is also concern that toll revenue may be diverted to uses other than the toll facility. Tolls could divert some trucks to toll-free highways that are less safe for large trucks. Some toll roads have mitigated the effects of tolls on road usage by allowing trucks to haul larger loads than on non-tolled facilities. New sources of revenue to provide money for freight infrastructure might include shipping container fees, customs revenue, a bill of lading fee, and a weight/distance tax. Some of these fees, though, would be expensive to collect, and others would generate relatively modest sums. For example, it would take a $1,650 annual truck registration fee to generate the same amount as a 10-cent increase in the fuels tax, roughly $15 billion annually. Proposals for new funding sometimes include the creation of a new trust fund or a new account in the highway trust fund. A freight transportation trust fund or freight transportation account could ensure that the revenues generated from freight-related uses are dedicated to freight-related improvement projects. Alternative approaches have involved creating a national infrastructure bank to provide low-cost, long-term loans on flexible terms for use on various types of projects, including freight projects, and providing greater subsidies to borrowers under the existing Railroad Rehabilitation and Infrastructure Finance program to encourage greater borrowing by freight railroads. Prior to January 1, 2015, Class II and Class III (or "short line") railroads were able to receive a tax credit, known as the "45G tax credit, for track maintenance" (26 U.S.C. §45G). H.R. 721 , introduced in the 114 th Congress, would extend this tax credit to the end of 2016. Tax credits for Class I freight railroads have also been proposed in the past ( H.R. 1806 , 111 th Congress). The credits are intended to support private investment in freight railroads without involving the government in deciding when and where that investment should take place. Since the heaviest trucks and railroads, particularly shortline railroads, often compete for the same freight, Congress may consider whether raising truck-related taxes that fund the Highway Trust Fund could be an appropriate method for encouraging rail investment. Several legislative proposals with significant freight provisions have been introduced in the 113 th and 114 th Congresses. The MAP-21 Reauthorization Act ( S. 2322 , 113 th Congress), reported out of the Senate Environment and Public Works Committee on May 15, 2014, would have created a new freight formula program, the National Freight Program (NFP). Funding for the NFP was set at $6 billion over the six years of the bill, starting with $400 million in FY2015 and increasing to $2 billion in FY2020. The bill also required the designation of a national highway freight network (NHFN) and, as a part of this, a primary highway freight network (PHFN). NFP funding was to be used only for projects on the NHFN, with a minimum percentage designated to projects on the PHFN. To be able to spend funds from the NFP, a state would have been required to create a state freight advisory committee and a state freight plan. The other legislative proposal was from the Obama Administration. Its bill, the Generating Renewal, Opportunity, and Work with Accelerated Mobility, Efficiency, and Rebuilding of Infrastructure and Communities throughout (GROW) America Act, was introduced by request in June 2014 ( H.R. 4834 , 113 th Congress).The act proposed to create two new grant programs for investments targeted to freight infrastructure, the Multimodal Freight Incentive Program and the National Freight Infrastructure Program. Together these programs were to be authorized at $10 billion over four years, with funding coming from the highway account of the transportation trust fund. Note: The President's FY2016 budget request includes the outline of a six-year GROW America Act that appears to be similar to its earlier proposal but with two extra years. The two new freight programs that would be authorized at $4 billion in year four of H.R. 4834 would continue at that level in years five and six of the new proposal. No other details are available. The Multimodal Freight Incentive Program, a formula program, was proposed in H.R. 4834 to fund highways, rail, landside port infrastructure, airport, and intermodal projects to improve freight movement. Funding was proposed to be $500 million in FY2015, $1 billion in FY2016, $1.5 billion in FY2017, and $2 billion in FY2018. The National Freight Infrastructure Program, a discretionary grant program in H.R. 4834 , was proposed to fund projects improving freight movement on highways, railroads, aircraft, waterways, or pipelines, as well as intermodal projects, and projects at international border crossings. Funding was proposed at $500 million in FY2015, $1 billion in FY2016, $1.5 billion in FY2017, and $2 billion in FY2018. H.R. 4834 would have required states that receive funding through the National Freight Infrastructure Program to establish state freight advisory committees and state freight plans. At the national level, the proposal required DOT to develop a national freight strategic plan and to "develop new tools and improve existing tools to support an outcome-oriented, performance-based approach to evaluate proposed freight-related and other transportation projects." H.R. 935 (114 th Congress) proposes to create a national freight network trust fund. Revenues to the trust fund would be 5% of the import duties collected by Customs and Border Patrol. Import duties that go to the general fund of the U.S. Treasury were approximately $32 billion in FY2014, 5% of which amounts to about $1.6 billion. H.R. 935 would use the trust fund to finance the National Freight Network Grant Program, a discretionary program that would fund a wide range of freight infrastructure projects. Another proposal for funding freight projects is a 1% tax on the amount paid for truck or rail shipments ( H.R. 1308 , 114 th Congress). H.R. 749 , as reported by the House Transportation and Infrastructure Committee in the 114 th Congress, seeks to expedite the permitting process for freight rail infrastructure projects.

Goods movement has increased substantially over the past few decades as the economy and global trade have expanded. Freight transportation demand in tandem with passenger-side demand has caused congestion in many parts of the transportation system, resulting in slower and less reliable freight movement. Also, the condition and performance of freight infrastructure play considerable roles in the efficiency of the freight system and, therefore, are likely to be of significant congressional concern in the reauthorization of the surface transportation program that is currently authorized through May 31, 2015. There is no specific federal freight transportation program. Instead, the federal government supports freight infrastructure through several programs that promote both passenger and freight mobility. The most important of these are four of the five "core" programs of the federal-aid highway program, which together account for roughly 90% of highway spending. One of those five programs, the Surface Transportation Program, also provides limited support for freight rail projects. Federal assistance to ports and inland navigation, waterborne shipping, and air freight are beyond the scope of this report. There is significant disagreement about the best way to accomplish improvements in freight system infrastructure. Among the most important points of contention are: The magnitude of the investments required and related policies to manage demand for existing transportation infrastructure as an alternative to increasing capacity. How to cover the cost. Most federal freight investments are currently funded through the highway trust fund, whose main source of revenue is taxes on motor fuels. These taxes no longer raise sufficient revenue to fund existing federal surface transportation programs, and proposals to increase federal spending on freight infrastructure are often linked to other fees or taxes that have not gained support in Congress. How to set priorities. Most federal highway funding is distributed by formula to state departments of transportation, which determine spending priorities in cooperation with metropolitan planning organizations. This process forces freight projects to compete with passenger-oriented projects, which may have greater support—especially when a proposed freight project primarily benefits so-called through trucks (rather than trucks making local pick-ups and deliveries). Changes in the law to establish priority for freight infrastructure would run contrary to the trend in recent reauthorization acts to give states greater discretion over their spending of federal highway funds. The role of the federal government in the planning process. The 2012 surface transportation reauthorization, the Moving Ahead for Progress in the 21st Century Act (MAP-21; P.L. 112-141), established a performance measurement system for state departments of transportation and metropolitan planning organizations. However, these provisions have yet to be fully implemented. Eventually, they are intended to lead to federal evaluation of state and local decision-making, which is likely to prove controversial.

For more than 50 years, the Small Business Administration (SBA) Disaster Loan Program has been a source of economic assistance to people and businesses stricken by disasters. Authorized by the Small Business Act, the program provides direct loans to help businesses, nonprofit organizations, homeowners, and renters repair or replace property damaged or destroyed in a federally declared or certified disaster. The SBA Disaster Loan Program is also designed to help small agricultural cooperatives recover from economic injury resulting from a disaster. SBA disaster loans include (1) Home and Personal Property Disaster Loans, (2) Business Physical Disaster Loans, and (3) Economic Injury Disaster Loans (EIDL). Most direct disaster loans (approximately 80%) are awarded to individuals and households rather than small businesses. The program generally offers low-interest disaster loans at a fixed rate. SBA disaster loans have loan maturities of up to 30 years. This report provides an overview of the Disaster Loan Program, discusses how disaster declarations trigger the SBA loan process, explains the different types of loans potentially available to disaster victims, and discusses terms and restrictions related to each type of loan. The report also provides data on the SBA Disaster Loan Program, including data related to the Gulf Coast hurricanes of 2005 and 2008, and Hurricane Sandy in 2012. This report also examines issues that may be of potential interest to Congress, such as SBA loan processing times, the implementation of expedited and immediate assistance programs required by Small Business Disaster Response and Loan Improvements Act of 2008, and the use of personal residences as collateral for business disaster loans. The following section describes the types of disaster loans available to homeowners, renters, and businesses, including the amount that can be borrowed, the program's loan terms, and eligibility requirements. Most SBA disaster assistance (roughly 80%) goes to individuals and households rather than businesses. SBA disaster assistance is provided in the form of loans, not grants, and therefore must be repaid to the federal government. Homeowners, renters, and personal property owners located in a declared disaster area (and in contiguous counties) may apply to SBA for loans to help recover losses from the disaster. Disaster loans provided to individuals and households fall into two categories: Personal Property Loans and Real Property Loans. A Personal Property Loan provides a creditworthy homeowner or renter located in a declared disaster area with up to $40,000 to repair or replace personal property owned by the victim. Eligible items include furniture, appliances, clothing, and automobiles damaged or lost in a disaster. These loans cover only uninsured or underinsured property and primary residences in a declared disaster area. Eligibility of luxury items with functional use, such as antiques and rare artwork, is limited to the cost of an ordinary item meeting the same functional purpose. Interest rates for Personal Property Loans cannot exceed 8% per annum or 4% per annum if the applicant is found by SBA to be unable to obtain credit elsewhere. Generally, borrowers pay equal monthly installments of principal and interest, beginning five months from the date of the loan. Loan maturities may be up to 30 years. Real Property Loans provide creditworthy homeowners located in a declared disaster area with up to $200,000 to repair or restore the homeowner's primary residence to its pre-disaster condition. Only uninsured or otherwise uncompensated disaster losses are eligible. The loans may not be used to upgrade a home or build additions to the home, unless the upgrade or addition is required by city or county building codes. Repair or replacement of landscaping and/or recreational facilities cannot exceed $5,000. A homeowner may borrow funds to cover the cost of improvements to protect their property against future damage (e.g. retaining walls, sump pumps, etc.). Mitigation funds may not exceed 20% of the disaster damage, as verified by SBA, to a maximum of $200,000 for home loans. As with Personal Property Loans, interest rates for Real Property Loans cannot exceed 8% per annum or 4% per annum if the applicant is unable to obtain credit elsewhere. Generally, borrowers pay equal monthly installments of principal and interest, beginning five months from the date of the loan. Loan maturities may be up to 30 years. SBA disaster assistance for businesses is also in the form of loans rather than grants and must therefore be repaid. SBA offers loans to help businesses repair and replace damaged property and financial assistance to businesses that have suffered economic loss as a result of a disaster. Disaster loans provided to businesses fall into two categories: Business Physical Disaster Loans and Economic Injury Disaster Loans (EIDL). Any business, regardless of size (other than an agricultural enterprise), located in a declared disaster area may be eligible for a Business Physical Disaster Loan. Business Physical Disaster Loans provide up to $2 million to repair or replace damaged physical property including machinery, equipment, fixtures, inventory, and leasehold improvements that are not covered by insurance. Damaged vehicles normally used for recreational purposes may be repaired or replaced with SBA loan proceeds if the borrower can submit evidence that the vehicles were used in their business. Businesses may utilize up to 20% of the verified loss amount for mitigation measures in an effort to prevent loss should a similar disaster occur in the future. Interest rates for Business Physical Disaster Loans cannot exceed 8% per annum or 4% per annum if the business cannot obtain credit elsewhere. As with personal disaster loans, borrowers generally pay equal monthly installments of principal and interest starting five months from the date of the loan. SBA will consider other payment terms if the business has seasonal or fluctuating income. Business Physical Disaster Loans maturities may be up to 30 years. EIDLs are available only to businesses located in a declared disaster area, have suffered substantial economic injury, are unable to obtain credit elsewhere, and are defined as small by SBA size regulations (which vary from industry to industry). For example, to be considered small, most manufacturing firms must have no more than 500 employees and most retail trade firms must have no more than $7 million in average annual sales. Small agricultural cooperatives and most private and nonprofit organizations that have suffered substantial economic injury as the result of a declared disaster are also eligible for EIDLs. Substantial economic injury "is such that the business concern is unable to meet its obligations as they mature or to pay its ordinary and necessary operating expenses." The maximum loan amount for an EIDL is $2 million. Loan proceeds can only be used for working capital necessary to enable the business or organization to alleviate the specific economic injury and to resume normal operations. The loan can have a maturity of up to 30 years and has an interest rate of 4% or less. Only victims located in a declared disaster area (and contiguous counties) are eligible to apply for disaster loans. Disaster declarations are "official notices recognizing that specific geographic areas have been damaged by floods and other acts of nature, riots, civil disorders, or industrial accidents such as oil spills." In general, the incident must be sudden and cause severe physical damage or substantial economic injury (such as tornadoes, hurricanes, and earthquakes). In contrast, some slow-onset events (incidents that unfold over time) such as shoreline erosion or gradual land settling are not viewed by SBA as declarable disasters. Droughts and below-average water levels in lakes, reservoirs, and other bodies of water may, however, warrant declarations. There are five ways in which the SBA Disaster Loan Program can be put into effect. These include two types of presidential declarations as authorized by the Robert T. Stafford Disaster Relief and Emergency Assistance Act (the Stafford Act), and three types of SBA declarations. While the type of declaration may determine what types of loans are made available, declaration type has no bearing on loan terms or loan caps. The following describes each type of declaration: 1. The President issues a major disaster declaration, or an emergency declaration, and authorizes both Individual Assistance (IA) and Public Assistance (PA). When the President issues such a declaration, SBA disaster loans become available to homeowners, renters, businesses of all sizes, and nonprofit organizations located within the disaster area. EIDL loans may also be made for victims in contiguous counties or other political subdivisions. 2. The President makes a major disaster declaration that only provides the state with PA. In such a case, a private nonprofit entity located within the disaster area that provides noncritical services may be eligible for an SBA disaster loan. The entity must first have applied for an SBA disaster loan and must have been deemed ineligible or must have received the maximum amount of assistance from SBA before seeking grant assistance from FEMA. Home and physical property loans are not provided if the declaration only provides PA. 3. The SBA Administrator issues a physical disaster declaration in response to a gubernatorial request for assistance. When the SBA Administrator issues this type of declaration, SBA disaster loans become available to eligible homeowners, renters, businesses of all sizes, and nonprofit organizations within the disaster area or contiguous counties and other political subdivisions. 4. The SBA Administrator may make an EIDL declaration when SBA receives a certification from a state governor that at least five small businesses have suffered substantial economic injury as a result of a disaster. This declaration is offered only when other viable forms of financial assistance are unavailable. Small agricultural cooperatives and most private nonprofit organizations located within the disaster area or continuous counties and other political subdivisions are eligible for SBA disaster loans when the SBA Administrator issues an EIDL declaration. 5. The SBA Administrator may issue a declaration for EIDL loans based on the determination of a natural disaster by the Secretary of Agriculture. These loans are available to eligible small businesses, small agricultural cooperatives, and most private nonprofit organizations within the disaster area, or contiguous counties and other political subdivisions. Additionally, the SBA administrator may issue a declaration based on the determination of the Secretary of Commerce that a fishery resource disaster or commercial fishery failure has occurred. As shown in Table 1 and Figure 1 , 4,210 declarations were issued from 2000 through 2014—an average of 279 a year. The greatest number of declarations (2,431) were issued by the Secretary of Agriculture (an average of 162 a year). In contrast, the fewest declarations came from the Secretary of Commerce (only two were issued during the time period). The following section describes the SBA Disaster Loan Program's trends and statistics including the number of disaster loan applications and amounts by loan type. As shown in Table 3 , SBA approved 533,628 disaster loan applications totaling over $26.5 billion for home, business, and EIDLs from 2000 to 2014. Both the number and amount of disaster loans approved vary from year to year, largely due to the varying severity of hurricane damages during the time period. Not all approved applicants accept the loans. Approximately 72% (380,450 loans) of approved disaster loans during the time period, amounting to roughly $15.5 billion, were actually disbursed to businesses and households. Figure 2 displays the percent of all approved loans that were disbursed each year. As shown in Table 3 and Figure 3 , from FY2000 to FY2014, 83.1% of disbursed disaster loans were home disaster loans (including Home Physical Disaster Loans and Personal Property Loans), 11.2% were for Business Physical Disaster Loans, and 5.7% were EIDLs. As shown in Table 3 , SBA disbursed 21,862 EIDLs from FY2000 to FY2014. These loans totaled approximately $2.0 billion. The average number of disbursed EIDLs per year from FY2000 to FY2014 was 1,457. The average amount of EIDLs provided by SBA per year during the same period was $135 million. As shown in Table 3 , SBA disbursed 316,004 home disaster loans (including Home Physical Disaster Loans and Real Property Loans) from FY2000 to FY2014. These loans totaled approximately $9.7 billion. The average number of disbursed home disaster loans per year from FY2000 to FY2014 was 21,067. The average amount of home disaster loans provided per year during the same period was $650 million. As shown in Table 3 , SBA disbursed 42,584 Business Physical Disaster Loans from FY2000 to FY2014. These loans totaled approximately $3.7 billion. The average number of disbursed Business Physical Disaster Loans from FY2000 to FY2014 was 2,839. The average amount of Business Physical Disaster Loans provided per year during the same period was $247 million. Several issues related to the SBA Disaster Loan Program may be of interest to Congress, including disaster loan processing times, the implementation of expedited and immediate assistance programs mandated by the Small Business Disaster Response and Loan Improvement Act of 2008, the use of personal residences for loan collateral, and the use of grants, as opposed to loans, to help businesses respond and recover from disasters. The SBA was criticized for not processing disaster loan applications in a timely manner following the Gulf Coast hurricanes of 2005 and 2008. On September 25, 2009, Manuel Gonzalez, Director of the SBA Houston District Office, testified before the Senate Committee on Small Business and Entrepreneurship that the agency's 2008 response to Hurricane Ike demonstrated programmatic improvements. According to Gonzalez, loan processing times had decreased and better interagency cooperation had been achieved. Gonzalez conceded, however, that there was still room for improvement. In FY2009, SBA's goal was to process 85% of disaster loan applications within 14 days for home disaster loans and within 18 days for business physical disaster loans and EIDLs. SBA continued to compare its actual performance against this standard even though it subsequently specified reduced standards of 27 days for home disaster loans and 30 days for business physical disaster loans and EIDLs in FY2013 Since then, SBA has established more approximate processing standards based on tiered levels of application volumes for all disaster loans: two to three weeks for less than 50,000 applications per year (level I); three to four weeks for 50,001—250,000 applications per year (level II); four-plus weeks for more than 250,000 applications per year (level III); and more than four-plus weeks for more than 500,000 applications per year (level IV). According to SBA, the percent of disaster loans processed within its new, tiered standard performance goal was 100% in FY2010, 100% in FY2011, 95% in FY2012, 55% in FY2013, and 100% in FY2014. SBA noted that its lower performance in FY2013 was largely due to increased loan volumes following Hurricane Sandy. Hurricane Sandy made landfall in southern New Jersey on October 29, 2012. The hurricane caused approximately $67 billion in damages, displaced more than 775,000 persons, and resulted in at least 59 fatalities. As of May 12, 2015, SBA had approved 36,911 hurricane Sandy disaster loans, totaling approximately $2.49 billion. In January 2013, there was a backlog of over 29,000 disaster loan applications pending processing. SBA extended office hours, shifted personnel, reallocated work, and hired additional personnel to address the backlog. It also created two expedited loan processes: one for home loans for applicants with relatively high incomes and good credit scores, and another for EIDLs. As a result of these efforts, the backlog was reduced to about 3,000 by April 2013. An SBA OIG study found that SBA's expedited process for home disaster loans reduced the application processing time by 2.3 days (18.7 days versus 21 days) compared to the standard processing method and SBA's expedited process for business disaster loans increased the application processing time by 4.4 days (43.3 days versus 38.9 days) compared to the standard processing method. The SBA OIG also found that neither of the expedited methods reduced the overall time from application acceptance to initial loan disbursements. Congress may be concerned that SBA disaster loans should be processed more quickly following major disasters, like Hurricane Sandy, in order to provide timely assistance to businesses and households. Congress could conduct oversight on loan processing and explore potential methods that might improve loan processing time. For example, SBA is moving from paper-based to electronic platforms to reduce processing times. On the other hand, some might caution that processing loans too quickly could potentially lead to waste, fraud, and abuse. From this perspective, Congress could examine methods for reducing processing time while guarding against the unintended consequence of an increased potential for loan fraud and abuse. In response to criticism of SBA's disaster loan processing following the Gulf Coast hurricanes of 2005 and 2008, and in an effort to improve SBA's Disaster Loan Program, Congress passed the Small Business Disaster Response and Loan Improvements Act of 2008 ( P.L. 110-234 ). The act included a number of measures to improve SBA's Disaster Loan Program. The act is divided into three parts as follows: Part I, Disaster Planning and Response: Part 1 of the act includes a number of measures intended to improve SBA's coordination with other agencies when responding to disasters. For instance, Section 12062(a)(5) requires the SBA administrator to ensure that the agency's disaster assistance programs are coordinated, to the maximum extent practicable, with FEMA's disaster assistance programs. Section 12063(5) requires that the administrator make every effort to communicate, through radio, television, print, and internet-based outlets, all relevant information needed by disaster loan applicants. Section 12069(a) requires that if SBA's primary facility for disaster loan processing becomes unavailable, another disaster loan processing facility must be made available within two days. Part II, Disaster Lending: Part 2 of the act provides additional loan amounts in certain circumstances, reforms some of SBA's loan processes, and grants SBA authority to defer payments of loans made to homeowners and businesses affected by the 2005 Gulf Coast hurricanes. For example, Section 12081 grants the SBA administrator authority to provide additional disaster assistance for events that cause significant loss of life or damage, Section 12084 establishes the Immediate Disaster Assistance Program, Section 12085 establishes an Expedited Disaster Assistance Loan Program, and Section 12086 allows the SBA administrator to carry out a program to refinance Gulf Coast disaster loans. Part III, Miscellaneous: Part 3 of the act pertains to reporting requirements for SBA disaster assistance programs. Section 12091 requires, after a major disaster, the SBA administrator to submit to the Senate Committee on Small Business and Entrepreneurship, the Senate Committee on Appropriations, the House Committee on Small Business, and the House Committee on Appropriations a report on the operation of the Disaster Loan Program not later than the fifth business day of each month during the applicable period for a major disaster. The reports must include the daily average lending volume (in number of loans and dollars), the percentage by which each category has increased or decreased since the previous report, the amount of funding available for loans, and an estimate of how long the available funding for salaries and expenses will last, based on SBA's spending rate. Among the programs intended to improve SBA's Disaster Loan Program are three guaranteed loan programs established in Part II of the act: the Expedited Disaster Assistance Loan Program (EDALP), the Immediate Disaster Assistance Program (IDAP), and the Private Disaster Assistance Program (PDAP). These programs are intended, in part, to help homeowners and business who are in immediate need of assistance. Section 12084 of the act required the SBA Administrator to establish and implement IDAP. It would provide businesses interim "bridge loans" through private sector lenders of up to $25,000 within 36 hours after SBA receives the loan application. Section 12085 of the act required the SBA Administrator to establish and implement EDALP which would provide up to $150,000 in "bridge" loans to businesses more quickly than standard SBA disaster loans. EDALP was designed to disburse the loans more quickly than standard SBA disaster loans. Section 12083 required the SBA Administrator to establish and implement PDAP. PDAP would provide up to $2 million in guaranteed loans to both businesses and homeowners. A 2014 GAO report found that SBA had not piloted or implemented the three programs. Consequently, these programs were unavailable in response to Hurricane Sandy. In the case of IDAP, SBA responded that informal feedback from various lenders indicated the "parameters of IDAP would make it difficult to implement." SBA also stated that it had developed forms and drafted a procedural guide but had not a conducted formal evaluation including lender feedback. While SBA has initiated the development of forms and procedural guidelines for the new programs, Congress may be concerned the loan programs are not being implemented in a timely manner. Congress may also be concerned that households and businesses may not have access to expedited loan assistance in future disasters if SBA fails to implement the mandated programs. With respect to lender feedback, Congress could conduct oversight concerning potential methods that could encourage lenders to participate in the program. To the extent that worthwhile assets are available, adequate collateral is required as security on all SBA loans. Assets such as equipment, buildings, accounts receivable, and (in some cases) inventory are considered by SBA as possible sources of repayment if they can be sold by the bank for cash. Collateral can consist of assets that are usable in the business as well as personal assets that remain outside the business. Collateral includes items such as a lien on the damage or replacement property, a security interest in personal/business property, or both. Loan recipients can assume that all assets financed with borrowed funds will be used as collateral for the loan. However, SBA generally will not decline a loan when inadequacy of collateral is the only unfavorable factor in a disaster loan application and SBA is reasonably sure that the applicant can repay the loan. SBA may decline or cancel loans for applicants who refuse to pledge available collateral. SBA does not require collateral for the following: EIDL . Generally, SBA does not require collateral to secure EIDLS of $25,000 or less. Physical Disaster Home and Physical Disaster Business Loans : SBA will not require collateral to secure a physical disaster home or physical disaster business loan of $14,000 or less. In addition, if a major disaster declaration is declared, SBA generally will not require collateral to secure a physical disaster home or physical disaster business loan of $25,000 or less. SBA requires collateral for loans larger than the amounts specified above as well as certified appraisals for loans greater than $250,000 secured by commercial real estate. In addition, SBA may require professional appraisals of both business and personal assets, plus any necessary survey and/or feasibility study. When real estate is being used as collateral, banks and other regulated lenders are required by law to obtain third-party valuation on transactions of $50,000 or more. According to the report published by the Bipartisan Task Force on Hurricane Sandy Recovery, some businesses could not obtain an SBA disaster loan unless they used their personal residences as collateral. Some business owners who lacked other forms of collateral were reluctant to use their personal residences as collateral because it was the only tangible asset they had left after the storm. The report also indicated that some businesses could not afford disaster loans even with six months grace periods and interest rates of 1%. Congress could explore methods that help business owners obtain disaster loans without using their personal residences as collateral, or prohibit SBA from requiring personal residences as collateral for disaster loans. For example, S. 956 , the Small Business Disaster Reform Act of 2015 would prohibit SBA from requiring a small business owner to use their primary residency as collateral if the owner has other assets with a value equal to, or greater than, the loan amount that could be used. With respect to the affordability of disaster loans, one potential solution suggested by the Bipartisan Task Force was the use of direct grants—similar to grants provided households by the Federal Emergency Management Agency (FEMA)—to help businesses rebuild and recover from disasters. Some, however, might express concern over the costs associated with providing grants. For example, between 2004 and 2013, FEMA provided renters and homeowners roughly $16 billion in grants through its Individual and Households Program (IHP). Providing grants to businesses could significantly increase federal expenditures for grant assistance. Critics of providing grants may also argue that, traditionally, grants have not been provided to businesses by Congress because businesses are responsible for obtaining insurance as part of their business portfolio. As mentioned earlier in this report, disaster loans have statutorily established ceilings on interest rates. Floors on interest rates, however, are not statutorily set. In general, interest is based on current average market rates as determined by the SBA Administrator (unless market rate exceeds the ceilings). Interest rates may therefore vary from disaster to disaster. For example, the interest rates for business loans in 2011 for businesses affected by flooding in Pennsylvania had an interest rate of 4% while interest rates for businesses affected by Hurricane Katrina in 2005 had an interest rate of 2.9%. To some, this may be perceived as inequitable. In other cases, some individuals and households cannot repay their loans despite the lower interest rates. Some may argue that Congress should establish a set interest for all disasters. Congress may also consider lowering interest rates for existing disaster loans. For example, H.R. 2857 , introduced in the 113 th Congress, would have restructured qualifying disaster loans at a lower rate. Congress could also consider offering loan forgiveness to those who are having difficulty repaying their loans. As a general rule, SBA does not offer loan forgiveness unless Congress intervenes. One exception was granted after Hurricane Betsy, when President Lyndon B. Johnson signed the Southeast Hurricane Disaster Relief Act of 1965. Section 3 of the act authorized the SBA administrator to grant disaster loan forgiveness or issue waivers for property lost or damaged in Florida, Louisiana, and Mississippi as a result of Hurricane Betsy. The act stated that ... to the extent such loss or damage is not compensated for by insurance or otherwise, (1) shall at the borrower's option on that part of any loan in excess of $500, (A) cancel up to $1,800 of the loan, or (B) waive interest due on the loan in a total amount of not more than $1,800 over a period not to exceed three years; and (2) may lend to a privately owned school, college, or university without regard to whether the required financial assistance is otherwise available from private sources, and may waive interest payments and defer principal payments on such a loan for the first three years of the term of the loan. Others may argue that interest rates are sufficiently low and that interest rates are needed to cover the administrative costs associated with disaster loans. Low interest rates and forgiveness could undermine SBA efforts to recoup some of the costs needed to administer the program. Supporters of the SBA Disaster Loan Program might contend that the SBA Disaster Loan Program has made improvements since Hurricane Katrina made landfall in 2005. They may argue that loan processing times have been reduced and interagency coordination has improved as evidenced by the response to hurricanes Gustav and Ike. On the other hand, others might argue that the SBA response to Hurricane Sandy indicates loan processing time still needs to be addressed. Some may also be troubled by SBA's perceived slow progress in implementing some of the requirements set forth in the Small Business Disaster Response and Loan Improvements Act of 2008 such as the implementation of EDALP and IDAP. They may further contend that the agency's response could have been more successful had these programs been in place before Hurricane Sandy. Why Does SBA Issue Disaster Loans Instead of FEMA? In 1978, President Jimmy Carter signed Executive Order 12127. The order merged many of the disaster-related responsibilities of separate federal agencies into the Federal Emergency Management Agency (FEMA). During FEMA's formation, it was determined that SBA would continue to provide disaster loans through the Disaster Loan Program rather than transfer that function to FEMA. At the 1978 hearing before a Subcommittee of the Committee on Government Operations, Chairman Jack Brooks questioned the rationale for keeping the loan program outside of FEMA. According to James T. McIntyre, Director, Office of Management and Budget (OMB), the rationale was as follows: [O]ne of the fundamental principles underlying this proposal is that whenever possible emergency responsibilities should be an extension of the regular missions of federal agencies. I believe the Congress also subscribed to this principle in considering disaster legislation in the past. The Disaster Relief Act of 1974 provides for the direction and coordination, in disaster situations, of agencies which have programs which can be applied to meeting disaster needs. It does not provide that the coordinating agency should exercise direct operational control.... [I]f the programs ... were incorporated in the new agency we would be required to create duplicate sets of skills and resources.... [S]ince the Small Business Administration administers loan programs other than those just for disaster victims, both the SBA and the new agency [FEMA] would have to maintain separate staffs of loan officers and portfolio managers if the disaster loan function were transferred to the new Agency.... [O]ne of our basic purposes for reorganization ... would be thwarted if we were to have to maintain a duplicate staff function in two or more agencies. McIntyre added, "We believe we have achieved a balance in this new agency [FEMA] between operational activities and planning and coordination functions." He further stated that "we can provide better service to the disaster victims if oversight of disaster response and recovery operations is vested in an agency which can adopt a much broader prospective than would be possible if this agency [FEMA] had operational responsibilities as well." Additionally, a clause in the Stafford Act that prohibits recipients of disaster aid from receiving similar types of aid from other federal sources is often cited as a rationale for keeping the entities distinct. Section 312 of the act states: The President, in consultation with the head of each Federal agency administering any program providing financial assistance to persons, business concerns, or other entities suffering losses as a result of a major disaster or emergency, shall assure that no such person, business concern, or other entity will receive such assistance with respect to any part of such loss as to which he has received financial assistance under any other program or from insurance or any other source. SBA Disaster Loan Approvals for Applicants in Gulf Coast States The following figures are provided to help frame discussions concerning SBA Loan Program activity in the Gulf Coast in response to the 2005 and 2008 hurricane seasons.

Through its Office of Disaster Assistance (ODA), the Small Business Administration (SBA) has been a major source of assistance for the restoration of commerce and households in areas stricken by natural and human-caused disasters since the agency's creation in 1953. Through its disaster loan program, SBA offers low-interest, long-term loans for physical and economic damages to businesses to help repair, rebuild, and recover from economic losses after a declared disaster. The majority of the agency's disaster loans, however (over 80%) are made to individuals and households (renters and property owners) to help repair and replace homes and personal property. The three main types of loans for disaster-related losses include (1) Home and Personal Property Disaster Loans, (2) Business Physical Disaster Loans, and (3) Economic Injury Disaster Loans (EIDL). Home Physical Disaster Loans provide up to $200,000 to repair or replace disaster-damaged primary residences. Personal Property Loans provide up to $40,000 to replace personal items such as furniture and clothing. Business Physical Disaster Loans provide up to $2 million to help businesses of all sizes and nonprofit organizations repair or replace disaster-damaged property, including inventory and supplies. Business Physical Disaster Loans and EIDLs also provide assistance to small businesses, small agricultural cooperatives (but not enterprises), and certain private, nonprofit organizations that have suffered substantial economic injury resulting from a physical disaster or an agricultural production disaster. EIDLs provide up to $2 million in financial assistance to businesses located in a disaster area that have suffered economic injury as a result of a declared disaster (regardless if there has been physical damage to the business). Congressional interest in the Disaster Loan Program has increased in recent years primarily because of concerns about the program's performance in responding to the Gulf Coast hurricanes of 2005 and 2008 as well as Hurricane Sandy in 2012. This report describes the SBA Disaster Loan Program, including the types of loans available to individuals, households, businesses, and nonprofit organizations, and highlights issues that may be of potential congressional concern. These concerns include SBA loan processing times, the use of personal residences as collateral for business disaster loans, and the implementation of expedited and immediate assistance programs required by Small Business Disaster Response and Loan Improvements Act of 2008.

This report provides an overview of selected campaign finance policy issues that have received recent legislative attention, or have otherwise been prominent, and which could receive attention during the 111 th Congress. Specifically, the report emphasizes nine issues: (1) bundling; (2) campaign travel aboard private aircraft; (3) electronic filing of Senate campaign finance reports; (4) the Federal Election Commission (FEC); (5) hybrid political advertising; (6) joint fundraising committees; (7) public financing of presidential campaigns; (8) 527 organizations; and (9) the related topic of restricting campaign activity among certain state election officials. The report includes a brief overview of each issue followed by a discussion of recent legislation (if any) and policy considerations. Legislative or regulatory activity, developments during recent election cycles, or a combination of all those factors suggest that each issue will remain a topic of debate during the 111 th Congress. This report is not intended to provide an exhaustive discussion of each topic. In some cases (noted throughout the report) other CRS products provide additional detail. The topics addressed in this report are typically considered separately, suggesting targeted legislation if Congress chooses to revisit the issues. The 111 th Congress could also consider broad legislation addressing one or more campaign finance issues. However Congress decides to proceed, the debate will likely be shaped by questions of (1) amounts and sources of money; (2) transparency; and (3) scope of regulation. As the final section of this report discusses, these factors unify the seemingly disparate policy issues discussed in the report and are common themes in the debate over campaign finance policy. During the 110 th Congress, approximately 50 legislative measures affecting federal campaign finance policy were introduced. Two became law. Most significantly, the Honest Leadership and Open Government Act (HLOGA; P.L. 110-81 ) restricted campaign travel aboard private aircraft and required political committees to report additional information to the FEC about certain contributions bundled by lobbyists. In addition, late in the second session of the 110 th Congress, the FEC's Administrative Fine Program, which had been scheduled to expire, was extended until 2013 ( P.L. 110-433 ). Other issues received hearings or floor votes but did not become law. These included House passage of legislation affecting campaign payments to candidate families ( H.R. 2630 , Schiff); disbursement of campaign funds by non-treasurers ( H.R. 3032 , Jones (NC)); and funding for certain criminal enforcement of the Bipartisan Campaign Reform Act ( H.R. 3093 , the relevant provision was an amendment sponsored by Representative Pence); A Committee on House Administration, Subcommittee on Elections, hearing on automated political telephone calls; Senate Rules and Administration Committee hearings on public financing of congressional campaigns ( S. 1285 , Durbin); coordinated party expenditures ( S. 1091 , Corker); electronic filing of Senate campaign finance reports ( S. 223 , Feingold); FEC nominations; and automated political telephone calls ( S. 2624 , Feinstein). Perhaps the most prominent policy concern for the second session of the 111 th Congress has been developments surrounding a recent Supreme Court ruling. On January 21, 2010, the Court issued a 5-4 decision in Citizens United v. Federal Election Commission . A legal analysis of the case is beyond the scope of this report and, indeed, the precise implications of the case remain to be seen. Additional discussion of various policy and legal issues appears in other CRS products. In essence, however, the opinion invalidated aspects of the Bipartisan Campaign Reform Act's (BCRA) electioneering communication provision, which had prohibited corporations and unions from using their treasury funds to air broadcast ads referring to clearly identified federal candidates within 60 days of a general election or 30 days of a primary election or caucus. Perhaps more notably, the decision also overturned the Supreme Court's 1990 ruling in Austin v. Michigan Chamber of Commerce , which had upheld restrictions on corporate-funded independent expenditures. ( Citizens United appears not to affect the ban on corporate or union contributions to political candidates.) As a consequence of Citizens United , corporations—and presumably unions—now appear to be free to use their treasury funds to air political advertisements explicitly calling for election or defeat of federal (or state) candidates. Previously, such advertising would generally have had to be financed through voluntary contributions raised by political action committees (PACs) affiliated with unions or corporations. Unlimited, albeit independent, expenditures by corporations and unions has spurred legislative action in Congress, although no post- Citizens United measures have become law. Possible policy responses for those favoring additional regulation include enacting public campaign financing legislation, altering contribution limits, pursuing shareholder protection initiatives, easing restrictions on coordinated party expenditures, or amending the Constitution, among others. By contrast, those who believe that Citizens United correctly strengthens corporate speech rights may prefer the status quo, in which case no legislative action may be necessary. Thus far, most congressional attention responding to the ruling has focused on the DISCLOSE Act ( H.R. 5175 ; S. 3295 ; S. 3628 ). The House of Representatives passed H.R. 5175 , with amendments, on June 24, 2010, by a 219-206 vote. By a 57-41 vote, the Senate declined to invoke cloture on companion bill S. 3628 on July 27, 2010. A second cloture vote failed (59-39) on September 23, 2010. The bill remains on the calendar. On a related note, on July 29, 2010, the Committee on Financial Services ordered reported H.R. 4790 . The bill would require additional disclosure of political expenditures to corporate shareholders and is designed as a partial response to Citizens United . Some of the issues considered during the 110 th Congress might be—or have been—addressed again during the 111 th Congress. Others became prominent during recent election cycles, especially 2008, and appear to be ongoing. The following discussion provides additional detail about selected issues that may continue to be on the legislative or oversight agenda. The Federal Election Campaign Act (FECA) assigns campaign treasurers with primary responsibility for filing FEC reports and ensuring that political committees comply with the act. Treasurers—not candidates—are legally responsible for disbursing campaign funds. In fact, FECA does not specify a role for candidates in campaign financial decisions. As a practical matter, however, candidates may exert substantial informal influence over campaign spending. In recent Congresses, some Members have expressed concern about how campaign funds would be spent in the event a candidate died. On March 25, 2009, the House Committee on Administration reported H.R. 749 (Jones, NC) by voice vote and without amendment. The bill would permit candidates to designate to the FEC an individual to direct campaign spending following the candidate's death. That designation would supersede the treasurer's normal spending responsibilities, but would not affect the treasurer's reporting or other responsibilities. A backup could also be identified if the designee died, became incapacitated, or were unable or unwilling to carry out his or her responsibilities. The bill also permits candidates to specify their wishes about how funds would be disbursed. On April 22, 2009, H.R. 749 passed the House by voice vote and under suspension of the rules. The measure was subject to only brief debate and received bipartisan support. H.R. 749 is virtually identical to H.R. 3032 , also sponsored by Representative Jones, and which the House passed on July 15, 2008, under suspension of the rules and by voice vote. The Senate took no action on the bill during the 110 th Congress, nor has it done so thus far during the 111 th Congress. H.R. 749 , and its predecessor ( H.R. 3032 ) have received bipartisan support amid candidates' desires to influence their campaign spending and make their wishes clear. To that end, H.R. 749 could alleviate the potential for asset disputes following candidate deaths. That outcome, however, depends on designees adhering to candidate wishes, and assumes that designees would be more faithful to candidate wishes than would be treasurers. H.R. 749 could create different levels of candidate authority over spending in life than in death. Specifically, although H.R. 749 would provide a mechanism for circumventing the treasurer after a candidate dies, the bill would not provide additional remedies for such action while the candidate is living. This may be a minor distinction due to candidates' de facto influence over their campaigns, despite FECA's general silence on the issue. Nonetheless, if Congress chose to enact H.R. 749 and felt it were important to create parity in candidates' abilities to direct campaign spending, it could amend FECA to create a clearer candidate role over campaign funds regardless of whether the candidate is living or dead. Congress might also provide explicit permission in FECA for candidates to hire and fire campaign treasurers. Bundling is a fundraising practice in which an intermediary either receives contributions and passes them on to a campaign or is credited with soliciting contributions that go directly to a campaign. Lobbyists often serve as bundlers. Bundling has been prominent in recent years both because of the additional disclosure required in HLOGA and because of the role bundling played in the 2008 presidential elections. Bundling opponents contend the practice allows individuals to circumvent FECA by delivering larger contributions than they could on their own, even though those contributions are funded by multiple sources. Critics also point to anecdotal evidence suggesting that some contributions routed through bundlers might have been coerced or come from impermissible sources. Nonetheless, bundling is not prohibited by FECA or FEC regulations; it is also a common fundraising practice. The FEC unanimously approved rules implementing HLOGA's bundling provisions on December 18, 2008. An "explanation and justification" (E&J) statement approved in February 2009 provided additional guidance and clarified the commission's decision-making process. HLOGA's major requirement regarding bundling, and the major requirement in the new bundling rules, is that political committees report contributions "reasonably known" to be bundled if at least two of those contributions aggregated at least $15,000 ($16,000 as adjusted for inflation in 2010) during specified reporting periods. Only contributions bundled by registered lobbyists must be included in bundling disclosure reports. Committees are to determine whether bundlers are registered lobbyists by consulting the websites of the Clerk of the House, Secretary of the Senate, or FEC (in the case of PACs maintained or controlled by registered lobbyists). The commission noted in the new rules that other sources of knowledge about lobbyists' bundling activities could also trigger reporting requirements. (As discussed in the next section, however, credit plays a more prominent role in bundling disclosure than does knowledge.) Two aspects of the new bundling rules have generated some controversy. The first concerns whether political committees "credit" particular lobbyists with raising bundled contributions. Under the new rules, political committees are required to report contributions as being bundled only if the committee has awarded (through external recognition or internal records) credit to a particular lobbyist or lobbyists for having bundled the contributions. As the commission noted in the E&J, a lobbyist merely claiming to have bundled contributions does not necessarily warrant disclosure, nor does committee knowledge of a lobbyist being a bundler if the committee has not credited that person with bundling for the committee. According to the commission, "[M]ere knowledge [of bundling], in and of itself, is not enough. Rather, it is necessary for a reporting committee to credit through 'records, designations, or other means of recognizing that a certain amount of money has been raised' before reporting is required." The second area of contention, related to the first, concerns how credit is awarded for jointly hosted fundraising events. Under the new rules, all hosts of joint fundraising events would have to be listed in bundling disclosure reports only if those hosts were registered lobbyists and were credited by the campaign with raising bundled contributions that met the $16,000 threshold. As the FEC stated in the E&J, for example, an event co-hosted by three lobbyists that generated $20,000 would require bundling disclosure attributing the entire amount to only the one lobbyist the committee credited with having been responsible for raising the funds (assuming the committee did not award credit to the other two). In cases in which more than one lobbyist is credited with raising funds, the committee must report the share raised by and credited to each individual. Some groups have criticized both these components of the rules, suggesting that they could permit political committees to avoid disclosing bundling activities simply because they do not award tangible credit for doing so. The joint-fundraiser provisions, they say, also could allow committees to avoid disclosing the roles of some bundlers through manipulation of crediting arrangements. The FEC, however, contends that awarding credit is the "focus of HLOGA Section 204" [the bundling provision] and that the rules are consistent with the law's legislative history. If Congress chooses to revisit bundling policy, two perspectives could be relevant. The first emphasizes reporting information about bundling. The second emphasizes further regulating bundling practices . From the reporting (disclosure) perspective, a key question is whether campaigns should continue to be permitted to provide information only about bundling by registered lobbyists. If so, existing requirements could be sufficient, provided that Congress is satisfied with the reporting criteria established in HLOGA and FEC regulations. Congress may also wish to monitor continued FEC implementation of the HLOGA requirements and the effectiveness of the new reporting process, which took effect during the spring and summer of 2009. If it chose to do so, Congress could also amend Section 204 of HLOGA to require different disclosure than is articulated in the new bundling rules. From a broader perspective, Congress may wish to increase transparency about bundling overall, including by non-lobbyists. A relatively straightforward way to do so could be to extend the existing disclosure requirements to cover bundling by anyone, regardless of profession. During the 110 th Congress, S. 2030 (Obama) essentially proposed such an approach; the bill did not advance beyond committee referral. If Congress adopted the view that bundling should be discouraged or reduced, additional regulation could be necessary. For example, limits could be applied to the amount or number of contributions arranged by a single bundler. Bundling could also be banned altogether. Depending on specifics, however, a ban could prohibit even basic fundraising involving multiple contributors. For those who believe that bundling circumvents FECA, additional restrictions or disclosure requirements could enhance transparency, limit the prevalence of bundling, or both. On the other hand, those restrictions could increase compliance burdens for the regulated community. Finally, those who view bundling as an efficient and effective fundraising practice may object to further regulation. In addition to the bundling restrictions discussed above (and other issues), HLOGA restricts campaign travel on private, non-commercial aircraft (e.g., charter jets). Before HLOGA became law, under 2003 FEC regulations political committees were permitted to reimburse those providing private aircraft at the rate of first-class travel as long as commensurate first-class commercial service were available for the route flown. Reimbursement at non-discounted coach or charter rates was required if commensurate first-class service were unavailable on the route. By contrast, under HLOGA, Senators, candidates, and campaign staff may continue to travel on private aircraft only if they reimburse the entity providing the aircraft for the "pro rata share of the fair market value" for rental or charter of a comparable aircraft (e.g., the charter rate). The latter rates would typically be well above the old first-class rate that applied to most flights before HLOGA took effect. Unlike their Senate counterparts, House Members, candidates, and campaign staff are "substantially banned" from flying aboard private, non-commercial aircraft, as HLOGA precludes reimbursements for such flights. Although the FEC adopted rules to implement HLOGA's air-travel provisions in December 2007, a required explanation and justification statement was not adopted before the commission lost its policymaking quorum in January 2008. Consequently, the air-travel rules were never published in the Federal Register and never took effect. Additional nominees were confirmed to the commission in June 2008, bringing the agency back to full policymaking strength. However, the commission did not finalize the HLOGA travel regulations until November 2009. Under the rules adopted by the FEC on December 14, 2007—but never finalized—Senate, presidential, and vice-presidential campaign travel aboard private aircraft was required to be reimbursed at the "pro-rata share" of the charter rate. These requirements also would have applied to travel on behalf of PACs (including leadership PACs ) and party committees. In essence, this meant that presidential, vice-presidential, or Senate campaign travel occurring aboard charter aircraft would have had to be paid for based on charter rates. HLOGA essentially banned reimbursement for House campaign travel aboard private aircraft, as was evident in the 2007 rules. On November 19, 2009, the commission revisited the travel rules at an open meeting. During the meeting, commissioners debated congressional intent in the relevant section (601) of HLOGA and potential interpretations of the statute. A motion to approve an explanation and justification (E&J) statement supporting the December 2007 rules failed by a 3-3 deadlocked vote along partisan lines. Immediately afterward, alternative rules and an accompanying E&J were approved by a 4-2 vote in which Chairman Walther (I) joined Republican Commissioners Hunter, McGahn, and Petersen to constitute a majority. Consequently, the new rules and E&J superseded the never-finalized 2007 rules. A detailed discussion of the lengthy and complex new rules is beyond the scope of this report. Essentially, however, the 2009 rules distinguish between restrictions on campaign travel and travel on behalf of PACs or political parties. The rules also require charter-rate reimbursement in some circumstances but permit reimbursement at coach, first-class, or charter rates (depending on the route flown) in others. Specifically, the new rules require that candidate -oriented travel for presidential, vice-presidential, and Senate travel be reimbursed at the charter rate. By contrast, travel on behalf of party committees or leadership PACs may be reimbursed based on the 2003 regulations (often the first-class rate). House campaign travel—including for House-oriented leadership PACs—aboard private aircraft remains, essentially, prohibited, although travel on behalf of House party committees could be reimbursed at the 2003 rates. Controversy has emerged over the degree to which the November 2009 rules reflect congressional intent as enacted in HLOGA. Some opponents of the new rules suggest that Congress clearly intended for charter-rate reimbursement to apply to all campaign-related travel, even if parties or PACs pay for the flights. They also argue that the rules could provide cover to avoid the more expensive charter-rate reimbursement simply by classifying travel as on behalf of PACs or parties rather than individual Senate campaigns. Defenders of the new rules, however, suggest that Congress required charter-rate reimbursement only for presidential, vice-presidential, or Senate candidate travel and that it would be improper for the FEC to require PACs or parties to reimburse at the charter rate (unless no commercial service were available). If Congress objects to the new rules, as at least one Senator has, oversight or legislation could be employed. For example, the charter rate could be applied to all campaign travel regardless of whether the travelers are doing so for candidates, parties, or PACs. In addition, Congress could clarify that restrictions on reimbursement by House leadership PACs are also intended to apply to Senate leadership PACs. Congress could also essentially ban Senate campaign travel aboard private aircraft, as is already the case for House campaign travel. As an alternative (or addition) to legislation, Congress could choose to monitor implementation of the new rules to determine whether travel reported as PAC and party travel actually primarily benefits those entities, or whether it appears to subsidize Senate campaigns. Finally, as is often the case with FEC rulemakings, Congress or others could pursue litigation to revisit the rules. By contrast, however, those who believe that the new rules accurately reflect congressional intent or are otherwise acceptable would likely prefer the status quo, in which case little or no congressional action is necessary. Unlike all other federal political committees (except those raising or spending less than $50,000 annually), Senate campaign committees, party committees, and PACs are not required to file campaign finance reports electronically. Senate reports are also unique because they are filed with the Secretary of the Senate rather than directly with the FEC. In the 110 th Congress, the Senate Committee on Rules and Administration reported S. 223 (Feingold), which would have extended electronic filing to Senate reports. The bill was never considered on the Senate floor, despite attempts to bring it up under unanimous consent. Despite the lack of success in the 110 th Congress, electronic filing remains a widely popular policy proposal. In the 111 th Congress, Senator Feingold has introduced S. 482 . That bill is substantially similar to S. 223 from the 110 th Congress. Senator Feingold has also introduced S. 1858 , which would amend FECA to both require electronic filing and reporting directly to the FEC. The Senate versions of the DISCLOSE Act ( S. 3295 and S. 3628 ) also contain electronic filing provisions. Two major policy questions surround electronic filling. Both are straightforward. First, should Senate campaign finance reports be filed electronically? Second, if so, where should those reports be filed? The primary arguments in favor of electronic filing concern efficiency and expense. Currently, a contractor converts the paper reports filed with the Secretary into electronic format. The FEC then makes the reports publicly available on the Internet. The conversion process can take weeks or months at a reported cost of $250,000 annually. As a result, House campaign finance data filed electronically (and directly with the FEC) are routinely available well before Senate data. Various Members of Congress, campaign finance groups, and media organizations have supported electronic filing. Both the FEC and the Secretary of the Senate have stated publicly that their offices are, or can be, prepared to administer electronic filing. Electronic filing could eliminate the conversion process and make public disclosure of the data much faster. Electronic filing could, therefore, improve transparency and reduce costs. Requiring electronic filing of Senate reports would also place the same filing responsibilities on Senate committees that currently exist for House candidate committees, party committees, and PACs. As a result, uniform filing standards would apply to all political committees. There is little, if any, notable opposition to electronic filing itself. However, some Members have called for addressing other campaign finance disclosure issues alongside electronic filing. For example, attempts in the 110 th Congress to bring up S. 223 were unsuccessful amid a dispute over whether the bill would be amended to require groups filing ethics complaints to disclose their donors. Similarly, at a March 2007 Senate Rules and Administration Committee hearing on S. 223 , Senator Stevens emphasized the need to also consider disclosure requirements for 527 organizations. Filing location has been a secondary issue of debate. Senate reports are currently filed with the Secretary of the Senate rather than with the FEC. Bypassing filing with the Secretary of the Senate could make reports more readily accessible to the public and could reduce delay or costs associated with transmitting the reports to the FEC. If campaign finance reports are considered Senate documents, however, some may object to their being filed with the FEC. During the 110 th Congress, Senator Feinstein reported at a markup of S. 223 that Senator Byrd raised concerns about the possibility of filing directly with the FEC because he viewed filing with the Secretary as a matter of Senate prerogative. The 1974 FECA amendments established the FEC, which enforces civil compliance with campaign finance law. The commission also facilitates disclosure of federal campaign finance data and administers the presidential public financing program. Six presidentially appointed commissioners lead the agency; the Senate may confirm or reject nominations to the FEC. The 110 th Congress enacted one bill affecting the agency's functioning. P.L. 110-433 , which President George W. Bush signed in October 2008, extended authority for the FEC's Administrative Fine Program (AFP) until 2013. (The program had been set to expire at the end of 2008.) The AFP sets standard penalties for routine financial-reporting violations and requires fewer resources than the commission's full enforcement process, which can involve protracted negotiations, litigation, or both. During the 111 th Congress, the FEC has had and will have responsibility for implementing any changes to campaign finance law that Congress enacts or judicial rulings that affect campaign finance law or regulation. Internal commission issues, including "deadlocked" votes—those which fail to achieve at least a four vote majority for or against an action—are also potentially noteworthy. As noted elsewhere in this report, commission rulemakings, particularly on campaign travel aboard private aircraft, could also receive congressional consideration. Perhaps the most fundamental policy question surrounding the FEC is the status of the agency itself. Questions about the commission's structure and effectiveness have long been a topic of debate. In the 111 th Congress, for example, S. 1648 (Feingold) would replace the FEC with a proposed Federal Election Administration (FEA). Major provisions of the bill would establish a three-member governing body with enhanced enforcement powers. Two similar bills, H.R. 421 (Meehan) and S. 478 (McCain), were introduced in the 110 th Congress. Neither bill advanced beyond committee referral. Other FEC issues would not necessarily warrant legislative action, but could be relevant for oversight or appropriations matters. In particular, Congress may wish to monitor the agency as the FEC continues to recover from a six-month loss of its policymaking quorum. Between January and June 2008, only two commissioners remained in office due to a nominations dispute. As a result, the commission was unable to approve (among other things) agency rules and enforcement actions. As noted previously, loss of the commission's operating quorum continues to be relevant for issues left unresolved from the period, such as, until recently, the HLOGA travel rules. Commission enforcement and operations could also be of interest to Congress. Some Members of Congress have also expressed concern about deadlocked votes at the commission (which can, but do not necessarily, affect enforcement issues). In January 2009, the FEC held two days of hearings on various operations issues. At these wide-ranging sessions, a variety of election lawyers and interest-group representatives both praised and criticized the FEC's procedures and transparency. The agency is also currently reconsidering its Internet presence, including how various constituencies are served through the FEC website. The commission held July and August 2009 hearings on the topic. The commission will also have responsibility for implementing regulatory changes resulting from litigation such as Citizens United . Finally, nominations to the FEC, subject to Senate advice and consent, have received legislative attention during the 111 th Congress. On April 30, 2009, the terms of two commissioners expired. The term of a third commissioner had already expired. As Table 1 shows, the term of Commissioner Ellen Weintraub expired in 2007. She remains at the agency in holdover status. The terms of Commissioners Donald McGahn and Steven Walther expired on April 30, 2009; they may also continue to serve in holdover status. A commissioner may remain in office after the expiration of his or term unless or until (1) the President nominates, and the Senate confirms, a replacement; or (2) the President, as conditions permit, makes a recess appointment to the position. On May 1, 2009, President Obama announced his intention to nominate Service Employees International Union (SEIU) associate general counsel John J. Sullivan to the commission. (Sullivan would have replaced Commissioner Weintraub.) The Senate Rules and Administration Committee held a brief hearing on Sullivan's nomination on June 10, 2009. Various campaign finance interest groups took opposing positions on the Sullivan nomination. In particular, groups such as the Campaign Legal Center and the Center for Competitive Politics reportedly disagreed about the extent to which Sullivan's positions—as expressed while representing the SEIU before the FEC—would have affected his ability to enforce FECA and FEC regulations, particularly regarding political advertising. At the June 10, 2009, Senate Rules and Administration Committee hearing, Sullivan noted that his SEIU work reflected advocacy on behalf of his client, not necessarily his personal willingness to enforce law or regulation. Three Senators who attended the hearing (Chairman Schumer, Ranking Member Bennett, and Senator Chambliss) expressed support for Sullivan's nomination and noted that they expected him to be confirmed. The committee favorably reported the nomination by voice vote on June 11, 2009. However, the nomination then received no additional action in the Senate. President Obama withdrew the nomination in August 2010. As of this writing, no replacement has been nominated. Hybrid advertising references a clearly identified candidate and makes generic references to other candidates of a political party (e.g., "John Doe and our Democratic team"). Hybrid ads are of potential legislative concern because of a cost-sharing practice associated with the ads. With traditional advertising, the sponsoring entity typically covers all costs. With hybrid advertising, the party and the candidate's campaign committee share costs. An FEC rulemaking on the issue has been open since May 2007. The controversy over hybrid advertising concerns whether the method of paying for those advertisements undermines FECA. Those calling for additional regulation of hybrid ads have suggested that cost-sharing represents a "loophole" that permits parties to improperly subsidize campaign spending. This is particularly noteworthy for publicly financed presidential campaigns, which must agree to limit their spending as a condition of receiving public funds. Cost-sharing might also be viewed as way of circumventing limits on coordinated party expenditures. Those who object to current cost-sharing practices allege that shared costs primarily benefit only the named candidate yet allow that candidate's campaign committee to pay for only a portion (e.g., 50%) of the advertising. Some groups have urged the FEC to adopt regulations attributing 100% of the cost to the named candidate. If Congress determines that additional regulation of hybrid advertising is necessary, it could wait for the FEC's ongoing rulemaking to proceed. However, it is unclear if or when the agency will issue new rules. Alternatively, Congress could legislate particular cost-sharing requirements. Doing so could close the arguable loophole surrounding hybrid ads, but would also involve legislating in a technical area more typically left to the FEC. Congress could also choose to make no changes if it determines that hybrid ads do not circumvent FECA or that additional regulation is unnecessary. Those opposed to additional restrictions suggest that existing FEC regulations provide sufficient guidance on various cost-sharing arrangements, including hybrid advertising. Additional restrictions, including legislation, could also minimize parties' flexibility to allocate costs according to individual circumstances. That flexibility was a central concern for various party representatives who testified at a July 2007 FEC hearing. Finally, cost-sharing associated with hybrid ads could also be viewed as the continuation of a long tradition of various contacts between parties and campaigns during campaigns. Therefore, some may fear that additional restrictions on hybrid advertising could threaten the relationship between parties and candidates. Joint fundraising committees were particularly active in the 2008 presidential race, but also supported House and Senate contests. Joint committees are of potential legislative concern because some observers contend that they facilitate large contributions that would otherwise be impermissible under FECA. FECA limits contributions from individuals as shown in Table 2 . In 2007-2008, individuals could contribute no more than $4,600 to a candidate campaign ($2,300 for the primary campaign and another $2,300 for the general-election campaign). As the table shows, individuals could also donate up to $28,500 annually to national party committees and up to $10,000 annually to state or local party committees. During the 2008 cycle, joint fundraising committees affiliated with the Democratic and Republican presidential campaigns collected contributions that exceeded the limits discussed above. In some cases, the committees (often called "victory funds") reportedly received contributions of $70,000 or more from a single source. Joint committees then distributed those contributions, in permissible amounts (i.e., consistent with the individual contribution limits), to other political committees. Recipients included each party's presidential campaign, their legal and accounting compliance committees, national party committees, and party committees in targeted states. As Congress considers whether or how to restrict joint fundraising committees, a key question is whether the House and Senate believe joint committees circumvent FECA. Some joint committees represent an "extra" way to support candidates above the individual contribution limits. A coalition of interest groups has urged the 111 th Congress to ban joint fundraising committees. If Congress chooses to restrict joint committees, at least four options exist. First, joint committees could be prohibited. Second, candidate participation in joint fundraising could be restricted. Third, Congress could restrict joint committees' abilities to transfer funds to other recipients. Fourth, FECA or FEC regulations on coordination could be amended to encompass joint fundraising. If joint fundraising committees were prohibited or restricted, those who wanted to support more than one political committee would have to contribute directly to those committees, within the limits established in FECA. Applying the coordination restrictions to joint committees could limit the amount of permissible transfers among committees. Any of these options could make it more difficult for individuals to make contributions to a single source in the hopes of benefitting multiple recipients. Conversely, Congress could choose to maintain the status quo if it determines that joint committees do not violate the spirit of FECA. In turn, this conclusion depends on whether one believes that joint committees are a backdoor method of supporting individual candidates or whether joint committees support a variety of party-building activities, as existing FECA provisions and FEC regulations appear to assume. Some also contend that joint committees represent an efficient way to funnel large aggregate contributions, in permissible amounts, to targeted states and political committees. No legislative action is necessary to maintain the status quo. Despite introduction of congressional public financing legislation in virtually every Congress since the 1950s, House and Senate campaigns have always been privately financed. The 1980s and early 1990s were the most intensive period of congressional activity on public financing of House and Senate campaigns. Congressional public financing legislation has only passed both chambers and been reconciled in conference once, during the 102 nd Congress (1991-1992). President George H.W. Bush vetoed the legislation ( S. 3 ), which would have provided additional funds to those facing certain high-spending opponents, in addition to matching funds and broadcast and postal benefits in certain cases. Momentum for congressional public financing legislation subsided by the mid-1990s and early 2000s. The issue has received renewed attention in recent Congresses. Five congressional public financing bills were introduced in the 110 th Congress: H.R. 1614 (Tierney), H.R. 2817 (Obey), H.R. 7022 (Larson), S. 936 (Durbin), and S. 1285 (Durbin). All five bills proposed to publicly fund House or Senate campaigns. All focused on providing grants and other benefits designed to cover all costs of participating candidates. None of the bills advanced out of committee, although the Senate Rules and Administration Committee held a hearing on various congressional public financing issues, including S. 1285 , in June 2007. Five congressional public financing bills have been introduced in the 111 th Congress. The first bill introduced, H.R. 158 (Obey), would essentially mandate public financing during House general elections by prohibiting candidate spending other than from a proposed public financing fund. In exchange, candidates would receive grants designed to cover full campaign costs. Second, H.R. 2056 (Tierney) proposes a "clean money, clean elections" model, in which participants would receive a combination of grants and matching funds in exchange for limiting campaign spending. Three other bills, H.R. 6116 (Larson), H.R. 1826 (Larson), and S. 752 (Durbin), propose voluntary public financing that provides a base subsidy, matching funds, and, except for H.R. 6116 , broadcast vouches. Unlike most public financing proposals, however, the three bills would not impose spending limits on participants, provided that their private fundraising were limited to $100 contributions (per election) from individuals. The Committee on House Administration held a July 28, 2009, hearing on H.R. 1826 . H.R. 6116 , introduced in September 2010, is apparently intended to supersede H.R. 1826 . The committee ordered H.R. 6116 reported on September 23, 2010. The debate over public financing of congressional campaigns is more than 50 years old. In brief, supporters say that public financing can reduce the threat of political corruption, enhance electoral competition, and allow candidates to focus on issues rather than raising money. On the other hand, opponents suggest that private financing is sufficient, particularly in an era when public funds are needed for various other government services. Some public financing opponents believe that government-funded campaign subsides amount to "welfare for politicians." The spending limits that also often accompany public financing proposals also raise constitutional concerns for those who criticize public financing proposals. In addition to those perennial issues, one of the most significant questions surrounding public financing proposals is how to design a program that provides enough benefits to allow participants to mount robust campaigns. The level of benefits and spending limits offered in exchange for participation in public financing is particularly important. The three companion bills, H.R. 6116 , H.R. 1826 , and S. 752 contain a familiar combination of grants and other benefits for participating candidates. Unlike most other proposals, however, the bills would not limit participants' expenditures, provided that their spending were limited to allocations from proposed public financing funds or private fundraising of no more than $100 per individual contributor, per election. These "small dollar" contributions would also be eligible for federal matching funds. Regardless of the chosen approach, public financing would not altogether eliminate private money in politics. Virtually all proposals require some private fundraising to establish viability, albeit far less than under private financing. In addition, some observers fear that public financing creates opportunities for more financial influence from less accountable sources, such as independent expenditures and election-related "issue advocacy" by interest groups. Public financing systems generally do not regulate fundraising or spending outside candidate campaigns, although legislation could address such issues. Perhaps the most prominent campaign finance issue during the 2008 election cycle was the status of the presidential public financing system. Even before the 2008 campaigns began in earnest, the cycle was widely perceived as the last in which the current public financing system could survive without major reform. The program suffers from low taxpayer participation, resulting in funding shortfalls during recent elections. As the program's financial resources and public participation generally declined in recent elections, so did participation by major candidates. In 2008, eight candidates received PECF matching funds during the primaries. Senator McCain, the Republican nominee, received public funds during the general-election campaign. Senator Obama, the Democratic nominee, became the first major-party nominee since the program's inception to completely decline public funds. Some observers have suggested that Senator Obama's decision to opt out of public financing, combined with the other challenges discussed above, marks the death knell of the program. Others contend that the public financing program can work well again if reformed. Until the 2000 election, the public financing program was the major funding source in presidential campaigns, particularly for the general election. Nonetheless, as noted above, public financing has become less appealing to candidates in recent elections. Other developments, such as joint fundraising committees allegedly threaten the program's intended emphasis on limiting private fundraising in exchange for public funds. Maintaining the status quo would leave the public financing program unchanged. If that approach is taken, however, there is widespread agreement that the most competitive candidates will continue to forgo public funds. As a result, the program could be in danger of providing funding only for those candidates with a limited chance of success. As the preceding discussion suggests, a fundamental policy question is what role—if any—Congress wants public financing to play in presidential campaigns. If that role is to be a prominent one, there is broad agreement that the program needs to be at least partially revamped. Making the program more attractive to competitive candidates, particularly through increased spending limits, is a major focus of several reform proposals. Such efforts will not come without costs. An infusion of funds, through an increased checkoff designation, other revenue sources, increased taxpayer participation, or a combination of all three, would likely be necessary. Public financing can also be controversial along ideological lines, which suggests that strong political will and coalition-building will be necessary if changes to the program are to be enacted. In the aftermath of the 2008 election cycle, the related issue of small contributions has also been a prominent topic of debate. Although publicly financed general-election candidates must agree to forgo private fundraising for their campaigns, public financing is designed to supplement small, private contributions during the primary campaign. Currently, the Presidential Election Campaign Fund (PECF) provides a 100% match of individual primary contributions up to $250. Providing additional matching funds have been a major component of recent reform proposals. Two bills to revamp the presidential public financing system were introduced in late July 2010. Neither H.R. 6061 (Price, NC) nor S. 3681 (Feingold) have been the subject of additional action. Those bills took root in similar proposals offered during the previous Congress. During the 110 th Congress, four bills ( H.R. 776 (Meehan), H.R. 4294 (Price, NC), S. 436 (Feingold), and S. 2412 (Feingold)) that proposed to restructure the PECF would have matched small contributions at 400% or 500% rather than the current 100%. In addition, the maximum matching contribution would have been lowered to $200 from the current $250. Increasing the match rate from the current 100% to 400% or 500% could increase the effect of small contributions. It could also provide substantially greater resources to publicly financed candidates. However, this approach assumes that sufficient funds would be available in the PECF to cover the additional match. In fact, sufficient funds have been unavailable during portions of recent election cycles. Nonetheless, proposals to reform the public financing program typically include revisions to funding mechanisms. Congress could also renew the focus on small contributions by permitting publicly financed campaigns to spend larger (or unlimited) amounts of funds raised through small contributions. This approach might or might not include matching funds. The effect could be to encourage candidates to focus their efforts on small contributions, while still providing government assistance for some campaign needs. However, focusing on small contributions would not necessarily contain campaign costs (another program goal), particularly for those candidates who were able to raise and spend virtually unlimited amounts. In fact, if spending limits were eliminated, public financing could become an additional, but potentially unnecessary, funding source for those already able to raise substantial private funds. Finally, public financing could be repealed. This approach would largely or entirely (depending on specifics) eliminate taxpayer funds in presidential campaigns. In the 110 th Congress, two bills ( H.R. 72 (Bartlett), H.R. 484 (Doolittle)) would have repealed parts of the program or the entire program. Neither bill advanced beyond committee referral. In the 111 th Congress, Representative Cole has H.R. 2992 introduced legislation to repeal public financing for presidential nominating conventions. FECA focuses largely on political committees, which include candidate committees, party committees, and PACs. In recent years, "527" organizations have shaped some elections even though they are not typically considered to be political committees. America Coming Together and Swift Boat Veterans for Truth, for example, were prominent (and controversial) in 2004. Much of the concern surrounding 527s has involved the argument that millions of dollars from these organizations affect federal elections without necessarily being regulated by FECA. The precise nature of 527s' financial impact is open to debate, as various research organizations and interest groups classify individual groups' activities differently and rely on different data. Nonetheless, and despite differing data and interpretations of those data, research has consistently shown decreased activity among 527s during the 2008 cycle compared with the 2004 cycle. Table 3 displays financial summaries from two prominent sources, CQ MoneyLine (a commercial tracking service) and the Center for Responsive Politics (CRP). Both sources show that 527s' receipts and expenditures during the 2008 cycle were far below those of the 2004 cycle. The 527 issue can be considered from both financial and regulatory perspectives. Financially, 527s remain a significant force surrounding some targeted races. 527s also continue to command substantial financial resources overall. Nonetheless, 527s' decreased financial activity suggests that the issue might not receive as much policy attention as 527s have in recent years. Even with decreased financial activity, however, the matter of regulating 527s continues to be controversial. Indeed, the major policy question surrounding 527s is whether all such organizations should be regulated as political committees under FECA. Thus far, the FEC has made case-by-case determinations of whether 527s' activities required them to register as political committees. Particularly after the 2004 elections, the FEC assessed major fines against some 527s for failing to register as political committees. However, because fines were not assessed until well after the election and represented a small portion of the organizations' operating budgets, some critics contended that the penalties and current regulation of 527s were insufficient. Controversy over FEC enforcement regarding 527s continues today. Against this backdrop, some have suggested that all 527s should be required to register with the FEC as political committees. In the 110 th Congress, H.R. 420 (Meehan) and S. 463 (McCain) would have amended FECA to treat 527s as political committees, with some exceptions. Requiring 527s to register as political committees would make those organizations subject to contribution limits and other requirements in FECA, just as all political committees are today. Those advocating additional regulation of 527s generally suggest that these groups' activities clearly influence federal elections and, therefore, should be captured by FECA. Others, however, contend that placing additional regulations on 527s is unnecessary and could stifle the groups' political speech. Election administration is not necessarily related to campaign finance policy. Some legislation, however, can affect both policy areas. Although devoted primarily to election administration, H.R. 512 proposes to amend FECA. Therefore, the FEC would implement the measure if it became law. As passed by the House (296-129) on September 29, 2010, H.R. 512 (Davis, CA) would prohibit "chief State election administration officials" (e.g., Secretaries of State) from "tak[ing] an active part" in managing or otherwise being involved in federal election campaigns if the official "has supervisory authority" for administering the relevant election. Among other restrictions, the bill would prohibit a chief election official from "serving as a member" of a federal candidate's principal (authorized) campaign committee or engaging in fundraising for their campaigns. The bill would provide an exemption for involvement in a family member's federal campaign. As H.R. 512 's findings section suggests, the bill could reduce the potential for conflicts of interest among officials who are involved in both campaigning for, and supervising the elections of, federal candidates. At a June 10 markup of the bill, some Members expressed concern that H.R. 512 appeared to presume that election officials could not objectively separate campaign activities and election-administration duties, and might unnecessarily limit election officials' political activities. Representative Lungren, ranking member of the Committee on House Administration, reiterated those themes during floor debate. By contrast, Representative Susan Davis countered that the measure was reasonably limited to thwarting potential corruption and designed to enhance integrity in the electoral process. As Congress considers H.R. 512 , at least two points, in addition to those discussed above, could be relevant. First, if Congress is primarily concerned about real or potential conflicts of interest among a state's chief election-administration officials, the language proposed in H.R. 512 could be sufficient. The bill does not, however, propose to regulate conduct by other election officials. Second, the scope of at least one element of the bill is potentially unclear. As noted above, H.R. 512 , would prohibit a chief state election-administration officer from "serving as a member of an authorized committee of a candidate for Federal office." In a practical sense, this language suggests that affected election-administration officials would be prohibited from active involvement in a federal candidate's campaign. The term "member," however, is not defined in FECA or in FEC regulations. Although the term "political committee" might connote membership, those involved in campaign management are also not typically referred to as committee members, which suggests potential ambiguity about which campaign roles the bill intends to regulate. If a more precise meaning of "member" were a concern, Congress could amend the bill to more explicitly identify particular campaign roles or duties. The FEC could also clarify the scope of that portion of the language through a rulemaking if H.R. 512 becomes law. For some, a steady increase in money flowing through the 2008 and 2010 election cycles suggests that the campaign finance system is in need of significant reform. Others contend that the primary focus should not be on the amount of money in politics, but on the way in which that money is regulated. For many, existing regulation is already too cumbersome. Both election cycles will undoubtedly inform deliberations about how, if at all, to examine campaign finance policy during the 111 th Congress. Some of the issues discussed in this report are closely tied to recent elections. Others have been prominent for several election cycles and have received congressional attention in the past. All the issues discussed in this report are essentially technical questions about how to regulate a particular facet of campaigns. Reaching consensus on these points can be difficult. There are, however, common themes that tend to organize the debate over campaign finance policy. Even when Members of Congress disagree about particular approaches, these themes can serve as useful starting points for considering policy options and debate. Whether there is "too much" money in American elections is a hotly debated topic. For some, the billions of dollars involved in federal campaigns signal potential corruption. The "money chase" of campaigns also allegedly prevents candidates and officeholders from concentrating on serving their constituents. Others counter that fundraising is an important test of a candidate's political viability and that the amount of money spent on American elections is far less than the amount spent on consumer goods. It is unlikely that this ideologically charged debate will be resolved in the foreseeable future. Even if the debate over amounts money is not resolved, sources  of funds could be ripe for legislation or oversight. The debate over 527s demonstrates that some entities' financial activities remain contentious. Similarly, the debate over public financing can be viewed as an attempt to steer candidates toward lower campaign spending with incentives (or requirements) to limit private fundraising. Bundling, hybrid advertising, and joint fundraising also raise policy questions about whether these funding sources should be further regulated. Transparency is typically accomplished through disclosure. Most of that information is then made publicly available. The details of which activities should be disclosed, and in which amounts, are sometimes controversial, but disclosure is generally accepted as a hallmark of campaign finance policy. The debate over electronic filing of Senate campaign finance reports has the most obvious connections to transparency. For some, the current form of paper filing is wasteful and causes unnecessary delay in providing information to the public. For others, broader disclosure concerns should also be addressed if Senate electronic filing is reconsidered. Senate prerogative may also be a concern. Other recent issues may also be considered from a transparency perspective. In particular, new disclosure requirements related to bundling—enacted in the 110 th Congress and potentially subject to expansion or revision during the 111 th Congress—represent an effort to provide more information about how some large contributions are raised. On the other hand, those efforts may cause an additional compliance burden or inhibit some donors from participating (at least as they otherwise would). Perhaps the most fundamental questions in campaign finance policy is which behaviors should be subject to FECA or FEC regulations, and to what extent. As Congress decides how or whether to address campaign finance issues in the 111 th Congress, these questions are again likely to be at the forefront of debate. All the policy issues addressed in this report could involve placing new requirements on members of the regulated community. Among the issues discussed in this report, debate has essentially focused on whether bundling, electronic filing, hybrid advertising, joint fundraising, recent developments in presidential public financing, and 527s undermine various requirements in FECA. More generally, the FEC itself may be reevaluated if Congress determines that its structure or effectiveness is insufficient for current needs. If Congress decides to address these or other campaign finance issues, a key question will be whether they are to be considered alone or jointly. All the issues discussed in this report could be self-contained. Some of the issues are also interactive. This is particularly true for presidential campaign financing, which has clear connections to public financing, bundling, hybrid advertising, and joint fundraising.

This report provides an overview of selected campaign finance policy issues that may receive, or have received, attention during the 111th Congress. Congress continues to consider the Supreme Court's January 21, 2010, ruling in Citizens United v. Federal Election Commission. The decision has shaped much of the legislative debate on campaign finance issues during the second session of the 111th Congress. Thus far, most congressional attention responding to the ruling has focused on the DISCLOSE Act (H.R. 5175; S. 3295; S. 3628). H.R. 5175 passed the House on June 29, 2010. On a related note, on July 29, 2010, the Committee on Financial Services ordered reported H.R. 4790. The bill would require additional disclosure of political expenditures to corporate shareholders and is designed as a partial response to Citizens United. Other than attention to Citizens United, four aspects of campaign finance policy have been subject to major actions thus far during the 111th Congress. First, in April 2009, the House passed legislation (H.R. 749) concerning authority to disburse campaign funds after a candidate's death. Second, on June 10, 2009, the Committee on House Administration favorably reported H.R. 512 (Davis, CA). The bill would amend the Federal Election Campaign Act (FECA) to restrict certain state election officials from involvement in others' campaigns. Third, on July 28, 2009, the Committee on House Administration held a hearing on H.R. 1826, a bill that would publicly finance House campaigns. The committee ordered reported a successor bill, H.R. 6116, on September 23, 2010. Finally, the Senate considered the nomination of John J. Sullivan to be a member of the Federal Election Commission for much of the 111th Congress. However, the President withdrew the nomination on August 5, 2010. Questions about the health of the presidential public financing system were especially prominent during the 2008 election cycle. Two bills to revamp the presidential public financing system were introduced in late July 2010. Neither H.R. 6061 nor S. 3681 have been the subject of additional action. Also in the 111th Congress, Representative Cole has introduced legislation (H.R. 2992) to repeal public financing for presidential nominating conventions. Legislation on public financing of congressional campaigns was introduced in early 2009 (H.R. 158, H.R. 1826, H.R. 2056, S. 751, and S. 752). H.R. 6116, apparently intended to supersede H.R. 1826, was introduced in September 2010 and, as noted above, was ordered reported. Recent election cycles also witnessed new or expanded techniques for raising and spending money, such as bundling, joint fundraising committees, and hybrid advertising. Remaining issues from the 110th Congress, such as electronic filing of Senate campaign finance reports (S. 482 and S. 1858 in the 111th Congress), may also receive renewed scrutiny. Other issues, such as 527 organizations, may also be addressed. Congressional oversight of the FEC could also be on the legislative agenda. Some of the issues discussed in this report have only recently received substantial attention. Others have long been controversial. All appear likely to remain prominent policy issues. Whether Congress decides to pursue these or other campaign finance issues, common questions about the role of money in politics, transparency, and the need for additional regulation are likely to shape the debate. The text of this report was last updated November 3, 2010. It will not be updated but remains relevant for historical reference. For more recent discussion, see CRS Report R41542, The State of Campaign Finance Policy: Recent Developments and Issues for Congress, by [author name scrubbed].

In the past year, policy consequences of U.S. aid restrictions on International Criminal Court (ICC) member countries that have not signed agreements exempting U.S. citizens from ICC prosecution have prompted policy-makers to alter the policy somewhat. Latin America has been at the forefront of that reassessment. In particular, some negative consequences for U.S. relations with Latin America have occurred as a result of ICC-related sanctions. Restrictions on military training aid have resulted in a dramatic decline in the number of Latin American military personnel receiving training in the United States. Similarly, restrictions on economic aid have hindered the ability of U.S. democracy and rule of law programs to work with governments in the region, especially in the Andean countries. Although most Members of Congress still support efforts to shield U.S. citizens serving abroad from ICC prosecution, many are beginning to oppose the use of sanctions to attempt to persuade countries to sign bilateral immunity (so-called "Article 98" agreements). Some Members of Congress advocate ending all ICC-related aid restrictions, while others believe that at least some restrictions should remain in place in order to encourage other countries to sign Article 98 agreements. The issue of whether to continue these aid restrictions is likely to be considered by the 110 th Congress. This paper discusses the evolving policy debate in the U.S. government concerning the use of ICC-related foreign aid restrictions. It focuses on the case of Latin America and the Caribbean, a region in which twelve countries (including Brazil, Bolivia, Ecuador and Mexico) have faced aid cutbacks for failing to sign an Article 98 agreement. In July 2002, the Rome Statute that created the International Criminal Court (ICC) entered into force. The ICC is the first permanent world court with jurisdiction to try individuals accused of war crimes and other serious human rights abuses. The United Nations, human rights groups, and most democratic nations supported the creation of the ICC. As of March 1, 2007, 104 countries have ratified the Rome Statute and are currently members of the ICC. The United States is not a party to the court and does not recognize ICC jurisdiction over U.S. soldiers or civilians serving in other countries. The ICC, comprised of eighteen judges and based in The Hague, may hear cases referred to it by the U.N. Security Council or by the states that are parties to the court. The ICC's lead prosecutor may also initiate investigations. Before a case may be tried, the ICC must work with national law enforcement agencies that, with support from the international community, must make arrests and send defendants to The Hague. Since its creation, the ICC has received three referrals by state parties, and the U.N. Security Council also referred the situation of allegations of atrocities being committed in Darfur, Sudan to the prosecutor. The prosecutor has opened investigations into the cases involving the Democratic Republic of the Congo, the Republic of Uganda, and Darfur, Sudan. In October 2005, the ICC issued its first arrest warrants to five individuals implicated in connection to the situation in Northern Uganda. Some analysts have recently asserted that the Bush Administration has begun to soften its once vocal opposition to the International Criminal Court (ICC). They argue that strong opposition to the ICC within the Administration has been gradually dissipating, particularly since the U.S. government allowed the U.N. Security Council to refer the Darfur, Sudan situation to the ICC in March 2005. According to State Department spokesman Sean McCormack, "We [the U.S. government] fully support bringing to justice those responsible for crimes and atrocities that have occurred in Darfur. We are at a point in the process where we could call upon the Sudanese government to cooperate fully with the ICC." Other analysts remain skeptical about whether a fundamental shift in U.S. policy towards the ICC is occurring and believe that, regardless of the court's merits, the U.S. government is going to continue to do all that it can in order to protect its military and civilians serving abroad from ICC prosecution. Although the United States initially supported the idea of establishing an international criminal court, fundamental objections to the proposed court's jurisdiction led the United States to vote against the Rome Statute. The United States' primary objections to the Rome Statute focus on the ICC's possible assertion of jurisdiction over U.S. soldiers who could be charged with "war crimes" resulting from legitimate use of force or U.S. civilians who could be charged for conduct related to carrying out U.S. foreign policy initiatives. Accordingly, the United States has sought immunity provisions through the U.N. Security Council for U.N.-authorized peacekeeping operations, and has pursued bilateral agreements with countries that are parties to the ICC in order to preclude extradition or surrender of U.S. citizens from each respective country to the ICC. Since 2003, the Bush Administration has sought bilateral agreements worldwide to exempt Americans from ICC prosecution, so-called "Article 98 agreements." On May 2, 2005, Angola became the 100 th country to sign an Article 98 agreement. The State Department has not publicly announced the signing of any other Article 98 agreements since that time, but a few more agreements may have been concluded. Article 98 agreements involve each state promising that it will not surrender citizens of the other signatory to the ICC, unless both parties agree in advance to the surrender. Supporters of the policy say that these agreements are not unlike the status of forces agreements (SOFAs) routinely negotiated to protect U.S. soldiers serving abroad from prosecution in foreign courts and are consistent with Article 98 of the Rome Statute. Critics have dismissed Article 98 agreements as unnecessary and accused the U.S. government of "blackmailing" developing countries, many of which are heavily dependent on U.S. assistance, into adopting them. The United States has concluded Article 98 agreements with fifteen countries in Latin America and the Caribbean, thirteen of which are in force. Table 1 depicts the status of each country in the region with respect to the ICC and Article 98. Countries that are subject to sanctions under legislation are those that are both parties to the ICC and that have not entered into an Article 98 agreement with the United States. Those countries include Barbados, Bolivia, Brazil, Costa Rica, Ecuador, Mexico, Paraguay, Peru, St. Vincent and the Grenadies, Trinidad, Uruguay and Venezuela. Although it has not signed an Article 98 agreement, Argentina is exempt from sanctions as it was declared a "major non-Nato ally" in 1998. Bolivia initially received a six-month waiver from cuts in U.S. military assistance that began in July 2003 because it had signed, but not ratified, an Article 98 agreement. The waiver expired in early 2004. Most of the Article 98 agreements for Latin America that are currently in force were signed in 2003. In the past two years, only four additional countries in Latin America and the Caribbean are known to have signed Article 98 agreements. Some countries have vocally opposed U.S. efforts to persuade them to sign Article 98 agreements. In June 2005, then-president of Ecuador, Alfredo Palacios, said that Washington "is free" to defend its policies with respect to the ICC, "but not at the expense of Ecuador's sovereignty and legal standing." Other politicians in the region have accused the United States of "blackmailing Latin American governments into signing an agreement they oppose in principle." The Article 98 campaign has been particularly unpopular in South America, a region in which a majority of the citizens support accountability for past human rights abuses, international law, and the ICC. In October 2005, Mexico became the 100 th country to ratify the Rome Statute, despite the prospect of losing military and economic assistance from the United States. At that time, a Mexican government spokesman said that Mexico "will be irrefutable in supporting the protocols of the international court, whatever the cost." Chile is considering ratifying the Rome Statute and is also unlikely to conclude an Article 98 agreement. There has been strong bipartisan support in Congress for legislation aimed at protecting U.S. soldiers and civilian officials from the jurisdiction of the ICC. Until recently, there had also been strong support for sanctioning some foreign assistance to governments of countries that are parties to the ICC and that do not have Article 98 agreements with the United States. The American Servicemembers' Protection Act or ASPA ( P.L. 107-206 , Title II) prohibits military assistance to countries that have not signed Article 98 agreements. On July 1, 2003, pursuant to the ASPA, the Bush Administration terminated military assistance to governments of countries that had not signed Article 98 agreements. Under the legislation, NATO countries or major non-NATO allies are exempted from those military aid restrictions. ASPA also gives the President the authority to waive the prohibition on military assistance without prior notice to Congress if he determines and reports to the appropriate committees that such assistance is important to the national interest. ASPA has affected International Military Education and Training (IMET) and Foreign Military Financing (FMF) assistance. The Nethercutt Amendment to the FY2005 Consolidated Appropriations Act ( H.R. 4818 / P.L. 108-447 ) prohibited Economic Support Funds (ESF) assistance to the governments of countries that have not entered into an Article 98 agreement with the United States. Some countries, including NATO members and major non-NATO allies, are exempted from that aid restriction. The President could also waive the prohibition on economic assistance for selected countries without prior notice to Congress if he determined and reported to the appropriate committees that such assistance was important to the national interest. The language also stipulated that countries that have been deemed eligible for Millennium Challenge Account grants will not lose MCA eligibility status due to the Article 98 issue. The Nethercutt Amendment was re-enacted by the 109 th Congress as part of the FY2006 Foreign Operations Appropriations Act ( H.R. 3057 / P.L. 109-102 ). Unlike the FY2005 appropriation, however, the FY2006 act requires that the President give Congress notice before he invokes a waiver, but that waiver may apply for any country that he deems to be of strategic interest to the United States. It also stipulates that, since ESF may be obligated over a two-year period, any leftover funds from FY2005 may now be made available for democracy and rule of law programs notwithstanding the provisions of Sec. 574 of P.L. 108-447 . Nethercutt aid restrictions continued in the FY2007 Continuing Appropriations Resolution ( P.L. 109-289 , as amended) and are likely to be included in the FY2008 Foreign Operations Appropriation bill. On September 30, 2006, the Senate unanimously consented to a conference report on the FY2007 Defense Authorization, H.R. 5122 / S. 2766 , which was passed by the House on September 29. The conference agreement, following the Senate version of the bill, modifies ASPA to end the ban on International Military Education and Training (IMET) assistance to countries that are members of the ICC and that do not have Article 98 agreements in place. The President signed the bill into law, P.L. 109-364 , on October 17. Restrictions on Foreign Military Financing (FMF) remain in place under ASPA. During the 109 th Congress, another bill was introduced, H.R. 5995 (Engel), that would have ended all restrictions on U.S. aid to countries that are members of the ICC and that do not have Article 98 agreements in place. If it had passed, the bill would have required the repeal of both ASPA and the Nethercutt Amendment. The ASPA and the Nethercutt Amendment have had an impact on U.S. foreign assistance to Latin America and the Caribbean. Pursuant to the American Servicemembers' Protection Act or ASPA ( P.L. 107-206 , title II), the Bush Administration terminated military assistance to governments of countries that had not signed Article 98 agreements as of July 1, 2003. The military assistance prohibition has included International Military Education and Training (IMET) and Foreign Military Financing (FMF). The IMET program provides training on a grant basis to students from allied and friendly nations. FMF provides grants to foreign nations to purchase U.S. defense equipment, services, and training. In FY2003, prior to ASPA, the United States provided some $4.65 million in IMET among the 12 countries sanctioned by ASPA. This funding enabled 771 military officers and civilian officials from those countries to receive training in the United States. In FY2004, aside from Bolivia, which received a temporary waiver from ASPA provisions, none of those countries participated in IMET. ASPA-related sanctions resulted in a loss of $1.9 million in IMET funding in FY2005. Although military assistance losses may not be significant when viewed from a regional perspective, they have resulted in some acute aid cuts for particular countries, including Bolivia, Ecuador, and Peru. Some analysts also assert that FMF cutbacks, totaling some $4.4 million in FY2005 and $3 million in FY2006, have made some military modernization projects difficult for the affected countries to continue. Others have responded that the effects of IMET and FMF funding restrictions have not been that significant when one considers that they have been divided among several countries and have only been in effect for a few years. Through the security-related ESF program, the United States provides economic aid to countries of strategic interest to U.S. foreign policy. Funding decisions on the ESF program are made by the State Department; programs are managed by USAID and the State Department. Strategic countries of interest to the United States are generally located in the Middle East or South Asia, but 11 Latin American countries have received some ESF funding in recent years, with Bolivia, Ecuador, Mexico, and Peru among the largest recipients. In FY2004, ESF assistance to countries that are now subject to Nethercutt aid restrictions totaled at least $42.6 million, including some $11.4 million for Mexico and $10.5 million for Ecuador. ESF funds were spent on a variety of projects including democracy, rule of law, and economic growth programs. In the last year, policy consequences of the ASPA-mandated aid restrictions have prompted debates within the Administration and in Congress. In particular, consequences of aid cutbacks for U.S. security cooperation in Latin America have begun to be examined and have led to some policy shifts. This shift became evident in Administration policy, congressional hearings, and in new legislation. At the beginning of 2006, the Bush Administration appeared to be divided over whether to continue linking U.S. assistance to Article 98 agreements. Secretary of State Condoleezza Rice acknowledged that invoking ASPA sanctions on key U.S. military allies may be "sort of the same as shooting ourselves in the foot" and that waivers of military aid restrictions are being considered on a case-by-case basis. In addition, the Defense Department's Quadrennial Defense Review called for a possible de-linking of military training programs from ASPA. Although the Defense Department, and particularly the U.S. Southern Command, opposed ASPA sanctions on military aid, the Bureau of Political-Military Affairs of the State Department reportedly strongly supported keeping the sanctions in place. On June 22, 2006, Adolfo Franco, Assistant Administrator for Latin America and the Caribbean at the U.S. Agency for International Development, suggested that the Bush Administration was considering lifting ICC-related sanctions against Latin American countries. He stated that the Administration had not yet decided whether to lift the sanctions on all countries affected in the region or only for a select few. Some analysts asserted that the Administration might lift the sanctions in order to improve the United States' image in the region. Similar policy debates occurred during congressional hearings held early in 2006 that mentioned the effects of Article 98 sanctions on U.S. relations with Latin America. On March 8, 2006, the Subcommittee on Western Hemisphere Affairs of the Senate Foreign Relations Committee held a hearing on the "Consequences for Latin America of the American Servicemembers' Protection Act." Subcommittee Chair, Senator Norm Coleman, expressed concern that, as a result of the ASPA sanctions, the United States is "missing key opportunities to engage officers ... from the sanctioned countries" and that this could lead to "a loss of U.S. diplomatic influence in the region." Witnesses focused their testimonies on describing the political and military effects that ASPA and Nethercutt sanctions have had on countries in Latin America and the Caribbean. One analyst asserted that the loss of IMET is severing "an important linkage between future military leaders [from the region learning about]...the U.S. model of civilian control of the military." Reduced opportunities in the United States, he added, may lead countries in the region to look elsewhere, including China, Russia, or Venezuela for training. Similarly, ESF restrictions may hamstring both U.S. bilateral and regional efforts to push desperately needed structural reforms, especially in the Andean countries. Another analyst asserted that the implementation of ASPA has damaged U.S. standing in the region and that "the effort to punish countries that don't sign Article 98 agreements has been perceived ... as bullying or arm-twisting." The witnesses suggested several ways to mitigate the possible negative consequences of ASPA on Latin America and the Caribbean. Those suggestions included encouraging the Bush Administration to issue national interest waivers to key allies in Latin America or declare more countries in the region to be major non-NATO allies (thereby exempting them from the aid restrictions). Another suggested option would be to repeal section 2007 of the ASPA and omit the Nethercutt provision from 2007 Foreign Operations appropriations legislation. On March 14, 2006, General Bantz Craddock, then-Commander of the U.S. Southern Command, while testifying before the Senate Armed Services Committee, stated that the ASPA continues to have "unintended consequences" for Latin America, and that without IMET funding, countries have been unable to afford the unsubsidized cost of courses offered in the United States. He stated that "this loss of engagement prevents the development of long-term relationships with future [Latin American] military and civilian leaders." Senator John McCain agreed with General Craddock's concerns about ASPA sanctions. He asserted that the United States was paying "a very heavy price" in countries where military aid programs have been cut. His concerns about military aid cuts were echoed by Senators John Warner, Carl Levin, Hillary Clinton, and James Inhofe. On June 21, 2006, Representative Dan Burton, former chair of the House International Relations Committee's subcommittee on the Western Hemisphere, publicly asked the Bush Administration to changes its policy regarding ASPA sanctions, citing congressional concerns about China's expanding influence in the region. By the fall of 2006, the Bush Administration was ready to use waivers to waive restrictions on FY2006 IMET and ESF funds. On October 2, 2006, President Bush directed the Secretary of State to waive FY2006 IMET restrictions for 21 countries. Barbados, Bolivia, Brazil, Costa Rica, Ecuador, Mexico, Paraguay, Peru, St. Vincent and the Grenadines, Trinidad and Tobago, and Uruguay were among the countries that received presidential waivers. On November 28, 2006, pursuant to Section 574 of P.L. 109-102 , President Bush also deemed that it was in the U.S. national interest to waive Nethercutt restrictions on FY2006 ESF assistance for Bolivia, Costa Rica, Cyprus, Ecuador, Kenya, Mali, Mexico, Namibia, Niger, Paraguay, Peru, Samoa, South Africa, and Tanzania. As previously mentioned, the 109 th Congress took action to end the ban on IMET restrictions but has left Nethercutt aid restrictions in the Foreign Operations Appropriations bills. On September 30, 2006, the Senate unanimously consented to a conference report on the FY2007 Defense Authorization, H.R. 5122 / S. 2766 , which was passed by the House on September 29. The conference agreement, following the Senate version of the bill, modifies ASPA to end the ban on International Military Education and Training (IMET) assistance to countries that are members of the ICC and that do not have Article 98 agreements in place. The President signed the bill into law, P.L. 109-364 , on October 17. Restrictions on Foreign Military Financing (FMF) remain in place under ASPA. Although some Members of Congress advocate ending all ICC-related sanctions, others believe that some aid restrictions should remain in place in order to encourage other countries to sign Article 98 agreements. The issue of whether to continue these aid restrictions is likely to be considered during the 110 th Congress.

During 2006, the Administration and Congress began to reassess some aspects of U.S. policy towards the International Criminal Court (ICC) because of unintended negative effects of that policy on relations with some ICC member countries, especially in Latin America. In Congress, support for aid restrictions on foreign aid to ICC member countries that have not agreed to exempt U.S. citizens from the court's jurisdiction has diminished. This policy shift has occurred largely because of increasing concerns about the negative effects that ICC-related sanctions have had on U.S. relations with Latin America, particularly in the area of security cooperation. In July 2002, the Rome Statute that created the ICC, the first permanent world court created to judge cases involving serious human rights abuses, entered into force. The United States is not a party to the ICC and does not recognize its jurisdiction over U.S. citizens. Since 2002, the Bush Administration has sought bilateral agreements worldwide to exempt U.S. citizens from ICC prosecution, so-called "Article 98 agreements." There has been strong bipartisan support in Congress for legislation aimed at protecting U.S. soldiers and civilian officials from the jurisdiction of the ICC. In 2002, Congress passed the American Servicemembers' Protection Act or ASPA (P.L. 107-206, title II), which prohibits military assistance to countries that are party to the ICC and that do not have Article 98 agreements. The Nethercutt Amendment to the FY2005 Consolidated Appropriations Act (H.R. 4818/P.L. 108-447) and FY2006 Foreign Operations Appropriations Act (H.R. 3057/P.L. 109-102) prohibited some economic assistance to the governments of those same countries. Nethercutt aid restrictions continued in the FY2007 Continuing Appropriations Resolution (P.L. 109-289, as amended) and are likely to be included in the FY2008 Foreign Operations Appropriation bill. The FY2007 Defense Authorization Act (H.R. 5122/P.L. 109-364), which President Bush signed into law on October 17, 2006, modifies ASPA to end the ban on International Military Education and Training (IMET) assistance to affected countries. Restrictions on Foreign Military Financing (FMF) remain in place. On November 28, 2006, pursuant to section 574 of P.L. 109-102, President Bush waived Nethercutt restrictions on FY2006 Economic Support Funds (ESF) to 14 countries, including Bolivia, Costa Rica, Ecuador, Mexico, Paraguay, and Peru. While some Members of Congress advocate ending all ICC-related sanctions, others believe that some aid restrictions should remain in place in order to encourage other countries to sign Article 98 agreements. The issue of whether to continue these aid restrictions is likely to be considered during the 110th Congress. This report may be updated.

Workers who lose their jobs due to a natural or other disaster can seek assistance through several federally supported programs. In many cases, disaster-affected workers will be served by permanent programs and systems that provide assistance to workers who involuntarily lose their jobs. In some cases, entities located within geographic areas affected by disasters can qualify for additional support that is limited to serving disaster-affected workers. This report discusses two income support programs and two employment service programs. In each benefit category, there is a broader permanent program and a more-targeted program for disaster-affected workers. Unemployment C ompensation 1 (UC) provides a weekly cash payment to workers who are involuntarily unemployed and meet other criteria. States administer UC benefits with U.S. Department of Labor (DOL) oversight. UC is financed via payroll taxes paid by employers: UC benefits are funded by state unemployment taxes (SUTA) and UC administration is funded by a federal unemployment tax (FUTA). UC benefits are considered entitlements for eligible workers and are required to be paid promptly. Disaster Unemployment Assistance (DUA) provides a weekly cash payment to individuals who become unemployed as a direct result of a major disaster and are not eligible for UC benefits. DUA is funded through the Federal Emergency Management Agency (FEMA) and administered by DOL through each state's UC agency. Dislocated Worker Activities under the Workforce Innovation and Opportunity Act (WIOA-DW) provides federal formula grants to states to provide training and career services to workers who involuntarily lose their jobs and meet other criteria. WIOA-DW grants are funded via discretionary appropriations to DOL and administered by state workforce agencies and local partners with DOL oversight. Disaster Dislocated Worker Grants (DDWGs) provide competitive federal grants that support temporary disaster response jobs for workers who are unemployed as a direct result of a disaster. DDWGs are awarded by DOL to the state and local partners that receive WIOA-DW funds. In terms of scale, the primary infusion of funds for disaster-affected workers will typically come from increased numbers of UC payments and, to a lesser extent, the availability of DUA benefits. Because UC and DUA outlays increase as the need grows, these funds can be responsive to the scale of a disaster. Conversely, WIOA-DW and DDWG funds are typically limited by annual appropriations and therefore may be less scalable than UC and DUA, which are entitlements for individuals. This report focuses on programs that provide assistance to workers on the basis of job loss due to a disaster. Other programs that may support such disaster-affected individuals but do not have job loss as an eligibility criterion are not included. Similarly, this report does not discuss programs that may assist workers who lost their jobs due to a disaster but establish eligibility based on criteria other than job loss, such as being low-income. Since some of the systems that support disaster-affected workers are permanent and have general eligibility criteria, benefit receipt is not contingent on a disaster meeting specific criteria. For example, disaster-affected workers may qualify for UC on the basis of becoming unemployed due to conditions created by a disaster (e.g., the place of business is closed because of a disaster), but benefit receipt does not require the presence of a specific type or magnitude of disaster. Similarly, the WIOA-DW system serves workers whose job loss is due to a disaster as well as workers who lose their jobs for other reasons. DUA and DDWG are contingent on disasters being declared as such. DUA benefits are available only to those individuals who have become unemployed as a direct result of a declared major disaster as determined under the Robert T. Stafford Disaster Relief and Emergency Assistance Act ( P.L. 100-707 , the Stafford Act) and if the disaster declaration includes the notice of availability of DUA benefits. DDWG assistance can be awarded in response to a disaster or emergency declared under the Stafford Act or "an emergency or disaster situation of national significance that could result in a potentially large loss of employment, as declared or otherwise recognized ... by a federal agency." The joint federal-state UC program is permanently authorized and provides income support through weekly UC benefit payments to eligible unemployed workers. The DUA program provides income support to individuals who become unemployed as a direct result of a major disaster and are not eligible for UC benefits. These unemployment insurance programs are entitlement programs funded through direct spending; benefits provided through these programs are not limited by appropriations. Consequently, these programs may be responsive to unemployment caused by disasters. Created under the Social Security Act of 1935, UC is a joint federal-state system that provides unemployment benefits to eligible individuals who become involuntarily unemployed for economic reasons and meet state-established eligibility rules. States administer UC benefits with oversight from DOL. Although federal laws and regulations provide some broad guidelines on UC benefit coverage, eligibility, and benefit determination, the specifics of benefits are determined by each state. This results in essentially 53 different UC programs. The UC program is financed by federal payroll taxes (FUTA) and state payroll taxes (SUTA). The 0.6% effective net FUTA tax paid by employers on the first $7,000 of each employee's earnings (no more than $42 per worker per year) funds federal and state administrative costs, loans to insolvent state UC accounts, the federal share (50%) of Extended Benefit (EB) payments, and state employment services. States levy their own payroll taxes (SUTA taxes) on employers to fund regular UC benefits and the state share of the EB program. SUTA is "experience rated" in all states; that is, the SUTA rate is based on the amount of UC paid to former employees. Generally, the more UC benefits paid to its former employees, the higher the tax rate of the employer, up to a maximum established by state law. The experience rating is intended to ensure an equitable distribution of UC program taxes among employers in relation to their use of the UC program, and to encourage a stable workforce. If economic conditions, such as recession, require the payment of UC benefits such that SUTA revenue is inadequate, states may have insufficient funds to pay for their UC benefits. Federal law, which requires states to pay these benefits, provides a loan mechanism within the Unemployment Trust Fund (UTF) framework that an insolvent state may opt to use to meet its UC benefit payment obligations. States must pay back these loans. If the loans are not paid back quickly (depending on the timing of the beginning of the loan period), states may face interest charges and the states' employers may face increased net FUTA rates until the loans are repaid. The UC program pays benefits to workers who become involuntarily unemployed for economic reasons and meet state-established eligibility rules. The UC program generally does not provide UC benefits to the self-employed, those who are unable to work, or those who do not have a recent earnings history. Additionally, states usually disqualify claimants who lost their jobs because of inability to work, voluntarily quit without good cause, were discharged for job-related misconduct, or refused suitable work without good cause. In order to receive UC benefits, claimants must have enough recent earnings (distributed over a specified period) to meet their state's earnings requirements; and be able to, available for, and actively searching for work. The UC program provides income support to eligible workers through the payment of weekly cash benefits during a spell of unemployment. UC benefits are available for a maximum duration of up to 26 weeks in most states. UC benefits may be extended at the state level by the permanent law Extended Benefits (EB) program if high unemployment exists within the state. After regular unemployment benefits are exhausted, the EB program may provide up to an additional 13 or 20 weeks of benefits, depending on worker eligibility, state law, and economic conditions in the state. The EB program was established by the Federal-State Extended Unemployment Compensation Act of 1970 (EUCA; P.L. 91-373). Workers who become unemployed as a result of a disaster may qualify for UC. For example, if a natural disaster damages a place of employment and the condition of the facility prevents the employees from working, the displaced workers may qualify for UC if they meet all the eligibility requirements. The UC program generally does not provide benefits to the self-employed, individuals who are unable to work, or individuals who do not have a recent earnings history. However, when a major disaster is declared, victims who would typically be ineligible for UC may be eligible for DUA. In cases where a disaster creates increased unemployment, a state may be more likely to meet the criteria to trigger onto an EB period and, thus, provide EB benefits to eligible individuals in that state. The DUA program provides income support to individuals who become unemployed as a direct result of a major disaster and are not eligible for UC benefits. First created in 1970 through P.L. 91-606, DUA benefits are authorized by the Stafford Act. DUA benefits are funded through the Disaster Relief Fund (DRF) administered by the Federal Emergency Management Agency (FEMA). The DRF is funded annually through appropriations and is a "no-year" account, meaning that any unused funds from the previous fiscal year (if available) are carried over to the next fiscal year. In general, when the balance of the DRF becomes low, Congress provides additional funding through both annual and supplemental appropriations to replenish the account. DOL administers the DUA program and coordinates with FEMA to provide the funds to the state UC agencies for payment of DUA benefits and payment of state administration costs under agreements with DOL. Based on the request of the affected state's governor, the President may declare a major disaster. The declaration identifies the areas in the state eligible for assistance. The declaration of a major disaster provides the full range of disaster assistance available under the Stafford Act, which may include, but is not limited to, the repair, replacement, or reconstruction of public and nonprofit facilities; cash grants for the personal needs of victims; housing; and unemployment assistance related to job loss from the disaster (i.e., DUA). Disaster-affected workers who are ineligible for UC may be eligible for DUA. The DUA benefits are available only to those individuals who work or live in the area of a declared disaster and have become unemployed as a direct result of the disaster. The individual eligibility requirements for DUA differ significantly from the UC program requirements. For example, eligibility for DUA benefits does not necessarily require that the individual have a substantial work history, and in some cases does not require that the worker be available for work (unlike the UC program requirements). In particular, the DUA regulation defines eligible unemployed workers to include the self-employed, workers who experience a "week of unemployment" following the date the major disaster began when such unemployment is a direct result of the major disaster, workers unable to reach the place of employment as a direct result of the major disaster, workers who were to begin employment and do not have a job or are unable to reach the job as a direct result of the major disaster, individuals who have become the breadwinner or major provider of support for a household because the head of the household has died as a direct result of the major disaster, and workers who cannot work because of injuries caused as a direct result of the major disaster. As with state UC programs, workers who do not have permission to work legally in the United States are not eligible for DUA benefits. Noncitizens must have a Social Security number and an alien registration card number in order to apply for DUA benefits. Generally, applications must be filed within 30 days after the date the state announces availability of DUA benefits. When applicants have good cause, they may file claims after the 30-day deadline. This deadline may be extended. However, initial applications filed after the 26 th week following the declaration date are not considered. Because DUA beneficiaries are not entitled to regular UC benefits, they are not eligible to receive Extended Benefits (EB). DUA benefits are generally calculated by state UC agencies under the provisions of the state law for UC in the state where the disaster occurred. When a reasonable comparative earnings history can be constructed, DUA benefits are determined in a similar manner to regular state UC benefit rules. Self-employed persons are expected to bring in their tax records to prove a level of earnings for the previous two years. These records would take the place of the employer-reported wage data in UC benefit determination. Likewise, workers who would otherwise be eligible for UC benefits except for the injuries caused as a direct result of the disaster that make them unavailable for work would receive DUA benefits in an amount equivalent to what they would have received under the UC system if they were available to work. Workers who do not have an employment history sufficient to qualify for UC benefits (either as a new worker or recent hire) receive a DUA benefit equivalent to half of the average UC benefit for their state. The maximum weekly benefit amount is determined under the provisions of the state law and cannot be more than the maximum UC benefit available in that state. The minimum weekly DUA benefit a worker may receive is half of the average weekly UC benefit for the state where the disaster occurred. Two related programs for dislocated workers can assist individuals who involuntarily lose their jobs due to a disaster. Federally funded Dislocated Worker Activities grants under the Workforce Innovation and Opportunity Act (WIOA, P.L. 113-128 ) are formula grants to states to provide job training and career services to individuals who lose their jobs, while Disaster Dislocated Worker Grants are competitive grants that support the provision of temporary jobs for workers who become unemployed as a result of a disaster. WIOA authorizes formula grants to state workforce agencies to support dislocated workers. The bulk of a state's WIOA Dislocated Worker (WIOA-DW) funds are subgranted to local workforce development boards that provide actual workforce services. WIOA-DW funds may support career services or training benefits for qualified workers, including workers who become unemployed as a result of a disaster. WIOA-DW funds are funded by discretionary appropriations. Statute specifies that 20% of WIOA-DW funds are allotted to a national reserve that primarily supports National Dislocated Worker Grants (including Disaster Dislocated Worker Grants, described later in this report). The unreserved funds are allotted to state workforce agencies via a formula that considers several unemployment-related factors. From the WIOA-DW funds that are allotted to the states, governors may reserve up to 15% for statewide activities ("governor's reserve") and up to 25% for rapid response activities that respond to large-scale layoffs. The remainder of the state's WIOA-DW grant is allocated to local workforce development boards that provide or facilitate services and benefits to individual workers. Generally, an eligible dislocated worker for the purposes of this program is a worker who (1) has involuntarily lost his or her job, (2) has demonstrated a labor force attachment, typically through eligibility for UC, and (3) is unlikely to return to his or her prior job. Workers whose job loss is attributable to a disaster and who meet the other criteria for dislocated workers may access services supported by WIOA-DW grants. In cases where funding is insufficient to serve all eligible dislocated workers, statute specifies that local providers must prioritize low-income individuals. The WIOA definition of low-income includes recipients of certain means-tested benefits as well as homeless individuals. Services under WIOA-DW are separated into career services and training. Career services can include assessment of skills and needs, provision of labor market information, and various forms of job search assistance. Training is provided through individual training accounts and can include occupational classroom training, on-the-job training, or more general job readiness training. Local providers have a great deal of discretion in the specific career services and training benefits that are provided to each eligible dislocated worker. A worker who loses his or her job due to a disaster may not qualify for WIOA-DW services if he or she does not meet other dislocated worker criteria in law. For example, if a worker displaced by a disaster is expected to return to his or her prior job, the worker would not qualify. Disaster-affected workers who do not meet WIOA-DW eligibility criteria may seek assistance under less-targeted WIOA funding streams (see subsequent " WIOA Adult Activities " section). The governor's reserve is designed to allow the state to respond to unanticipated mass layoffs, such as layoffs due to a disaster (natural or otherwise). The governor may use funds from the reserve to support "rapid response" activities in areas within the state that experience large-scale dislocation. These rapid response activities include contacting dislocated workers immediately after dislocation to determine eligibility for various benefits and services as well as developing a coordinated local response in seeking state economic development aid. The WIOA-DW formula does not specifically target funds to disaster-affected areas. Because the formula is based on unemployment factors, areas with high levels of unemployment after a disaster may qualify for higher levels of funding in subsequent years' formula allocations. Due to the construction and implementation of the formula, however, it is possible that unemployment that results from a disaster may not be considered by the formula until a year or more after the disaster. The WIOA-DW program operates in partnership with WIOA Adult Activities (WIOA-AA), a separate grant program. WIOA-AA provides federal formula grants to states to support career services and training activities that are similar to those supported through the WIOA-DW program. Services under both WIOA-DW and WIOA-AA are typically provided by the same state agency at the same physical location. Unlike WIOA-DW funding, which is limited to a statutory definition of dislocated workers, WIOA-AA funding can be used to serve any jobseeker over the age of 18, including new labor force entrants and incumbent workers. Because eligibility for WIOA-AA benefits does not require job loss, the program does not fit this report's criteria for inclusion. Still, WIOA-AA benefits may provide career services and training benefits to disaster-affected workers whose job loss or job interruption does not meet the WIOA-DW definition. Disaster Dislocated Worker Grants (DDWGs) are grants that support disaster relief employment : temporary disaster recovery jobs for disaster-affected workers. In some cases, DDWGs can also support career services and training for participants already enrolled in temporary jobs or persons who have relocated due to a disaster. DDWGs are one of several types of National Dislocated Worker Grants (NDWGs). NDWGs are supported by a 20% reservation from the WIOA dislocated worker appropriation. DOL has the discretion to determine the portion of NDWGs that will be used for DDWGs. NDWGs are authorized by Section 170 of WIOA. DDWGs applications must be submitted by the state or territorial agency that receives WIOA-DW formula funds. States may initially apply for DDWGs using an abbreviated Emergency Application, which should be submitted within 15 days of the qualifying declaration. The state applicant must submit a full application within 60 days. While state agencies are the grantee, they may subgrant funds to local workforce development boards or expend funds through public and private agencies engaged in qualified projects. DDWG funds can be awarded to states that experience an emergency or major disaster as declared under the Stafford Act or by a federal agency. States may also qualify for a grant if a substantial number of individuals (at least 50) relocated to the state or area from a federally declared disaster area. Individuals eligible for disaster relief employment must either reside in the disaster-affected area or have been forced to relocate due to the disaster. In addition, eligible workers must be a dislocated worker as defined in Section 3(15) of WIOA, a long-term unemployed individual as defined by the state, temporarily or permanently laid off as a consequence of the disaster, or a self-employed individual who become unemployed or significantly underemployed as a result of the disaster. DDWGs primarily support Disaster Relief Employment: temporary jobs that respond to the disaster. Generally, these positions can be clean-up and recovery efforts such as demolition, repair, or reconstruction. Eligible temporary jobs can also include humanitarian efforts such as the distribution of food, clothing, or other provisions. Workers employed in Disaster Relief Employment must be paid wages that are the higher of the federal, state, or local minimum wage, or the comparable rate of pay for similar workers at the same employer. In most cases, a participant may not hold a temporary job for longer than 12 months or 2,080 hours. DDWGs can also support career and training services for dislocated workers who are already participating in temporary jobs and are unlikely to return to their prior employment. In cases where a DDWG is awarded on the basis of relocated workers, career and training services will be the primary services because eligible workers have relocated to outside the disaster area. When considering disaster response programs, it can be useful to consider funding mechanisms (e.g., federal appropriations or state taxes), funding limitations (e.g., capped or entitlements), and whether a program is designed as an immediate benefit or a longer-term investment. In the past, Congress has enacted legislation in response to some of these issues and program limitations. In budgetary terms, UC benefits are an entitlement (although the program is financed by a dedicated state tax imposed on employers in the state and not by general revenue). Similarly, DUA benefits are paid from federal funds appropriated for the DRF and have always been paid to individuals who meet the eligibility requirements in a manner similar to an entitlement. While funding for the DRF depends upon the appropriations process, when the balance of the DRF becomes low, Congress has always provided additional funding through both annual and supplemental appropriations to replenish the account. Consequently, both UC and DUA have the ability to rapidly respond to unemployment caused by disasters and provide immediate income support to the unemployed. However, increased UC outlays may potentially trigger increases on SUTA or FUTA taxes on the affected state's employers because even if a state's trust fund account is depleted, the state remains legally required to continue paying benefits. Such a state may need to raise SUTA taxes on its employers or reduce UC benefit levels. Alternatively, a state might borrow money either from the dedicated loan account within the UTF or from outside sources. If a state chooses to borrow funds from the UTF, not only will the state be required to continue paying benefits, it also will be required to repay the funds (plus any interest due) it has borrowed from the federal loan account. If the loans are not repaid within approximately two years, an increase in the net FUTA taxes faced by the state's employers may be triggered. In the past, Congress has enacted temporary measures to address high levels of UC claims and corresponding stress on state UC trust funds after a disaster. After Hurricane Katrina, Congress enacted the QI, TMA, and Abstinence Programs Extension and Hurricane Katrina Unemployment Relief Act of 2005 ( P.L. 109-91 ), which transferred $500 million from the Federal Unemployment Account of the UTF to the state accounts of Alabama ($15 million), Louisiana ($400 million), and Mississippi ($85 million). This helped to alleviate the burden of the increased UC claims and prevent or dampen automatic SUTA tax increases that would have otherwise occurred in response to increased state UC outlays. More recently, Congress enacted the Bipartisan Budget Act of 2018 ( P.L. 115-123 ). Among other provisions, P.L. 115-123 included Section 20801, which authorized a deferral of interest payments on an outstanding federal UI loan for the U.S. Virgin Islands. WIOA-DW and DDWG activities are supported by annual discretionary appropriations and associated activities are constrained by appropriations levels. In some cases, Congress has appropriated additional funds for these activities in disaster-related areas, though funding is not automatic and, because it must be appropriated, it is likely to be less timely than UC or DUA. Whether or not Congress appropriates supplemental funds, states have some flexibility to direct WIOA-DW funds to disaster-affected areas (particularly through the governor's reserve) and DOL has some discretion in awarding DDWG funds. DOL can, for example, choose to direct a larger portion of the National Dislocated Worker Set-Aside to DDWG activities, but it is still subject to annual funding limits and prioritizing DDWG activities will likely mean less funding for other National Dislocated Worker activities. Funding for workforce services has been expanded temporarily through additional appropriations that supplemented regular annual appropriations. In 2005, the Department of Defense, Emergency Supplemental Appropriations to Address Hurricanes in the Gulf of Mexico, and Pandemic Influenza Act ( P.L. 109-148 ) appropriated $125 million in supplemental funds for National Emergency Grants (a precursor to DDWGs) "related to the consequences of hurricanes in the Gulf of Mexico in calendar year 2005," of which Hurricane Katrina was the most severe. More recently, the aforementioned P.L. 115-123 appropriated $100 million to the dislocated worker national reserve (the intermediate funding stream that supports DDWGs) for expenses directly related to the consequences of Hurricanes Harvey, Maria, and Irma and for those jurisdictions that received a major disaster declaration due to wildfires in 2017. UC and DUA benefits usually offer the advantage of getting assistance to affected workers quickly, but benefits are of limited duration. Conversely, WIOA-DW and DDWG may offer less immediate relief, but may function as a longer-term investment in disaster-affected communities. Both UC and DUA benefits are structured to rapidly respond to economic conditions (caused by a disaster in the case of DUA) and provide immediate income support to the unemployed. In particular, each state agency responsible for administration of the UC program is assessed in part on the state's "methods of administration" to ensure that eligible claimants are paid UC benefits promptly when determined to be eligible. While these benefits can typically be provided quickly, it should be noted that the prompt payment of both UC and DUA benefits is dependent on a functioning state UC program. If the administrative abilities of the state offices are impacted by the disaster—as occurred in Louisiana after Hurricane Katrina and has also been experienced after the series of 2017 hurricanes in Puerto Rico and the U.S. Virgin Islands—the processing of claims and subsequent payment of benefits may be delayed. UC and DUA are available for a limited duration. UC is limited by state policy and is typically limited to 26 weeks. DUA assistance is available to eligible individuals as long as the major disaster continues, but no longer than 26 weeks after the disaster declaration. After Hurricane Katrina, Congress enacted the Katrina Emergency Assistance Act of 2006 ( P.L. 109-176 ). Section 2 of this law extended DUA benefits for persons eligible under the Stafford Act due to Hurricane Katrina or Hurricane Rita for an additional 13 weeks, for a total of 39 weeks of potential benefits. Workers who exhausted their UC benefits but had received less than a total of 39 weeks of benefits would receive DUA benefits for as many weeks as necessary to reach a total of 39 weeks of UC and DUA benefits combined. This extension did not apply to any subsequent major disasters. The WIOA-DW program's general strategy of preparing dislocated workers for locally in-demand jobs may offer limited short-term value, especially if large numbers of local worksites are disrupted due to the disaster. WIOA-DW activities could, however, be viewed as a longer-term investment in preparing dislocated workers for an area's post-disaster labor market. Disaster relief employment under DDWG is designed to respond to labor market disruptions by providing dislocated workers with federally subsidized employment while local labor markets recover. It may provide a more-immediate benefit than WIOA-DW activities, but the time necessary to award a DDWG, recruit workers, begin work, and pay the workers may create some time gap between a disaster and federal resources reaching workers. The 12-month maximum duration of disaster relief employment, however, may offer a longer benefit window than UC and/or DUA. Permanent law specifies that, in some cases, disaster relief employment under DDWGs can be extended past the original 12-month maximum for an additional 12 months. Supplemental appropriations can also extend the window for these programs. For example, the additional funds appropriated in the aforementioned P.L. 115-123 specified that the funds would be available through September 30, 2019, more than two years after the landfall of the 2017 hurricanes.

The federal government supports several programs that can provide assistance to workers who lose their jobs as a result of a natural or other disaster. In many cases, disaster-affected workers will be served by permanent programs and systems that generally provide assistance to workers who involuntarily lose their jobs. In some cases, disaster-triggered federal supports may be made available to provide additional assistance or aid to workers who do not qualify for assistance under the permanent programs. This report discusses two income support programs and two workforce service programs. In each benefit category, there is a broader permanent program and a more-targeted program for disaster-affected workers. All of these programs are administered through state agencies and some programmatic details may be state-specific. Unemployment Compensation (UC) provides a weekly cash payment to workers who are involuntarily unemployed and meet other criteria. States administer UC benefits with U.S. Department of Labor (DOL) oversight. UC benefits are considered entitlements for eligible workers and funded via payroll taxes paid by employers. Disaster Unemployment Assistance (DUA) provides a weekly cash payment to individuals who become unemployed as a direct result of a major disaster and are not eligible for UC benefits. DUA is funded by the federal government and benefits are paid through each state's UC agency. Dislocated Worker Activities under the Workforce Innovation and Opportunity Act (WIOA-DW) are federal formula grants to states to provide training and career services to workers who involuntarily lose their jobs and meet other criteria. WIOA-DW grants are funded via DOL appropriations and administered by state workforce agencies and local partners with DOL oversight. Disaster Dislocated Worker Grants (DDWGs) are competitive federal grants that support temporary disaster response jobs for workers who are unemployed as a direct result of a disaster. DDWGs are awarded by DOL to the state and local partners that receive WIOA-DW funds. Since UC and DUA outlays increase as the need grows, these funds can be responsive to the scale of a disaster. Conversely, WIOA-DW and DDWG funds are limited by appropriations levels and therefore may be less immediately scalable than UC and DUA, which are entitlements for individuals. In some instances, Congress has enacted legislation to temporarily expand these programs that serve disaster-affected workers or otherwise extend supplemental support to the states administering them. These prior efforts may serve as a model when Congress considers legislation to support workers affected by disasters.

This report provides a selection of materials for locating information on foreign countries and international organizations. This first section presents sources giving an overview of politics, economics, and recent history; the next section covers specialized topics. Included are titles of some of the most frequently consulted bibliographic sources that are available for use in many libraries. The third section provides Internet addresses for travel and international information. Finally, included is a list of foreign chanceries located in Washington, DC. Those who may wish to write to the U.S. government agencies included here can consult local libraries for addresses. Background Notes (Washington, GPO) are published by the U.S. Department of State for each country of the world and revised intermittently. Profile information is given on the people, geography, economy, government, and U.S. relations with the country. Also included is tourist information and a basic reading list. Europa Yearbook (London, Europa Publications), an annual publication, is valued for its economic statistics and trade figures, as well as for its brief historical and economic background. It contains listings of cabinet members and media in each country, and a section on international organizations including the United Nations. Statesman ' s Year - Book (New York, St. Martin's Press) contains similar information in a more abbreviated form. General encyclopedias, such as Encyclopedia Americana (New York, Grolier), World Book Encyclopedia (Chicago, Field Enterprises), American Academic Encyclopedia (Danbury, CT, Grolier) and New Encyclopedia Britannica (Chicago, Encyclopedia Britannica, Inc.), provide detailed narratives on the history, geography, culture, economics, etc., of various nations. Pictures, maps, and charts are also featured. Political Handbook of the World (Binghamton, NY, CSA Publications) is an annual publication that contains narrative information on the government, politics, political parties, legislature, and news media of each country in the world. Statistical Abstract of the United States (Washington, GPO), an annual publication by the Bureau of the Census at the Department of Commerce, includes comparative international statistics on population, households, health, education, economic measures, and a guide to foreign statistical abstracts. World Almanac and Book of Facts (New York, Funk & Wagnalls) and Time Almanac (New York, Little, Brown) are two annual publications with sections on countries of the world. They include statistics on population, geography, names of government officials, and brief historical background. World Factbook (Washington, GPO) is a popular annual publication of the Central Intelligence Agency (CIA), which contains statistics and facts on the land, language, people, economy, defense, religion, literacy, etc., of each country of the world. Listed below are selected sources on the following topics: human rights, immigration, international organizations, international trade and business, maps, military strengths, people, terrorism, travel, and working/studying abroad. Amnesty International Report (New York, Amnesty International USA) documents Amnesty International's work annually throughout the world. Entries contain accounts of imprisonment, torture, and killing by repressive governments. Country Reports on Human Rights Practices (Washington, GPO) is an annual publication by the U.S. Department of State. Contains information on respect for and violation of civil liberties and political rights in each country. Statistical Yearbook (Washington, GPO) is an annual publication of the Department of Homeland Security's Bureau of Citizenship and Immigration Services (formerly the Immigration and Naturalization Service (INS) of the Department of Justice). Provides a wide array of statistical information including immigration to the United States by country and region, naturalization, and border enforcement. World Refugee Survey (Washington, GPO), prepared annually by the U.S. Committee for Refugees, documents and reports the conditions of displaced persons worldwide and provides statistics for a given year. Encyclopedia of Associations, International Organizations (New York, Gale Research) is published annually and gives brief descriptions of thousands of international nonprofit membership organizations. Yearbook of International Organizations (Munich, Germany, K.G. Saur), edited annually by the Union of International Associations (UIA), is divided into three densely packed volumes by organization description, country, and subject index. Each entry provides a description of the organization, its publications, affiliations, and address. Country Reports on Economic Policy and Trade Practices (Washington, GPO) is an annual publication by the State Department that contains information on individual countries key economic indicators, debt management policies, exchange rates, structural policies, worker rights, and trade policies. Exporters ' Encyclopedia (New York, Dun & Bradstreet) is an annual publication that profiles U.S. commercial requirements for main export areas of the world. Traditionally focused on U.S. exports to Europe and Japan, it now includes profiles on emerging Asian and Latin American markets. Handbook of International Economic Statistics (Washington, GPO) is compiled by the CIA's Directorate of Intelligence and published intermittently. The Handbook provides basic statistics in comparing worldwide economic performance and is divided by chapters into overall economic profiles by regions of the world. International Financial Statistics (Washington, IMF) is a monthly publication by the International Monetary Fund (IMF) that provides information on exchange rates, money and banking, international transactions, government accounts, and national accounts for IMF member countries. Principal International Businesses (New York, Dun & Bradstreet) is published annually and provides business addresses worldwide by geographical areas and by standard industrial classification (SIC) codes. Map Catalog (New York, Tilden Press) is an annual publication that lists government and commercial sources by subject and by state for specialized maps of countries such as topographical, political, and aerial/satellite reproductions. Military Balance (London, Brassey's) is updated each year to provide timely and quantitative assessment of military forces and defense expenditures of various countries. Data, compiled by the International Institute of Strategic Studies (IISS), include statistics on manpower, equipment, and weapons systems. World Military Expenditures and Arms Transfers (Washington, GPO) is prepared by the U.S. Arms Control and Disarmament Agency. Published biennially, it provides statistical tables of military and economic variables including arms transfer deliveries by major supplier and recipient country. World Military and Social Expenditures (Washington, World Priorities), by Ruth Leger Sivard and contributing writers, is a biennial reporting of world resources for social and military purposes by geographic region. Included are summaries of recent conflicts and the ranking of countries by military and social indicators along with detailed maps. Chiefs of State and Cabinet Members of Foreign Governments (Washington, GPO) is issued monthly by the Central Intelligence Agency. It provides a listing of names without biographical material. Congressional Directory (Washington, GPO) is published biennially. It contains a section listing foreign diplomatic representatives and consular offices in the United States; it also lists ambassadors and U.S. diplomatic and consular offices abroad. Current Biography (New York, H.W. Wilson) has been published monthly except December since 1940 and compiled annually as Current Biography Yearbook . It provides background information on people prominent in the national news and international affairs. Selected references are listed at the end of each entry. Diplomatic List (Washington, GPO) is issued quarterly by the Department of State. It contains the names of foreign diplomats assigned to Washington, DC. International Who ' s Who (London, Europa) is published annually, a ready reference source that provides biographical information on the world's most influential people. International Year Book and Statesman ' s Wh o ' s Who (West Sussex, England, Reed Information Services) is an annual compilation that provides biographies of leading politicians, diplomats, and businessmen worldwide. Divided into three sections, it also contains background on international organizations and a brief overview of the nations of the world. Key Officers of Foreign Service Posts (Washington, GPO), revised and issued quarterly by the Department of State, provides names of key U.S. personnel at embassies abroad as well as addresses and telephone numbers for all U.S. embassies. Patterns of Global Terrorism (Washington, GPO), an annual publication of the Department of State, reviews terrorist activities from the past year. It includes a chronology of terrorist incidents and descriptions of selected terrorist organizations. Culturgrams: The Nations Around Us (Provo, UT, Brigham Young Univ.), published annually and developed by the David M. Kennedy Center for International Studies, summarizes the unique customs, traditions, and lifestyles within a country and includes greetings and gestures, languages spoken, and national holidays. The Department of State's Bureau of Consular Affairs issues current information on areas of the world that may be hazardous for American citizens traveling abroad through its Travel Warnings and Travel Alerts, and its Bureau of Consular Affairs, Overseas Citizens Services, [phone number scrubbed] or on the Internet at http://www.travel.state.gov where country information is updated regularly. The Centers for Disease Control and Prevention (CDC), based in Atlanta, Georgia, have an international travelers' hotline for the latest information on immunization requirements, recommendations, and health conditions for countries around the world. To receive information, contact the CDC at 877-FYI-TRIP toll free or on the Internet at http://wwwn.cdc.gov/travel/default.aspx . Current travel guides for regions and countries of the world can provide up-to-date information on entry requirements and documents, monetary exchanges, historical background, as well as information on restaurants and hotels. A reliable travel agent can be a valuable source of service and information for planning a trip abroad, and most countries maintain official tourist information bureaus in major cities such as New York, Chicago, Los Angeles, and San Francisco. These offices are often excellent sources of free printed matter—brochures, maps, posters, etc. A directory of tourism offices worldwide is also available on the Internet (see " Selected Topics of Interest " below). Many countries also have similar information available on the Internet. Refer to the section on " Internet Sources for Countries of the World " (below) for further details. Treaties in Force (Washington, GPO), compiled annually by the Department of State, provides information on treaties and other international agreements entered into by the United States and recorded by the Department of State as being in force as of January 1 of each year. Note: This publication is no longer available in print. However, it is available on the Internet only at http://www.state.gov/s/l/treaty/treaties/2007/index.htm . Academic Year Abroad and Vacation Study Abroad (New York, Institute of International Education) are annual publications of the Institute of International Education (IIE), the largest U.S. higher education exchange agency. Both provide details on international education and work opportunities by regions of the world. Recent statistics on study and work abroad are listed in the appendixes. How To Find an Overseas Job With the U.S. Government: A Complete and Comprehensive Guide (Oakton, VA, Cantrell Corporation). Published intermittently, it provides a comprehensive agency-by-agency guide to international federal government positions abroad, including position descriptions and qualifications. Vacation Work ' s Work Your Way Around the World and Teaching English Abroad (Distributed in the U.S. by Peterson's Guides, Inc.). Published irregularly, these sources offer information by field of work (agriculture, business and industry, teaching English, etc.) and by country as well as information on certification, taxes, training, and visa regulations. World of Learning (London, Europa), is an annual publication that lists the addresses and telephone numbers of colleges, universities, research institutions, and libraries, alphabetically by country and briefly describes selected educational organizations. Internet search engines (Altavista, Google, Yahoo!, etc.) scan the Web on a given topic, then index and create sets for each entry. Below are some examples of search engines for general country and regional information. Altavista World at http://world.altavista.com . Translations of any text in English to one of 12 other languages listed and vice versa, using Babelfish. Google at http://directory.google.com/Top/Regional/Countries . Also click on "Language Tools" at http://www.google.com/language_tools for translation of text or websites. InfoPlease - Countries of the World at http://www.infoplease.com/countries.html . Kasbah at http://www.kasbah.com/news/index.htm for world news, travel, and the latest news worldwide on the war in Iraq. WorldLingo http://www.worldlingo.com/en/products_services/worldlingo_translator.html . Translate English text, website, and email to languages listed and vice versa. Yahoo! - Regional at http://dir.yahoo.com/Regional/Countries . A listing and brief description of selected Internet sites for country information using the Web is itemized below. Bureau of the Census International Statistical Agencies http://www.census.gov/main/www/stat_int.html . This website is a source of demographic, economic, and social statistics for several nations. Also available is the International Data Base (IDB), a databank containing demographic and socio-economic statistics (population, migration, ethnicity, etc.) for 224 countries and areas of the world at http://www.census.gov/ipc/www/idb/ . A ranking of countries by total population is available from 1950 to 2050 by clicking on "Country Rankings." Centers for Disease Control and Prevention (CDC) at http://www.cdc.gov . This website provides the latest information related to travelers' health and high-risk areas worldwide at http://wwwn.cdc.gov/travel/default.aspx . Central Intelligence Agency (CIA) at https://www.cia.gov/ . The CIA Website provides information by selected topics—What's New, feature stories, related Web links, news and information, the current editions of the World Factbook at https://www.cia.gov/cia/publications/factbook/index.html and the Chiefs of State and Cabinet Members of Foreign Governments at https://www.cia.gov/library/publications/world-leaders-1/index.html ; and a listing of other publications at https://www.cia.gov/library/publications/index.html . Department of Commerce at http://www.doc.gov . This website provides information on U.S. trade with other nations and international statistics under the heading "International Outreach," and information on trade opportunities at http://www.commerce.gov/TradeOpportunities/index.htm . It also provides a listing of the Commerce Department agencies on the Web, such as the International Trade Administration (ITA), Economic Development Administration, and others. Department of State at http://www.state.gov . This website provides current information on U.S. foreign policy, current hot topics of interest, travel and business information. It also provides Internet links to related agencies and international sources. Current editions of Background Notes, Consular Information Sheets, Country Commercial Guides, Country Reports on Human Rights Practices, Patterns of Global Terrorism , and Travel Advisories/ Travel Warnings are available full text at http://www.state.gov/travelandbusiness/ . Foreign travel information is available through the Bureau of Consular Affairs at http://travel.state.gov . Information on foreign exchange and training programs, international broadcasting (including foreign commentary on the United States, Voice of America (VOA), Radio Liberty/Radio Free Europe), international youth exchanges, and the Fulbright Program can be found at the Bureau of Educational and Cultural Affairs at http://exchanges.state.gov . Links to U.S. embassies, consulates, and diplomatic missions abroad are available at http://usembassy.state.gov . International Trade Administration (ITA) at http://www.ita.doc.gov . The International Trade Administration of the Department of Commerce provides background and information on promoting trade and investment. Library of Congress at http://www.loc.gov/rr/international/portals.html . This website provides "authoritative, in-depth information about the nations and other areas of the world." They are arranged alphabetically by country or area with links for each country sorted into a wide range of broad categories." It also has a link to "Selected Web Resources on Terrorism" at http://www.loc.gov/rr/international/hispanic/terrorism/terrorism.html . Overseas Private Investment Corporation (OPIC) at http://www.opic.gov . Official Website of OPIC, an independent government agency that assists and advises 140 economies around the world. Included is information on the organization, employment, publications and press releases, and Web links. Peace Corps at http://www.peacecorps.gov . This website provides background information on its volunteer programs, countries where volunteers serve, press releases, and links to other government agencies. United States Agency for International Development (USAID) at http://www.usaid.gov . This website of the USAID offers links to related government and international agencies dealing with development in the Third World. It includes background on USAID, press releases, and programs promoting economic growth, environmental protection, and basic health worldwide. Voice of America (VOA) at http://www.voanews.com/english/portal.cfm . Official website of the VOA provides information on its history and current news releases. It lists the various languages the VOA broadcasts and links to websites in those languages at http://www.voanews.com/english/screen_map.cfm . It also includes a "Pronunciation Guide" for the names of some world leaders and regions of the world at http://names.voa.gov . The Electronic Embassy at http://www.embassy.org . This website links the staff and resources of selected embassies in Washington, DC, to their constituencies in business, education, and politics. It also provides links to other websites for the foreign affairs community. African Union (AU), formerly the Organization of African Unity (OAU), at http://www.africa-union.org . This is the official website for the African Union (AU). In July 2002, the OAU, founded in 1963, was superseded by the AU. It provides information on its members, the OAU Charter, current activities, human rights, economy, peacekeeping, and conflict resolution available in Arabic, English, French, and Portuguese. Asian Pacific Economic Cooperation (APEC) at http://usinfo.state.gov/eap/east_asia_pacific/apec.html . U.S. State Department website on APEC that contains current news and background information and a link to the 2007 Annual Chair website - Australia at http://www.apec2007.org/ . Association of Southeast Asian Nations (ASEAN) at http://www.aseansec.org . This website contains background information on ASEAN and its members: Indonesia, Malaysia, Philippines, Singapore, Thailand (the original five members), Brunei, Cambodia, Vietnam, Laos, and Myanmar in the areas of politics, economics, business, trade statistics, and culture. It also provides links to each country's home page, the ASEAN Summit and past Summits, press releases, and related websites. European Union (EU) at http://www.chemie.fu-berlin.de/adressen/eu.html . The European Union (EU), formerly known as the European Community (EC) and the European Economic Community (EEC), was founded in 1993. Currently, there are twenty-seven independent member states. Included are detailed maps of each nation, a map of Europe, historical information on the EU and its related agencies, and links to other European sites and the EU Home Page at http://europa.eu.int/abc/index_en.htm and summaries of EU legislation by topic at http://europa.eu.int/scadplus/scad_en.h t m . G - 8 Summits at http://www.g8.gc.ca/menu-en.asp . This site is maintained by the Canadian Department of Foreign Affairs and International Trade. It provides background information on the next Summit in Hokkaido Toyako, Japan in July 2008. Last year's G-8 Summit in Heiligendamm, Germany, June 6-8, 2007, at http://w w w.g-8.de/Webs/G8/EN/Homepage/home.html , focused on climate protection to Africa policy to the newly launched "Heiligendamm Process." Included are links to previous summits, and documents including lists of delegations, communiques, etc. that can be found at http://www.g8.gc. c a/common/links-en.asp . International Monetary Fund (IMF) at http://w w w.imf.org . This website provides links to IMF Country Reports on economic trends in IMF member countries, IMF Working Papers, press releases, annual meetings, and general background information on the IMF. It also provides links to other international organizations and can also be translated online into Arabic, Chinese, French, Japanese, Russian, and Spanish. North Atlantic Treaty Organization (NATO) at http://www . nato.int / home.htm . This website provides background information on NATO including its members, related agencies, documents, press releases, and links to related websites. Current issues of NATO Review are available at http://www.nato.int/docu/review.htm . Organization of American States (OAS) at http://www.oas.org . The OAS is the world's oldest regional organization (conceived in 1826 and OAS Charter created in 1890). This website provides information on the political, social, and economic issues in the region (today comprising Canada, the United States, Latin America, and the Caribbean). Information on the member states, text of speeches, and reports from the General Assembly are included in English, French, Portuguese, and Spanish. Organization for Economic Cooperation and Development (OECD) at http://www.o e cdwash.org . The OECD is an international organization composed of industrialized market-economy nations since 1960. This website is the home page of the OECD's Washington Center. It provides information on its members, OECD publications, and frequently requested statistics. It also offers links to related agencies and to OECD's Paris Headquarters Home Page. Summit of the Americas at http://www. s ummit-americas.org . The official "Summit of the Americas Information Network" with information and Web links to all summits at http://www.summit-americas.org/eng-2002/previous-summits.htm . Included are texts of the summit declarations and information on the summit process. United Nations (U.N.) at http://w w w.un.org . The official Internet site for the U.N. in either graphic or text versions. An overview of the U.N. system, including its Charter, member states, conferences, and publications, is provided. This website also provides numerous links to U.N. organizations at http://www.uns y stem.org ; printable world maps at http://www.un.or g /Depts/Cartographic/english/ htmain.htm ; and InfoNation for statistical data by member states by selecting basic or advanced at http:// c yberschoolbus.un.org/infonation3/menu/advanced.asp . World Bank at http://www. w orldba n k.org . This website provides a detailed collection of worldwide economic data, socioeconomic indicators, and links to other international organizations. It includes also information on country projects. World Trade Organization (WTO) at http://w w w .wto.org . This official website of the WTO provides information on the organization, WTO publications, news releases, links to U.N. and other related sites in English, French, and Spanish. Africa Country Specific Page for Africa at http://www.sas.upenn.edu/African_Studi e s/Home_Page/Country.html . Maintained by the African Studies Program at the University of Pennsylvania, this site lists each African nation alphabetically and provides a country map, African embassies in the United States, related links, and background from the CIA's World Factbook . Asia and the Pacific Asia Source at http://www.asi a so u rce.org . A source of current news on the region and sources of scholarly material on many aspects of Asia from the Asia Society. Included are maps, bibliographies, statistics, and country comparisons at http://www. a siasource.org/profiles/ap_mp_04.cfm . Pacific Islands Internet Resources at http://www2.hawaii.ed u /~ogden/ p iir/index.html . This website offers numerous links and information on the nations of the Pacific such as Hawaii and Kiribati, the Marshall Islands, Micronesia, Palau, Tonga, and others. Australia and New Zealand Australian Bureau of Statistics at http://www.abs.gov.au . This website provides links to statistical information on its states and territories as well as key national indicators (social and economic), census, media releases, and international statistics. New Zealand at http://www.sta t s.govt.nz . Official New Zealand country website provides a variety of information on its land, people, economy, international comparisons, and links to statistics in the Commonwealth and abroad. Canada Statistics Canada at http://www.stat c an.ca . This website provides statistical data on health, education, foreign trade, the labor market in Canada, census data, and selected international comparisons in English and French. Europe Europa at http://europa.eu . int . Europa is a Web server offering information on the EU's policies and current agenda. Provides Web links to European governments (in English and various other languages) as well as information by special topics and themes via Eurostat at http://europa.e u .int/en/comm/eurostat . Latin America (Central and South America) Latinworld at http://latin w orld.com . Self-proclaimed "premier search engine for Iberoamerica and the Caribbean." This website is searchable in English, Spanish, and Portuguese. Click on "Countries" for information on Spain and countries in North, Central, and South America, and is a forum for Latin Americans and people interested in Latin America. WWW Virtual Library: Latin American Studies at http://lanic.utexas.edu/las.html . Maintained by the University of Texas at Austin, this website is a comprehensive source of information on Latin America and the Caribbean. It allows searches by key word, country, or selected topics and provides links to related Web sources in English, Portuguese, and Spanish. Middle and Near East Center for Middle Eastern Studies at http://ww w .ias.berkeley.edu/cmes . Maintained by the University of California at Berkeley, this site contains links to many Middle East country servers, Islamic studies, Judaism and Jewish studies, and Middle East centers in the United States. Middle East Studies at http://www.columbia.edu/cu/lweb/indi v /mideast/cuvlm . Maintained by Columbia University, this website provides information to resources on the Middle East and Jewish Studies by region and by country. It also provides Web links to Middle East news sources, bibliographies, and libraries. Russia and Eastern Europe Russian and Eastern European Studies at http://www.ucis. p itt.edu/crees/ . Maintained by the University of Pittsburgh, the Center for Russian and East European Studies (CREES), this site provides information by subject, geographical region, and links to electronic resources on the Baltic states, Central and Eastern Europe, the CIS, the Russian Federation, and the former Soviet Union at http://www. u cis.pitt.edu/crees/internet.html . Armed Forces Worldwide/Foreign Military at http:// w ww.military.com/Resources/ResourceSubmittedFileView?file=world_map_front_door.htm . This website is maintained by Military.com, which provide descriptive and statistical information. Click on the map to access data on armed forces by individual country or by continent. Conflicts at http://www.flashpoints.info/FlashPoints_home.html . This website, Flash Points, provides information and links to contemporary conflicts worldwide by country as well as other related links. See also Peace and Conflicts. Constitutions of the World at http://www.oefre.unib e .ch/law/icl/index.html . From the International Constitutional Law Project, this website offers links to sources for the text of constitutions of selected countries and lists recent changes with dates. Country Studies at http://lcweb2.loc.gov/f r d/cs . Produced by the Federal Research Division at the Library of Congress under the Country Studies/Area Handbook Program sponsored by the U.S. Department of the Army. This website contains electronic versions of the Country Studies book series. The majority of the text of the published books are included, but without tables, graphs, and other appendixes. Currently, 101 countries are available online. Crime and Justice Information at http://www.uncjin.org . United Nations Crime and Justice Information Network (UNCJIN) in Vienna, Austria, provides statistical information on crime prevention and criminal justice issues for numerous countries, including a link to the Federal Bureau of Investigation (FBI). Currency Converter at http://www.oanda.com/converter/classic . Maintained by OANDA, the Internet arm of Olsen & Associates of Switzerland, this website allows currency conversion for 164 currencies, both current and historical. Distance (How Far Is It?) at http://www.indo.com/distance . This website is a service of Bali Online and uses data from the U.S. Bureau of the Census and a supplementary list of cities around the world to calculate the distance (in miles and kilometers) between any two places worldwide, and also give their respective latitude and longitude as well as a map showing the two places. Elections and Electoral Systems at http://www.psr.keele.ac.uk/election.htm . This website is a valuable source of information based in the United Kingdom on recent or upcoming elections for a selected list of countries, including the United States. It also provides links to government home pages, local elections, and electronic media. Expatriates at http://www.e s capeartist.com . The EscapeArtist website provides information on "overseas living for international job seekers, expatriates, adventurers, and tax exiles." It lists Web links to living overseas, country destination profiles, investing, expatriate magazines, and resources for global relocation. Foreign Governments at http://www.library.northwestern.edu/govinfo/resource/internat/foreign.html . Maintained by Northwestern University, this website provides official government links worldwide and Internet links to selected international organizations. See also National Parliaments. Foreign Languages at http://www.travlang.com/languages . Foreign Languages for Travelers allows users to search for a particular word or phrase for 80 languages available at this website. Human Rights at http://www.am n esty.org . Amnesty International on the Internet provides links to all Amnesty Web pages by country, including Amnesty International USA at http://www.amnesty.org/en/worldwide-sites . International Affairs Resources at http:// w ww.etown.edu/vl . Maintained by the Political Science Department of Elizabethtown College, this website provides more than 2,600 annotated links related to international affairs in broad categories: media sources, organizations, regions and countries, and by topic. International Business Resources at http://globaledge.msu.edu/ . Now known as Global Edge, this site maintained by Michigan State University, offers an exhaustive listing of companies, directories, and yellow pages with regional or country specific information under the headings "Country Insights" and "Resource Desk." International Business and Economic Sources at http://library.uncc.edu/display/?dept=reference&format=open&page=68 . The Virtual International Business and Economic Sources (VIBES) on the Internet is accessed and maintained by the J. Murrey Atkins Library at the University of North Carolina at Charlotte. Entries in VIBES include 3,500 comprehensive Web links to business and economic information by country, region, and various subject areas, including industry sector (commodities), foreign exchange rates, banking, exporting/importing, trade issues, trade law, and intellectual property. International Security at http://www.isn.ethz.ch . The International Relations and Security Network (ISN) on the Internet is maintained by the Center for Security Studies and Conflict Research in Zurich, Switzerland. It is a comprehensive network for information on global security and defense issues, and allows searching by subject or region, and Web links to news and other institutions worldwide. Maps http://www.lib . utexas.edu/Libs/PCL/Map_collection/Map_collection.html . Maintained by the Perry-Castañeda Library at the University of Texas at Austin, this website provides electronic copies of maps by current interest, region (Africa, Asia, Europe, the Americas, polar regions and oceans, etc.) and selected world cities. Also provides links for maps by country, city, and state and maps of special interest for hot spots like Iraq. See also the entry for the U.N. for a link to printable maps online and Maps area at http://www.mapsarea.com , for a portal of world maps and atlases. National Parliaments at http://wc.wustl.edu/parliaments.html . Maintained by the Weidenbaum Center on the Economy, Government, and Public Policy at Washington University in St. Louis, this site provides links to selected national parliaments. It is arranged alphabetically from the Albanian Parliament to Zimbabwe's Parliament. News Link at http://newslink.org . This site offers links to major news sources (newspapers, magazines, radio/TV programs, etc.) nationally and for selected areas worldwide. Newspapers at http://ww w .newspapers.com . This website offers worldwide listings of newspapers by regions and then by country in that region. Peace and Conflicts at http://www.cidcm.umd.edu/ . Maintained by the University of Maryland's Center for International Development and Conflict Management (CIDCM), this website provides an annual publication that updates its descriptions of the status of major armed conflicts worldwide. Political Leaders/Chiefs of State/World Rulers at http://www.govspot.com/categories/worldleaders.htm . This website lists current political leaders worldwide by clicking on "Chiefs of State" or 'World Rulers." This website also lists present and past world rulers by individual country. See also "World's Statesmen," below. Political Resources on the Net at http://www.politicalresources.net . This website lists political sites on the Internet by country, and has links to parties, organizations, and national governments worldwide as well as international organizations such as the European Union and United Nations. A unique feature called "Political Site of the Week" focuses on the political activity of one nation for a given week. Refugees at http:// w ww.unhcr.org . The official website of the U.N. High Commissioner for Refugees (UNHCR) offers background on the UNHCR, map-based and text-based access to country-specific information about refugees, Refugees magazine, and related Web links. Social Security in Other Countries at http://www.ssa.gov/international . Maintained by the Office of International Programs of the U.S. Social Security Administration (SSA), this website provides details on 21 social security programs outside the United States and links to selected countries and their agencies. Statistical Resources on the Web http://www.lib.umich.edu/govdocs/stats.html . Maintained by the University of Michigan's Document Center, this website has numerous statistics on foreign economies, foreign trade, and foreign government data sources. It also provides links to U.S. government agencies, foreign governments, news sources, and related sites. Terrorism at http://www.terrorism.com . The Terrorism Research Center is an independent institute dedicated to the study of terrorism and counter terrorism at home and abroad. Note: some premium content is based on subscription. It also offers related links to U.S. and international government sites at http://www.terrorism.com/modules.php?op=modload&name=Web_Links&file=index . Tourism Offices at http://www.towd.com . The Tourism Offices Worldwide Directory indexes only official government tourism offices, convention and visitors bureaus, and similar agencies. It also provides addresses, telephone and fax numbers, and e-mail (if available) for various countries including the United States. Treaties and International Agreements The Multilaterals Project at http://fletcher.tufts.edu/multilaterals.html is maintained by the Fletcher School of Law and Diplomacy at Tufts University. This website offers selected international laws and treaties by subject and a chronological listing. It also offers links to historical foreign documents, selected treaties, and the U.N. Treaty Database with selected U.N. documents. Treaties from the Avalon Project at Yale Law School are available at http://www.yale.edu:80/lawweb/avalon/avalon.htm . Maintained by Yale Law School, this website contains documents relevant in the areas of diplomacy, economics, history, government, law, and politics. It provides links supporting documents to the texts, Frequently Asked Questions (FAQs), and Project Diana, an online human rights archive. Work and Study Abroad at http://www.ciee.org . Maintained by the Council on International Educational Exchange (CIEE), this website provides materials on work and study abroad opportunities for American students and recent graduates on summer jobs, internships, and overseas career opportunities with a link to GoAbroad.com at http://www.goabroad.com , a self-proclaimed "leading international education and experiential travel resource with directories containing over 25,000 opportunities abroad updated daily including study abroad, internships, volunteer opportunities, teach abroad, language schools and more." Work Abroad and International Jobs at http://www.overseasjobs.com . Overseas Job Express provides links to numerous Internet resources such as international job mailing lists, summer opportunities, internships, and résumés on the Web. Work Opportunities/Resources for International Jobs at http://www.rileyguide.com/internat.html . The Riley Guide to Job Resources includes a section on resources for international job opportunities for selected countries and Web links to multiple countries and regions. World ' s Statesmen at http://www.worldstatesmen.org . Self-proclaimed "complete and up to date encyclopedia of all the leaders of nations and territories." International organizations and recent religious leaders are listed separately. This site also provides detailed chronologies, flags, national anthems, maps and information on global politics and history. (Area Code 202) Afghanistan, Republic of, 2341 Wyoming Ave., NW, 20008, 483-6410 Albania, Republic of, 2100 S St., NW, 20008, 223-4942 Algeria, 2118 Kalorama Rd., NW, 20008, 265-2800 Angola, Republic of, 1615 M St., NW, Suite 900, 20036, 785-1156 Antigua and Barbuda, 3216 New Mexico Ave., NW, 20016, 362-5122 Argentine Republic, 1600 New Hampshire Ave., NW, 20009, 238-6400 Armenia, Republic of, 2225 R St., NW, 20008, 319-1976 Australia, 1601 Massachusetts Ave., NW, 20036, 797-3000 Austria, 3524 International Court, NW, 20008, 895-6700 Azerbaijan, Republic of, 2741 34 th St., NW, 20008, 337-3500 Bahamas, Commonwealth of the, 2220 Massachusetts Ave., NW, 20008, 319-2660 Bahrain, State of, 3502 International Dr., NW, 20008, 342-0741 Bangladesh, People's Republic of, 3510 International Drive, NW, 20008, 244-2745 Barbados, 2144 Wyoming Ave., NW, 20008, 939-9200 Belarus, Republic of, 1619 New Hampshire Ave., NW, 20009, 986-1604 Belgium, 3330 Garfield St., NW, 20008, 333-6900 Belize, 2535 Massachusetts Ave., NW, 20008, 332-9636 Benin, Republic of, 2124 Kalorama Road, NW, 20008, 232-6656 Bolivia, 3014 Massachusetts Ave., NW, 20008, 483-4410 Bosnia and Herzegovina, Republic of, 2109 E St., NW, 20037, 337-1500 Botswana, Republic of, 1531-1533 New Hampshire Ave., NW, 20036, 244-4990 Brazil, 3006 Massachusetts Ave., NW, 20008, 238-2700 Brunei, 3520 International Court, NW, 20008, 237-1838 Bulgaria, Republic of, 1621 22 nd St., NW, 20008, 387-0174 Burkina Faso, 2340 Massachusetts Ave., NW, 20008, 332-5577 Burma (see Myanmar) Burundi, Republic of, 2233 Wisconsin Ave., NW, Suite 212, 20007, 342-2574 Cambodia, 4530 16 th St., NW, 20011, 726-7742 Cameroon, Republic of, 2349 Massachusetts Ave., NW, 20008, 265-8790 Canada, 501 Pennsylvania Ave., NW, 20001, 682-1740 Cape Verde, Republic of, 3415 Massachusetts Ave., NW, 20007, 965-6820 Central African Republic, 1618 22 nd St., NW, 20008, 483-7800 Chad, Republic of, 2002 R St., NW, 20009, 462-4009 Chile, 1732 Massachusetts Ave., NW, 20036, 785-1746 China, People's Republic of, 2300 Connecticut Ave., NW, 20008, 328-2500 Colombia, 2118 Leroy Place, NW, 20008, 387-8338 Congo, Democratic Republic of, 1726 M St., NW 20036, 234-7690 (formerly Zaire) Congo, Republic of, 4891 Colorado Ave., NW, 20011, 726-5500 Costa Rica, 2114 S St., NW, 20008, 234-2945 Cote d'Ivoire, Republic of, 2424 Massachusetts Ave., NW, 20008, 797-0300 Croatia, Republic of, 2343 Massachusetts Ave., NW, 20008, 588-5899 Cuba (see Switzerland for Cuban Interests Section)* Cyprus, Republic of, 2211 R St., NW, 20008, 462-5772 Czech Republic, 3900 Spring of Freedom St., NW, 20008 274-9100 Denmark, 3200 Whitehaven St., NW, 20008, 234-4300 Djibouti, Republic of, 1156 15 th St., NW, Suite 515, 20005, 331-0270 Dominica, Commonwealth of, 3216 New Mexico Ave., NW, 20016, 364-6781 Dominican Republic, 1715 22 nd St., NW, 20008, 332-6280 East Timor, 4201 Connecticut Ave., NW, Suite 504, 20008, 966-3202 Ecuador, 2535 15 th St., NW, 20009, 234-7200 Egypt, Arab Republic of, 3521 International Court, NW, 20008, 895-5400 El Salvador, 2308 California St., NW, 20008, 265-9671 Equatorial Guinea, 2020 16 th St., NW, 20009, 518-5700 Eritrea, State of, 1708 New Hampshire Ave., NW, 20009, 319-1991 Estonia, 1730 M St., NW, Suite 503, 20036, 588-0101 Ethiopia, 3506 International Drive, NW, 20008, 364-1200 Fiji, The Republic of, 2233 Wisconsin Ave., NW, Suite 240, 20007, 337-8320 Finland, 3301 Massachusetts Ave., NW, 20008, 298-5800 France, 4101 Reservoir Rd., NW, 20007, 944-6000 Gabon, Gabonese Republic, 2034 20 th St., NW, Suite 200, 20009, 797-1000 Gambia, The, 1156 15 th St., NW, Suite 1000, 20005, 785-1399 Georgia, Republic of, 1615 New Hampshire Ave., NW, Suite 300, 20009, 387-2390 Germany, Federal Republic of, 4645 Reservoir Rd., NW, 20007, 298-4000 Ghana, 3512 International Dr., NW, 20008, 686-4520 Greece, 2221 Massachusetts Ave., NW, 20008, 939-1300 Grenada, 1701 New Hampshire Ave., NW, 20009, 265-2561 Guatemala, 2220 R St., NW, 20008, 745-4952 Guinea, Republic of, 2112 Leroy Place, NW, 20008, 986-4300 Guinea-Bissau, 15929 Yukon Lane, Rockville, MD 20855 [phone number scrubbed] Guyana, 2490 Tracy Place, NW, 20008, 265-6900 Haiti, Republic of, 2311 Massachusetts Ave., NW, 20008, 332-4090 Holy See, The, 3339 Massachusetts Ave., NW, 20008, 333-7121 Honduras, 3007 Tilden St., NW, Suite 4-M, 20008, 966-7702 Hungary, Republic of, 3910 Shoemaker St., NW, 20008, 362-6730 Iceland, 1156 15 th St., NW, Suite 1200, 20005, 265-6653 India, 2107 Massachusetts Ave., NW, 20008, 939-7000 Indonesia, Republic of, 2020 Massachusetts Ave., NW, 20036, 775-5200 Iran (see Pakistan for Iranian Interests Section)* Iraq 1801 P Street, NW, 20036, 483-7500 Ireland, 2234 Massachusetts Ave., NW, 20008, 462-3939 Israel, 3514 International Drive, NW, 20008, 364-5500 Italy, 3000 Whitehaven St., NW, 20008, 612-4400 Ivory Coast (see Cote d'Ivoire) Jamaica, 1520 New Hampshire Ave., NW, 20036, 452-0660 Japan, 2520 Massachusetts Ave., NW, 20008, 238-6700 Jordan, Hashemite Kingdom of, 3504 International Dr., NW, 20008, 966-2664 Kazakhstan, Republic of, 1401 16 th St., NW, 20036, 232-5488 Kenya, Republic of, 2249 R St., NW, 20008, 387-6101 Korea, Republic of (South), 2450 Massachusetts Ave., NW, 20008, 939-5600 Kuwait, State of, 2940 Tilden St., NW, 20008, 966-0702 Kyrgyzstan, Kyrgyz Republic, 2360 Massachusetts Ave., NW, 20008, 338-5141 Laos, Lao People's Democratic Republic, 2222 S St., NW, 20008, 332-6416 Latvia, 4325 17 th St., NW, 20011, 726-8213 Lebanon, 2560 28 th St., NW, 20008, 939-6300 Lesotho, Kingdom of, 2511 Massachusetts Ave., NW, 20008, 797-5533 Liberia, Republic of, 5201 16 th St., NW, 20011, 723-0437 Liechtenstein, 888 17 th , NW, Suite 1250, 20006, 331-0590 Lithuania, Republic of, 2622 16 th St., NW, 20009-4202, 234-5860 Luxembourg, 2200 Massachusetts Ave., NW, 20008, 265-4171 Macedonia, Republic of, 1101 30 th St., NW, Suite 302, 20007, 337-3063 Madagascar, 2374 Massachusetts Ave., NW, 20008, 265-5525 Malawi, 2408 Massachusetts Ave., NW, Suite 320, 20008, 797-1007 Malaysia, 3516 International Court, NW, 20008, 572-9700 Mali, 2130 R St., NW, 20008, 332-2249 Malta, Republic of, 2017 Connecticut Ave., NW, 20008, 462-3611 Marshall Islands, Republic of, 2433 Massachusetts Ave., NW, 20008, 234-5414 Mauritania, Islamic Republic of, 2129 Leroy Place, NW, 20008, 232-5700 Mauritius, 4301 Connecticut Ave., NW, Suite 441, 20008, 244-1491 Mexico, 1911 Pennsylvania Ave., NW, 20006, 728-1600 Micronesia, Federated States of, 1725 N St., NW, 20036 223-4383 Moldova, Republic of, 2101 S St., NW, 20008, 667-1130 Mongolia, 2833 M St., NW, 20007, 333-7117 Morocco, Kingdom of, 1601 21 st St., NW, 20009, 462-7979 Mozambique, Republic of, 1990 M St., NW, Suite 570, 20036, 293-7146 Myanmar, Union of, 2300 S St., NW, 20008, 332-9044 Namibia, Republic of, 1605 New Hampshire Ave., NW, 20009, 986-0540 Nepal, 2131 Leroy Place, NW, 20008, 667-4550 Netherlands, 4200 Linnean Ave., NW, 20008, 244-5300 New Zealand, 37 Observatory Circle, NW, 20008, 328-4800 Nicaragua, 1627 New Hampshire Ave., NW, 20009, 939-6570 Niger, Republic of, 2204 R St., NW, 20008, 483-4224 Nigeria, Federal Republic of, 1333 16 th St., NW, 20036, 986-8400 Norway, 2720 34 th St., NW, 20008, 333-6000 Oman, Sultanate of, 2535 Belmont Rd., NW, 20008, 387-1980 Pakistan, 3517 International Court, NW, 20008, 243-6500 Iranian Interests Section, 2209 Wisconsin Ave., NW, 20007, 965-4990 Palau, Republic of, 1150 18 th St., NW, Suite 750, 20036, 452-6814 Panama, Republic of, 2862 McGill Terrace, NW, 20008, 483-1407 Papua New Guinea, 1779 Massachusetts Ave., NW, Suite 805, 20036, 745-3680 Paraguay, 2400 Massachusetts Ave., NW, 20008, 483-6960 Peru, 1700 Massachusetts Ave., NW, 20036, 833-9860 Philippines, 1600 Massachusetts Ave., NW, 20036, 467-9300 Poland, Republic of, 2640 16 th St., NW, 20009, 234-3800 Portugal, 2125 Kalorama Rd., NW, 20008, 328-8610 Qatar, State of, 2555 M St., NW, 20037, 274-1600 Romania, 1607 23 rd St., NW, 20008, 332-4848 Russian Federation, 2650 Wisconsin Ave., NW, 20007, 298-5700 Rwanda, Republic of, 1714 New Hampshire Ave., NW, 20009, 232-2882 Saint Kitts and Nevis, 3216 New Mexico Ave., NW, 20016, 686-2636 Saint Lucia, 3216 New Mexico Ave., NW, 20016, 364-6792 Saint Vincent and the Grenadines, 3216 New Mexico Ave., NW, 20016, 364-6730 San Marino, Republic of, 1899 L St., NW, 20036, 223-3517 Saudi Arabia, 601 New Hampshire Ave., NW, 20037, 337-4076 Senegal, Republic of, 2112 Wyoming Ave., NW, 20008, 234-0540 Serbia, 2134 Kalorama Rd., NW, 20008, 332-0333 Sierra Leone, 1701 19 th St., NW, 20009, 939-9261 Singapore, Republic of, 3501 International Place, NW, 20008, 537-3100 Slovak Republic, 3523 International Court, NW, 20008, 237-1054 Slovenia, Republic of, 2410 California St., NW, 20008, 386-6601 Somalia—Embassy ceased operations on May 8, 1991. South Africa, 3051 Massachusetts Ave., NW, 20008, 232-4400 Spain, 2375 Pennsylvania Ave., NW, 20037, 452-0100 Sri Lanka, 2148 Wyoming Ave., NW, 20008, 483-4025 Sudan, Republic of the, 2210 Massachusetts Ave., NW, 20008, 338-8565 Suriname, Republic of, 4301 Connecticut Ave., NW, Suite 460, 20008, 244-7488 Swaziland, Kingdom of, 3400 International Dr., NW, 20008, 362-6683 Sweden, 2900 K St., NW, 20005, 467-2600 Switzerland, 2900 Cathedral Ave., NW, 20008, 745-7900 Cuban Interests Section, 2630 16 th St., NW, 20009, 797-8518 Syrian Arab Republic, 2215 Wyoming Ave., NW, 20008, 232-6313 Tajikistan, 1005 New Hampshire Ave., NW, 20037, 223-6090 Tanzania, United Republic of, 2139 R St., NW, 20008, 939-6125 Thailand, 1024 Wisconsin Ave., NW, Suite 401, 20007, 944-3600 Togo, Republic of, 2208 Massachusetts Ave., NW, 20008, 234-4212 Trinidad and Tobago, Republic of, 1708 Massachusetts Ave., NW, 20036, 467-6490 Tunisia, 1515 Massachusetts Ave., NW, 20005, 862-1850 Turkey, Republic of, 2525 Massachusetts Ave., NW, 20008, 612-6700 Turkmenistan, Republic of, 2207 Massachusetts Ave., NW, 20008, 588-1500 Uganda, Republic of, 5911 16 th St., NW, 20011, 726-7100 Ukraine, 3350 M St., NW, 20007, 333-0606 United Arab Emirates, 3522 International Court, NW, Suite 400, 20008, 243-2400 United Kingdom of Great Britain & Northern Ireland, 3100 Massachusetts Ave., NW, 20008, 588-6500 Uruguay, 1913 I St., NW, 20006, 331-1313 Uzbekistan, Republic of, 1746 Massachusetts Ave., NW, 20036, 887-5300 Vatican City (see Holy See) Venezuela, Republic of, 1099 30 th St., NW, 20007, 342-2214 Vietnam, Socialist Republic of, 1233 20 th St., NW, Suite 400, 20037, 861-0737 Yemen, Republic of, 2319 Wyoming Ave., NW, 20008, 965-4760 Zaire (see Congo, Democratic Republic of) Zambia, Republic of, 2419 Massachusetts Ave., NW, 20008, 265-9717 Zimbabwe, Republic of, 1608 New Hampshire Ave., NW, 20009, 332-7100 Note: Cuba and Iran do not have official diplomatic relations with the United States and therefore do not have chanceries in Washington, DC. Their interest sections are located at other chanceries (Switzerland and Pakistan respectively). In addition, North Korea does not have diplomatic relations with the United States and has no interest section in Washington, DC. In addition to the list of chanceries, these addresses may also be useful: European Union Delegation of the European Commission to the United States 2300 M Street, NW Washington, DC 20037 [phone number scrubbed] Fax: [phone number scrubbed] http://www.eurunion.org Hong Kong Trade Development Council 219 East 46 th Street New York, NY 10017 [phone number scrubbed] Taiwan Taipei Economic and Cultural Representative Office (TECRO) 4201 Wisconsin Avenue, NW Washington, DC 20016 [phone number scrubbed] American Institute in Taiwan 1700 North Moore Street Suite 1700 Arlington, VA 22209 [phone number scrubbed] Note: The United States maintains unofficial relations with Taiwan through the American Institute in Taiwan.

This report provides a selection of authoritative materials for locating information on foreign countries and international organizations. In the general information section, it presents sources giving an overview of politics, economics, and recent history. A specialized information section cites sources on human rights, immigration, international organizations, military strengths, terrorism, and other topics. Included are titles of some of the most frequently consulted bibliographic sources that are available for use in many libraries. Electronic information on foreign countries is also provided, via the Internet, by agencies of the federal government, official foreign government websites, international organizations, and related sources. Included is a current list of foreign chanceries located in Washington, DC, as of the date of this report. This report will be updated periodically through the year as new materials become available.

Since the 1970s, energy tax policy in the United States has attempted to achieve two broad objectives. First, policymakers have sought to reduce oil import dependence and enhance national security through a variety of domestic energy investment and production tax subsidies. Second, environmental concerns have led to subsidization of a variety of renewable and energy efficiency technologies via the tax code. While these two broad goals continue to guide policy, enacted policies that solely focus on achieving only one of the goals are often inconsistent with policies solely designed to achieve the other goal. For example, subsidies to oil and gas producers, while enhancing domestic oil and gas production and ultimately increasing the burning of fossil fuels, encourage an activity which may have negative environmental consequences. By providing a longitudinal perspective on energy tax policy and expenditures, this report examines how current revenue losses resulting from energy tax provisions compare to historical losses and provides a foundation for understanding how current energy tax policy evolved. Further, this report compares the relative value of tax incentives given to fossil fuels, renewables, and energy efficiency. Recent legislation has introduced, reintroduced, expanded, and extended a number of energy tax provisions. While a number of the current energy provisions have a long historical standing in the tax code, a wider variety of tax incentives, to promote a range of energy sources, are presently available than have been available in the past. After reviewing the history of energy tax policy, this report examines the economic rationale for government interventions in energy markets. Understanding when and how government intervention can improve market outcomes assists in evaluating the potential effects of various tax policy proposals. In the case of energy markets, externalities, other market barriers, and national security concerns raise the possibility that government intervention via tax policy may lead to a more economically efficient distribution of energy resources. Trends in energy tax expenditures have changed substantially over the past 30 years. In the early 1980s, revenue losses associated with energy tax provisions were approximately 3% of total revenue losses from all tax expenditures. In the mid-1980s, energy tax expenditures and total tax expenditures were scaled back. While total tax expenditures relative to GDP have trended up since the mid-1980s, energy tax expenditures relative to total tax expenditures have remained below early 1980s levels. Relatively low levels of tax expenditures do not necessarily suggest that the government is devoting fewer resources towards achieving energy policy goals, as federal grants, loans and loan guarantees, and mandates are also important energy policy tools. Examining trends in revenue losses associated with energy tax provisions provides insight into the actual direction of energy tax policy. In inflation-adjusted terms, revenue losses associated with energy tax provisions in the late 1970s and early 1980s are similar in total cost to revenue losses in the late 2000s. The composition of these revenue losses, however, has changed significantly. In the late 1970s nearly all revenue losses associated with energy tax provisions were the result of two tax preferences given to the oil and gas industry. In the early 1980s, revenue losses associated with special treatment for the oil and gas industry accounted for more than three quarters of all federal revenue losses associated with energy tax expenditures. Changes in policy, coupled with declining oil prices in the late 1980s, dramatically reduced revenue losses associated with oil and gas tax policy. Throughout the 1990s, the bulk of revenue losses associated with energy tax provisions were attributable to the tax credit for unconventional fuels. In the 2000s, revenue losses associated with renewable energy production incentives began to make up a larger portion of energy tax expenditure revenue losses, reaching an estimated 21% in 2006. Revenue losses associated with tax provisions benefitting fossil fuels also remained important into the 2000s, with a large proportion of revenue losses in the mid-to-late 2000s associated with the unconventional fuel production credit, benefitting synthetic coal producers. In the late 2000s, the majority of revenue losses have been associated with incentives designed to promote biofuels. The federal government also loses significant revenue from excise tax credits given to alcohol fuel blenders (specifically, the volumetric ethanol excise tax credit (VEETC)). While excise tax credits are not technically a tax expenditure (technically, tax expenditures are only revenue losses associated with income tax provisions), these excise tax credits have played an important role in shaping energy tax policy. In 2010, tax credits for alcohol fuels reduced excise tax receipts by $5.7 billion. In 2009, Congress enacted the Section 1603 grant in lieu of tax credit program as part of the American Recovery and Reinvestment Act (ARRA; P.L. 111-5 ). The Section 1603 grant program allows taxpayers eligible for the renewable energy production tax credit (PTC) and investment tax credit (ITC) to elect to receive a one-time cash payment from the Treasury instead of tax payments. In 2010, outlays under this program were $4.2 billion. The history of energy tax policy can be divided into five eras: the oil and gas period from 1916 through 1970, the energy crisis period of the 1970s, the 1980s free-market era of the Reagan Administration, the post-Reagan era of the 1990s, and the 2000s, which is characterized by a renewed interest in promoting renewable energy. For more than half a century, federal energy tax policy focused almost exclusively on increasing domestic oil and gas reserves and production. There were no tax incentives promoting renewable energy or energy efficiency. During that period, two major tax preferences were established for oil and gas. These two provisions speed up the capital cost recovery for investments in oil and gas exploration and production. First, the expensing of intangible drilling costs (IDCs) and dry hole costs was introduced in 1916. This provision allows IDCs to be fully deducted in the first year rather than being capitalized and depreciated over time. Second, the excess of percentage over cost depletion deferral was introduced in 1926. The percentage depletion provision allows a deduction of a fixed percentage of gross receipts rather than a deduction based on the actual value of the resources extracted. Through the mid-1980s, these tax preferences given to oil and gas remained the largest energy tax provisions in terms of estimated revenue loss. Both of these provisions remain in the tax code in limited form today. Events in the 1970s caused a dramatic shift in the focus of federal energy tax policy as evidenced by legislation enacted in the late 1970s and early 1980s. First, large budget deficits made it difficult to continue the large tax preferences given to oil and gas. Second, the 1970s brought a heightened awareness of environmental issues, resulting in interest in promoting alternative energy sources alongside energy efficiency. Finally, the oil embargo and subsequent energy crisis of 1973, followed by the 1979 crisis in the wake of the Iranian Revolution, led policymakers to enact policies promoting alternative fuels (both alcohol and unconventional fuels) and energy efficiency. Additionally, policy also focused on increasing domestic energy production to enhance national energy security. Three broad actions were taken through the tax code shifting energy policy away from oil and gas promotion towards creating incentives for alternative energy and efficiency. First, the oil industry's two major tax preferences—expensing of IDCs and percentage depletion—were significantly reduced. Second, several excise taxes penalizing the use of fossil fuels were introduced. These included the federal "gas guzzler" tax, a windfall profit tax on oil, and an excise tax on petroleum (the "Superfund" program). Third, a number of tax incentives were implemented to promote energy efficiency and incentivize alcohol and unconventional fuels. Most of these new tax subsidies were introduced as part of the Energy Tax Act of 1978 (ETA78, P.L. 95-618 ). The Windfall Profit Tax Act of 1980 (WPT80; P.L. 96-223 ) also introduced a number of provisions that had the effect of either discouraging fossil fuel production or promoting unconventional (synthetic) or renewable fuels. In spite of these policy shifts, the majority of revenue losses associated with energy tax provisions served to benefit the oil and gas industry well into the 1980s. Since the 1970s, policymakers have continued to provide incentives for the development of both conventional and renewable forms of energy. In recent years, the policy focus has shifted more towards incentives for renewables. Policymakers have also continued to focus on providing incentives for energy efficient technologies in many different sectors. The residential energy efficiency tax credits, which were allowed to expire in the 1980s, were reenacted. A number of incentives for energy efficiency in commercial, industrial, and transportation sectors have been reinstated, expanded, or introduced. The Reagan Administration sought to pursue what was believed to be a more neutral and less distortionary energy tax policy. As such, the Administration opposed using tax law to promote oil and gas development, energy efficiency, renewable energy sources, or unconventional or renewable fuels. It was believed that high oil prices alone would be enough to spur the economically efficient level of investment in unconventional or renewable energy sources. Congress, in being consistent with the free market approach, allowed a number of the energy tax provisions enacted under the ETA78 to expire. Most business energy tax credits were allowed to expire in 1982 as scheduled. The residential energy tax credits were allowed to expire at the end of 1985 as scheduled. Of the ETA78 energy tax provisions scheduled to expire, only the tax credit for energy property (solar, geothermal, ocean geothermal, and biomass) was extended. Toward the end of President Reagan's second term, in 1988, following a massive decline in oil prices, the windfall profit tax (enacted under the WPT80) was repealed. While the Reagan Administration did successfully reduce the number of energy tax provisions, the Administration did not accomplish all of their stated goals. Specifically, the primary tax incentives for oil and gas (expensing of IDCs and percentage depletion) were not eliminated, although they were scaled back as part of the Tax Reform Act of 1986 (TRA; P.L. 99-514 ). In addition to a reduction in the number of favorable energy tax provisions, revenue losses associated with energy tax provisions fell during the 1980s due to relatively low energy prices. Low oil and gas prices during the late 1980s reduced investment. Consequently, revenue losses associated with tax provisions designed to promote investment in oil and gas declined. In the post-Reagan era, energy tax policy again followed a more interventionist course. A number of provisions were enacted to promote energy production from renewable sources, alcohol fuels, and unconventional fuels. In addition, favorable tax provisions continued to be extended to the oil and gas industry. The first major tax policies enacted under President George H. W. Bush were contained in the revenue provisions of the Omnibus Budget Reconciliation Act of 1990 (OBRA90; P.L. 101-508 ). First, the act increased the gasoline tax by 5¢ per gallon while also doubling the gas-guzzler tax. Second, the act introduced a 10% tax credit for enhanced oil recovery expenditures, liberalized some of the restrictions on the percentage depletion provision, and reduced the effect of the alternative minimum tax (AMT) on oil and gas investments. Third, the act expanded the unconventional fuel production credit and introduced a tax credit for small ethanol producers. The Energy Policy Act of 1992 ( P.L. 102-486 ) included a number of energy tax provisions. The tax credit for energy produced using renewable resources was established under this act. The renewable energy production tax credit (PTC) (IRC §45) was only available for electricity generated using wind or closed-loop biomass systems. The act also included a number of other energy tax provisions, including an income tax deduction for the costs of clean-fuel powered vehicles, liberalization of the alcohol fuels tax credit, another expansion of the unconventional fuel production credit, and further liberalization of the favorable tax provisions for oil and gas. The Tax Relief and Extension Act, enacted as Title V of the Ticket to Work and Work Incentives Improvement Act of 1999 ( P.L. 106-170 ), extended and liberalized the production tax credit, while also extending liberalizations regarding the percentage depletion provision for oil and gas. In 1993, President Clinton proposed a differential British thermal unit (Btu) tax on fossil fuels, which was ultimately dropped in favor of an excise tax increase on motor fuels. The Omnibus Budget Reconciliation Act of 1993 (OBRA93; P.L. 103-66 ) contained a 4.3¢ per gallon increase in the motor fuel excise tax. The revenues were allocated for deficit reduction rather than to the highway or other trust funds. The late 1990s were characterized by low crude oil prices, which hurt oil producers and encouraged consumption. Additionally, with oil prices at record lows, there was little economic incentive to invest in energy efficiency, renewable energy, or renewable fuels. Rising oil prices in the early 2000s led to a push for comprehensive energy legislation in the 107 th and 108 th Congresses. While comprehensive energy legislation was debated and otherwise stalled, energy tax policy goals were pursued through smaller provisions in tax relief and jobs bills. The Working Families Tax Relief Act of 2004 ( P.L. 108-311 ) retroactively extended four energy tax subsidies that had been allowed to expire. These included (1) the tax credit for energy produced using renewable resources (PTC), (2) the suspension of the 100% net income limitation for the oil and gas percentage depletion allowance, (3) the tax credit for electric vehicles, and (4) the deduction for clean fuel vehicles. The American Jobs Creation Act of 2004 ( P.L. 108-357 ) also included tax credits for alcohol fuels and biodiesel. Additionally, the act increased the number of technologies that were eligible for the renewable energy production tax credit. The Energy Policy Act of 2005 (EPACT05; P.L. 109-58 ) was the culmination of efforts for comprehensive energy legislation that began in 2001. (See the shaded text-box below for a listing and brief explanation of the energy tax provisions of EPACT05.) Spurred by rising energy prices and growing dependence on foreign oil, the law was shaped by competing concerns about energy security, environmental quality, and economic growth. Included in EPACT05 were a number of tax provisions related to energy infrastructure, domestic fossil fuels, energy efficiency, clean motor vehicles and fuels, among others. EPACT05 was responsible for substantially increasing energy tax subsidies, both in terms of the number of provisions and amount of federal revenue losses. At the end of the 1990s, there were 11 energy tax expenditure programs listed in the President's Budget. The 2007 budget listed 38 energy tax expenditure programs. The provisions enacted or modified under EPACT05 can be classified as those related to electricity infrastructure, domestic fossil fuels, energy efficiency, and clean motor vehicles and fuels. The energy tax provisions contained within EPACT05 attempted to enhance domestic energy production and increase energy efficiency. The electricity infrastructure provisions included electricity generation incentives as well as those designed to facilitate the restructuring of the electric utility industry. Electricity market conditions (spiking prices, supply shortfalls, and transmission bottlenecks) led to the belief that incentives for investment in electricity generation and transmission were needed. Many of the domestic fossil fuel incentives were based on proposals that had been made in response to the low oil prices of the late 1990s. While oil prices had increased by 2005, EPACT05 still included a number of spending, tax, and deregulatory incentives to stimulate the production of oil and gas. The energy efficiency provisions of EPACT05 represented an effort to reduce energy consumption. EPACT05 reestablished some of the residential and business energy efficiency credits that had been allowed to expire in the 1980s as well as introduced a number of other energy efficiency incentives. Recognizing that transportation is the nation's largest energy consuming sector, EPACT05 expanded incentives for alcohol fuels and clean motor vehicles. Following EPACT05, additional incremental changes to energy tax policy were made in subsequent legislation. Provisions in the Tax Increase Prevention and Reconciliation Act ( P.L. 109-222 ) reduced tax subsidies to oil and gas, while the Tax Relief and Health Care Act of 2006 ( P.L. 109-432 ) extended a number of renewable energy provisions that were set to expire. The Food, Conservation, and Energy Act of 2008 ( P.L. 110-234 ), otherwise referred to as the 2008 Farm Bill, contained a provision to promote cellulosic ethanol through a blenders credit. The 2008 and 2009 stimulus bills expanded and extended energy tax incentives for renewables and efficiency. The Emergency Economic Stabilization Act of 2008 (EESA; P.L. 110-343 ) contained a number of energy tax provisions, primarily ones that extended existing provisions. The majority of the extended tax breaks went to promote renewable energy production, encourage energy efficiency, or provide incentives for alcohol fuels and clean motor vehicles. The cost of the energy tax extenders legislation in the Emergency Economic Stabilization Act of 2008 was fully financed, or paid for, by raising taxes on the oil and gas industry (mostly by reducing oil and gas tax breaks) and by other tax increases. From the perspective of energy tax policy, the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5 ) modified incentives for renewable energy production, energy efficiency, clean motor vehicles, as well as a number of other energy tax incentives. Like EESA, most of ARRA focused on modifying and extending previously enacted energy tax provisions promoting renewables, efficiency, and alternative technology vehicles. ARRA's Section 1603 grants for renewables, discussed in greater detail below, substantially changed federal incentives for renewable energy by converting the previously available tax credits into direct cash payments. ARRA also provided tax incentives for advanced energy manufacturing that were not previously available. A number of energy tax provisions were scheduled to expire at the end of 2010, including the Section 1603 grants in lieu of tax credits program, the excise tax credits for alcohol fuels, and the tax credits for energy efficiency improvements to existing homes. Under the Tax Relief, Unemployment Reauthorization, and Job Creation Act of 2010 ( P.L. 111-312 ), the Section 1603 grant program and the tax credits for alcohol fuels were extended for one year, through 2011. The tax credits for energy efficiency improvements to existing homes were also extended, but at a reduced rate. The tax credits for advanced energy manufacturing were not extended in P.L. 111-312 . The primary economic justification for intervening in energy markets via the tax code is to address market failures. When market failures are present, resources are not efficiently allocated. Market failures can result from the presence of externalities, the existence of principal-agent problems or informational inefficiencies, or from a failure to adequately address national security concerns. The following paragraphs elaborate on these concepts in the context of energy taxation. Both the production and consumption of energy often generate negative externalities. For example, burning fossil fuels contributes to air pollution and generates greenhouse gasses. When an activity generates a negative externality, imposing a tax on the activity can improve economic efficiency. For example, driving gasoline powered motor vehicles may impose negative externalities due to polluting emissions as well as increased highway congestion. Imposing a tax equal in value to the monetary value of the driving-induced environmental and congestion damages reduces the equilibrium quantity of driving. By imposing a tax, potential drivers face a price of driving that is equal to the social marginal cost associated with driving. With a tax, an individual's choices regarding driving are based on their own costs as well as the external costs driving imposes on society. As an alternative, policymakers often subsidize a substitute activity, one that is associated with fewer negative externalities. Following the example above, policymakers may choose to subsidize public transportation, reducing the price of public transportation relative to driving. Currently, there are a number of subsidies available for renewable energy production and technologies. While taxing activities associated with negative externalities may enhance economic efficiency, subsidizing the alternative activity is not necessarily economically efficient. Subsidizing renewable energy, in this context, reduces the average price of energy, which increases demand and ultimately consumption. Subsidies for renewable energy, by decreasing the average price of energy, work against initiatives for energy efficiency. Further, the government must raise revenue to finance these subsidies. Such revenues may be raised using distortionary taxes. Intervention in energy markets has also been justified in the presence of principal-agent problems. Principal-agent problems occur when the ultimate consumer of energy does not make equipment purchasing decisions. For example, with rental property, landlords choose what appliances to install while tenants are often responsible for paying utility bills. Landlords may be unwilling to pay higher prices for energy-efficient appliances when the savings will ultimately accrue to tenants. Tax policies that reduce the cost of energy-efficient appliances tend to increase energy-efficient installations. Existing tax policies, however, do not directly aim to ameliorate the under-installation of energy-efficient property in markets that likely suffer from principal-agent problems (current energy tax incentives are not targeted toward markets susceptible to principal-agent problems, such as rental housing). Informational problems and a variety of other market barriers may also be used to justify government intervention in energy markets. For example, homeowners may not know the precise payback or rate of return of a specific energy-efficient device. This may explain the so-called "energy paradox"—the empirical observation that consumers require an abnormally high rate of return to undertake energy-efficiency investments. High initial first costs of energy-efficiency investments are also often cited as a barrier to investment in energy efficiency. When externalities lead to an inefficient use of energy resources, tax policy may effectively address the inefficiency. It is less clear that tax policy will effectively address the inefficiency when informational problems or other barriers prevent an efficient allocation of energy resources. While tax subsidies can be used to reduce the cost of investing in energy-efficient property, informational programs or consumer lending programs may also be effective at encouraging investments in energy-efficiency. Preserving national security is another often-cited rationale for intervention in energy markets. Presently, much of the petroleum consumed in the United States is derived from foreign sources. There are potentially a number of external costs associated with petroleum importation, especially when imported from unstable countries and regions. First, a high level of reliance on imported oil may contribute to a weakened system of national defense or contribute to military vulnerability in the event of an oil embargo or other supply disruption. Second, there are costs to allocating more resources to national defense than otherwise necessary when relying on high levels of imported oil. Specifically, there is an opportunity cost associated with resources allocated to national defense, as such resources are not available for other domestic policy initiatives and programs. To the extent that petroleum importers fail to take these external costs into account, there is market failure. While imposing a tax on imported oil would theoretically correct for this externality, in practice such a tax would likely violate trade agreements. Instead, policymakers have historically subsidized domestic oil and gas production. The economic well-being and economic security of the nation depends on having stable energy sources. There are national economic costs associated with unstable energy supplies, such as increasing unemployment and inflation that may follow oil price spikes. While domestic production subsidies for oil and gas may reduce the cost of producing, such subsidies are unlikely to materially change consumer prices. Oil as a commodity is priced on world markets, and so long as the United States remains an open economy it will be affected by world oil price fluctuations. Even if the United States produces all the energy consumed domestically, world oil price fluctuations will impact the prices of other imported goods. The Congressional Budget and Impoundment Act of 1974 (the Budget Act; P.L. 93-344 ) defines tax expenditures 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 tax liability." Both the Treasury Department and the Joint Committee on Taxation (JCT) provide annual tax expenditure estimates. The Treasury's list is included in the President's annual budget submission. The JCT issues annual tax expenditure estimates as a stand-alone product. Tax provisions that reduce excise tax revenues are technically not considered tax expenditures under the Budget Act. Tax provisions are only considered to have tax expenditure impacts if they lead to a reduction in corporate or personal income tax receipts. Consequently, excise tax credits are not considered tax expenditures. Even though excise tax credits or rate reductions are not technically considered tax expenditures, provisions that provide exemptions from, or credits against, excise taxes still reduce taxpayers' aggregate tax liability and lead to federal revenue losses. Grants paid by the Treasury are also not tax expenditures, as grants involve direct federal outlays rather than revenue losses attributable to reduced tax receipts. Figure 1 illustrates the broader trend in tax expenditures from 1977 through 2010 as well as the trend in energy tax expenditures. The solid line depicts revenue losses arising from tax expenditures as a percentage of GDP. Between 1977 and 1987 revenue losses associated with tax expenditures increased from less than 6% of GDP to nearly 10% of GDP. By reducing tax rates, eliminating and scaling back various tax expenditures, and generally broadening the tax base, the Tax Reform Act of 1986 (TRA86; P.L. 99-514 ) reduced revenue losses associated with tax expenditures. By 1989 revenue losses associated with tax expenditures were again less than 6% of GDP. Since the end of the 1980s, revenue losses associated with tax expenditures as a percentage of GDP have trended upward. The increase in revenue losses associated with tax expenditures partially reflects rising incomes during periods of economic expansion, but it is also the result of the introduction of new tax expenditures or the expansion of existing tax expenditure provisions. The dashed line in Figure 1 depicts revenue losses associated with energy-related tax expenditures as a percentage of total tax expenditures. While tax expenditures as a percentage of GDP were high in relative terms in the late 1970s into the early 1980s, energy tax expenditures relative to total tax expenditures were also relatively high. In 1982, revenue losses from energy tax expenditures as a percentage of total tax expenditures exceeded 3%. By the end of the 1980s, revenue losses from energy tax expenditures as a percentage of total tax expenditures dropped to less than one-third of one percent (0.3%). Energy tax expenditures as a percentage of total tax expenditures have remained below 1% in all years except 2009 (energy tax expenditures as a percentage of total tax expenditures were estimated to be 1.1% in 2009). The reduced importance of energy tax expenditures may be reflective of a policy preference in which tax policy is not the preferred mechanism for achieving energy policy goals. In addition to tax incentives, there are a number of federal grants and energy-related mandates designed to achieve federal energy goals. For example, ARRA's Section 1603 grant in lieu of tax credit program converted some of the federal support for renewable energy into a grant program not delivered directly through the tax code. Technically, tax expenditures cannot be simply summed to estimate the aggregate revenue loss because of interaction effects. When the revenue losses associated with various tax provisions are estimated, the estimates are made assuming that there are no changes in other provisions or in taxpayer behavior. Consequently, aggregate tax expenditure estimates, derived from summing the estimated revenue effects of individual tax expenditure provisions, are unlikely to reflect the actual change in federal receipts associated with removing various tax provisions. While a summation of tax expenditure revenue loss estimates may not be technically accurate, the analysis presented here likely provides a useful approximation of the general trend in energy tax expenditures. It is unknown whether the summing of individual tax expenditure provisions understates or overstates actual revenue losses associated with tax expenditures. Furthermore, since many tax expenditure provisions remain in the tax code minimally changed for long periods of time, the bias from summing tax expenditures remains approximately the same from year to year. Even if the summation of tax expenditures is not believed to represent accurate levels of revenue loss, the examination of trends is still highly useful. Figure 2 illustrates trends in energy tax expenditures in current dollars from 1977 through 2010. Figure 3 presents energy tax expenditures using inflation-adjusted dollars. Through the 1970s and most of the 1980s the majority of tax expenditures benefited the oil and gas industry through the expensing of IDCs and percentage depletion provisions. In 1977, before the enactment of the ETA78, annual revenue losses of the expensing of IDCs and percentage depletion provisions to the oil and gas industry were more than $2 billion ($6 billion in 2010 dollars). While the ETA78 and WPT80 enacted energy tax provisions to encourage efficiency and unconventional and renewable fuels, the majority of energy tax expenditures continued to result from the expensing of IDCs and percentage depletion provisions for oil and gas. In 1981, these two oil and gas tax provisions resulted in revenue losses of $4.9 billion while the residential energy efficiency credits resulted in revenue losses of $0.5 billion ($10.5 billion and $1.2 billion in 2010 dollars, respectively). The majority of the $1.2 billion for "other" energy tax expenditures were attributable to the expensing of IDCs and percentage depletion provisions for fuels other than gas and the energy credit for investment in renewable energy production. While a number of energy tax incentives were allowed to expire under the Reagan Administration, the most striking change in energy tax expenditures came toward the end of the 1980s. By 1988, energy tax expenditures were only $0.6 billion ($1 billion in 2010 dollars). Part of the reason for this relatively low estimate for revenue losses is the negative tax expenditure estimate ($-0.6 billion) associated with the expensing of IDCs for oil and gas. While the tax incentives for oil and gas were scaled back under the TRA in 1986, external market forces, specifically low oil prices, were also responsible for the reduction in energy tax expenditures during the late 1980s that persisted into the 1990s. The tax expenditure estimate for the expensing of IDCs provision can be negative—indicating an increase in federal revenues rather than a loss—since the provision represents a tax deferral, essentially an interest free loan from the government. Government revenue losses from the expensing of IDCs are incurred when an investment is made, as the costs are expensed in the first year. Over the next four years, however, there is an offsetting gain for the government, as no further deductions on investments can be made. When investments are growing, the additional amount deducted via expensing exceeds the offsetting gains from reduced cost depletions, and the government faces revenue losses. Investments in oil and gas fell off following the collapse of oil prices in 1986. In 1988 and 1989, the tax expenditure estimates for the expensing of IDCs provision were negative, indicating an increase in federal revenues. Throughout the 1990s and into the 2000s, the estimated revenue losses associated with this provision remained relatively small. Throughout the 1990s, growth in energy tax expenditures was primarily driven by the unconventional fuel production credit (IRC § 29). In 1990, the two major oil and gas provisions, expensing of IDCs and percentage depletion, accounted for $0.4 billion in tax expenditures ($0.6 billion in 2010 dollars) while the remaining $0.6 billion ($0.9 billion in 2010 dollars) in revenue losses was attributable to a variety of other provisions, some for renewable energy and others for fossil fuel energy sources. By 1999, estimated revenue losses from expensing of IDCs and percentage depletion for oil and gas was $0.9 billion while the estimated revenue losses from the unconventional fuel production credit were $1.3 billion ($1.1 and $1.7 billion in 2010 dollars, respectively). Between 1990 and 1999, total energy tax expenditures had increased from $1 billion to $2.8 billion ($1.5 to $3.6 billion in 2010 dollars). While the unconventional fuel production tax credit was initially enacted as part of the WPT80, the early revenue losses associated with the provision were low. The goal of the unconventional fuel production tax credit was to stimulate the production of synthetic fuels using domestic deposits of oil, gas, and coal. Even in the face of the high oil prices of the late 1970s and early 1980s, there was little production of unconventional fuels. By the late 1980s and into the early 1990s, producers of unconventional gases, such as coal bed methane and tight sands gas, had begun to claim the credit. The credit was expanded and extended under OBRA in 1990 and again under the Energy Policy Act of 1992. The composition of energy tax expenditures remained relatively stable throughout the late 1990s and early 2000s. By 2005, significant changes in the composition of revenue losses attributable to energy tax expenditures began to emerge. As provisions enacted under EPACT05 in 2005 went into effect, revenue losses associated with energy tax provisions increased. The provision primarily responsible for increasing energy tax expenditures in the years immediately after 2005 was the unconventional fuel production credit. In 2004, revenue losses associated with the unconventional fuel production credit were an estimated $0.6 billion. By 2007, revenue losses associated with the provision had increased more than seven-fold to $4.5 billion. The unconventional fuels production credit was designed to induce the substitution of coal for oil and stimulate the development of a new synthetic fuel industry, but ultimately there were questions as to whether the credit served to benefit its intended recipients. A number of favorable private letter rulings from the IRS in the late 1990s and early 2000s encouraged an increasing number of producers to claim the tax credit for synthetic fuels. To qualify for the credit for coal-based synthetic fuel, producers had to demonstrate that their process involved a "substantial chemical change." Some firms qualifying for this credit were simply spraying newly mined coal with diesel fuel, pine-tar resin, limestone, acid, or some other substance to induce this chemical change. By the mid-2000s there was evidence of substantial abuse of the credit. Following EPACT05, the Section 29 credit was eliminated from the Internal Revenue Code. Non-expired incentives for unconventional fuels are now claimed as part of the general business credit, under § 45K, and subject to overall limitations. Revenue losses associated with the tax credit for electricity produced from renewable resources also grew relatively rapidly following 2005. While first introduced under the Energy Policy Act of 1992, revenue losses associated with the provision were negligible until 2005. In 2004, the American Jobs Creation Act expanded the list of technologies eligible for the credit. The eligibility of additional technologies, rising oil prices spurring investment in renewables, and a greater interest in reducing the use of fossil fuels, were all factors likely contributing to additional claims of the renewable energy production credit. By 2006, 23% ($2.1 billion) of estimated energy tax expenditures were attributable to the renewable energy production tax credit. The primary tax incentives for renewable energy were substantially altered with the introduction of the Section 1603 grants in lieu of tax credits under ARRA. Effectively, this provision allows PTC-eligible projects to instead receive a one-time payment from the Treasury in lieu of tax benefits. As of March 31, 2011, $6.9 billion had been paid out in Section 1603 grants. Under current law, Section 1603 grants will not be available to projects with a construction start date after December 31, 2011. A number of residential and commercial energy efficiency tax incentives that had been allowed to expire in the 1980s were reintroduced under EPACT05. Over time, the share of energy tax expenditures supporting residential energy efficiency has fluctuated. In the early 1980s, tax expenditures associated with residential energy efficiency exceeded $0.5 billion, and represented about 9% of all energy-related tax expenditures. In 2007 the revenue losses for residential energy efficiency, the largest of the efficiency tax provisions enacted under EPACT05, were estimated to be $0.3 billion, or 3% of all energy tax expenditures. By 2010, estimated revenue losses for residential energy tax provisions had increased to $1.9 billion, or 22% of all energy tax expenditures. The recent increase in the share of energy tax expenditures supporting residential energy efficiency can be attributed to the increased generosity of these tax credits under ARRA. Specifically, during 2009 and 2010, certain residential energy efficiency improvements were eligible for a 30% tax credit, up to $1,500. While the tax credits for residential energy efficiency improvements were extended through 2011 under the Tax Relief, Unemployment Reauthorization, and Job Creation Act of 2010 ( P.L. 111-312 ), the credit rate was reduced to 10% and the credit capped at $500. The most striking change in the composition of energy tax expenditures in the 2000s is the dramatic increase in the estimated revenue losses associated with the tax credits for alcohol fuels and biodiesel. This increase is primarily attributable to "black liquor." In the context of taxes, the term "black liquor" currently refers to a process in which pulp mills use a mixture of conventional fuel (such as diesel fuel) and a byproduct of the pulping process as an energy source for the mill. Prior to 2010, black liquor qualified for an income tax credit under the alternative fuel mixture tax credit. The intent of this credit was not to provide a tax subsidy for black liquor, but instead to create incentives for companies producing liquid motor fuels from biomass. When enacted, this provision was estimated to cost less than $100 million annually. In the first half of 2009, $2.5 billion in tax credits were claimed. In 2009, an estimated 50% of energy tax expenditures were revenue losses associated with tax credits for alcohol fuels, with the vast majority of these credits going to producers using black liquor. The alcohol fuel mixture credit was allowed to expire at the end of 2009. The IRS subsequently ruled that black liquor qualifies for the cellulosic biofuel producer credit, which does not expire until the end of 2012. Under the Reconciliation Act of 2010 ( P.L. 111-152 ), Congress modified the cellulosic biofuel producer credit such that fuels with significant water, sediment, or ash content, such as black liquor, were no longer eligible. This healthcare reform pay-for reduced estimated tax expenditures associated with this provision by $23.6 billion over the 2010 through 2019 budget window. Figure 4 provides a comparison of the relative magnitude of revenue losses associated with tax incentives for fossil fuels, renewables, and energy efficiency over time ( Appendix A provides information on how various energy tax provisions are categorized). The data in Figure 4 are presented in inflation-adjusted dollars. In the late 1970s, all revenue losses associated with energy tax expenditures provided benefits to fossil fuels, primarily oil, gas, and coal. Following the enactment of ETA78 and WPT80, revenue losses associated with tax provisions providing incentives for renewables and efficiency increased, but remained small relative to revenue losses associated with tax preferences for fossil fuels (in 1982, revenue losses associated with tax expenditures for renewables and efficiency were approximately 18% of those associated with tax preferences for fossil fuels). From the late 1980s through the early 2000s, not only were revenue losses associated with energy tax provisions low relative to previous and current levels, revenue losses associated with renewables and efficiency also made up a small proportion of total energy tax expenditures. In the mid-2000s, revenue losses associated with energy tax provisions for renewables increased rapidly. Revenue losses associated with fossil fuels also increased in the mid-2000s. This increase was driven by the unconventional fuel production credit. By 2006, revenue losses associated with renewables were an estimated $2.6 billion (in 2010 dollars) while revenue losses associated with incentives for fossil fuels were an estimated $6.2 billion (in 2010 dollars). In 2006, the majority of the revenue losses associated with incentives for renewables were attributable to the renewable energy PTC. The large increase in the estimated revenue losses associated with tax incentives for renewables in 2009 is attributable to "black liquor" under the alcohol fuel mixture tax credit. As noted above, producers whose production processes rely on black liquor are no longer eligible for the alternative fuel mixture tax credit or the cellulosic biofuel producer credit. By 2010, the balance of energy tax expenditures had shifted such that tax expenditures supporting renewables were estimated to exceed those supporting fossil fuels. Estimates suggest that in 2010, 39% ($3.4 billion) of energy tax expenditures supported renewables. An estimated 28% ($8.7 billion) supported fossil fuels. As is discussed in greater detail below, when excise tax credits for alcohol fuels, biodiesel, and the Section 1603 grants in lieu of tax credits are included, an even larger share of federal tax support for energy can be attributed to renewables. Taken together, Figure 2 , Figure 3 , and Figure 4 emphasize the trends in energy tax policy over the last 30 years. The value of tax subsidies given to oil and gas through the expensing of IDCs and percentage depletion were dramatically reduced in the late 1980s. Following a period of relatively low levels of energy tax expenditures, revenue losses associated with energy tax provisions have increased, reaching levels similar to those experienced during and immediately following the "energy crisis" of the late 1970s. While the goal of energy tax policy has been to promote renewables and efficiency, the majority of revenue losses associated with energy tax expenditures in recent years have been associated with credits for unconventional or alcohol fuels. Even more striking is the fact that the primary beneficiaries of these tax credits—in both the case of the unconventional fuels production credit and the case of black liquor—were not those policymakers drafting the provision initially sought to subsidize. As noted above, excise tax credits and various other tax-related revenue losses are not considered tax expenditures. Consequently, the excise tax credit for alcohol fuel mixtures—also known as the "blenders credit"—does not appear in conventional estimates of energy tax expenditures. The biodiesel producer tax credit, which results in a reduction in excise tax receipts, is also not included in the tax expenditure estimates above. Finally, Treasury grants in lieu of the renewable energy investment tax credit (ITC) or production tax credit (PTC), enacted under Section 1603 of the Recovery Act (ARRA), are not directly included in the tax expenditure estimates above. Figure 5 illustrates the magnitude of revenue losses due to tax expenditures as defined above relative to revenue losses from reduced excise tax receipts and outlays associated with the Treasury grants in lieu of tax credits in inflation-adjusted dollars. Over the past 30 years, tax incentives for alcohol fuels have resulted in substantial federal revenue losses. Most of the revenue losses associated with alcohol fuels have been realized either through excise tax exemptions or credits. Such exemptions or credits, however, do not show up as a tax expenditure, as these provisions do not directly reduce income tax liability. Tax incentives for alcohol fuel blends were first enacted under ETA78. Under ETA78, alcohol fuels blends received a partial exemption from the excise tax on gasoline. The American Jobs Creation Act of 2004 ( P.L. 108-357 ) restructured the tax subsidies for alcohol fuels. First, the blenders income tax credit was eliminated (since this credit was not as valuable as the excise tax exemption, the primary benefits for alcohol fuels were realized through the excise tax exemption, not the income tax credit). Second, the blenders excise tax exemption was replaced with the volumetric ethanol excise tax credit (VEETC). From the perspective of alcohol fuel blenders, the change from an exemption to a credit increased the value of this tax provision. Excise tax revenue losses increased following the change from an excise tax exemption to an excise tax credit. In 2004, an estimated $1.45 billion ($1.67 billion in 2010 dollars) in revenue was lost due to the excise tax exemption. In 2006, an estimated $2.57 billion ($2.77 billion in 2010 dollars) in revenue was lost due to the excise tax credit. By 2010, estimated revenue losses associated with the excise tax credit were $5.68 billion. The VEETC is set to expire at the end of 2011. The American Jobs Creation Act of 2004 ( P.L. 108-357 ) also created an excise tax credit for biodiesel. In 2009, estimated revenue losses associated with the biodiesel excise tax credit were $0.81 billion. The biodiesel mixture credit terminated on December 31, 2009, but was retroactively extended through the end of 2011 in the Tax Relief, Unemployment Reauthorization, and Job Creation Act of 2010 ( P.L. 111-312 ). To provide an additional comparison of revenue losses associated with tax preferences for fossil fuels, renewables, and efficiency, revenue losses associated with the excise tax credits for alcohol fuels and biodiesel are incorporated into Figure 4 , presented earlier in this report. Including excise tax exemptions for alcohol fuels and biodiesel increases revenue losses for renewables relative to revenue losses for fossil fuels and efficiency, with the most dramatic shift taking place in the mid-2000s (see Figure 6 ). When revenue losses associated with excise tax preferences are included, estimated revenue losses associated with tax provisions benefiting renewables exceed estimated revenue losses associated with provisions benefiting fossil fuels in 1988-1989 and again in 2008. In 2008, estimated revenue losses associated with provisions benefitting renewables (including alcohol fuels) were an estimated 1.6 times estimated revenue losses benefitting fossil fuels. Under Section 1603 of ARRA, qualifying commercial renewable energy projects have the option of electing to receive a one-time cash grant from the Treasury in lieu of the renewable energy PTC or ITC. In the wake of the financial crisis, many renewable power project developers and their investors were less able to take advantage of existing tax credits for renewable energy projects. The grant in lieu of tax credit program was designed to provide an incentive for renewable energy development during the economic slowdown, where there was diminished demand for tax incentives. Currently, for projects to be eligible for the grant in lieu of tax credits, construction has to begin before the end of 2011. The President's FY2012 Budget reports that $4.21 billion was awarded in grants under Section 1603 in 2010. Between 2010 and 2016, it is estimated that the total effect on outlays of the Section 1603 Treasury grant program will be $18.95 billion. Figure 7 presents data on tax expenditures, including fuel excise tax provisions and outlays resulting from the Section 1603 grant program. When the excise tax provisions for alcohol fuels, biodiesel, and Section 1603 grant outlays are included, the cost associated with tax provisions for renewables is an estimated $13.78 billion for 2010. The value of fossil fuel tax expenditures in 2010 is an estimated $2.4 billion. Including these tax provisions, the cost of tax provisions that support renewables is roughly six times greater than the cost of provisions that support fossil fuels. Since the 1970s, energy tax policy has attempted to achieve two broad objectives. First, policymakers have sought to reduce oil import dependence by subsidizing domestic sources of energy. Second, environmental concerns have motivated tax preferences for various renewable energy sources and energy efficiency. Using estimated federal revenue losses associated with energy tax provisions, it is not clear that energy tax policy in practice has followed a stable course consistent with these objectives. The low levels of energy tax subsidization in the late 1980s and throughout the 1990s, coupled with periods of relatively low oil prices, did little to promote the development of domestic energy resources, renewable or otherwise. The overall level of tax subsidization of domestic energy resources in the mid-to-late 2000s was similar to early 1980s levels (in inflation-adjusted terms). During the late 1980s, throughout the 1990s, and into the 2000s, revenue losses associated with energy tax provisions were low, both relative to total tax expenditures and relative to current energy tax expenditure levels. Since 2005, revenue losses associated with the renewable energy production tax credit have been increasing, suggesting an increase in renewable energy production and domestic renewable energy capacity. By 2010, revenue losses associated with tax incentives for renewables exceeded those available for fossil energy resources. While environmental concerns have led to an increasing number of tax incentives for renewables and efficiency being made available, energy tax expenditures still suggest that, even in recent years, fossil fuels remain subsidized in practice. Since the late 1970s, tax subsidies for oil and gas have been scaled back and made less generous, but revenue losses attributable to fossil fuel subsidies persisted through 2007. Overall, the number of energy tax provisions has increased since the 1970s, providing tax incentives to a broader spectrum of energy-related activities. In 2007, even with an increasing number of tax provisions designed to promote renewables and efficiency in place, the majority of energy tax expenditure revenue losses still served to benefit fossil fuels. In 2007, nearly half of the energy tax expenditure revenue losses were attributable to the unconventional fuel production credit being claimed by coal-based synfuel producers. Following the expiration of the unconventional fuel credit in 2007, energy tax policy, as evaluated according to revenue losses, appears to have shifted towards favoring renewables. While revenue losses associated with the excise tax credit for alcohol fuels (ethanol) and the renewable energy production tax credit have increased in relative importance, most of the revenue losses categorized as being associated with renewables are attributable to "black liquor." The fact that the tax provisions associated with the largest estimated revenue losses in the 2000s—the unconventional fuel tax credit claimed by synfuel producers and the alcohol fuels and cellulosic biofuels income tax credit claimed by those using "black liquor"—had high revenue loss stemming from claims that were inconsistent with policymakers' intent, raises concerns about using the tax code to achieve energy policy objectives. Designing tax policy that is more consistent with economic objectives could help address these concerns. Energy tax policy, particularly in the 2000s, has focused on subsidizing a variety of clean-energy alternatives, an approach that is unlikely to maximize economic efficiency. Taxing energy-related activities that generate negative externalities (such as the burning of fossil fuels), as opposed to subsidizing clean-energy alternatives, would likely enhance the efficiency of energy tax policy. Taxing an activity that imposes negative externalities reduces the amount of the activity in equilibrium, as a corrective tax leads market participants to consider the full internal and external costs of the activity when making consumption or production choices. Taxing activities that generate negative externalities also allows the government to avoid "picking winners," which is often the result when selective subsidies are given to certain sectors within the complete set of alternatives. To provide subsidies, the government must generate revenue. If that revenue is generated by levying distortionary taxes in other sectors of the economy, such as income taxes that lead individuals to reduce work hours, such a policy is unlikely to be economically efficient. The government may be creating inefficiencies in the labor market via income taxes to finance subsidies for clean-energy alternatives. Taxing energy-related activities that generate negative externalities, increasing the price of activities associated with negative externalities relative to the clean-energy alternatives, would also create incentives for increased investment in and utilization of the clean-energy alternative without creating distortions in other markets. Finally, limiting selective subsidies would reduce the scope for taxpayers to find loopholes allowing them to exploit energy tax incentives. Both coal-based synfuel producers and "black liquor" claimants were able to make small modifications in what were currently utilized production techniques, modifications which resulted in billions of dollars of tax incentives. Clean-energy tax subsidies do create incentives for alternative and innovative energy resources. Congress, in drafting tax policy, however, faces significant challenges. Creating narrowly defined clean-energy tax policy may stifle innovation, while providing broader incentives leaves open the possibility of tax loopholes and potential abuse. Appendix A. Data Tables Table A -1 provides data from a sample of cross sections used to create Figure 2 . Additional data regarding revenue losses associated with a specific tax provisions are available from the author upon request. Table A -2 presents the estimated revenue losses associated with various tax provisions presented in Table A -1 , adjusted for inflation. This information was used in creating Figure 3 and Figure 5 . Again, additional data regarding revenue losses associated with a specific tax provisions are available from the author upon request. Table A -3 presents estimated revenue losses associated with various energy tax provisions. The provisions are categorized as those that benefit fossil fuels, those that benefit renewables (both electricity and fuels), and those that promote efficiency. Fuels excise tax preferences include excise tax provisions for alcohol fuels, biodiesel, and renewable diesel. Appendix B. Cumulative Revenue Losses Associated with Various Tax Preferences This appendix presents data on the revenue losses over time associated with various energy tax preferences. Specifically, the sections below present historical revenue losses associated with tax provisions that benefit the oil and gas sector, those that benefit renewable energy, and revenue losses associated with the excise tax credits for alcohol fuels. Cumulative Revenue Losses: Oil and Gas Tax Preferences Over time, the primary tax incentives for oil and gas were the percentage depletion allowance and the ability to expense intangible drilling costs (IDCs). Before the 1980s, these were the only tax incentives designed specifically to promote investment in oil and gas. Tax preferences for oil and gas introduced in the 1980s and 1990s, such as expensing allowance for tertiary injectants and the tax credit for enhanced oil recovery, sought to encourage domestic production by providing tax incentives for difficult to extract domestic oil resources. Table B -1 provides an estimate of the cumulative revenue losses associated with these tax provisions, through the year 2000, in constant 2000 dollars. Table B -2 presents historical revenue losses over the 2000 through 2010 period. As was the case in the earlier time period referenced above, the percentage depletion allowance and ability to expense IDCs continues to make up the majority of oil and gas related federal revenue losses. Cumulative revenue losses, combining the data from Table B -1 and Table B -2 , are presented in Table B -3 . Since 1968, the percentage depletion allowance has resulted in an estimated $111 billion in federal revenue loss. The ability to expense IDCs has resulted in an estimated $78 billion over the same time period. The majority of historical revenue losses associated with targeted tax incentives for oil and gas are attributable to these two provisions. From 1968 through 2010, estimated revenue losses associated with targeted tax incentives for the oil and gas sector sum to $193.4 billion. Cumulative Revenue Losses: Renewables Historically, the primary tax incentives for renewable energy have been the investment tax credit (ITC) and production tax credit (PTC). The ability to forgo these tax credits and instead receive a one-time grant from the Treasury under Section 1603 of ARRA substantially increased the cost of these provisions during recent years. Table B -4 and Table B -5 present historical data on tax expenditures for renewable energy. Since tax incentives for renewable energy were first introduced in the late 1970s, the estimated cumulative cost has been $24.6 billion. Of this, $5.3 billion is due to outlay payments under the Section 1603 grants in lieu of tax credits program. An estimated $12.2 billion, roughly half of the total support through tax-related incentives, is attributable to the renewable energy ITC and PTC. Cumulative Revenue Losses: Excise Tax Credits for Alcohol Fuels Table B -6 presents estimated revenue losses associated with the excise tax exemption for alcohol fuels from 1980 through 2010. The first row presents revenue losses in current dollars. The second row presents revenue losses in 2010 inflation-adjusted dollars. The third row presents estimated revenue losses adjusting for income tax offsets (discussed below), in 2010 inflation adjusted-dollars. Over time, federal revenue losses increased, reflecting increased use of alcohol fuels, particularly ethanol. Beginning in 2005, the volumetric ethanol excise tax credit (VEETC) was introduced to replace the previously available excise tax exemption for ethanol. Since excise tax credits are deductible, replacing the excise tax exemption with an excise tax credit has additional federal revenue consequences, above and beyond payouts for the excise tax credit. Specifically, income tax receipts decrease due to the higher excise tax deduction. Assuming an average tax rate of 25%, excise tax credits resulting in $5.7 billion in lost excise tax receipts in 2010 also reduce income tax receipts by an estimated $1.4 billion ($5.7 * 0.25). Between 2005 and 2010, income tax offsets (foregone income tax receipts) associated with the alcohol fuels excise tax credit can be approximated at $5.7 billion ($22.6 * 0.25). Including estimated income tax offsets, and adjusting for inflation, total federal losses associated with alcohol fuels excise tax credits between 2005 and 2010 were approximately $29.3 billion dollars. Since the introduction of excise tax preferences for alcohol fuels, these excise incentives have resulted in $43.8 billion in revenue losses. When including estimated revenue losses associated with income tax offsets, total revenue losses associated with excise tax preferences for alcohol fuels between 1980 and 2010 total an estimated $49.7 billion.

Since the 1970s, energy tax policy in the United States has attempted to achieve two broad objectives. First, policymakers have sought to reduce oil import dependence and enhance national security through a variety of domestic energy investment and production tax subsidies. Second, environmental concerns have led to subsidization of a variety of renewable and energy efficiency technologies via the tax code. While these two broad goals continue to guide policy, enacted policies that solely focus on achieving only one of the goals are often inconsistent with policies solely designed to achieve the other goal. For example, subsidies to oil and gas producers, while enhancing domestic oil and gas production, encourage an activity with negative environmental consequences. By providing a longitudinal perspective on energy tax policy and expenditures, this report examines how current revenue losses resulting from energy tax provisions compare to historical losses and provides a foundation for understanding how current energy tax policy evolved. Further, this report compares the relative value of tax incentives given to fossil fuels, renewables, and energy efficiency. Recent legislation has introduced, reintroduced, expanded, and extended a number of energy tax provisions. While a number of the current energy provisions have a long historical standing in the tax code, a wider variety of tax incentives, to promote a range of energy sources, are presently available than have been available in the past. Examining trends in revenue losses associated with energy tax provisions provides insight into the actual direction of energy tax policy. In inflation-adjusted terms, revenue losses associated with energy tax provisions in the late 1970s and early 1980s are similar to revenue losses in the late 2000s. The composition of these revenue losses, however, has changed significantly. In the late 1970s nearly all revenue losses associated with energy tax provisions were the result of two tax preferences given to the oil and gas industry. In the early 1980s, revenue losses associated with special treatment for the oil and gas industry accounted for more than three quarters of all federal revenue losses associated with energy tax expenditures. Changes in policy, coupled with declining oil prices in the late 1980s, dramatically reduced revenue losses associated with oil and gas tax policy. Throughout the 1990s, the bulk of revenue losses associated with energy tax provisions were attributable to the tax credit for unconventional fuels. In the 2000s, revenue losses associated with renewable energy production incentives began to make up a larger portion of energy tax expenditure revenue losses. Revenue losses associated with tax provisions benefitting fossil fuels also remained important into the 2000s, with a large proportion of revenue losses in the mid-to-late 2000s associated with the unconventional fuel production credit, benefitting synthetic coal producers. In the late 2000s, the majority of revenue losses have been associated with incentives designed to promote alternative fuels and biofuels. By 2010, revenue losses associated with tax incentives for renewables exceeded revenue losses associated with fossil fuels. The Section 1603 grants in lieu of tax credits, made available starting in 2009, have resulted in increased federal financial support for renewables. The federal government also loses revenue from excise tax credits given to alcohol fuel blenders (specifically, the volumetric ethanol excise tax credit (VEETC)). While excise tax credits are not technically a tax expenditure (technically, tax expenditures are only revenue losses associated with income tax provisions), these excise tax credits have played an important role in shaping energy tax policy and were estimated to result in revenue losses of $5.7 billion in 2010 alone.

Each Member serves as the leader of his or her personal office. In contrast, a Member who is a committee chair serves in addition as the leader of a committee, with responsibility for setting the course and direction of the panel for other committee members and the House. A chair also has responsibility for overseeing a large professional and paraprofessional staff. Although day-to-day staff management is typically entrusted to a committee staff director, all senior committee staff are operational managers who should ensure that all of the duties and activities supporting a chair's goals are carried out effectively. Once a committee chair is selected during the postelection transition period, the chair, often in consultation with others, makes a series of decisions and takes a series of actions. Decisions may be related to the committee's policy calendar; the committee's administrative functions; the chair's responsibilities during committee sessions; the role of committee members; the relationship with the committee's ranking minority member, other chairs, and party leaders; subcommittee leaders; and other subjects. This report addresses some of the critical matters a House committee chair—new or continuing to the next Congress from the concluding one—confronts from the time of the early organization meetings in November to approximately March or April. The report is divided into the following sections: Transition, Administrative Matters, Committee Organization, Committee Procedure and the Role of a Chair, Procedural Tools for Committee Chairs, Floor Consideration and the Role of a Chair, and Legislative Issues and Agenda. Each section is divided into more specific topics. Actions with an identifiable deadline appear in italic . This report contains numerous citations to House rules, which may be found, along with the parliamentarian's notes, in Constitution , Jefferson's Manual, and Rules of the House of Representati ve s o f the United States, One Hundred Fifteenth Congress . An explanatory document of House rules and precedents, arranged by parliamentary subject-matter, is House Practice: A Guide to the Rules, Precedents, and Procedures of the House . The Congressional Research Service (CRS) maintains a set of reports on the legislative process and congressional procedures, including the budget process and budget procedures, and congressional organization that is wide ranging in format, coverage, and subject matter. CRS has an even wider range of reports on hundreds of legislative issues. All CRS reports are available on the CRS website at http://www.crs.gov . The Office of the Parliamentarian is the official source of parliamentary advice for committees, although parliamentarians do not attend committee meetings to assist the chair, unlike their service to the presiding officer during a meeting of the House. CRS's specialists and analysts on Congress also provide confidential parliamentary assistance and training for committee and subcommittee chairs, majority and minority committee members, and majority and minority staff. CRS policy specialists and analysts may assist committees, Members, and staff confidentially in framing policy issues, developing legislative options, planning hearings, providing written and oral policy and legislative analyses at all stages of the legislative process, and appearing as nonpartisan witnesses at hearings. The House routinely meets for so-called early organization in November, just a week or so after the election, with organizational activities continuing into December and even into January or later. The November meetings typically occur simultaneously with the orientation activities planned for Members-elect and might overlap with a so-called lame-duck session. The "steering committee" for each party (the House Democratic Caucus and the House Republican Conference), or the specific party entity responsible for committee assignments, traditionally is constituted during the early organization meetings. Party rules govern each party's process for selecting committee members and designating committee and subcommittee chairs or ranking minority members. If one or more committee chairmanships are contested or open, the majority party's steering committee may conduct interviews of candidates for chair during early organization meetings. Each party's steering committee also typically makes most committee assignment recommendations during early organization, although that process may take longer as the majority and minority parties negotiate committee party ratios or for another reason. In some instances, the party's leader—the Speaker or minority leader—is the appointing official for members, or some members, of certain committees; the Speaker, as his or her party's leader, is also the appointing official for certain chairs. The Democratic Caucus and Republican Conference meet to confirm the recommendations of their respective steering committees and party leaders. The majority party tries to complete the chairmanship selection process during this transition period. The official election of chairs and Members to committees occurs after the new Congress convenes, with the adoption of two or more House resolutions making committee assignments recommended by the party caucuses. These resolutions are voted on routinely without debate within the first few days of a new Congress. Unless a separate assignment resolution designating committee chairs is offered, designation of chairs and ranking minority members, whose names appear first on their party's roster for each committee, occurs with the adoption of the committee assignment resolutions. As committee chairs are determined during early organization meetings or thereafter, the selection process for subcommittee chairs may also begin. Applicants for subcommittee chairmanships might meet with their committee's chair, or even with a prospective chair. Applicants might also consult the Speaker who, as party leader, has influence with committee chairs over the selection of some subcommittee chairs. In the selection process for some subcommittee chairs, including those of Appropriations Committee subcommittees, the party leader may be directly involved. The Democratic Caucus and Republican Conference also discuss, and might amend and adopt, their internal (party) rules during the postelection transition period. Committee chairs monitor developments in their party's organization that affect their committee's structure and operations. In addition, chairs might offer their own amendments to party rules to protect their panel's interests. During the transition period, the House Rules Committee undertakes consideration of possible modifications to the Rules of the House for the new Congress. If the House is meeting in a lame-duck session, the Rules Committee might hold hearings on potential House rules changes. Outgoing chairs, retiring Members, chair candidates, and other Members may be included as witnesses. Committee chairs are often active participants in the drafting stage of changes to House rules because any changes to committee assignments (including term limits and assignment limits), committee jurisdictions, committee procedures, numbers of subcommittees, and other rules and standing orders can have a direct effect on certain, many, or all committees. On the day it convenes, the new House agrees to a simple resolution, oftentimes numbered H.Res. 5 , that adopts chamber rules for the duration of the new Congress . The resolution normally is worded to adopt the rules of the previous Congress with a series of specific amendments to them, effective with the House's agreeing to the resolution. (See also the " Legislative Issues and Agenda " section related to committees' planning that may occur during the postelection transition for legislative and oversight activities.) As a two-year Congress ends, House rules and practice require committees to publish certain documents and prepare records for the National Archives. These activities are usually brought to a conclusion during the postelection transition period. Under House rules, each committee must submit an activities report to the House by January 2 of each odd-numbered year . Such a report is to contain sections summarizing a committee's legislative activities and authorization and oversight activities. Specific requirements exist regarding what is reported on authorization and oversight activities. If Congress has adjourned sine die or it is after December 15, whichever occurs first, a chair may file the report without approval by the committee so long as the report was made available to each committee member for seven calendar days and it includes any supplemental, minority, additional, or dissenting views submitted by committee members. Although committees are not required by House rules to publish a calendar, many committees do. The Appropriations, House Administration, and Ethics Committees have traditionally not published a calendar. As a "calendar" in the congressional argot, a committee calendar lists all measures referred to the committee during a Congress, the committee's actions on them, and congressional action on measures the committee reported. A calendar might also include the committee's rules, a statement of the committee's jurisdiction, rosters of the committee and its subcommittees, rosters of committee staff, and other information. Committee records are the property of the House and must be kept separate from the personal office records of a committee chair. At the end of a Congress, each committee is required to transfer its noncurrent records to the clerk of the House for transfer to the National Archives. This rule on noncurrent records and Rule XI, clause 2(e)(3) together establish standards for public availability of records, under certain circumstances allowing committees to determine restrictions on availability. A committee chair controls the selection of committee staff, authorizes expenditures from the committee budget, establishes operational and ethics policies, determines committee travel allocations, decides the content of the committee website, and assumes responsibility for administration of the committee's rooms, paperwork, and other operations. The chair negotiates and decides on the allocation of budget, resources, and duties with the minority. One of the first orders of business for a committee in a new Congress is the drafting of a committee budget to pay the expenses the panel will incur during a two-year Congress. Most committees entrust this responsibility to the committee chair, although a committee's minority party members seek to ensure that they receive an appropriate allocation of resources. Typically working from the committee's budget in the previous Congress, the chair modifies the previous budget to create a funding request reflecting the committee's anticipated resource needs. The structure and content of committees' budget requests have changed very little in recent years. A committee's budget shows staff salary requirements and expenses, such as reimbursements and costs for consulting services, printing, office equipment, supplies, subscriptions, travel, and other items. The Committee on House Administration provides information to committees on scheduling and documentation related to committees' expense resolutions. Each committee meets to approve its budget request, and committee members may propose changes to the draft before a vote on approval. Following a committee's approval, the committee chair typically introduce s a House resolution, usually in late January or in February , to provide his or her committee with funding for the two years of a Congress. Once a resolution is introduced, the chair provides electronic and printed copies of the budget request, as well as any supporting documentation, to the House Administration Committee, to which the individual committees' resolutions are referred. The chair and ranking minority member of each committee are typically invited to testify before the House Administration Committee in support of their committee's budget request. The chair of the House Administration Committee introduces an omnibus committee funding resolution, called a "primary expense resolution" in House rules. The House Administration Committee marks it up and reports it to the House. The House traditionally acts on the omnibus committee funding resolution in March. House rules also allow a primary expense resolution to contain a reserve fund for unanticipated expenses of committees. The House Administration Committee makes allocations from such a fund, subject to the Speaker's approval. In addition, House rules allow for the possibility of one or more supplemental expense resolutions. By the 18 th of each month, each committee is directed to submit to the House Administration Committee an original and two copies of a report signed by the committee chair that contains a statement of expenses, staffing information, and other details on the committee's activities during the preceding month . House rules require funds made available to a committee to be used for the activities of that committee. Chairs are personally responsible for the "payment of any official expenses incurred that exceeds the provided committee funds or is incurred but not reimbursable under [Handbook] regulations." With the exception of franked mail, however, a chair or committee member may spend his or her own money "in support of official committee business." Decisions on the structure and organization of a committee staff rest with the committee's chair. A determination of a committee's staffing needs, including how the committee will staff its subcommittees, is integral to the creation of a committee budget. With regard to subcommittee staffing, a House rule states: "... the chair of each committee shall ensure that sufficient staff is made available to each subcommittee to carry out its responsibilities under the rules of the committee.... " Committee chairs have implemented this requirement in different ways. Some chairs provide autonomous staff to their committee's subcommittees, whereas others maintain staff at the full-committee level and detail staff to subcommittees as needed. Other systems are also used. The same House rule states that "... the chair of each committee shall ensure ... that the minority party is treated fairly in the appointment of ... staff." Another House rule indicates that the minority party is entitled to one-third of the up to 30 so-called statutory staff provided under the rule, or 10 staff if a committee hires 30 staff. Negotiation between the committee chair and the minority, presumably the ranking minority member, could result in additional staff being available to the minority. The committee's ranking minority member is ostensibly responsible for minority staff. However, the committee chair exerts control in some instances, for example in authorizing travel and approving other activities detailed in committee rules or office manuals. Minority staff's "character and qualifications" must also be "acceptable to a majority of the committee." Most functions performed by committee staff, and the job titles given committee staff, are similar among committees. A staff director serves as the overall manager of a committee's staff, acts as liaison between the chair and staff, and may be the chair's closest policy adviser. (On the Appropriations Committee and its subcommittees, staff directors have been called clerks.) A general counsel generally serves as the legal counsel for the committee. This staff member often may also serve as the panel's parliamentarian. If a counsel does not have the parliamentarian role, the practice of most committees is to hire a professional staff member to serve in that capacity. Professional policy staff, also called counsel by some committees, serve as issue experts covering the policy areas over which the committee has jurisdiction. A chief clerk and other clerks, referred to as administrative staff, call the roll at committee meetings and hearings and serve as document managers, webmasters, calendar clerks, receptionists, and the like. The committee majority negotiates with the minority regarding the division of administrative support activities. In addition to the monthly expense report mentioned above, each committee chair prepares a payroll certification form for the committee and transmits it to the Human Resources Office no later than the 1 5 th day of each month. With the approval of the House Administration Committee, a committee chair is also responsible for signing any contracts for consultants and authorizing staff detailed from government departments or agencies. Committees have majority and minority suites for staff. They also often have additional office space not connected to these suites. Even when a party continues in the majority, some shifting of space allocated to specific committees often occurs. When the majority changes, the parties' committee staffs typically trade suites. The chair might decide the location of key staff members and the allocation of space to subcommittee staff or to other staff groups or teams. Each committee is also provided parking permits. The committee chair designates to whom parking spaces are allocated and whether indoor spaces will be reserved or unreserved. Committee chairs prepare on a quarterly basis a consolidated report of spending for foreign travel by committee members and employees and provide the report to the clerk of the House. A House rule governs foreign travel and requires committee members and staff to report to a committee's chair within 60 days of completing foreign travel. Each committee has a website, and each committee's website is different. Decisions on website design, website content, and the minority's input reside with a committee's chair. The minority and individual subcommittees are entitled to separate pages that are linked to a committee's website and accessible only from the committee's website. Committees may not include political or campaign information on their website or link to any campaign or political party website. Committees are restricted in the URL they may use. Committee websites must also comply with the House Administration Committee's security regulations. House rules identify the maximum number of subcommittees each committee may create. Only certain named committees may have more than 5 subcommittees. The Appropriations Committee is allowed not more than 13 subcommittees; the Armed Services, Foreign Affairs, and Oversight and Government Reform Committee are allowed not more than 7 subcommittees; and the Transportation and Infrastructure Committee is allowed not more than 6 subcommittees. Committees limited to 5 subcommittees are permitted to create a sixth subcommittee if it is an oversight subcommittee. Moreover, waivers enduring for a single Congress have been granted in H.Res. 5 to specific committees to allow them to have additional subcommittees. A committee chair normally proposes the number of subcommittees for the committee. However, it is the responsibility of the committee majority, acting through the committee chair and often subject to one or more party rules, to determine a committee's number of subcommittees as well as the subcommittees' size and assignment of members, jurisdiction, and authority, that is, whether they may mark up legislation or may only conduct hearings and oversight. Further, a chair decides whether subcommittees may hire autonomous staff or obtain staff assistance from a centralized full-committee staff. On some committees, subcommittee chairs are elected, or even selected, either by the Democratic Caucus or Republican Conference or by the respective party's leader, often in consultation with the committee chair. In addition, pursuant to chamber rules, a committee's chair and ranking minority member may serve ex officio as members of the committee's subcommittees. Some committees' rules allow these ex officio members to be counted for a quorum or to vote, but others do not. House rules direct committee chairs to designate majority-party committee and subcommittee vice chairs. No other rule seems to restrict these choices so that, for example, a vice chair need not be the most senior majority-party member of a committee or a subcommittee. Although the selection of a committee vice chair rests with the committee chair, the committee chair often makes choices after consultation with party leadership. A vice chair may preside over the committee or subcommittee in the absence of the chair. The House requires its committees to adopt committee rules and to publish those rules both in electronic form and in the Congressional Record not later than 30 days after the committee chair is elected . Most chairs review their committee's rules from the prior Congress and propose incremental adaptations to align them with the committee's perceived needs in the current Congress. A committee organization meeting is usually the first meeting held by a committee, often within a very few days or weeks of the convening of a Congress. Party caucuses on each committee traditionally meet separately prior to the first official meeting of a committee. At a committee's first meeting, committee rules are discussed, amended, and adopted. For example, quorum requirements should reflect the size and ratio of the committee, which may change from one Congress to the next. In addition, the relationship between the majority and minority parties should be made clear. How much authority should the minority or the ranking minority member have in agenda setting and other decisions, such as the issuance of subpoenas? The use of terms such as "concurrence," "consultation," or "notification" related to agenda setting and other decisions will describe the relationship between the majority and minority parties, or between the chair and ranking minority member, and the authority of each party. Committee rules might also need to be amended to account for changes to House rules that were contained in H.Res. 5 and that affect committees. Existing committee rules usually manifest the role and authority of the committee chair; the ability of the majority, especially the chair, to control the agenda and legislative actions of the committee; and the desire of party leadership to move party-favored legislation through a committee and to the floor. Therefore, committee rules tend to change only incrementally from one Congress to the next. Specific items must be addressed in committee rules, such as the selection of a regular meeting day, although committees have flexibility in drafting their rules. Under House rules, the chamber's rules are the rules of its committees, and a committee's rules may not be inconsistent with chamber rules. If a committee's rules are silent on a matter, House rules apply. Numerous functions are routine in a committee office and are undertaken by staff. Nevertheless, a committee chair can establish the environment for committee activities and direct the staff accordingly. For example, committees have assigned meeting rooms, most of which have a fixed dais. Beyond that, a chair may wish to make decisions about the standard setup for hearings, markups, and other business meetings; the location of witness and staff tables; management of live media coverage; presence of staff on the dais; the role and duties of staff at committee meetings; assistance in the maintenance of order in a room; items to be set at members' places, and so on. Some matters, or aspects of some matters, can be routinized through checklists, form letters, and ongoing contacts. For example, committee staff can create templates to be used in most situations for requesting the attendance of attorneys from the Office of Legislative Counsel, obtaining recording and transcription services from the Office of Official Reporters, providing notifications to the Capitol Police, and extending invitations to witnesses. A committee chair establishes the committee agenda, divides work between the subcommittees and the full committee, determines procedural strategy, calls hearings, selects witnesses and determines the order of their testimony, presides over hearings and markups, chooses the markup vehicle and pursues an amendment strategy, prepares the committee report accompanying legislation, and discusses, or might negotiate, any of these matters with the ranking minority member. Under House rules, a committee chair must publicly announce the date, place, and subject matter of a hearing at least one week in advance of the date and publish the announcement in the Daily Digest section of the Congressional Record and make it publicly available in electronic form . Various hearing-related and administrative tasks need to be performed in preparation for a hearing, many of which are undertaken by committee staff. The committee chair is responsible for the selection and invitation of witnesses to testify, including determining the order in which they will testify and whether they will appear alone or as part of a panel. The minority, however, is entitled under the rules to also call witnesses. A committee chair may decide whether or not to swear a witness. A chair might also decide who for the majority should lead questioning of a particular witness or on a particular subject or what alternatives to member-by-member questioning to pursue. House rules require a committee chair to maintain order and decorum during committee proceedings—recognizing committee members, responding to breaches of decorum by a witness or of professional ethics by a witness's counsel, and maintaining order in the audience and for audio and visual coverage. Chairs should make an opening statement to reiterate the purpose of a hearing and set a tone for the hearing, and chairs should also speak last to thank witnesses for their testimony. In addition, chairs often send thank-you letters to witnesses after their appearance. Committee chairs have primary authority for the scheduling of a markup, selection of a markup vehicle, and conduct of a markup. House rules disallow a committee meeting to be held prior to the "third day on which members have notice," and House rules require the text of a markup vehicle to be available at least 24 hours in advance of a markup meeting. Many committee chairs caucus with their party's committee members prior to a markup to discuss strategy at the markup. As with hearings, many tasks need to be performed in preparation for markups, although many of them are conducted by staff. During a markup, a committee chair often serves as the primary spokesman (or designates the primary spokesman) for or against amendments offered to the markup vehicle. A committee chair also decides whether to vote first or last on a recorded vote. (Chairs usually make a one-time decision, which they adhere to on most or all votes in all of their committee's markups.) At the end of a markup, should a committee vote to report a measure, it is incumbent upon the chair, pursuant to House rules, to report the measure "promptly" and to take the "steps necessary" to secure chamber consideration of the measure. The committee chair is responsible for preparation of the committee report to accompany legislation reported from the committee as well as committee reports and documents on other committee activities. A committee must in addition post in electronic form within 48 hours recorded votes taken in markup and within 24 hours the text of amendments adopted. Outgoing chairs usually recommend to their successors that they hire or charge a specific staff member with primary responsibility for procedural matters because a chair must follow and enforce parliamentary procedures during sittings of the committee, sometimes with little or no notice of the parliamentary issue raised. In addition, a chair may need advice on parliamentary rulings and strategy before, during, and after a committee meeting. Attorneys from the Office of the Parliamentarian of the House do not attend committee meetings, although they meet with or take calls from committee members and staff related to committee meetings. Confidential parliamentary assistance and training for committee and subcommittee chairs, majority and minority members, and majority and minority staff is also available from CRS. Outgoing chairs also recommend to their successors that they have a procedural script for each markup so that a chair has ready access to language to initiate or respond to common parliamentary matters, such as recognition of a committee member to offer an amendment, the reservation of a point of order, or a request for a recorded vote. The chair and committee staff also attempt to anticipate possible procedural roadblocks prior to a markup and to prepare responses that will allow the chair and the majority party to prevail in their legislative objectives. A committee chair usually works with other majority-party members of the committee, and on occasion with minority-party members, to decide what role subcommittees will play in the committee's work. Questions about this role include the following: Will subcommittees be authorized to mark up legislation or solely to hold hearings? Will the subject matter of legislation influence that decision? Will the role of subcommittees be uniform for all of a committee's subcommittees? If one or more subcommittees mark up legislation, what form will be used to report their work to the full committee—a letter to the full committee detailing subcommittee action, a formal subcommittee report, the introduction of legislation reflecting the subcommittee's action, or some other method? Will subcommittees be named in committee rules? What role(s) and authority of subcommittees will be detailed in committee rules, or will the rules be silent on these matters? As suggested earlier in this report, different committees have differing relationships with their subcommittees, and, even within one committee, different subcommittees might have differing roles. Rules and practices of the House vest discretion with a committee chair, but he or she must be vigilant and well served by committee staff in using this discretion. As already indicated, committee chairs are responsible for maintaining order and decorum in committee proceedings. They also have parliamentary tools at their disposal to allow them to minimize delaying tactics. In exercising the authority and prerogatives available, a chair seeks to strike a balance between the responsibility of the majority to govern and the right of the minority to be heard. Some key procedures are listed here concerning questions of order that might arise in a committee session and the authority of the chair to respond to them: The chair has discretion to recognize committee members to pose a parliamentary inquiry. He or she also has authority to decline to entertain an inquiry if, in the chair's judgment, the inquiry is not relevant to the pending question. The chair does not need to respond to hypothetical questions raised under the guise of a parliamentary inquiry. In addition, the chair does not need to respond to an issue until the issue is raised. A parliamentary inquiry may not be used to ask a question about the substance of a measure or amendment. The purpose of a parliamentary inquiry is to ask a parliamentary question. The chair rules on points of order. Debate on a point of order is at the discretion of the chair. A ruling on a point of order, however, may be appealed and the appeal may be tabled. In the early days of a new Congress, when dozens of bills are introduced each day that the House is in session, committees must pay special attention to referral decisions to ensure that referrals do not adversely affect their jurisdiction over specific measures or over subject matter generally. By March 30, 2017, 1,847 bills, 92 joint resolutions, 42 concurrent resolutions, and 238 simple resolutions had been introduced in the House. Pursuant to House rules on referral of legislation, these measures were referred to one or more House committees, with a primary committee designated for measures referred to more than one committee. In addition to the normal complexities involved in determining committees' jurisdiction over a measure, the creation of a permanent Homeland Security Committee, which has some overlapping jurisdiction with other standing committees, has added uncertainties to referral decisions. Concerns or disputes, and suggested solutions, such as re-referral or sequential referral, need to be acted upon quickly, potentially with negotiations between committees and by being brought to the Speaker's attention because referrals are made on the Speaker's authority under House rules. When a measure is reported by a committee, it is the responsibility of the committee chair to consult the party leadership to determine floor scheduling for the measure. There are two principal routes to the floor: suspension of the rules, and a special rule from the House Rules Committee. If a measure is reported or ordered reported and is fairly noncontroversial, it might qualify to be considered under the suspension of the rules procedure. A committee chair might mention at markup his or her intention to seek floor consideration by that means. If the measure is deemed appropriate for suspension consideration, the chair notifies the Speaker of the House and majority leader of his or her desire for the measure to be considered in that manner. It is within the Speaker's discretion, subject to guidelines in party rules, to choose legislation to be considered under the suspension procedure. If the measure is more contentious or does not appear appropriate for suspension consideration, a special rule can be sought. The committee chair writes a letter to the Rules Committee, possibly cosigned by the ranking minority member, asking the panel for a hearing on the measure. If, after consultation with the majority leadership, the Rules Committee holds such a hearing, the committee chair is traditionally the first witness to testify on behalf of the legislation, perhaps with the ranking minority member. The chair recommends the type of special rule sought for the measure's consideration and how the special rule should address matters, such as points of order, that the chair would like the special rule to cover. In making the motion to suspend the rules and pass a measure or following the adoption of a special rule in the House, the chair may take, delegate, or delegate in part the role of majority floor manager. In this role, the chair determines which majority-party Members speak on a measure, in what order, and for what amount of time, and which Members will speak in support of or in opposition to amendments that are allowed and offered on the floor. If the chair as floor manager is opposed to an amendment, he or she is entitled to close debate on it. The committee chair is usually responsible for choosing, for his or her party, which amendments will receive voice votes and which will require recorded votes. The chair also takes a lead in raising or debating parliamentary questions and points of order. Finally, if a House- and Senate-passed measure is to be reconciled by conference with the Senate, a committee chair works with the party leadership in selecting conferees from his or her committee and in determining the overall number of conferees to, perhaps, accommodate other committees and individual Members. The committee chair serves as the chair of the House delegation or may chair the conference. The time before a new Congress convenes and the time immediately afterward are critical periods for the development of a committee's agenda—for the next months, the first session, and even the two-year Congress. Some legislation can move quickly through committee, and perhaps through the two houses of Congress, but other legislation can take many months and perhaps still not have cleared Congress before it adjourns sine die after two years. A committee might look back to the previous Congress, or previous Congresses, to see what groundwork has been laid through hearings and other activities, such as Government Accountability Office (GAO) evaluations requested, on subject matter within the committee's jurisdiction. A committee might also look ahead to the current or following Congress when a major, multiyear program authorization is expiring or when the committee wishes to report legislation to reform a major federal program. Action in the current Congress can save time and build momentum in the next Congress. Some committees hold retreats, sometimes with outside speakers, to help them develop their legislative agenda. The major initiatives of the President and his administration are sometimes first announced in the annual State of the Union address, which often occurs during the third or fourth week of January. These initiatives can be new for the President, a reiteration of actions the President sought in the past from Congress, an endorsement of legislative proposals originated by Members of Congress, a refocus to an existing set of programs, or an expansion or contraction of a set of programs that the President's annual budget might subsequently reflect. Many other forms of presidential initiatives are also possible, such as the issuance of executive orders. A House committee's jurisdiction might encompass one or more presidential initiatives, and the chair and members of the committee must listen to the President's initiatives both as committee members and as individual Members representing their district and party. The chair and the committee's majority-party members are under no specific obligation to take any action on a suggestion or request of the President or on legislation subsequently transmitted by the President or his Administration to Congress unless they are directed by the House or their party to take an action. Considerations of whether or not to take an action, and what that action might be, could include whether or not the President and Congress are controlled by the same party, or whether just one chamber is of the same party as the President; the President's and his Administration's commitment to an initiative; the chair's and the committee's majority-party members' interests, priorities, and desires; House leadership and majority-party sentiments; minority-party views; a decision on which chamber of Congress should act first; the role of Congress and necessity for congressional action, such as the expiration of the authorization of a major federal program; the necessity for or benefits of action and the consequences of inaction; alternatives to congressional action and potential consequences of inaction; other matters competing for a place on the committee's agenda; national, regional, local, ideological, and other political perspectives; public opinion; the impact of regional, national, and international events; actions anticipated in another committee with related jurisdiction; and actions anticipated in the other chamber. By law, the President transmits a budget for the U.S. government after the first Monday in January but no later than the first Monday in February. In its content, the budget will contain budget requests, proposed legislative language related to specific requests, and legislative initiatives that have budget consequences. Although the President's budget is referred to the Appropriations Committee, less than 40% of new budget authority is within the jurisdiction of the committee, and it has no jurisdiction over revenues or debt. Particular budget requests and legislative initiatives, including changes to entitlement and revenue laws, are within the jurisdiction of specific legislative committees. Legislative proposals in support of the President's budget recommendations might not be submitted until much later, yet implementation of some, many, or the major initiatives in the President's budget might depend on congressional passage of legislation separate from annual appropriations bills. Many of the same considerations that a committee might review related to presidential initiatives in the State of the Union address apply to the committee's activities related to matters within the committee's jurisdiction in the President's budget. In addition, a committee might want to hold hearings or undertake other actions to influence the appropriations process if it strongly supports or disagrees with specific budget requests. Some committees hold budget-themed hearings immediately or shortly after the President transmits the budget to hear from relevant Cabinet secretaries and agency heads and perhaps others. Transmittal of the President's budget has a noticeable, immediate impact on House committees. Transmittal begins a season of work taking place simultaneously in the Budget, Appropriations, and legislative, or authorizing, committees, with parallel activities occurring in Senate committees. (See, below, " Expiring Authorizations .") Under the Congressional Budget Act of 1974 ( P.L. 93-344 ), Congress is expected to complete bicameral agreement on a concurrent resolution on the budget by April 15 , although it does not usually do so. Also under the Budget Act, the House Appropriations Committee is expected to report all the annual appropriations bills by June 10 , although it does not usually do so. To prepare a concurrent resolution on the budget, the House Budget Committee holds hearings, which may include appearances by the President's economic team of Cabinet and Cabinet-rank officials, and receives analyses from the Congressional Budget Office (CBO), among other inputs. A critical part of the committee's information gathering is its receipt of "views and estimates reports" from each of the other House committees. Under the Congressional Budget Act and House rules, House committees report their views and estimates to the Budget Committee no later than six weeks after the President transmits his budget, which would be no later than March 15 if the President transmits the budget on February 1. A House committee might hold a meeting at which it considers its proposed views and estimates report, or the committee might consider the proposed report in the course of a meeting having several agenda items. Committee chairs usually take the lead in deciding the approach to drafting the report and in the drafting itself. Not all committees necessarily hold a meeting on their proposed views and estimates reports. A committee's views and estimates report might take the form of a letter to the Budget Committee's chair and ranking minority member, the form of a detailed report, or another form. Sometimes majority and minority members of a committee submit separate views and estimates, and sometimes individual members of a committee submit additional or other views to supplement their committee's report. A report typically includes comments on the President's budget proposals and estimates of the budgetary impact of any legislation likely to be considered by a committee during the current session of Congress. A report might contain specific comments on direct spending within a committee's jurisdiction and could also discuss the committee's authorizations that require funding in annual appropriations measures. A views and estimates report might also comment on structural and procedural aspects of the budget that affect a committee's jurisdiction. The Ways and Means Committee's views and estimates report discusses revenues and revenue and debt legislation. Because of the amount of work it takes for the House Appropriations Committee to consider and draft the House's annual appropriations bills, the appropriations subcommittees usually begin their hearings quickly once the President transmits the budget. Over the course of several months, each subcommittee will likely hear from relevant Cabinet officials and other agency heads; numerous executive officials who can speak to specific programs and activities; Members of Congress; and public witnesses, that is, not federal government officials or employees. The concurrent resolution on the budget establishes total spending levels, among other provisions. The joint explanatory statement accompanying the conference report on the budget resolution contains the allocation of spending among each chamber's committees, including the House Appropriations Committee. The Appropriations Committee subdivides its allocation among its subcommittees. If a budget resolution has not been finally agreed to by the House and Senate, the House might adopt a "deeming resolution," minimally making a spending allocation to the Appropriations Committee. In the absence of a budget resolution, the House may begin consideration of annual appropriations bills after May 15. A budget resolution agreed to by both chambers might also contain reconciliation instructions, which are provisions directing specified committees to report legislation within their jurisdiction that changes revenues or spending, or both, by certain amounts, usually by a specified deadline. If the budget resolution agreed to by the House and Senate contains reconciliation instructions, the instructions are an order of the parent chamber to named committees to comply. In such a case, the named committees must put reconciliation on their agendas. In establishing federal programs and agencies, Congress often provides an authorization for a period of time. A program, for example, might have a one-year authorization, requiring passage of legislation each year to continue the program, or it might have a multiyear authorization of two, three, or more years, requiring the passage of legislation only before the end of the specific number of years to continue the program. Congress also sometimes passes legislation temporarily continuing a program for six months, a year, or some other period to give itself additional time to complete passage of new multiyear authorization legislation. These fixed-year and short-term authorizations can apply to spending programs, tax provisions, grants of legal authority, or other matters. (See also, below, new requirements placed on committees to plan for authorizations in " Oversight and Investigations .") Legislation to "reauthorize" existing programs and agencies and legislation authorizing new programs and agencies might also have failed to clear the previous two-year Congress and therefore remain potential agenda items in the current Congress. Ushering through Congress legislation to reauthorize programs and agencies is some of the most consequential work that legislative committees undertake each Congress. Committees may consider authorization legislation because existing authority is about to expire, new authority is needed to deal with new or newly identified issues, or for other reasons. New authorizations and major reauthorizations can consume a large amount of committees' time and effort during one or more sessions of Congress. Reauthorizations that are arguably noncontroversial, such as for some small business programs, are nonetheless important legislative products that committees must support with their time and effort to see them enacted into law. Many provisions of the revenue code and the major entitlement programs continue in effect indefinitely. To make changes in these kinds of laws, Congress must enact new law. However, some provisions of these kinds of laws are temporary, and Congress needs to enact new law to continue temporary provisions in effect. Each committee tries to anticipate and plan its work related to expiring authorizations. Among the possible consequences that a committee might consider for inaction, in addition to the potential lapse of the program or agency, are the decline of congressional control over policy; ceding of policy influence, where appropriations are necessary, to the Appropriations Committee from a legislative committee; loss of jurisdiction by a committee; and loss of influence by and support for a committee within the House. Although the President and the executive departments and agencies are often sources of important or high-profile legislation, committee chairs and committee members, especially majority-party members, establish a committee's legislative priorities. It is their interests, sense of national needs, political judgments, and hard work that focus a committee's limited time on a legislative agenda. In the time before a new Congress convenes and in the time immediately afterward, a committee chair, his or her closest allies, and the chair's party have the most flexibility in determining the key legislative issues the committee will address in the two-year time frame of a Congress. To wait to identify key legislative issues until later in the first session allows greater opportunity for other individuals and events to determine a committee's agenda. To go forward without knowledge of key legislative issues risks having exigencies and events determine the agenda and having committee resources misallocated by looming deadlines or to lower-priority matters. One of the ways in which congressional committees gather information for possible future lawmaking, inform committee members communally on a topic, and influence the implementation of laws already enacted by Congress is through the conduct of oversight—"continuous watchfulness" in the words of the Legislative Reorganization Act of 1946 —and especially the convening of oversight hearings. The rules of the House assign to committees responsibility for determining, based on oversight, whether laws within their respective jurisdictions should be changed or if additional laws are necessary. Among the requirements for committees' reports' contents under House rules, reports on measures are to include oversight findings and recommendations. House rules require each committee (except Appropriations, Ethics, and Rules) to hold an open meeting to adopt an authorization and oversight plan for a two-year Congress by February 15 of the first session of a Congress and to submit the plan to the Oversight and Government Reform, House Administration, and Appropriations Committees. House rules also direct committees to establish oversight subcommittees or assign to subcommittees responsibility for oversight. Preparation of an authorization and oversight plan requires immediate attention to accurately reflect a committee's oversight priorities. The plan, however, is not a straitjacket in limiting oversight to subjects listed in the plan or requiring oversight action on every subject listed. Committees have tended to include a broader set of oversight subjects in their plans than it is likely they can cover in a two-year Congress. However, preparation of the plan is a key opportunity for the chair, subcommittee chairs, and other committee members to determine what oversight they consider critically important, particularly as it relates to the committee's legislative priorities. With an identification of critical oversight subjects, a committee can make assignments to and establish schedules for committee staff, agency and program staff, GAO, and other entities that support the committee in its oversight function. In addition, Congress has created entities, such as GAO, the inspectors general, and CRS, that are specifically directed to inform Congress through written reports and oral communications. Congress has also placed reporting requirements in numerous statutes, providing Congress with an enormous flow of information from the executive branch. These and other resources' intellectual capital—analysts, attorneys, economists, other specialists, written reports, and consultative services—provide a committee with a "running start" in establishing oversight priorities for agencies and programs within its jurisdiction. Congressional oversight can be viewed as a continuum of activities that in its most potent expression is the investigative power of Congress. Congressional investigations might include the use of subpoenas; depositions; discussions with witnesses' attorneys; witnesses invoking constitutional privileges in order not to testify; the invoking of executive privilege; and the threat of citation, or citation, by the House of a witness for contempt. Early and careful planning, consistent application of committee resources, highly capable committee staff, and perseverance are some attributes associated with successful congressional committee investigations. Congress has passed a number of laws that provide mechanisms for approving or disapproving executive proposals. These laws sometimes address specific legislation and sometimes address a class of proposal. For example, the President has trade negotiating authority under the Bipartisan Congressional Trade Priorities and Accountability Act of 2015 until at least July 1, 2018 ( P.L. 114-26 ). Using this authority, the President negotiated certain trade agreements to be considered in Congress under expedited congressional procedures established in trade laws. Other laws, such as the Congressional Review Act ( P.L. 104-121 , subtitle E), contain a procedural mechanism for Congress to review and disapprove proposed federal agency rules. As a committee contemplates its agenda, it seeks to be aware of pending and potential executive proposals that might be within its jurisdiction and subject to congressional approval or disapproval. Transition (Early Organization to Swearing-in) Early organization, including possible party selections of chairs—possibly occurring the week of November 13, 2018 Activities report—to be submitted by January 2, 2019 Preparation of committee calendar; transfer of noncurrent records to the clerk of the House Adoption of the Rules of the House for the 116 th Congress—January 3, 2019, or later House adopts resolutions electing chairs and members to committees—after the Rules of the House have been adopted Administrative Matters Committees' approval of their expense resolutions in the form of a simple resolution—late January or February, pursuant to information from the Committee on House Administration House Administration Committee introduces primary committee expense resolution, which is agreed to by the House—March Monthly expenses report submitted by committees to Committee on House Administration—by the 18 th of each month Monthly payroll certification submitted by committees to CAO's Human Resources Office—by the 15 th of each month Quarterly consolidated foreign travel submitted by committees to clerk of the House Committee Organization Committees' adoption of their rules and publication in electronic form and in the Congressional Record —not later than 30 days after the committee chair is elected Plan for subcommittee structure and authority—no later than a committee meeting to adopt committee rules, but more likely during the transition beginning with early organization Election of subcommittee chairs and designation of committee and subcommittee vice chairs—following adoption of a committee's rules Committee Procedure and the Role of a Chair Announcement of date, place, and subject matter of a hearing and publication in electronic form and in the Congressional Record —at least one week prior to the hearing Notice of a committee's markup meeting is published in electronic form and in the Congressional Record —at least three days prior to the meeting Publication of the text to be marked up—not later than 24 hours prior to the meeting's commencement Electronic posting of a committee's recorded votes and of the text of amendments adopted—not later than 48 hours after a vote is taken and not later than 24 hours after an amendment has been adopted Preparation of a committee report on legislation and filing in the House—promptly, but, in general, not later than seven days after a measure has been approved by a committee Legislative Issues and Agenda President's State of the Union address to Congress—typically, the third or fourth week of January President's budget submitted to Congress—by law, no later than the first Monday in February, although the budget has been submitted later than that date Committees report their views and estimates to the Budget Committee—no later than six weeks after the President transmits his budget Committees submit oversight plans to Committees on Oversight and Government Reform, Appropriations, and House Administration—February 15 Congress completes its bicameral agreement to a concurrent resolution on the budget—April 15, although Congress in some years has not completed action or has completed action at a later date House may begin consideration of appropriations bills, even in the absence of final action on a concurrent resolution on the budget—May 15 Under the Congressional Budget Act, House Appropriations Committee is to report its last appropriations bill—June 10, although this date has not been predictive

A committee chair serves as the leader of a committee, with responsibility for setting the course and direction of the panel for committee members and the House and for managing a large professional and paraprofessional staff. The senior committee staff should ensure the chair's goals are carried out effectively. Once a committee chair is selected during the postelection transition period, he or she, often in consultation with others, makes a series of decisions and takes a series of actions. Some actions complete a committee's duties in the Congress just ending. Other actions are taken in anticipation of the new Congress and then in the new Congress. Decisions may be related to the committee's policy calendar; the committee's administrative functions; the chair's responsibilities during committee sessions; the role of committee members; the relationship with the committee's ranking minority member, other chairs, and party leaders; subcommittee leaders; and other subjects. Many decisions are made with a deadline imposed by House rules. Specifically, a committee chair controls the selection of committee staff, authorizes expenditures from the committee budget, establishes operational and ethics policies, determines committee travel allocations, decides the content of the committee website, and is responsible for administration of the committee's rooms, paperwork, and other operations. Most committees entrust the drafting of the budget to the committee chair, although a committee's minority party members seek to ensure that they receive an appropriate allocation of resources. Before the chair introduces a funding resolution, the committee approves the chair's draft budget. The House requires its committees to adopt committee rules in an open session and to publish those rules in both the Congressional Record and electronic form not later than 30 days after the committee chair is elected. A chair normally proposes adopting, with amendments he or she offers, the rules under which the committee operated in the previous Congress. A chair proposes the number and responsibilities of subcommittees for the committee. A chair is also responsible for other documents required of committees under House rules, such as a biennial authorization and oversight plan, a biennial activities report, and a views and estimates report related to the annual congressional budget process. A committee chair establishes the committee agenda; calls hearings; selects witnesses and determines the order of their testimony; presides over hearings and markups; chooses any markup vehicle and pursues an amendment strategy; prepares the committee report accompanying legislation; and discusses, or might negotiate, any of these matters with the ranking minority member. The chair maintains order and decorum during committee meetings and takes various steps to protect the committee's jurisdiction in the referral of legislation and other matters. When a measure is reported by a committee, it is the responsibility of the committee chair to consult the party leadership to determine floor scheduling for the measure. This report covers the period from the House's early organization meetings in November to approximately March or April following the convening of a new Congress.

The Fair Labor Standards Act (FLSA) requires the payment of a minimum wage, as well as overtime compensation at a rate of not less than one and one-half times an employee's hourly rate for hours worked in excess of a 40-hour workweek. While the FLSA exempts some employees from these requirements based on their job duties or because they work in specified industries, most employees must be paid in accordance with the statute's requirements for work performed. The increased use of personal data assistants (PDAs) and smartphones by employees outside of a traditional work schedule has raised questions about whether such use may be compensable under the FLSA. As PDAs and smartphones provide employees with mobile access to work email, clients, and co-workers, as well as the ability to create and edit documents outside of the workplace, it may be possible to argue that non-exempt employees who perform work-related activities with these devices should receive overtime if such activities occur beyond the 40-hour workweek. This report reviews the FLSA's overtime provisions and examines some of the U.S. Supreme Court's seminal decisions on work. Although PDAs and smartphones provide a new opportunity to consider what constitutes work for purposes of the FLSA, the Court's past FLSA decisions, including those involving on-call time, may provide guidance on how courts could evaluate overtime claims involving the new devices. Section 7(a)(1) of the FLSA, states, in relevant part, [N]o employer shall employ any of his employees who in any workweek is engaged in commerce or in the production of goods for commerce, or is employed in an enterprise engaged in commerce, or in the production of goods for commerce, for a workweek longer than forty hours unless such employee receives compensation for his employment in excess of the hours above specified at a rate not less than one and one-half times the regular rate at which he is employed. The term "employ" is defined by the FLSA to mean "to suffer or permit to work." The term "work," however, is not defined by the statute. In 1944, the Supreme Court sought to clarify the meaning of that term in Tennessee Coal, Iron & Railroad Co. v. Muscoda Local No. 123 , a case involving miners who travelled daily to and from the working face of underground iron ore mines. Muscoda Local No. 123 and two other unions representing the miners maintained that the workers' hours of employment should include the travel time, and that the miners were entitled to overtime compensation because their hours of employment exceeded the statutory maximum workweek. Without a statutory definition for "work," the Court in Tennessee Coal relied on the plain meaning of the term to conclude that the miners' travel time should be construed as work or employment for purposes of the FLSA. The Court noted, "[W]e cannot assume that Congress here was referring to work or employment other than as those words are commonly used—as meaning physical or mental exertion (whether burdensome or not) controlled or required by the employer and pursued necessarily and primarily for the benefit of the employer and his business." The Court maintained that the dangerous conditions in the mine shafts provided proof that the journey to and from the working face involved continuous physical and mental exertion. In addition, the miners' travel to and from the working face was not undertaken for the convenience of the miners, but was performed for the benefit of the mining companies and their iron ore mining operations. In Armour v. Wantock , the Court clarified that actual physical or mental exertion was not necessary for an activity to constitute work under the FLSA. In Armour , a group of fire guards who remained on call on the employer's premises contended that they were entitled to overtime compensation for their on-call time. Although the employer attempted to make this time tolerable by providing beds, radios, and cooking equipment, the Court found that the guards were entitled to overtime compensation. The Court observed the following: Of course an employer, if he chooses, may hire a man to do nothing, or to do nothing but wait for something to happen. Refraining from other activity often is a factor of instant readiness to serve, and idleness plays a part in all employments in a stand-by capacity. Readiness to serve may be hired, quite as much as service itself, and time spent lying in wait for threats to the safety of the employer's property may be treated by the parties as a benefit to the employer. Whether time is spent predominantly for the employer's benefit or for the employee's is a question dependent upon all the circumstances of the case. In Anderson v. Mt. Clemens Pottery , a 1946 case involving workers at a pottery plant and the computation of compensable work time, the Court concluded that time spent walking to a work area on the employer's premises after punching a time clock was compensable. The Court indicated that because the statutory workweek includes all time that an employee is required to be "on the employer's premises, on duty, or at a prescribed workplace," the time spent in these activities must be compensated. Other preliminary activities, such as putting on aprons and preparing equipment, were also found to be compensable because they were performed on the employer's premises, required physical exertion, and were pursued for the employer's benefit. At the same time, however, the Court in Mt. Clemens Pottery recognized "a de minimis rule" for activities that involve only a few seconds or minutes of work beyond an employee's scheduled work hours. The Court explained that "[i]t is only when an employee is required to give up a substantial measure of his time and effort that compensable working time is involved." Fearing that Mt. Clemens Pottery would subject employers to significant and "wholly unexpected" financial liabilities, Congress passed the Portal-to-Portal Act, which abolished all claims for unpaid minimum wages and overtime compensation related to activities engaged in prior to May 14, 1947. The Portal-to-Portal Act also provided prospectively that an employer would not be subject to liability under the FLSA for failing to pay a minimum wage or overtime compensation for travel to and from the place where an employee's principal activity or activities are performed, or for activities that are "preliminary to or postliminary to [those] principal activity or activities." The Court's recognition of a de minimis rule and the enactment of the Portal-to-Portal Act have been viewed as attempts to limit the broad definition of "work" established in Tennessee Coal . Even after the Portal-to-Portal Act's enactment, however, the Court continued to find certain preparatory and concluding activities to be compensable under the FLSA. In Steiner v. Mitchell , for example, the Court found that the time spent by workers in a battery plant changing clothes at the beginning of a shift and showering at the end of a shift was compensable work time under the FLSA. Citing a colloquy between several senators and one of the sponsors of the Portal-to-Portal Act, the Court maintained that Congress did not intend to deprive employees of the benefits of the FLSA if preliminary or postliminary activities are an integral and indispensible part of the principal activities for which they are employed. In IBP v. Alvarez , the Court further concluded that the time spent walking between a changing area where protective clothing was put on and taken off and a work area was also compensable time under the FLSA. Whether non-exempt workers may be entitled to overtime compensation for work activities performed using a PDA or smartphone beyond a 40-hour workweek will probably depend on the facts of each case. At a minimum, an employee seeking such compensation will likely have to establish that he was engaged in compensable work. The factors articulated by the Court in Tennessee Coal continue to be recognized as a starting point for determining whether an employee's activities constitute work under the FLSA. First, does use of a PDA or smartphone require physical or mental exertion? Second, is the use of a PDA or smarthphone controlled or required by the employer? Finally, is the use of a PDA or smartphone necessarily and primarily for the benefit of the employer and his business? While the facts of each case will ultimately determine whether the Tennessee Coal factors are satisfied, it seems possible that at least some PDA or smartphone use could be viewed as compensable work under the FLSA. Even with the Court's reconsideration in Armour of the need for physical or mental exertion to constitute work, it appears reasonable to conclude that at least some PDA or smartphone use will require mental exertion. An employee responding to work email or reviewing or editing documents is arguably engaged in mental exertion. Further, providing PDAs and smartphones to non-exempt employees without any statement or policy about not using the devices outside of regular work hours may lead to the conclusion that their use is controlled or required by the employer, particularly if supervisors or senior employees send messages or documents with the expectation that they will be immediately read or reviewed. Finally, because employers could benefit from an employee's response to email or his review of a document after regular work hours, it could be argued that the employee's PDA or smartphone use is necessarily or primarily for the benefit of the employer and his business. The absence, however, of any significant case law involving the FLSA and PDA or smartphone use makes it difficult to know exactly how courts will evaluate related claims for overtime compensation. Some believe that cases involving on-call time could be instructive, particularly because they present an analogous situation in which an employee is kept in constant contact with the employer. In Skidmore v. Swift & Co ., one of the Court's early cases involving on-call time and the payment of overtime compensation, the Court indicated that the law does not preclude "waiting time from also being working time." The Court maintained, however, that the availability of overtime pay involves an examination of the agreement between the parties, consideration of the nature of the service provided and its relation to the waiting time, and all of the surrounding circumstances. In reversing a denial of overtime compensation in Skidmore , the Court further explained that whether on-call time should be considered compensable under the FLSA depends upon the degree to which the employee is free to engage in personal activities during periods of idleness when he is subject to call and the number of consecutive hours that the employee is subject to call without being required to perform active work. Hours worked are not limited to the time spent in active labor, but include time given by the employee to the employer. Since the Court's decision in Skidmore , other courts have found on-call time compensable under the FLSA. In Pabst v. Oklahoma Gas & Electric Co ., for example, the U.S. Court of Appeals for the Tenth Circuit determined that a group of electronic technicians who were expected to respond to alarms sent to their pagers and computers were entitled to compensation for their on-call time. Citing Skidmore and Armour , the court focused on the burdens placed on the technicians as a result of their on-call duties, such as diminished sleep habits because of the frequency of the alarms and the employer's required response time. Where the burdens placed on employees as a result of on-call duties are minimal, courts appear more likely to find that on-call time is not compensable under the FLSA. In Owens v. Local No. 169 , for example, the Ninth Circuit concluded that an employer with an ongoing policy of phoning its regular daytime mechanics after hours to return to the workplace to fix equipment was not liable for overtime compensation resulting from the employees' on-call duties. The court maintained that the employer's on-call policy was far less burdensome than other policies that had been successfully challenged. Unlike the technicians in Pabst , the mechanics in Owens were not required to respond to all calls and received an average of only six calls a year. The courts' focus on an employee's ability to engage in personal activities in on-call cases may indeed prove instructive as they begin to consider whether work-related PDA and smartphone use is compensable under the FLSA. Although a court may find that an employee's use of a PDA or smartphone is "work" for purposes of the FLSA, it may conclude that such use is so minimal or unobtrusive that it is not compensable under the FLSA. Such a finding would seem to be consistent not only with the on-call jurisprudence, but also with the de minimis rule articulated by the Court in Mt. Clemens Pottery . At the very least, a court will likely have to evaluate all of the circumstances of an employee's case to determine whether his PDA or smartphone use is compensable. As PDA and smartphone use by employees increases and the expectations of supervisors, co-workers, and clients evolve, it seems likely that courts will be confronted with numerous cases involving overtime compensation based on the work-related use of these devices. At least one case involving the retail sales consultants and assistant store managers of AT&T Mobility is currently being litigated. The non-exempt plaintiffs in Zivali v. AT&T Mobility are seeking overtime compensation for their work outside of their regular work hours. The employees argue that AT&T Mobility required them to carry company-owned smartphones and encouraged them to provide their numbers to customers. They contend that AT&T Mobility fosters a corporate culture in which employees "are expected to perform certain tasks off-duty." In May 2011, a federal district court found that the plaintiffs were not similarly situated for purposes of maintaining a collective action under the FLSA. However, the court also concluded that the evidence suggested that at least some of the plaintiffs might be able to recover uncompensated overtime from AT&T Mobility, and rejected the company's motion for summary judgment. The case is likely to be watched closely by both employers and employees who are required to carry PDAs and smartphones.

The increased use of personal data assistants (PDAs) and smartphones by employees outside of a traditional work schedule has raised questions about whether such use may be compensable under the Fair Labor Standards Act (FLSA). As PDAs and smartphones provide employees with mobile access to work email, clients, and co-workers, as well as the ability to create and edit documents outside of the workplace, it may be possible to argue that employees who are not exempt from the FLSA's requirements and who perform work-related activities with these devices should receive overtime if such activities occur beyond the 40-hour workweek. This report reviews the FLSA's overtime provisions, and examines some of the U.S. Supreme Court's seminal decisions on work. Although PDAs and smartphones provide a new opportunity to consider what constitutes work for purposes of the FLSA, the Court's past FLSA decisions, including those involving on-call time, may provide guidance on how courts could evaluate overtime claims involving the new devices.

A major issue in the upcoming farm bill debate is likely to be funding for conservation programs. Current authorization for mandatory funding for most of these programs, under the Farm Security and Rural Investment Act of 2002 ( P.L. 107 - 171 ), expires at the end of FY2007. Mandatory funding means that the amount authorized by Congress is available unless limited to smaller amounts in the appropriations process; if appropriators do not act, the amount that was authorized is provided to the program. These mandatory funds are provided by the U.S. Department of Agriculture's Commodity Credit Corporation, a financing institution for many agriculture programs, including commodity programs and export subsidies. While most conservation programs currently are authorized using mandatory funding, discretionary funding is used for six conservation programs. For discretionary programs, appropriators decide how much funding to provide each year in the annual agriculture appropriations bill, subject to any maximum limit set in law. Conservation program advocates prefer mandatory funding over discretionary funding. They believe that it is generally easier to protect authorized mandatory funding levels from reductions during the appropriations process than to secure appropriations each year. However, since FY2002, Congress has limited funding for some of the mandatory programs each year below authorized levels in annual appropriations acts. Advocates for these programs decry these limitations as significant changes from the intent of the farm bill, which compromise the programs' ability to provide the anticipated magnitude of benefits to producers and the environment. Others, including those interested in reducing agricultural expenditures or in spending the funds for other agricultural purposes, counter that, even with these reductions, overall funding has grown substantially. Congress provided mandatory funding for selected conservation programs for the first time in the 1996 farm bill ( P.L. 104 - 127 ). Prior to 1996, all conservation programs had been funded as discretionary programs. Conservation program advocates viewed mandatory funding as a much more desirable approach, and Congress agreed, enacting provisions that moved some conservation programs from discretionary to mandatory funding. Some advocates viewed this change in funding as a major achievement in the 1996 farm bill. Amounts authorized for these programs at the time may seem modest when compared with today's levels. Programs funded with mandatory funding, and their authorized levels under the 1996 law, included the following: Conservation Reserve Program (a maximum of 36.4 million acres at any time through FY2002, with no dollar amount specified); Wetland Reserve Program (a maximum of 975,000 acres at any time through FY2002, with no dollar amount specified); Environmental Quality Incentives Program ($130 million in FY1996, and $200 million annually thereafter through FY2002); Wildlife Habitat Incentives Program (a total of $50 million between FY1996 and FY2002); Farmland Protection Program (a total of $35 million with no time span specified); and Conservation Farm Option ($7.5 million in FY1997, increasing each year to a high of $62.5 million in FY2002). The 2002 farm bill greatly expanded mandatory funding for conservation, authorizing the annual funding levels shown in Table 1 . Mandatory funding was provided both for expiring programs that were reauthorized and for new programs created in the legislation. The increase in authorized funding levels was widely endorsed for many reasons. Conservation supporters had long been seeking higher funding levels, and this was another significant step in that effort. An argument that proved particularly persuasive in this farm bill debate was documentation of large backlogs of interested and eligible producers who were unable to enroll because of a lack of funds. Demand to participate in some of the programs exceeded the available program dollars several times over, and some Members reasoned that higher funding was warranted to satisfy this demand. Funding for FY2002 is not included in Table 1 , as the FY2002 appropriations legislation was enacted on November 28, 2001, six months before the 2002 farm bill. Program funding decisions had to be based on prior legislation. Indeed, by the time this farm bill was enacted, the FY2003 appropriations process was well along. However, the 2002 farm bill did authorize money in FY2002 for several mandatory programs. In each year since FY2002, annual agriculture appropriations acts have capped funding for some of the mandatory conservation programs below authorized levels. The programs that are limited and the amounts of the limitations change from year to year. One program, the Wetland Reserve Program, has been capped in enrolled acres, which appropriators translate into savings based on average enrollment costs. Table 1 compares the authorized spending level for each of the programs with the amount that Congress actually provided through the appropriations process. It does not include any mandatory conservation programs enacted since the 2002 farm bill, including the Conservation Reserve Program Technical Assistance Account (enacted in P.L. 108 - 498 ), the Healthy Forest Reserve (enacted in P.L. 108 - 148 ), and the Emergency Forestry Conservation Reserve Program (enacted in P.L. 109 - 148 ). Many of the spending reductions originate in the Administration's budget request. Since the farm bill states that the Secretary "shall" spend the authorized amounts for each program each year, Congress must act to limit spending to a lesser amount. The mix of programs and amounts of reduction in the Administration request have varied from year to year. Congress has concurred with the Administration request some years for some programs. Starting in FY2003, the requested reductions in mandatory funding below the authorized levels (shown in the table), are as follows: In FY2003, the request was submitted before the farm bill was enacted, and did not include any requests to reduce funding levels. In FY2004, the request was to limit the Wetlands Reserve Program (WRP) to 200,000 acres ($250 million), limit the Environmental Quality Incentives Program (EQIP) to $850 million, limit the Ground and Surface Water Program (GSWP) to $51 million, limit the Wildlife Habitat Incentive Program (WHIP) to $42 million, limit the Farmland Protection Program (FPP) to $112 million, limit the Conservation Security Program (CSP) to $19 million, and eliminate funding for the Watershed Rehabilitation and Agricultural Management Assistance (AMA) Programs. In FY2005, the request was to limit the WRP to 200,000 acres ($295 million), EQIP to $985 million, WHIP to $59 million, FPP to $120 million, and CSP to $209 million, and eliminate funding for the Watershed Rehabilitation and AMA Programs. In FY2006, the request was to limit the WRP to 200,000 acres ($321 million), EQIP to $1.0 billion, WHIP to $60 million, FPP to $84 million, Biomass Research and Development to $12 million, and CSP to $274 million, and eliminate funding for the Watershed Rehabilitation and AMA Programs. In FY2007, the request is to limit EQIP to $1.0 billion, GSWP to $51 million, WHIP to $55 million, FPP to $50 million, Biomass Research and Development to $12 million, and CSP to $342 million, and eliminate funding for the Watershed Rehabilitation and AMA Programs. While Congress has reduced funding for some mandatory conservation programs, either in support of an Administration request or on its own, the reductions did not exceed 10% of the total until FY2005. However, the gap between authorized levels and actual amounts continues to grow. As a percentage, this gap has grown from 2.4% of the total authorized amount in FY2003 to 12.7% in FY2006. Even with these changes, however, actual total funding has risen almost $720 million over the same four-year time period, which is an increase of almost 25% from the FY2003 authorization. Reductions have not been uniform among programs. The largest mandatory program, the CRP, has not been limited in any way by appropriators since the 2002 farm bill was enacted. The second-largest program, EQIP, has absorbed the largest reductions from authorized levels, totaling $396 million between FY2003 and FY2006. Funding for a third program, the CSP, has been amended four times since 2002. As initially enacted, it was the first true conservation entitlement program; that is, any individual who met the eligibility requirements would be accepted into the program. Congress has capped CSP and then repeatedly reduced the cap to fund other activities, usually disaster assistance. More generally, the table shows that reductions have varied from year to year and program to program since 2002. At one extreme, the Watershed Rehabilitation Program has received no mandatory funding in any year (it is one of the five conservation programs authorized to receive discretionary appropriations as well, and those have been provided), and at the other extreme, the CRP has not been limited in any way. Some of the programs have unusual characteristics that affect how they are treated for budget purposes, as noted in the table footnotes. For example, the Grasslands Reserve and Klamath River Basin Programs each have a total authorized level that is not subdivided by fiscal year in the authorizing legislation. For those programs, the amount that was spent each year (not the remaining lifetime authorization) is included for purposes of calculating the percentage by which funding is reduced. As a result of the many variations in how these programs are authorized (some in acres and others in dollars, and some as a total amount and others by year), there are several alternative ways to calculate the annual and total reduction from the authorized level. However, all of these calculations lead to the same general set of observations. First, overall funding for the suite of mandatory agriculture conservation programs has been reduced each year. Second, the magnitude by which this suite of programs is being reduced has been growing each year. Third, these reductions may still be significant to current or potential beneficiaries of those program. Fourth, even with the reductions, overall funding for the group of mandatory programs has continued to rise. Finally, funding for the discretionary agricultural conservation programs varies more from year to year, with much larger percentage reductions than the mandatory programs in some years. Greater variation in funding for discretionary programs supports the view of conservation proponents that using the mandatory approach has been a more successful and predictable approach to conservation program funding in recent years. (For more information on each of these programs, CRS Report RL32940, Agriculture Conservation Programs: A Scorecard , by [author name scrubbed] and [author name scrubbed] (pdf).) When considering whether reductions in mandatory funding for conservation programs compromise the conservation effort, three points are relevant. First, a measure of how conservation funding is viewed in relation to other agriculture funding was provided in the FY2006 reconciliation process, which required the agriculture committees to reduce total USDA mandatory program funding by $3.0 billion over five years, including a reduction of $176 million in FY2006. Conservation provided $934 million of those savings, with no reductions for FY2006. This amount is about 25% of the total reduction that was enacted, $3.7 billion over five years. The savings came from lowering caps on spending for CSP and EQIP in future years (which also required authorizing them beyond FY2007), and eliminating unspent funds for the Watershed Rehabilitation Program carried over from earlier years. Part of the debate was whether conservation is being asked to bear a disproportionate share of these reductions. (For more information, see CRS Report RS22086, Agriculture and FY2006 Budget Reconciliation , by [author name scrubbed] .) Second, it appears highly likely that reductions to mandatory program spending at the current scale will continue. Reductions have been in every administration request and annual appropriations bill since FY2003. It is less certain, however, whether these reductions will continue to grow as a percentage of the total. Future change will depend on both congressional support for conservation specifically, and broader pressures that influence overall federal spending. It is likely that the affected programs and the magnitude of the reductions will continue to vary from year to year, making it difficult to forecast the future based on the past. Third, supporters of conservation programs may look for ways to address the challenge of spending reductions in the next farm bill. However, several broader forces may make it difficult to authorize higher funding levels or to protect current funding levels for these conservation programs. One force may be broad efforts to control federal spending. A second force may be competition among various agriculture constituencies for limited funds; the FY2006 reconciliation process provided an indication of how Congress will treat conservation when it must make decisions based on this competition. A third force may be limits on the capacity of federal conservation agencies, at current staffing levels and with the current approaches, to plan and install all the conservation practices that additional funding would support, and it seems likely that increasing staff levels in federal agencies to provide more conservation will not be an option.

The Farm Security and Rural Investment Act of 2002 authorized large increases in mandatory funding for several agricultural conservation programs. Most of these programs expire in FY2007, and the 110th Congress is likely to address future funding levels in a farm bill. Since FY2002, Congress has acted, through the appropriations process, to limit funding for some of these programs below authorized levels. It limited total funding for all the programs to 97.6% of the authorized total in FY2003, and the percentage declined annually to 87.3% in FY2006. Program supporters decry these growing limitations as reductions that compromise the intent of the farm bill. Others counter that, even with the limitations, overall conservation funding has grown substantially, from almost $3.1 billion in FY2003 to almost $3.8 billion in FY2006. This report reviews the funding history of the programs since the 2002 farm bill was enacted. It will be updated periodically.

The level of pay for congressional staff is a source of recurring questions among Members of Congress, congressional staff, and the public. Members of the House of Representatives typically set the terms and conditions of employment for staff in their offices. This includes job titles, duties, and rates of pay, subject to a maximum level, and resources available to them to carry out their official duties. There may be interest in congressional pay data from multiple perspectives, including assessment of the costs of congressional operations; guidance in setting pay levels for staff in Member offices; or comparison of congressional staff pay levels with those of other federal government pay systems. Publicly available resources do not provide aggregated congressional staff pay data in a readily retrievable form. The most recent staff compensation report was issued in 2010, which, like previous compensation reports, relied on anonymous, self-reported survey data. Pay information in this report is based on the House Statement of Disbursements (SOD), published quarterly by the Chief Administrative Officer, as collated by LegiStorm, a private entity that provides some congressional data by subscription. Data in this report are based on official House reports, which afford the opportunity to use consistently collected data from a single source. Additionally, this report provides annual data, which allows for observations about the nature of House Member staff compensation over time. This report provides pay data for 12 staff position titles that are typically used in House Members' offices. The positions include the following: Caseworker Chief of Staff District Director Executive Assistant Field Representative Legislative Assistant Legislative Correspondent Legislative Director Office Manager Press Secretary Scheduler Staff Assistant House Member staff pay data for the years 2001-2015 were developed based on a random sampling of staff for each position in each year. In order to be included, House staff had to hold a position with the same job title in the Member's office for the entire calendar year. For each year, the SOD reports pay data for five time periods: January 1 and 2; January 3-March 31; April 1-June 30; July 1-September 30; and October 1-December 31. The aggregate pay of those five periods equals the annual pay of a congressional staff member. For each year, 2001-2015, a random sample of 45 staff for each position, and who did not receive pay from any other congressional employing authority, was taken. Every recorded payment ascribed to those staff for the calendar year is included. Data collected for this report may differ from an employee's stated annual salary due to the inclusion of overtime, bonuses, or other payments in addition to base salary paid in the course of a year. For some positions, it was not possible to identify 45 employees who held that title for the entire year. In circumstances when data for 18 or fewer staff were identified for a position, this report provides no data. Generally, data provided in this report are based on no more than three observations per Member office per year, and only one per office per position each year. Pay data for staff working in Senators' offices are available in CRS Report R44324, Staff Pay Levels for Selected Positions in Senators' Offices, FY2001-FY2014 . Data describing the pay of congressional staff working in House and Senate committee offices are available in CRS Report R44322, Staff Pay Levels for Selected Positions in House Committees, 2001-2014 , and CRS Report R44325, Staff Pay Levels for Selected Positions in Senate Committees, FY2001-FY2014 , respectively. There may be some advantages to relying on official salary expenditure data instead of survey findings, but data presented here are subject to some challenges that could affect the findings or their interpretation. Some of the concerns include the following: There is a lack of data for first-term Members in the first session of a Congress. Authority to use the Member Representational Allowance (MRA) for the previous year expires January 2, and new MRA authority begins on January 3. As a consequence, no data are available for first-term Members of the House in the first session of a Congress. Pay data provide no insight into the education, work experience, position tenure, full- or part-time status of staff, or other potential explanations for levels of compensation. Data do not differentiate between staff based in Washington, DC, district offices, or both. Member offices that do not utilize any of the 12 job position titles or their variants, or whose pay data were not reported consistently, are excluded. Potential differences could exist in the job duties of positions with the same title. Aggregation of pay by job title rests on the assumption that staff with the same title carry out similar tasks. Given the wide discretion congressional employing authorities have in setting the terms and conditions of employment, there may be differences in the duties of similarly titled staff that could have effects on their levels of pay. Tables in this section provide background information on House pay practices, comparative data for each position, and detailed pay data and visualizations for each position. Table 1 provides the maximum payable rates for House Member staff since 2001 in both nominal (current) and constant 2016 dollars. Constant dollar calculations throughout the report are based on the Consumer Price Index for All Urban Consumers (CPI-U) for various years, expressed in constant, 2016 dollars. Table 2 provides the available cumulative percentage changes in pay in constant 2016 dollars for each of the 12 positions, Members of Congress, and salaries paid under the General Schedule in Washington, DC, and surrounding areas. Table 3 - Table 14 provide tabular pay data for each House Member office staff position. The numbers of staff for which data were counted are identified as observations in the data tables. Graphic displays are also included, providing representations of pay from three perspectives, including the following: a line graph showing change in pay, 2001-2015, in nominal (current) and constant 2016 dollars; a comparison, at 5-, 10-, and 15- year intervals from 2015, of the cumulative percentage change in median pay for that position to changes in pay, in constant 2016 dollars, of Members of Congress and federal civilian workers paid under the General Schedule in Washington, DC, and surrounding areas; and distributions of 2015 pay in 2016 dollars, in $10,000 increments. Between 2011 and 2015, the change in median pay, in constant 2016 dollars, increased for one position, office manager, by 0.22%, and decreased for 11 staff positions, ranging from a -3.53% decrease for field representatives to a -25.83% decrease for executive assistants. This may be compared to changes over the same period to Members of Congress, -5.10%, and General Schedule, DC, -3.19%. Between 2006 and 2015, the change in median pay, in constant 2016 dollars, decreased for all 12 staff positions, ranging from a -1.99% decrease for legislative directors to a -24.82% decrease for executive assistants. This may be compared to changes over the same period to Members of Congress, -10.41%, and General Schedule, DC, -0.13%. Between 2001 and 2015, the change in median pay, in constant 2016 dollars, ranged from a 4.27% increase for chiefs of staff to a -23.35% decrease for executive assistants. Of the 12 positions, one saw a pay increase, while 11 saw declines. This may be compared to changes over the same period to the pay of Members of Congress, -10.40%, and General Schedule, DC, 7.36%.

The level of pay for congressional staff is a source of recurring questions among Members of Congress, congressional staff, and the public. There may be interest in congressional pay data from multiple perspectives, including assessment of the costs of congressional operations; guidance in setting pay levels for staff in Member offices; or comparison of congressional staff pay levels with those of other federal government pay systems. This report provides pay data for 12 staff position titles that are typically used in House Members' offices. The positions include the following: Caseworker, Chief of Staff, District Director, Executive Assistant, Field Representative, Legislative Assistant, Legislative Correspondent, Legislative Director, Office Manager, Press Secretary, Scheduler, and Staff Assistant. Tables provide tabular pay data for each House Member office staff position. Graphic displays are also included, providing representations of pay from three perspectives, including the following: a line graph showing change in pay, 2001-2015; a comparison, at 5-, 10-, and 15-year intervals from 2015, of the cumulative percentage change in pay of that position to changes in pay of Members of Congress and salaried federal civilian workers paid under the General Schedule in Washington, DC, and surrounding areas; and distributions of 2015 pay in $10,000 increments. In the past five years (2011-2015), the change in median pay, in constant 2016 dollars, increased for one position, office manager, by 0.22%, and decreased for 11 staff positions, ranging from a -3.53% decrease for field representatives to a -25.83% decrease for executive assistants. This may be compared to changes over the same period to Members of Congress, -5.10%, and General Schedule, DC, -3.19%. Pay data for staff working in Senators' offices are available in CRS Report R44324, Staff Pay Levels for Selected Positions in Senators' Offices, FY2001-FY2014. Data describing the pay of congressional staff working in House and Senate committee offices are available in CRS Report R44322, Staff Pay Levels for Selected Positions in House Committees, 2001-2014, and CRS Report R44325, Staff Pay Levels for Selected Positions in Senate Committees, FY2001-FY2014, respectively. Information about the duration of staff employment is available in CRS Report R44683, Staff Tenure in Selected Positions in House Committees, 2006-2016, CRS Report R44685, Staff Tenure in Selected Positions in Senate Committees, 2006-2016, CRS Report R44682, Staff Tenure in Selected Positions in House Member Offices, 2006-2016, and CRS Report R44684, Staff Tenure in Selected Positions in Senators' Offices, 2006-2016.

T he National Park Service's (NPS's) backlog of deferred maintenance (DM)—maintenance that was not done as scheduled or as needed—is an issue of ongoing interest to Congress. The agency estimated its DM needs for FY2016 at $11.332 billion. Although other federal land management agencies also have DM backlogs, NPS's backlog is the largest. Because unmet maintenance needs may damage park resources, compromise visitors' experiences in the parks, and jeopardize safety, NPS DM has been a topic of concern for Congress and for nonfederal stakeholders. Potential issues for Congress include, among others, how to weigh NPS maintenance needs against other financial demands within and outside the agency, how to ensure that NPS is managing its maintenance activities efficiently and successfully, and how to balance the maintenance of existing parks with the establishment of new park units. This report addresses frequently asked questions about NPS DM. The discussion is organized under the headings of general questions, funding-related questions, management-related questions, and questions on Congress's role in addressing the backlog. The Federal Accounting Standards Advisory Board defines deferred maintenance and repairs (DM&R) as "maintenance and repairs that were not performed when they should have been or were scheduled to be and which are put off or delayed for a future period." NPS uses similar language to define deferred maintenance . Although NPS uses the term DM rather than DM&R, its estimates also include repair needs. Following NPS's usage, this report uses the term DM to refer to NPS's deferred maintenance and repair needs. Members of Congress and other stakeholders also often refer to DM as the maintenance backlog . As suggested by the above definition, DM does not include all maintenance, only maintenance that was not accomplished when scheduled or needed and was put off to a future time. Another type of maintenance is cyclic maintenance —that is, maintenance performed at regular intervals to prevent asset deterioration, such as to replace a roof or upgrade an electrical system at a scheduled or needed time. Although NPS considers cyclic maintenance separately from DM, NPS has emphasized the importance of cyclic maintenance for controlling DM costs. Cyclic maintenance, the agency has stated, "prevent[s] the creation of DM and enabl[es] repairs to fulfill their full life expectancy." NPS also performs routine, day-to-day maintenance as part of its facility operations activities. Such activities include, for example, mowing and weeding of landscapes and trails, weatherizing a building prior to a winter closure, and removing litter. NPS estimated its total DM for FY2016 at $11.332 billion. This amount is nearly evenly split between transportation-related DM in the "Paved Roads and Structures" category and mostly non-transportation-related DM for all other facilities (see Table 1 ). The Paved Roads and Structures category includes paved roadways, bridges, tunnels, and paved parking areas. The other facilities are in eight categories: Buildings, Housing, Campgrounds, Trails, Water Systems, Wastewater Systems, Unpaved Roads, and All Other. NPS also estimates annually a subset of DM that includes its highest-priority non-transportation-related facilities. For FY2016, DM for this subset of key facilities was estimated at $2.271 billion. NPS's estimated maintenance backlog increased for most of the past decade before dropping in FY2016. Over the decade as a whole (FY2007-FY2016), Figure 1 and Table 2 show a growth in NPS DM of $1.718 billion in nominal dollars and $0.021 billion in inflation-adjusted dollars. Multiple factors may contribute to growth or reduction in the NPS maintenance backlog, and stakeholders may disagree as to their respective importance. One key driver of growth in NPS maintenance needs has been the increasing age of agency infrastructure. Many agency assets—such as visitor centers, roads, utility systems, and other assets—were constructed by the Civilian Conservation Corps in the 1930s or as part of the agency's Mission 66 infrastructure initiative in the 1950s and 1960s. As these structures have reached or exceeded the end of their anticipated life spans, unfunded costs of repair or replacement have contributed to the DM backlog. Further, agency officials point out, as time goes by and needed repairs are not made, the rate at which such assets deteriorate is accelerated and can result in "a spiraling burden." Another key factor is the amount of funding available to the agency to address DM. The sources and amounts of NPS funding for DM are discussed in greater detail below, in the section on " Funding Questions ." NPS does not aggregate the amounts it receives and uses each year to address deferred maintenance, but agency officials have stated repeatedly that available funding has been inadequate to meet DM needs. In recent years, Congress has increased NPS appropriations to address DM, in conjunction with the agency's 2016 centennial anniversary. NPS has stated that these funding increases, although helping the agency with some of its most urgent needs, have been insufficient to address the total problem. Some observers have advocated further increases in agency funding as a way to address DM, whereas others have recommended reorienting existing funding to prioritize maintenance over other purposes. The Administration's budget request for FY2018 would reduce some NPS funding for DM while increasing other NPS DM-oriented funding. Another subject of attention is the extent to which acquisition of new properties may add to the maintenance burden. Stakeholders disagree about the role played by new assets acquired by NPS, through the creation of new parks or the expansion of existing parks, in DM growth over the past decade. To the extent that newly acquired lands contain assets with maintenance and repair needs that are not met, these additional assets would increase NPS DM. According to the agency, new additions with infrastructure in need of maintenance and repair have been relatively rare in recent years, and most of the acquired lands have been unimproved or have contained assets in good condition. In past years, NPS also has stated that some acquisitions of "inholdings" within existing parks have even facilitated maintenance and repair efforts by providing needed access for maintenance activities. Others have contended that even if new acquisitions do not immediately contribute to the backlog, they likely will do so over time, and that further expansion of the National Park System is inadvisable until the maintenance needs of existing properties have been addressed. For example, the Administration's FY2018 budget proposes to eliminate funding for NPS federal land acquisition projects in order to "focus fiscal resources toward managing lands already owned by the federal government." Some observers also have expressed concerns that growth in NPS DM may be at least partially due to inefficiencies in the agency's asset management strategies and/or the implementation of these strategies. The section of this report on " Management Questions " gives further details on NPS's management of its DM backlog. NPS has taken a number of steps over the decade to improve its asset management systems and strategies. The Government Accountability Office (GAO) has recommended further improvements. From year to year, the completion of individual projects, changes in construction and repair costs, and similar factors play a role in the growth or reduction of NPS DM. For instance, with respect to the reduction in NPS DM for FY2016, the agency stated: The database used to track DM and other facility asset information changes daily as data is entered, updated, closed out, and corrected in the system. The "snapshot" of the data taken at the end of Fiscal Year (FY) 2016 is exactly that … a view of the NPS data as of Sep 30, 2016. Many factors contributed to this almost $600 million decrease, including data cleanup, completion of several large projects, revisions to several large project work orders, and savings from decreases in construction costs. Still another issue is that the methods used by NPS and the Department of the Interior (DOI) to estimate DM have varied over time and for different types of maintenance reports. For example, the estimates in Figure 1 and Table 2 , above, draw on two different types of DM reports. For FY2006-FY2013, the estimates are calculated from DM ranges that NPS provided to DOI for annual departmental financial reports. Starting in FY2014, NPS began to publish separate estimates of agency DM on its website, which include some assets—such as buildings that NPS maintains but does not own—that are not included in the DOI departmental estimates. Additionally, during the earlier FY2006-FY2013 period, DOI changed its methods for calculating its estimated DM ranges, and NPS was in the process of completing its database of reported assets. What portion of the overall change in NPS DM over the decade may be attributable to changes in methodology or data completeness, rather than to other factors, is unclear. Although all four major federal land management agencies—NPS, the Bureau of Land Management (BLM), the Fish and Wildlife Service (FWS), and the Forest Service (FS)—have DM backlogs, NPS's backlog is the largest. For FY2016, NPS reported DM of more than $11 billion, whereas FS reported DM of roughly half that amount (about $5.5 billion), and FWS and BLM both reported DM of less than $2 billion. DM for the four agencies is discussed further in CRS Report R43997, Deferred Maintenance of Federal Land Management Agencies: FY2007-FY2016 Estimates and Issues . NPS reports DM by state and territory in its report titled NPS Deferred Maintenance by State and Park . The 20 states with the highest NPS DM estimates are shown in Table 3 . The states with the highest DM are not necessarily those with the most park acreage. For example, Alaska contains almost two-thirds of the total acreage in the National Park System but accounts for less than 1% of the agency's DM backlog. Instead, the amount, type, and condition of infrastructure in a state's national park units are the primary determinants of DM for each state. For example, transportation assets are a major component of NPS DM, and states with NPS national parkways—the George Washington Memorial Parkway (mainly in Virginia and Washington, DC), the Natchez Trace Parkway (mainly in Mississippi and Tennessee), the Blue Ridge Parkway (North Carolina and Virginia), and the John D. Rockefeller Jr. Memorial Parkway (Wyoming)—are all among the 20 states with the highest DM. Table 4 shows the 20 individual park units with the highest maintenance backlogs. Various factors may contribute to the relatively high DM estimates for these park units as compared to others. For example, many of them are older units whose infrastructure was largely built in the mid-20 th century. Some sites, such as Gateway National Recreation Area and Golden Gate National Recreation Area, are located in or near urban areas and may contain more buildings, roads, and other built assets than more remotely located parks. Three of the 10 units with the highest estimated DM are national parkways, consistent with the high proportion of NPS's overall DM backlog that is related to road needs. It is not possible to determine the total amount of funding allocated each year to address NPS's DM backlog, because NPS does not aggregate these amounts in its budget reporting. Funding to address DM comes from a variety of NPS budget sources, and each of these budget sources also funds activities other than DM. NPS does not report how much of each funding stream was used for DM in any given year. Although it is not possible to determine amounts allocated to NPS deferred maintenance, GAO estimated amounts allocated for all  NPS maintenance (including DM, cyclic maintenance, and day-to-day maintenance activities) for FY2006-FY2015. GAO estimated that, over that decade, NPS's annual spending for all types of maintenance averaged $1.182 billion per year. GAO did not determine what portion of this funding went specifically to DM. NPS has testified that annual funding of roughly $700 million per year, targeted specifically to DM, would be required simply to hold the maintenance backlog steady without further growth. NPS has used discretionary appropriations, allocations from the Department of Transportation, park entrance fees, donations, and other funding sources to address the maintenance backlog. Most of the funding for DM comes from discretionary appropriations, primarily under two budget activities, titled "Repair and Rehabilitation" and "Line-Item Construction." The Repair and Rehabilitation (R&R) budget subactivity, within the NPS's Operation of the National Park System (ONPS) budget account, focuses on large-scale, nonrecurring repair needs, and repairs for assets where scheduled maintenance is no longer sufficient to improve the condition of the facility. R&R funds are used for projects with projected costs of less than $1 million each. NPS estimated that, over the past five years, a range from 49% to 83% of R&R funds have been specifically targeted to projects on the DM backlog, as opposed to projects associated with other types of maintenance. The Administration's FY2018 budget would fund the R&R subactivity at $99.3 million, a decrease of $25.2 million from FY2017 appropriations provided in P.L. 115-31 . The Line- Item Construction budget activity, within the NPS's Construction account, provides funding for the construction, major rehabilitation, and replacement of existing facilities needed to accomplish approved management objectives for each park. This funding is used for projects expected to cost $1 million or more. NPS prioritizes projects for funding on the basis of their contribution to parks' financial sustainability, health and safety, resource protection, and visitor services, as well as on the basis of a cost-benefit analysis. NPS estimated that, over the past five years, a range from 59% to 87% of Line-Item Construction funds have been used specifically to reduce the DM backlog. The Administration's FY2018 budget would fund the Line-Item Construction activity at $137.0 million, an increase of $5.0 million over FY2017 appropriations provided in P.L. 115-31 . Portions of other NPS discretionary budget activities and accounts also are used for DM. These include various budget activities within the ONPS and Construction accounts, as well as NPS's Centennial Challenge account. The Centennial Challenge account provides federal funds to match outside donations for "signature" NPS parks and programs. The funding is used to enhance visitor services, reduce DM, and improve natural and cultural resource protection. The Administration's FY2018 budget justification requests $15.0 million for the Centennial Challenge program, a decrease of $5.0 million from the amount provided for FY2017 in P.L. 115-31 . Beyond NPS discretionary appropriations, a number of other, nondiscretionary agency revenue streams also are used partially or mainly to address DM. NPS receives an annual allocation from the Highway Trust Fund to address transportation needs, including transportation-related DM. Funds are provided to NPS (and other federal land management agencies) by the Federal Highway Administration, primarily under the Federal Lands Transportation Program. In recent years, these allocations have funded approximately two-thirds of NPS's transportation-related maintenance spending. For FY2018, NPS's allocation from the Federal Lands Transportation Program is $284.0 million, an increase of $8.0 million from the FY2017 allocation. Through related federal highway programs, NPS could potentially receive additional funding. Park entrance and recreation fees collected under the Federal Lands Recreation Enhancement Act (16 U.S.C. §§6801-6814) may be used for DM, among other purposes. The fees, most of which are retained at the collecting parks, may be used for a variety of purposes benefiting visitors, including facility maintenance and repair, interpretation and visitor services, law enforcement, and others. NPS estimates entrance and recreation fee collections of $256.9 million for FY2017 and $259.5 million for FY2018. NPS collects concessions franchise fees from park concessioners who provide services such as lodging and dining at park units. The fees, collected under the National Park Service Concessions Management Improvement Act of 1998 (54 U.S.C. §§101911 et seq.), are available for use without further appropriation and are mainly retained at the collecting parks. They may be used to reduce DM, among other purposes, with priority given to concessions-related DM. NPS estimates concessions franchise fee collections of $127.8 million for FY2017 and $131.3 million for FY2018. The National Park Service Centennial Act ( P.L. 114-289 ) established the NPS Centennial Challenge Fund . In addition to discretionary appropriations (discussed above), the fund is authorized to receive, as offsetting collections, certain amounts from the sales of entrance passes to seniors. NPS estimates that the senior pass sales will provide an additional $15.0 million for the account for FY2018 on top of discretionary appropriations. The funding may be used for a variety of projects but must prioritize DM, improvements to visitor services facilities, and trail maintenance. Federal funds must be matched by nonfederal donations on at least a 50:50 basis. The Centennial Act also established the NPS Second Century Endowment and directed that it receive, as offsetting collections, revenues from senior pass sales totaling $10 million annually. The endowment also is authorized to receive gifts, devises, and bequests from donors. The funds may be used for projects approved by the Secretary of the Interior that further the purposes of NPS, including projects on the maintenance backlog. More broadly, other types of d onations to NPS may be used for projects that reduce DM, among a variety of other purposes. NPS estimated that, through all of these programs combined, the agency would receive donations of $75.0 million in FY2017 and $71.0 million in FY2018 (in addition to the revenues generated from the sales of the senior passes). Under the Helium Stewardship Act of 2013 ( P.L. 113-40 ), NPS will receive $20 million in FY2018 from proceeds from the sale of federal helium, to be used for DM projects requiring a minimum 50% match from a nonfederal funding source. Other NPS mandatory appropriations also have been partially used for DM. These include monies collected under the Park Building Lease and Maintenance Fund, transportation fees collected under the Transportation Systems Fund, and rents and payroll deductions for the use and occupancy of government quarters, among others. NPS estimated varying amounts for these mandatory appropriations for FY2017 and FY2018. Some Members of Congress and other stakeholders have proposed sources of additional funding to address NPS's DM needs. Legislative proposals in the 115 th Congress are discussed in the " Role of Congress " section, below. Among other sources, stakeholders have proposed to increase NPS DM funding with resources from the Land and Water Conservation Fund, offshore oil and gas revenues that currently go to the General Treasury, income tax overpayments and contributions, motorfuel taxes, and coin and postage stamp sales. By contrast, others have suggested that NPS DM could be reduced without additional funding—for example, by improving the agency's capital investment strategies, increasing the role of nonfederal partners in park management, or disposing of assets. NPS uses computerized maintenance management systems to prioritize its DM projects. Agency staff at each park perform condition assessments that document the condition of park assets according to specified maintenance standards. The information is collected in a software system through which the agency assigns to each asset a facility condition index (FCI) rating—a ratio representing the cost of DM for the asset divided by the asset's replacement value. (A lower FCI rating indicates a better condition.) The agency also assigns an asset priority index (API) rating that assesses the importance of the asset in relation to the park mission. Projects are prioritized based on their FCI and API ratings, as well as on other criteria related to financial sustainability, resource protection, visitor use, and health and safety. The agency's scoring system aligns with criteria identified in its Capital Investment Strategy. In addition to the funding challenges discussed earlier, NPS faces other issues in managing the maintenance backlog. In December 2016, GAO reported on NPS management of maintenance activities, and identified both successes and challenges. In terms of challenges, GAO reported that competing duties often make it difficult for park staff to perform facility condition assessments in a timely manner, that the remote location of some assets contributes to this difficulty, that the agency's focus on high-priority assets likely may lead to continued deterioration of lower-priority assets, and that NPS lacks a process for verifying that its Capital Investment Strategy is producing the intended outcomes. GAO also reported on successes in NPS asset management—for example, that the agency's assessment tools are consistent with federally prescribed standards and that it is working with partners and volunteers to address maintenance needs. An additional challenge, identified in NPS budget documents, relates to the disposal of unneeded assets to reduce the agency's maintenance burden. Part of NPS's asset management includes identifying assets that may be candidates for disposal. For example, some assets may have high FCI ratings, indicating expensive maintenance needs, along with low API ratings, indicating that they are not of high importance to the NPS mission. NPS may favor destroying or disposing of such assets, but the agency has stated that the cost of removing the assets often precludes the use of this option. GAO also identified that legal requirements—such as the requirement in the McKinney-Vento Homeless Assistance Act ( P.L. 100-77 , as amended) that federal buildings slated for disposal must be assessed for their potential to provide homeless assistance before being disposed of by other means—create additional obstacles for NPS disposal of unneeded properties. Congress has addressed NPS's maintenance backlog through oversight, funding, and legislation. For example, in the 115 th Congress, both the House and the Senate have held oversight hearings to investigate options for addressing NPS DM. Annual appropriations for NPS are discussed in CRS Report R42757, National Park Service: FY2017 Appropriations and Ten-Year Trends . Several recent laws and proposals outside of annual appropriations, including the National Parks Centennial Act of 2016 and bills introduced in the 115 th Congress, are discussed under the following questions. The National Parks Centennial Act ( P.L. 114-289 ), enacted in December 2016, contained a variety of provisions aimed at addressing the NPS maintenance backlog as well as meeting other park goals. The law created two funds that may be used to reduce DM—the National Park Centennial Challenge Fund and the Second Century Endowment for the National Park Service. Both funds receive federal monies from the sale of senior recreation passes, as well as donations. DM projects are a prioritized use of the Centennial Challenge Fund and are among the potential uses of endowment funds. The law also made changes to extend eligibility for the Public Land Corps and increase the authorization of appropriations for the Volunteers in the Parks program. Participants in these programs perform a variety of duties that help address DM, among other activities. In addition, the law authorized appropriations of $5.0 million annually for FY2017-FY2023 for the National Park Foundation to match nonfederal contributions. Contributions to the foundation are used for a variety of NPS projects and programs, including projects on the maintenance backlog. Bills in the 115 th Congress related to NPS deferred maintenance include the following. H.R. 1577 , the National Park Service Transparency and Accountability Act, would require the Secretary of the Interior to submit to Congress a report evaluating the NPS's Capital Investment Strategy and its results, including a determination of whether the strategy is achieving its intended outcomes and any recommendations for changes. H.R. 2584 / S. 751 , the National Park Service Legacy Act of 2017, would establish a National Park Service Legacy Restoration Fund with funding from mineral revenues. Annual amounts deposited into the fund would begin at $50.0 million for FY2018-FY2020 and would rise gradually to $500.0 million for FY2027-FY2047. The funds would be available to NPS for expenditure without further appropriation. They would be used for "high-priority deferred maintenance needs of the Service," with 20% of the funding going to transportation-related maintenance and the remaining 80% going to repair and rehabilitation of non-transportation-related assets. Projects with a nonfederal cost share would receive special treatment in priority rankings. The funding could not be used for land acquisition, and it could not supplant discretionary funding for NPS facility operations and maintenance. H.R. 2863 , the Land and National Park Deferred Maintenance (LAND) Act, would establish a National Park Service Maintenance and Revitalization Conservation Fund. The fund would receive $450.0 million each year from mineral revenues, of which $375.0 million would go to NPS, with $25.0 million going to each of three other agencies: FWS, BLM, and FS. The monies would be available for expenditure without further appropriation and would be used for "high priority deferred maintenance needs that support critical infrastructure and visitor services." Funds could not be used for land acquisition. S. 1460 , Section 5101, would establish a National Park Service Maintenance and Revitalization Conservation Fund as part of a broader energy-modernization bill. Although the fund would have the same name as in H.R. 2863 , the Senate version would provide for deposits to the fund of $150.0 million per year from offshore revenues collected under the Outer Continental Shelf Lands Act (43 U.S.C. 1338 et seq.). The funds would be available for expenditure only when appropriated by Congress. The monies would be used for "high-priority deferred maintenance needs of the Service that support critical infrastructure and visitor services" and could not be used for land acquisition.

This report addresses frequently asked questions about the National Park Service's (NPS's) backlog of deferred maintenance—maintenance that was not performed as scheduled or as needed and was put off to a future time. NPS's deferred maintenance, also known as the maintenance backlog, was estimated for FY2016 at $11.332 billion. More than half of the NPS backlog is in transportation-related assets. Other federal land management agencies also have maintenance backlogs, but NPS's is the largest and has drawn the most congressional attention. During the past decade (FY2007-FY2016), NPS's maintenance backlog grew steadily before decreasing in FY2016. Overall, the deferred maintenance estimate grew by an estimated $1.718 billion in nominal dollars and $0.021 billion in inflation-adjusted dollars over the decade. Many factors might contribute to growth or reduction in deferred maintenance, including the aging of NPS assets, the availability of funding for NPS maintenance activities, acquisitions of new assets, agency management of the backlog, completion of individual projects, changes in construction and related costs, and changes in measurement and reporting methodologies. The backlog is distributed unevenly among states and territories, with California, the District of Columbia, and New York having the largest amounts of deferred maintenance. The amounts also vary among individual park units. Sources of funding to address NPS deferred maintenance include discretionary appropriations, allocations from the Department of Transportation, park entrance and concessions fees, donations, and others. It is not possible to determine the total amount of funding from these sources that NPS has allocated each year to address deferred maintenance, because NPS does not aggregate these amounts in its budget reporting. NPS prioritizes its deferred maintenance projects based on the condition of assets and their importance to the parks' mission, as well as other criteria related to financial sustainability, resource protection, visitor use, and health and safety. NPS has taken a number of steps over the decade to improve its asset management systems and strategies. Some observers, including the Government Accountability Office (GAO), have recommended further improvements. Some Members of Congress and other stakeholders have proposed new sources of funding to address NPS's deferred maintenance needs. Bills in the 115th Congress to increase NPS funding for deferred maintenance—including H.R. 2584, H.R. 2863, S. 751, and S. 1460—would draw from mineral revenues currently going to the Treasury. Other proposed funding sources have included monies from the Land and Water Conservation Fund, income tax overpayments and contributions, new motorfuel taxes, and coin and postage stamp sales. Other stakeholders have suggested that NPS deferred maintenance could be reduced without additional funding—for example, by improving the agency's capital investment strategies or increasing the role of nonfederal partners in park management. H.R. 1577 would require the Secretary of the Interior to evaluate NPS's Capital Investment Strategy and report on any recommended changes.

The Trans-Pacific Partnership (TPP) is a potential free trade agreement (FTA) among 12, and perhaps more, countries ( Figure 1 ). The United States and 11 other countries of the Asia-Pacific region—Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam—are negotiating the text of the FTA. With over 20 chapters under negotiation, the TPP partners envision the agreement to be "comprehensive and high-standard," in that they seek to eliminate tariffs and nontariff barriers to trade in goods, services, and agriculture, and to establish or expand rules on a wide range of issues including intellectual property rights, foreign direct investment, and other trade-related issues. They also strive to create a "21 st -century agreement" that addresses new and cross-cutting issues presented by an increasingly globalized economy. The TPP draws congressional interest on a number of fronts. Congress would have to approve implementing legislation for U.S. commitments under the agreement to enter into force. In addition, under long-established executive-legislative practice, the Administration notifies and consults with congressional leaders, before, during, and after trade agreements have been negotiated. Furthermore, the TPP will likely affect a range of sectors and regions of the U.S. economy of direct interest to Members of Congress and could influence the shape and path of U.S. trade policy for the foreseeable future. This report examines the issues related to the proposed TPP, the state and substance of the negotiations (to the degree that the information is publically available), the specific areas under negotiation, the policy and economic contexts in which the TPP would fit, and the issues for Congress that the TPP presents. The report will be revised and updated as events warrant. The Trans-Pacific Strategic Economic Partnership, as it was originally known, was conceived in 2003 by Singapore, New Zealand, and Chile as a path to trade liberalization in the Asia-Pacific region. Brunei joined negotiations in 2005, and the Trans-Pacific Strategic Economic Partnership (P-4) agreement was concluded in 2006. In March 2008, the United States joined the negotiations to conclude the still outstanding investment and financial services provisions. President Bush notified Congress of his intention to negotiate with the existing P-4 members on September 22, 2008, and with other countries, Australia, Peru, and Vietnam, on December 30, 2008. After a period of reflection on U.S. trade policy, the Obama Administration decided to continue with the TPP negotiations. On November 14, 2009, President Obama committed the United States to engage with the TPP countries "with the goal of shaping a regional agreement that will have broad-based membership and the high standards worthy of a 21 st -century trade agreement." President Obama formally notified Congress of his Administration's intention to enter into negotiations with the TPP countries on December 14, 2009. That notification set off a 90-day timeline under the now-expired 2002 trade promotion authority (TPA) legislation, for congressional consultations prior to the beginning of negotiations. In October 2010, TPP participants agreed by consensus to the inclusion of Malaysia as a negotiating partner. The negotiating partners announced a framework for the agreement at the sidelines of the Asia-Pacific Economic Cooperation (APEC) Ministerial in Honolulu, HI, November 8-13, 2011. Thereafter, Canada, Japan, and Mexico started to consult with the existing TPP partners on joining the negotiations. After several months of intense bilateral consultations with each of the current TPP countries, those countries agreed by consensus to the inclusion of Mexico and Canada and they began participating as negotiating partners in December 2012. Japan continued to debate internally the question of joining the negotiations, with Prime Minister Abe announcing Japan's official interest in March 2013. After concluding bilateral consultations, Japan began to fully participate in the TPP negotiations in July 2013. In early 2014, South Korea began consultations with the TPP negotiating partners over the possibility of joining, but at the time of this writing has yet to make a formal request to join the negotiations. It remains unclear whether the current 12 partners would permit another country's participation before concluding the initial agreement, although the United States seems to favor waiting until the current negotiations are completed. There is as yet no formal limit to the potential membership of the TPP, aside from excluding those countries unwilling to commit to the ambition of the proposed FTA. All current members of the TPP negotiations are also members of APEC, and the TPP countries have stated that membership expansion will likely focus on other APEC members first, such as South Korea, though non-APEC countries with a focus on trade liberalization, such as Colombia and Costa Rica, have also expressed an interest in joining TPP. The TPP negotiations remain ongoing through informal rounds, as well meetings among the chief negotiators and trade ministers. Both TPP leaders and ministers met on the sidelines of the November 2014 APEC meetings, but no major breakthrough was announced. A TPP Leaders statement following the meetings largely reiterated previous announcements, highlighting continued progress, and stating that "with the end coming into focus, we have instructed our ministers and negotiators to make concluding this agreement a top priority." The most recent negotiating session occurred in Hawaii during March 9-13, 2015. Prior to this round, an Australian negotiator claimed that 9 chapters had been completed: competitiveness and business facilitation, cooperation and capacity building, cross-border trade in services, customs, development, regulatory coherence, small and medium enterprises, telecommunications and temporary entry. Congressional consideration of Trade Promotion Authority (see text box below) could have significant implications for the conclusion of the TPP negotiations. Although the outstanding issues may be relatively limited, these issues are also likely the most challenging. The scope of tariff and agricultural quota removal or market access on sensitive products, particularly agricultural goods, as well as provisions over nontariff issues such as intellectual property rights, the environment, state-owned enterprises, and investment are reportedly among the most contentious unresolved issues. The United States' bilateral market access negotiations with Japan have been challenging as Japan seeks to maintain import protections for several categories of sensitive agriculture products and the United States seeks to address concerns over nontariff barriers in the Japanese auto market. As the two largest TPP economies, these bilateral talks have significant implications for the broader 12-country TPP negotiations and the timing of their conclusion. If completed as intended, the proposed TPP agreement would strengthen and deepen trade and investment ties among its participants. However, it may also have implications in larger, strategic contexts beyond the immediate participants: for U.S. trade policy in general; for the emerging trade architecture in the Asia-Pacific; for the multilateral trade regime within the WTO; and for U.S strategic interests in the Asia-Pacific region. The Obama Administration has argued that the strategic value of a potential TPP agreement parallels its economic value: TPP is as important strategically as it is economically. Economically, TPP would bind together a group that represents 40 percent of global GDP and about a third of world trade. Strategically, TPP is the avenue through which the United States, working with nearly a dozen other countries (and another half dozen waiting in the wings), is playing a leading role in writing the [trade] rules of the road for a critical region in flux. President Obama reiterated the strategic significance of the TPP negotiations during his State of the Union address to the 114 th Congress, arguing that the United States would benefit from developing the region's trade rules as opposed to other regional actors, namely China. The centerpiece of our economic rebalancing is the Trans-Pacific Partnership (TPP)-a high-standard agreement the United States is crafting with Asia-Pacific economies from Chile and Peru to New Zealand and Singapore.[ ... ] We always envisioned the TPP as a growing platform for regional economic integration. –Thomas Donilon, U.S. National Security Adviser, March 11, 2013 . The TPP has potential implications beyond U.S. economic interests in the Asia-Pacific. The region is increasingly seen as being of vital strategic importance to the United States. Throughout the post-World War II period, the region has served as an anchor of U.S. strategic relationships, first in the containment of communism and more recently as a counterweight to the rise of China. This trend has recently been accentuated by the Obama Administration's "pivot to Asia," along with the perception that the center of gravity of U.S. foreign, economic, and military policy is shifting to the Asia-Pacific region. The TPP is viewed as an important element in the U.S. "rebalancing" toward Asia. U.S. participation in TPP negotiations serves several strategic goals in U.S. trade policy. First, it continues and expands a U.S. trade policy strategy that began with the North American Free Trade Agreement (NAFTA), which entered into force in 1994, of using FTAs to promote trade liberalization and potentially to spark multilateral negotiations in the World Trade Organization (WTO). The George W. Bush Administration expanded the use of this strategy under the rubric of "competitive liberalization," negotiating 11 FTAs with 16 countries. The last three of these FTAs—with Colombia, Panama, and South Korea—were approved by Congress in 2011. However, the future direction of this policy was uncertain, given the low commercial value of some of these agreements and lack of new obvious partner countries. Meanwhile, an increasing web of bilateral and regional FTAs, were being concluded among other parties in the Asia-Pacific region and worldwide. The Bush Administration's and, then, the Obama Administration's support for negotiating a TPP agreement signaled that the United States remains engaged in regional free trade negotiations. The TPP arguably provides the United States with the opportunity to project its trade interests by negotiating a "comprehensive and high standard" FTA with provisions that build on those in FTAs the United States concluded throughout the 2000s, especially the most recent FTAs, such as the U.S.-Korea FTA (KORUS). The TPP partner countries share a reliance on world trade and have been some of the greatest advocates for trade liberalization. While they differ in economic levels of development, they have committed themselves to negotiating a comprehensive FTA. That, by itself is not new; the United States has often conducted asymmetrical negotiations with countries of differing levels of development in which it has dominated. This time, however, with more players at varied levels of development, and with an economic heavyweight like Japan participating, concluding the negotiations may require greater compromise by all participants. Practically speaking, the TPP approach could eclipse the alternative model of narrower goods-based FTAs that are offered by China, or other countries, or somewhat more comprehensive agreements used by the European Union and Japan that, nonetheless, exclude sensitive agriculture products. Adoption of these other models, even if open to U.S. participation, could be seen as disadvantageous to U.S. farmers, businesses and workers because they exclude provisions important to U.S. commercial trade—agriculture, disciplines on services, investment, and intellectual property rights, as well as enforceable provisions on labor and environment. In addition, the TPP aims to establish disciplines on new trade issues, such as state-owned enterprises or supply chain facilitation that could serve as a model for future negotiations bilaterally, regionally, or in the WTO. Though structured as a regional FTA, the TPP may have an impact on the multilateral process of the WTO and the Doha Development Agenda (Doha Round) of multilateral trade negotiations. While the WTO ministers continue to discuss a Doha Round agenda that critics contend is increasingly irrelevant to the present trading system, the TPP represents a way for the United States and its partners to advance discussions of a "21 st -century trade agenda." The influence of the TPP impact could be great due to its potential expansion and, hence, the fact that it could eventually affect a substantial amount of world trade—over 60% of U.S. trade alone is with other APEC members. The debate over whether FTAs have a positive or negative effect on the multilateral system continues. Proponents of bilateral and regional agreements would argue that successful negotiation and implementation of proposed new trade rules in the TPP, on such emerging issues as state-owned enterprises and regulatory coherence, could serve as a template for future WTO negotiations; a successful TPP agreement among the current negotiating partners could cause other regional economies to consider joining (as seen with the addition of Canada, Japan, and Mexico) in order to ensure they remain competitive in TPP markets, thus furthering the WTO goal of greater global trade liberalization; and TPP could help promote and ensure the longevity of domestic economic policy reforms, particularly for countries such as Vietnam. Opponents, however, would counter that efforts toward the TPP and other regional/bilateral FTAs may divert attention and resources from multilateral WTO efforts; increased trade among TPP members due to the preferential tariff structures of the agreement could simply be diverted from other regions rather than be newly- created; and the spread of FTAs may actually make international commerce more difficult as companies must navigate varying rules and standards associated with different agreements. This last issue of overlapping trade rules may be particularly relevant for the potential TPP agreement as it will encompass countries with numerous existing FTAs. The proposed TPP agreement could add another layer of complexity or it could simplify the existing trade rules in the region by unifying them under one agreement. For example, according to the USTR, the TPP countries have committed to establishing a common set of rules of origin for determining whether a product originates inside the TPP. How these and other trade rules inside the potential TPP agreement relate to those in existing FTAs will be of interest moving forward. The current 12 TPP countries already form part of a growing network of Asia-Pacific FTAs ( Figure 2 ). The United States has FTAs in place with six of the TPP countries: Australia, Canada, Chile, Mexico, Peru, and Singapore. In addition, the proposed TPP seeks to build on the existing Trans-Pacific Strategic Economic Partnership (P-4), a free trade area among Brunei, Chile, New Zealand, and Singapore. The current TPP partners also include 4 of the 10 members of the Association of Southeast Asian Nations (ASEAN): Brunei, Malaysia, Singapore, and Vietnam. ASEAN countries have negotiated a free trade area amongst each other as well as several external FTAs. All 12 TPP partners are also members of the 21-member Asia-Pacific Economic Cooperation (APEC) forum, which does not negotiate FTAs among its membership, but serves as a forum for dialogue on and establishes nonbinding commitments toward the goals of open and free trade and investment within the region. To some, the United States and its TPP partners are jump-starting the consensus-based approach of APEC. In the context of this forum for dialogue and nonbinding commitments, APEC Leaders in 2010 agreed to push forward the creation of a Free Trade Area of the Asia-Pacific (FTAAP), and it continues to be a broad vision for the group. They acknowledged the TPP as potentially one of a number of "ongoing regional undertakings" on which to build to eventually achieve an FTAAP. Other ongoing regional undertakings include potential trade agreements between ASEAN and other Asian countries. The Regional Comprehensive Economic Partnership (RCEP), for example, would join ASEAN and its six FTA partners—Australia, China, India, Japan, New Zealand, and South Korea—in one collective FTA. It is unclear how these two regional undertakings, RCEP and TPP, may impact one another and how they will affect the potential for an FTAAP. The RCEP may not aim for the same level of ambition in terms of tariff reduction and trade liberalization as the TPP. By allowing sensitive items or rules to be left out of the negotiations, this platform could be more appealing to countries less inclined to the declared, if thus far unrealized, high-standard ambitions of the TPP. Yet, several countries, including Australia, Brunei, Japan, Malaysia, New Zealand, Singapore, and Vietnam, are moving forward as negotiating partners in both the TPP and RCEP and view these negotiations as complementary. The TPP partners, including the United States, have also expressed an interest in expanding the TPP to additional countries across the Asia-Pacific region. They maintain that new members are welcome so long as they strive for the same level of trade liberalization as the current negotiating partners. Many policy observers note the absence of China, the region and world's second-largest economy, from the ongoing negotiations. At a November 20, 2013, speech, National Security Advisor to the President Susan Rice reiterated U.S. policy that, "we welcome any nation that is willing to live up to the high standards of this agreement to join and share in the benefits of the TPP, and that includes China." The degree to which a potential TPP agreement and its participants are prepared to include China, as well as China's willingness or interest in participating in a comprehensive agreement, will help determine if the TPP truly has the potential to become an FTAAP. With the agreement's focus on expansion throughout the region, the current negotiating partners may wish to establish disciplines now on certain aspects of the Chinese and other Asia-Pacific economies. This may, in part, explain the push for potential new disciplines on state-owned enterprises inside the TPP. The overall economic impact of the potential TPP agreement will likely depend on a number of factors, including the extent of the trade liberalization achieved in the agreement, as well as the current level and potential growth of trade and investment among TPP members. On both measures, the TPP appears significant given that the TPP would be the largest U.S. FTA by trade flows ($727 billion in U.S. goods exports and $882 billion in imports in 2014), and the TPP negotiators have expressed their intent to achieve a "comprehensive and high-standard" FTA that will broadly liberalize regional trade and investment. From the U.S. perspective, a significant share of this liberalization has already occurred from existing U.S. FTAs with 6 of the 11 TPP partners, although potential disciplines in areas not covered in previous FTAs may be significant for some sectors ( Figure 3 ). Japan's entry into the negotiations greatly increased the potential economic significance of the agreement. Among the U.S. negotiating partners in the TPP, Japan is the largest economy and largest trading partner without an existing U.S. FTA (and hence, with greater scope for trade liberalization with the United States). In 2014, Japan was the United States' fourth largest goods export ($67 billion) and import ($134 billion) market. As high income countries, U.S.-Japan trade differs considerably from U.S. trade with the other negotiating partners, many of them lower to middle income nations, without U.S. FTAs. Hence, Japan's participation in the agreement has drawn the interest of a wide range of U.S. industries, including sectors like agriculture, automotive, and services. Malaysia and Vietnam also stand out among the TPP countries without existing U.S. FTAs, both in terms of their current trade and investment with the United States and their potential for future growth. Together these countries have a population of over 120 million and their economies have experienced rapid growth in recent years. Moreover, Malaysia's and Vietnam's average applied most-favored nation tariffs—the average tariff on imports—are 6% and 9.5%, respectively, two of the highest levels among TPP members. Both nations also have substantial state sectors which may be affected by TPP outcomes. U.S. trade with TPP countries was more than $1.6 trillion in merchandise in 2014 and more than $273 billion in services in 2013, the most recent periods for which data are available ( Table 1 and Table 2 ). U.S. foreign direct investment (FDI) into TPP countries totaled nearly $86 billion in 2013, while TPP countries invested more than $69 billion in the United States ( Table 3 ). Even before Canada and Mexico became negotiating partners in the TPP, the agreement had the potential to become the second-largest U.S. FTA by trade flows. Now with the NAFTA countries and Japan participating, the TPP has the potential to become the largest U.S. FTA. The current group of 12 countries is diverse in population, geographic location, and economic development, and U.S. trade relations with the countries reflect this diversity. The major U.S. merchandise exports are fairly similar to most TPP countries and include motor vehicles and parts; petroleum and coal products; computer equipment, semiconductors, and electronic components; agriculture and construction machinery; and aircraft. However, the top U.S. merchandise imports vary greatly by country. Agriculture and natural resources products are key U.S. imports from Australia, Chile, New Zealand, and Peru, while apparel products are the main U.S. imports from Vietnam. Canada and Mexico are both major suppliers of crude oil to the United States, but they also supply manufactured products like motor vehicles and motor vehicle parts. U.S. imports from Malaysia and Singapore consist primarily of manufactured products such as computers, semiconductors, and electronic components. Motor vehicles and motor vehicle parts make up nearly 35% of U.S. goods imports from Japan. In terms of value, Canada and Mexico are by far the largest U.S. trading partners among TPP countries in goods, and both are significant U.S. services trade and investment partners. Both countries share a large border with the United States and are among the oldest U.S. FTA partners. Japan is the third-largest U.S.-TPP goods trade partner, and second-largest services trade and investment partner. Considering the other eight TPP partners, Singapore and Australia are the top U.S. goods export markets and top overall services trade and investment partners with the United States, while Malaysia, Vietnam, and Singapore are the top sources of U.S. goods imports. Market access for goods, services, and agriculture often forms the crux of FTA negotiations. However, nontariff barriers such as technical barriers to trade and sanitary and phytosanitary standards, while considered rules, also have an impact on market access. Negotiations on these latter issues are designed to ensure that, as tariff barriers are reduced, they are not replaced by other forms of protection. A fundamental element of most FTAs is commitments among FTA partners to eliminate most, if not all, tariffs and quotas on their trade in goods. Current average most-favored nation (MFN) tariff levels for TPP countries vary from 0% to nearly 10% ( Figure 6 ). The TPP will include tariff phase-out schedules that cover more than 11,000 commodity categories for each of the partner countries. At their November 2011 meeting in Honolulu, the TPP trade ministers stated that they are aiming for duty-free access for trade in goods. The tariff schedules likely will provide for phase-out of tariffs, with tariffs on many products phased-out immediately when the agreement enters into force, and tariffs on more sensitive products phased out over longer and varying periods of time. All of the current TPP countries are in the process of some tariff elimination as each has an FTA with one or more of the other TPP partners. As mentioned above, the United States has free trade agreements with Australia, Canada, Chile, Mexico, Peru, and Singapore, and the original P-4 countries have already negotiated FTA provisions among themselves. The TPP may build on these previous commitments and harmonize tariff elimination for all members. TPP partners are also discussing provisions that deal with export and import licensing procedures, customs issues, and trade facilitation. Differences are likely to arise between the developed countries and some of the developing countries, including Vietnam, over elimination of tariffs on labor-intensive products, such as textiles and apparel and footwear. The United States, for example, has included in its FTAs long tariff phase-out periods, special safeguards, and restrictive rules of origin (see below) to protect U.S. domestic producers from the adverse effects of import-sensitive products. For example, certain U.S. footwear manufacturers have argued for maintaining high tariffs on imported footwear, while some U.S. producers and retailers and Vietnam are pressing for lower tariffs to gain greater access to the U.S. market. Developing countries have argued that they need preferential access to the large markets in order to compete with producers from other countries, such as China. A high priority for the United States in its negotiations of bilateral and regional free trade agreements has been increased market access for services providers, especially financial services, including insurance and banking; professional services, including legal services and private educational services; telecommunication services; express delivery; e-commerce and data flows (see e-commerce section below). In doing so, the United States has sought to expand on modest commitments that trade partners have made in the World Trade Organization (WTO) under the General Agreement on Trade in Services (GATS), especially in light of the perceived failure of WTO partners to expand on those commitments in the now dormant Doha Round. U.S. FTAs with TPP partners Australia, Canada, Chile, Mexico, Peru, and Singapore already cover trade in services. Although these countries cover more than half of U.S.-TPP services trade, Japan is also a major U.S.-services trade partner, so its entry has increased the significance of these provisions. Moreover, innovations regarding trade in services is a key part of the Obama Administration's vision of the TPP as a "21 st -century model" for trade agreements, and the United States seeks TPP services provisions to be as broad as possible to cover trade with future entrants. Restrictions in services trade, like nontariff barriers on goods trade, can take many different forms, making them difficult to quantify and compare across countries. The OECD has created indices that can provide some measure of services trade restrictiveness. These indices, available for OECD countries across 18 different services sectors, suggest that there is considerable variation in services trade restrictiveness among TPP OECD countries (Australia, Canada, Chile, Japan, Mexico, New Zealand, and the United States) and hence opportunity for liberalization through TPP negotiation efforts. For example, in telecommunications, the index, which takes a value from 0 to 1 with a higher number indicating greater restrictiveness, ranging from 0.12 for the United States to 0.30 for Japan and 0.34 for Mexico. Such restrictions are likely even greater among some of the least developed TPP countries not included in the OECD database. Similar work by researchers at the World Bank, which covers more countries at less detail, supports this hypothesis. Their index for overall services trade restrictiveness, which takes a value from 0 to 100, ranges from 11 for New Zealand to 41.5 for Vietnam and 46.1 for Malaysia, although Peru (16.4) scores even lower than the United States (17.7). According to the agreed outline, the TPP will cover services trade in several separate chapters, with some overlap. The section on cross-border trade in services—in which the buyer and seller are located in different territories—will employ the "negative list approach" (as did the P-4 agreement), that is, the provisions are to apply to all types of services unless specifically excluded by a partner country in an annex to the agreement. This approach is generally considered to be more comprehensive than the "positive list approach" used in the WTO General Agreement on Trade in Services (GATS) that requires each covered service to be identified. The negative approach also implies that any new type of service that is developed after the agreement enters into force is automatically covered unless it is specifically excluded. Most trade agreements on cross-border services trade, including U.S. FTAs and the original P-4 agreement, contain basic provisions on services that will likely be part of the TPP: nondiscriminatory treatment of services from partner-country providers, including national treatment and most-favored-nation treatment; market access—no limitations on the number of service suppliers, the total value or volume of services provided, the number of persons employed, or the types of legal entities or joint ventures that a foreign service supplier may employ; prohibition on requirements that a partner-based service provider maintain a commercial presence in the country of the buyer; mutual recognition of professional qualifications for certification of service providers; transparency in the development and application of government regulations; and allowance for payments and transfers of capital flows in the provision of services. In recent FTAs, including KORUS FTA, the United States has made market access of express delivery services a priority, which could also be the case in its negotiations on the TPP. Of particular concern are cases where a government-owned and operated postal system provides express delivery services competing with private sector providers. The KORUS FTA (Annex-12-B) stipulates that the postal system cannot use its monopoly power in providing postal services to give an express delivery subsidiary an unfair advantage. Nor should it divert revenues from its postal services to subsidize its express delivery services to the disadvantage of other providers. In addition, other chapters in the proposed agreement would affect trade in services because of the nature of services and their modes of delivery. Most services require the provider and buyer to be co-located, and the largest volume of services trade occurs when the provider has a commercial presence in the form of a direct investment in the country of the buyer and sells the service to the buyer. Therefore, provisions of the TPP that may pertain to foreign investments (discussed elsewhere) relate to trade in services. In addition, many service providers, such as sellers of entertainment programming, are intellectual property owners and argue for strong IP rights protection, the subject of another chapter in the proposed TPP (and discussed elsewhere). Often, businesses rely on cross-border transmission of data and the ability to transfer that data with a minimum of restrictions is also being considered elsewhere in the agreement. Furthermore, most of the barriers to trade in services are in the form of domestic regulations; therefore, the cross-cutting objective for regulatory coherence could affect trade in services. According to the November 2011 outline, as in previous U.S. FTAs, the TPP will have a separate chapter on telecommunications trade. The TPP is to promote access to telecommunications networks for foreign services suppliers and transparency of regulations pertaining to telecommunications services. Along with these objectives, the United States sought and obtained in the KORUS FTA commitments to allow U.S. investment in foreign telecommunications companies. Negotiations over the services provisions may lead to controversy between the developed countries, including the United States, Australia, Canada, Japan, New Zealand, and Singapore, and developing countries. Developed countries have pushed for greater market access for services. Developing countries have been more cautious on liberalization in services trade as they fear competition in sectors they view as a source of domestic employment and worry about the political implications of forcing open sectors that are often controlled by politically powerful interests. Also, the United States may be challenged to open its market to providers of maritime services. The United States has also been pressed to liberalize access to its market through the so-called GATS mode-4 delivery—temporary entry of business personnel to provide services. No U.S. FTA negotiated after the agreements with Chile and Singapore agreements includes provisions on the temporary movement of personnel. The draft TPP outline indicates that financial services, including insurance and insurance-related services, banking and related services, as well as auxiliary services of a financial nature, will be addressed in a separate chapter as in previous FTAs. The original P-4 agreement did not include financial services provisions when it came into force in 2006. However, the P-4 partners committed to concluding a financial services (and investment) chapter within two years—a commitment that was overtaken by the launch of the TPP. The financial services chapter would adapt relevant provisions from the foreign investment chapter and the cross-border trade in services chapter. The KORUS FTA was the most recent U.S. FTA in which the United States negotiated provisions on financial services and which presumably will serve as a model for U.S. negotiations of the TPP in this area. The KORUS FTA distinguishes between financial services traded across borders and those sold by a provider with a commercial presence in the home country of the buyer. In the case of providers with a foreign commercial presence, the KORUS FTA applies the negative list approach; in the case of cross-border trade, the KORUS FTA limits coverage to specific banking and insurance services. The KORUS FTA and other U.S. FTAs provide that nothing in the FTA would prevent a party to the agreement from imposing prudential measures to ensure the integrity and stability of the financial system. The KORUS FTA also addresses insurance sold by Korea Post, in particular that Korea Post is not regulated as other financial institutions. U.S. providers have argued that government-owned and operated insurance providers are not regulated as stringently and therefore, have a competitive advantage over their privately owned counterparts. The KORUS FTA stipulates Korea Post insurance operations would be subject to tighter regulation. Another issue of U.S. concern regarding financial services was assurances that a U.S. financial service provider located in South Korea would be able to transfer information electronically or by other means from the host country where it is required in the ordinary course of business. Such information could include accounting information and human resources information that a company would want to transfer and process to a central location rather than having to process and keep at individual locations. Host governments are cautious that such transfers of information might violate domestic privacy laws and considerations. The United States is a member of the plurilateral WTO Government Procurement Agreement (GPA) and has sought the inclusion of government procurement provisions in its FTAs. Among TPP partner countries, only Japan, Singapore, and New Zealand are members of the GPA, with New Zealand becoming a member in late 2014. In previous FTA negotiations with Malaysia, the United States had sought concessions on government procurement, a sensitive area for Malaysia which since 1969 has maintained preferences designed to assist the ethnic Malay population. All U.S. FTAs—including those with TPP partners Australia, Peru, Chile, Singapore, and NAFTA—include chapters on government procurement. Nearly identical to U.S. obligations in the GPA, although with different schedules of commitments for various government agencies, the FTA obligations provide opportunities for firms of each nation to bid on certain federal and state contracts over a set monetary threshold on a reciprocal basis. A similar chapter has been proposed by U.S. negotiators in the TPP talks. On July 30, 2014, 123 Members of Congress wrote to President Obama to urge the Administration not to negotiate government procurement provisions that would limit the application of Buy American provisions through extension of government procurement opportunities and obligations to TPP partner countries. Supporters of expanded procurement opportunities argue that the reciprocal nature of the government procurement provisions will allow U.S. firms access to major government procurement market opportunities overseas. This market potentially could be quite large. According to the WTO, government procurement accounts for 15%-20% of a country's GDP, and the size of the government procurement market among GPA members was $1.6 trillion in 2008. The United States has indicated that it is not seeking to cover state or local procurement in the TPP negotiations. This may be due to resistance among some U.S. states in providing access to their procurement markets. States must voluntarily opt in to government procurement commitments in FTAs, but the number of states doing so has dropped substantially from the 37 states that signed up to the GPA to 10 states that have acceded to commitments under the most recent U.S. bilateral FTAs with South Korea, Panama, and Colombia. However, Canada reportedly is seeking to address remaining U.S. Buy American exclusions concerning state and municipal projects funded by the federal government by proposing to obligate sub-federal entities to open procurement projects funded by a central government to competition from firms in TPP countries. Negotiating the terms of agricultural trade liberalization within the context of what trade negotiators have billed as a high-standard trade agreement for the 21 st century continues to be central to efforts to fashion an overall TPP agreement. Within this process, bilateral negotiations between the United States and Japan that seek to come to terms on market access for a handful of key agricultural commodities that Japan considers to be sensitive and in need of continued import protection has become an important objective for U.S. agricultural interests. While other agricultural issues remain on the table (discussed below), the market access issues with Japan appear to be a crucial stepping stone for substantially concluding the agricultural dimension of an agreement which, in turn, could help to clear the pathway for moving the broader TPP negotiations toward an end point. U.S. agriculture has both offensive and defensive interests in the TPP negotiations. Many in the U.S. agriculture and the agribusiness/food manufacturing sectors view positively the prospect of market openings in the three most commercially significant countries with which the United States does not yet have an FTA (i.e., Japan, Malaysia, and Vietnam). On the defensive side of the ledger, the U.S. sugar industry is opposed to providing additional access to the U.S. sugar market, while the U.S. dairy industry has offensive and defensive interest that extend beyond tariffs and market access. In negotiating expanded market access, the TPP countries have engaged in a process where offers are exchanged with each other and then responded to with requests to improve the offer. To date, USTR has engaged in a separate offer/request process with each of the five countries that the United States does not yet have a bilateral FTA—Brunei, Japan, Malaysia, New Zealand, and Vietnam. Whether this process has been undertaken with Canada is unclear. A major issue for U.S. agricultural interests is that Canada maintains support regimes for several significant commodity groups, including dairy, poultry and eggs. These regimes support domestic prices and discourage imports, with the result that access to these product markets has not been fully liberalized under the Canada-U.S. FTA. With respect to other countries with which the United States has an FTA, the U.S. position is that it will not engage in talks to reopen any existing market access provision. Japan—currently the fourth largest market for U.S. agricultural exports—is generally considered to be the most promising market within the TPP group for U.S. agriculture. In an analysis issued in October 2014, the U.S. Department of Agriculture (USDA) modeled a TPP agreement in which tariffs and tariff rate quotas on agricultural products were eliminated. The model projected that Japan would absorb 70% of the $8.5 billion increase in agricultural trade among TPP countries in 2025, with U.S. agricultural interests capturing one-third of the increase in farm exports within the TPP. It follows that for U.S. agriculture to realizing this potential market expansion depends greatly upon the extent to which Japan agrees to reduce the high tariffs and restrictive quotas that surround its most sensitive commodities. These measures protect Japanese producers of pork, beef, rice, wheat, barley, dairy products, and sugar by discouraging imports. The offers that Japan has tabled with respect to relaxing access to its market for these sensitive commodities have not been made public. During the last half of 2014 numerous Members of Congress and some commodity groups expressed concern about whether Japan's concession offers to cut tariff rates and remove other restrictions on imported products, were ambitious enough to gain congressional support for an agreement. For instance, on July 30, 2014, 140 House Members signed a letter to President Obama expressing "deep concern over Japan's current market access offer" in the TPP negotiations. The letter characterizes Japan's effort to exempt numerous tariff lines from complete elimination as "objectionable," adding that it "falls far short of acceptability." Similarly, in early September 2014 the National Pork Producers Council (NPPC), along with trade organizations representing hog producers in Australia, Chile, and Mexico issued an open letter to TPP negotiators which referenced Japanese restrictions on trade in pork and called for an agreement "in which full tariff elimination is achieved for virtually all products, including pork." The letter cites "Reports that Japan has made unacceptable tariff offers in each of the agricultural sectors it considers sensitive, including pork." More recently though, there have been unofficial indications that Japan has sweetened its access offers on its most sensitive commodities, though definitive details have not been made public. Japanese press reports have suggested the Japanese government has improved its market access offers to the United States on pork, beef, and rice, suggesting that a narrowing of differences over these sensitive items may be in the works. In late January 2015, the NPPC cited "significant progress" on Japan's market access offer on pork. In his testimony of March 18, 2015 before the House Committee on Agriculture, American Farm Bureau Federation President Bob Stallman stated "Indications are that there will be a reduction in Japan's beef tariffs, reform of their gateway price system for pork, additional TRQ for rice and reduction in tariffs on dairy products." In an indication that concern about expanding market access for U.S. agricultural products in a TPP agreement is not limited to Japan alone, signatories to the House letter of July 30, 2014 (see above) added that they are "troubled by Canada's lack of ambition, which is threatening a robust outcome for U.S. farmers." The reference appeared to be aimed at the import protections Canada maintains to shield its poultry, egg, and dairy industries from foreign products, which it believes could undermine the supply management regimes that support prices for these commodities. To underscore the point, the House letter urges the President to pursue TPP negotiations without Japan, Canada or any other country that fails to open its markets in line with the high standards envisaged for the TPP. The market access issue with Canada is one that would be expected to move to the forefront of negotiations once the agricultural market access negotiations between the United States and Japan have been settled. An agreement with Japan that provides for substantially improved access to Japanese markets for its sensitive commodities would likely create strong pressure to achieve a similar outcome with Canada. Under such circumstances Canada might, in turn, seek greater access to U.S. markets for selected commodities, such as sugar, sugar-containing products, peanuts, and dairy products among others. The number of agricultural market access issues that remain to be resolved and the length of time this may require are open questions. During House and Senate trade policy hearings in January 2015, Members in both Chambers noted that several issues remain unresolved in the TPP negotiations. In his January 2015 report, House Ways and Means Committee Ranking Member Levin, provided additional detail and identified numerous outstanding issues in the TPP negotiations, among which he cited the need to gain greater access for U.S. agricultural products to markets in Japan and Canada. Dairy and sugar are among the most significant of the sensitive U.S. agricultural commodities. Although U.S. agricultural groups generally have pressed for the complete elimination of all tariffs and other restrictions on market access for agricultural products imported by other TPP countries, not all food and commodity groups support this approach. At this point in the negotiations, the U.S. dairy industry, as represented by the National Milk Producers Federation (NMPF) and the U.S. Dairy Export Council (USDEC), are pressing for greater access to certain dairy product markets within the TPP, particularly Canada and Japan.In a joint letter to Members of Congress on March 2, 2015, the NMPF and USDEC emphasized the importance of striking a TPP agreement that expands access to these markets for the U.S. dairy industry, stating: "Our goal is an agreement that on balance offers net trade benefits to the U.S. industry. To get there, market access into the region's most protected dairy markets—Japan and Canada is imperative." The letter continues, "However, Japan needs to do more; in particular it needs to provide avenues for U.S. export growth in all areas." The two dairy organizations made a pointed reference to Canada, asserting, "Likewise, Canada has yet to put forward an offer on dairy. In order for TPP to be successful and truly comprehensive, it is imperative that Canada provide significant market opening for the full range of U.S. dairy products." In a subsequent letter of March 19, 2015 that was addressed to Agriculture Secretary Tom Vilsack and U.S. Trade Representative Michael Froman, along with their counterparts in Australia and New Zealand, the NMPF, USDEC, the International Dairy Foods Association, together with dairy industry organizations in Australia and New Zealand, struck a similar theme. In this letter, the dairy groups highlighted the importance of achieving increased market access in Japan and Canada, and asserted that more progress is needed on that front. Thus the letter states, "While negotiations with Japan have made progress, vital work remains." The letter adds, "In addition, Canada now needs a great deal more focus and we urge the immediate commencement of focused dairy market access negotiations with Canada. It is imperative that Canada provide commercially meaningful market openings for all dairy products if it is to remain a participant in the treaty." The U.S. sugar production sector, as represented by the American Sugar Alliance, has opposed opening the U.S. sugar market to any additional imports from the TPP region. But the Sweetener Users Association, representing candy makers and other sugar-consuming industries, have argued that any TPP agreement should provide for immediate, new access to the U.S. market for foreign sugar, while also establishing a glide path to trade liberalization for all sugar-producing TPP partners. They argue the increased competition would benefit both sugar-consuming businesses and consumers. To this end, it remains to be seen whether Australia, a major sugar producer, will use the TPP negotiations to press for access to the U.S. sugar market, perhaps in return for engaging in priority issues for the United States, such as e-commerce, investor-state dispute settlement, and state-owned enterprises. In the rules portion of the TPP, negotiators are seeking to better address disputes that can arise over differences on how to handle human health and animal/plant safety issues (i.e., sanitary and phytosanitary standards (SPS)) associated with trade in agricultural products, and the possible ramifications of regulating the sale of some tobacco products on trade in tobacco. The "Intellectual Property Rights" chapter could include provisions to prescribe how agricultural products with a "geographical indication" designation are to be treated. The "Competition" chapter could address objectives sought by Australia and New Zealand to secure disciplines on TPP countries' use of export subsidies, export credits, and food aid to promote their farm sectors. As part of the effort to make the TPP a 21 st -century agreement, while boosting U.S. agricultural exports beyond what U.S. negotiators might secure in market access talks alone, negotiators are drafting a chapter on sanitary and phytosanitary (SPS) matters that lays out commitments relating to human health and animal/plant safety which would go beyond those found in the World Trade Organization's (WTO) SPS Agreement. An important issue that has been a source of controversy concerns what approach should be included to resolve SPS disagreements that arise among TPP members. USTR has tabled text that would establish both a "consultative mechanism" among technical experts to address SPS disputes that arise, and a "rapid-response mechanism" designed to quickly resolve SPS barriers that block shipments of perishable products. Other TPP countries that are significant agricultural exporters appear to favor a dispute settlement process for SPS obligations. At the Ottawa round in July 2014, USTR reportedly indicated it would accept dispute settlement for some SPS obligations, but not for all. Unclear was what type of dispute settlement mechanism would be acceptable and which SPS obligations the United States would agree to subject to this procedure. U.S. agricultural interests and food groups have supported the inclusion of an enforcement mechanism for SPS disputes in the TPP text. In testimony before the House Committee on Agriculture on March 18, 2015, the United Fresh Produce Association cited the increasing use of nontariff barriers as an obstacle to U.S. fruit and vegetable exports and advocated for "the creation of a dispute settlement process that resolves nontariff trade issues in a timely manner." A letter from 24 Members of Congress on SPS disputes, dated August 3, 2012, called for the inclusion of "effective and enforceable rules" to strengthen the role of science in resolving differences. A different perspective on SPS enforcement is expressed in Representative Levin's report to the Council on Foreign Relations in September 2014. In that report, Representative Levin cautioned that any new SPS disciplines under TPP must not place U.S. regulatory sovereignty at risk in view of the broad array of conditions that exist across TPP countries. On the matter of controlling tobacco use, the U.S. position as articulated by USTR has drawn criticism from a number of quarters for being inadequate to protect public health, while others have argued that tobacco products are uniquely harmful and should be excluded from trade liberalization altogether. USTR's August 2013 proposal for tobacco products clarifies that TTP countries agree that exceptions allowed under the two multilateral trade agreements (i.e., Article XX(b) of the General Agreement on Tariffs and Trade (GATT) and Article XVI of the General Agreement on Trade in Services (GATS)), which allow for measures that are necessary to protect human, animal or plant life or health, would not violate the agreements if the measure is not a disguised trade barrier. The proposal would require a TPP signatory to consult with its TPP partners before bringing a legal challenge under any tobacco control measures agreed upon in a TPP text. Malaysia has countered with a proposal that would exempt tobacco-control measures from being challenged under TPP. USTR's proposal has been criticized by some Members of Congress, by a number of tobacco control groups, and by attorneys general from 45 states and territories. In a letter to President Obama of October 30, 2013, 56 Members of the House asserted that USTR's August 2013 proposal would likely lead to greater use of tobacco products in developing countries. A November 12, 2013 letter from 12 Senators to USTR Ambassador Michael Froman expressed concern that USTR's TPP proposal could allow tobacco companies to use trade law to undermine domestic tobacco control measures, and advocated excluding tobacco products from TPP. Five U.S. tobacco control groups lamented that USTR retreated from its earlier proposal that would have made it more difficult for tobacco companies to challenge domestic tobacco control measures under trade agreements. They noted that USTR's August 2013 proposal fails to recognize tobacco as a "uniquely harmful product," while also pointing out that it would not cover lawsuits filed by tobacco firms, and would not provide countries that have strong control measures with the protections needed to rebuff challenges by the industry. The 45 attorneys general issued a letter to USTR in January 2014, expressing concern that TPP could pose a threat to state and local regulation of tobacco products, and urging USTR to exclude tobacco products from TPP. At the same time, a number of U.S. business associations and food and agriculture organizations have taken a stand against any effort to exclude tobacco product manufacturers from investor-state dispute settlement provisions in a TPP agreement. In a letter of October 21, 2014, to Japan's ambassador to the United States, the U.S. Chamber of Commerce, the National Association of Manufacturers, the American Farm Bureau Federation, the American Meat Institute, and others, asserted that excluding any sector from the basic rules of investment agreements would undermine the investment trade and rules-based system, and would carry with it a number of negative consequences. Senator Mitch McConnell has expressed to USTR Michael Froman his concern over any effort to exclude tobacco products from investor-state dispute settlement provisions within TPP. Another agricultural trade issue that has surfaced in the TPP negotiations concerns the use of geographical indications (GIs). GIs apply primarily to agricultural products, including cheese, wines, and spirits. Examples of GIs are Roquefort cheese, Idaho potatoes, Champagne, and Tuscan olive oil. The WTO's intellectual property rights agreement and related provisions in the FTAs negotiated by the United States recognize the use of geographical indications to protect the quality and reputation of a distinctive product produced in a particular region of a country. The U.S. dairy industry, though, is concerned that GI protections which the European Union (EU) has accorded to cheese names that U.S. manufacturers consider to be common names, such as parmesan and asiago, could impede their access to export markets. The U.S. dairy industry wants safeguards included in TPP to ensure that exports of cheeses using common food names, like parmesan, feta and romano, will not be blocked as a result of bilateral FTAs that TPP member states negotiate with the EU. This arises from the GI provision in the EU-South Korea FTA (KOREU), and in the EU-Canada FTA which is pending ratification. The U.S. dairy industry argues the GI provisions in these agreements have, and will, limit U.S. exports to these markets. An open question is how the TPP will treat this matter for countries that have an existing FTA with the EU that provides for recognition of such GI-restricted products. In their joint letter of March 2, 2015 to Members of Congress, NMPF and USDEC called for addressing the GI issue within TPP through "improving safeguards surrounding the use of common food names" in response to what it called "the EU's abuse of geographical indications to erect barriers to U.S. exports." One of Australia's TPP negotiating objectives, supported by New Zealand, has been to secure disciplines on other TPP countries' use of export subsidies, official export credits, and food aid in support of their agricultural sectors. Its negotiators have argued for years in the multilateral Doha Round that these programmatic tools distort agricultural trade and should be modified when negotiating trade agreements in order to minimize such impacts. The United States has eliminated the use of export subsidies for agricultural products and, in recent years, has significantly reformed its use of export credit guarantees. However, the United States has signaled its opposition to any effort to include food aid disciplines in the TPP, contending that such rules should be developed on a multilateral basis. Some observers have suggested that Australia's insistence on the inclusion of issues relating to agricultural export competition is part of a strategy to engineer a compromise which would include the United States addressing Australia's other priorities, such as obtaining additional access to the U.S. market for Australia's sugar and dairy products, and securing an exclusion for Australia from TPP's final investor-state dispute settlement mechanism. In addition to market access, the TPP contains several provisions that build upon rules and disciplines contained in the World Trade Organization's Uruguay Round agreements. Many of these provisions have become part of the standard template for U.S. FTAs. While all countries likely would eventually have to adhere to all of the obligations of the agreement, TPP participants may be open to allowing developing countries in the TPP to have longer phase-in periods for rules-based commitments. The United States has sought increased intellectual property rights (IPR) protection in its FTAs. IPR negotiating objectives in the last U.S. Trade Promotion Authority (TPA) ( P.L. 107-210 ) in effect between 2002 and 2007 included, among others: (1) the application of existing IPR protection to digital media; and (2) negotiation of trade agreements in terms of IPR that "reflect a standard of protection similar to that found in U.S. law." This phrase opened the door to the negotiation of provisions that go beyond the level of protection provided in the WTO Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement, including with the current TPP negotiations. For example, the United States has sought to have its partner countries sign the World Intellectual Property Organization's (WIPO's) Performances and Phonograms Treaty, an agreement to which Brunei, New Zealand, and Vietnam are not parties. These provisions from the last TPA are included in the objectives in the Baucus/Hatch/Camp 2014 TPA proposal ( H.R. 3830 / S. 1900 ). The United States traditionally has favored strong copyright provisions in its FTAs, of importance to industries such as books, movies, and music that rely on IPR. In some areas, notably the relationship between copyright and the Internet, different domestic constituencies have sought to influence the U.S. negotiating position. Some copyright provisions that the United States has sought in its recent FTAs include extending the copyright term to no less than 70 years from death of the author or authorized publication from no less than 50 years currently. For works not attributed to an author the term would be 95 years; prohibiting the removal or alteration of digital rights management; prohibiting the circumvention of copyrighted work; providing limited liability for Internet service providers (ISP) for certain copyright infringement (see below). U.S. stakeholders have held divergent views relating to copyright enforcement and the Internet, with views differing especially between ISPs and traditional content providers. Internet providers and other activists are seeking to provide a more explicit balance in the agreement text between the rights of content providers and users of copyright material, while content providers have favored strong ISP liability provisions for effective copyright enforcement. The United States reportedly proposed language to place certain limitations on copyrights consistent with the so-called "three-step test": that the exception (1) is consistent with domestic copyright law; (2) does not conflict with the normal exploitation of the work; and (3) does not unreasonably prejudice the interest of the rights holder. The proposal also reportedly obligates each country to provide for such exceptions in their domestic copyright laws. The United States reportedly favors criminal penalties for "willful" trademark infringement, counterfeiting, and copyright piracy on a "commercial scale." Commercial scale includes acts that result in no direct or financial gain, such as file sharing. It would also require criminal penalties for importing counterfeit labeling and packaging whether done willfully or not, and it would require criminal penalties for cam-cording in movie theatres. Some countries, notably Australia, New Zealand, and Singapore, reportedly have sought to replace U.S. text on criminal enforcement with that of the Anti-Counterfeiting Trade Agreement (ACTA). Although both ACTA and the U.S. proposal for the TPP, which largely track the IPR provisions in the U.S.-Korea FTA, provide stricter criminal enforcement measures than the WTO TRIPS Agreement, ACTA provides greater flexibility than what is reportedly contained in U.S. proposals regarding a country's enforcement of IPR. For example, in ACTA, financial gain is necessary to be considered commercial scale for prosecution, and willfulness is required for importation of trademark infringing goods. The scope of patentability has become an issue in the IPR negotiations. U.S. FTAs generally have followed the TRIPS Agreement, which makes patents available "for any invention, whether product or processes, in all fields of technology, provided that they are new, involve and inventive step, and are capable of industrial application." However, in the TPP negotiations, the United States reportedly has also sought the ability to patent: plants and animals; diagnostic, therapeutic, or surgical methods if they cover a method of using a machine, manufacture, or composition of material; and new forms, uses or methods of an existing product without enhanced efficacy. These provisions did not appear in the U.S.-Korea FTA. Critics assert that the last point encourages the practice of "evergreening," a practice whereby a manufacturer allegedly would make minor modifications to an existing product to extend its patent, thus delaying the introduction of generic equivalents. Manufacturers contend that new versions of their product represent more potent, longer-lasting formulations or improved delivery systems that make taking the drug easier or more convenient. The debate over patent provisions in the TPP also relate to pharmaceuticals and access to medicines, one of the more controversial provisions in U.S.-negotiated FTAs in recent years. The controversy revolves around whether to assert the more far-reaching IPR provisions of the KORUS FTA or to adopt the somewhat more flexible "May 10 th Agreement" provisions found in the Colombia, Peru, and Panama FTAs. Based on published reports, it appears that U.S. negotiators are trying to develop an approach that would build on the May 10 th Agreement, which sets different standards for developed countries (as found in the KORUS FTA) than developing countries (as in the Colombia, Panama, and Peru FTAs) for certain intellectual property provisions. In late November 2013, USTR reportedly introduced a revised proposal that would attempt to balance the provision of certain patent protections with the ability of developing countries in the TPP to access needed medicines. The new proposal tracks the intent of the May 10 th provisions by reportedly providing options to developing countries in the TPP concerning certain patent protections, at least as long as they remained a developing country based on some agreed-upon benchmark. According to reports, the proposal would allow developing countries to follow the provisions of the U.S. Peru FTA, under which patent term extensions, which allow for the extension of a patent term in cases of "unreasonable" delay in market approval, would be optional; patent linkages—preventing regulators from extending market approval to a generic drug without determining that an existing patent would not be violated—would be optional provided a rights-holder would otherwise be able to defend the patent; and data exclusivity, the prohibition of use by generics of clinical test data (usually supplied by the original patent holder), would be for five years after marketing approval for the patented product. However, the Peru FTA permitted the clock to start on the exclusivity period at the time of first-country market approval if the second country approved the product within six months of the date of first market approval. Countries reportedly would be eligible for these provisions based on an economic indicator such as per capita gross national income (GNI) or product (GDP). If the World Bank benchmark of $12,161 per capita GNI was used, Malaysia, Mexico, Peru, and Vietnam would qualify as developing in the TPP. Other countries would have to adhere to as yet undetermined standards based on language contained in the Australia, Chile, and Singapore FTAs with the United States. TPP partners also reportedly have discussed an alternative proposal, adopting one standard but allowing developing countries to phase in compliance with those obligations. However, consensus remains lacking on whether to include these provisions at all. A November 2013 proposal from Canada, Chile, Malaysia, and New Zealand, and Singapore omitted these additional patent protections. Recently, it has been reported that the United States is seeking to negotiate side letters with partner countries to pledge "favorable clarifications" on key IPR issues in return for accepting stronger language in a final agreement. The U.S. proposal also supports pre-grant opposition procedures, which allows third parties to object to patents at their initial application to challenge frivolous or substandard patent applications. Prior to this proposal, the United States reportedly favored eliminating pre-grant opposition. The United States reportedly is seeking a 12-year period of data exclusivity for biologics under the proposed TPP. Biologics are medical preparations derived from living organisms, but generally are not considered distinct from traditional pharmaceuticals in U.S. IP law. Biotechnology groups claim that the development and approval process for large molecule biologics—as opposed to small molecule pharmaceuticals—are more complex and require longer exclusivity periods for a product to be commercially viable. Under the 2010 Affordable Care Act, biologics are given a 12-year exclusivity period. Moreover, the USTR, in its blog release, stated "[t]raditionally, the U.S. approach to trade negotiations has been to base proposals on existing U.S. law, where the current standard is 12 years." An additional question in the negotiations has been how to define the scope of biologic medicines, or whether to define them at all. The United States is reportedly seeking language to improve protections for trade secrets, especially as the USTR continues to describe protection of U.S. trade secrets as a growing challenge in its 2014 Special 301 report on IPR protections abroad. This text responds to the concerns of U.S. business that governments have pressured them to reveal trade secrets or transfer technology to further a country's "indigenous innovation" policies. Companies are also reportedly increasingly victimized by outright theft of their trade secrets, especially through cybertheft, and have decried the often lax remedies available to combat such theft. Penalties for trade secret theft vary widely among TPP countries; one U.S. objective in the negotiations reportedly is to require countries to establish criminal penalties for the theft of trade secrets. In addition, other chapters in the TPP negotiations may also concern the issue of trade secrets. Such an agenda may involve prohibiting countries from: (1) conditioning market access on technology transfer; (2) seeking concessional terms for acquiring or licensing IPR by SOEs; (3) requiring the use of locally owned or developed IPR; (4) promoting the development of local standards to unfairly advantage local firms; and (5) requiring the unnecessary disclosure of confidential business information, or failing to protect that information. In addition, Malaysia reportedly proposed preventing countries from requiring the disclosure of proprietary formulas for food and food products as a condition for market access. It is not thought that these practices are particularly egregious in any of the countries currently negotiating the TPP, but they may become more salient if other nations accede to the agreement. Rules of origin (ROO) define those goods that originate in the FTA region and therefore are eligible for preferential treatment under the agreement. The negotiating teams are far along in their consideration of product-specific rules, seeking a single TPP rule of origin to the extent possible. The TPP participants have already agreed that the ROO would be "objective, transparent, and predictable." Negotiators reportedly also have agreed that inputs produced in any TPP country may be cumulated so that a product produced with components made in multiple TPP countries can be claimed as originating within the TPP region and therefore be eligible for preferential treatment. While ROOs have been discussed in terms of market access for automobiles and concerns about global supply chains generally, they have proved especially contentious with regard to textiles and apparel. In all previous FTAs, the United States has used the "yarn forward" rule. This rule requires that an apparel product could be considered from within the FTA area, and therefore eligible for preferential treatment, if the entire manufacture of the product, from the spinning of the yarn to final assembly, has occurred within the FTA region. Representatives of the U.S. textile industry have argued for the tighter "yarn forward rule" to be included in the TPP. Some U.S. apparel firms, retailers, and distributors, as well as some TPP countries, including Vietnam, seek a less restrictive "cut and sew," or single transformation, rule, which would allow its products manufactured from materials of non-TPP origin to benefit from the TPP. While U.S. negotiators remained committed to the yarn-forward rule, the United States and other TPP partners reportedly have been discussing compromise positions. For example, the United States has proposed "short-supply provisions" to allow a certain amount of non-originating inputs in apparel assembly on a permanent or temporary basis and reportedly tabled an initial list of yarns and fabrics eligible for the short-supply designation during the Lima Round in May 2013. Alternatively, some have proposed regional value content ROOs which would allow for certain non-originating inputs to be used as long as originating inputs made up a certain percentage of the value of the product. However, a more liberalized ROO may be opposed by U.S. FTA partners such as Mexico and Peru, where textile and apparel industries have been oriented to trade with the United States through the yarn-forward standard. Technical barriers to trade (TBT) are standards and regulations that are intended ostensibly to protect the health and safety of consumers and for other legitimate purposes, but through design or implementation, discriminate against imports. In order to minimize trade distortion, WTO members must adhere to the Agreement on Technical Barriers to Trade. The TBT Agreement covers voluntary standards that industries apply, technical regulations that governments impose for health and safety purposes, and assessment procedures that governments employ to determine that a product meets required standards. The TBT Agreement establishes rules and procedures for member countries to follow, including making sure that standards, technical regulations, and conforming assessment procedures are applied non-discriminatively and in a manner not more trade restrictive than necessary. It addition, it requires that members practice transparency as regulations are developed and applied, that international standards are used where appropriate, and that the domestic technical regulations of trading partners are recognized as equivalent to domestic regulations when possible. A key provision of the agreement is that WTO members have a central point of inquiry from which firms can ask for information on standards and regulations. U.S. FTAs, including the U.S.-South Korea FTA (KORUS), expanded on the TBT agreement by, among other things, providing opportunities for partner countries to comment on proposed standards and regulations and the implementation of regulations. TPP negotiators are seeking to build on the KORUS FTA as a model in developing TBT provisions and are including annexes on sector-specific TBT commitment to harmonize their approaches to regulations in key areas. The debate over access to medicines encompasses other issues beyond pharmaceutical patent protections. Several TPP negotiating partners administer a national formulary for medicines purchased by the government for their national health services. These formularies often rely on generic drugs to the extent possible to maintain availability and contain costs. The U.S. pharmaceutical industry has expressed concern that the practices and procedures in national healthcare programs, including New Zealand's Pharmaceutical Management Agency (PHARMAC), which maintains their formulary, put "innovative pharmaceutical products," often made in the United States, at a disadvantage. They contend that access to the country's health care technology markets can be blocked by government's use of procedures that are nontransparent or do not provide due process. In negotiations with Australia over a similar system, the United States and Australia agreed to a series of consultation and transparency mechanisms designed to afford U.S. manufacturers an opportunity to make their case for inclusion in the formulary. New Zealand reportedly has ruled out changes to PHARMAC absent "reciprocal" concessions by the United States to federal or state-level drug pricing or reimbursement programs such as Medicaid. The United States reportedly has modified its position on a process to appeal adverse decisions on listing new drugs and the pricing of those drugs. In response to concerns raised by several U.S. NGOs on the applicability of these provisions to U.S. formularies, USTR states, "Nothing we are doing in TPP, including our proposals on transparency and procedural fairness, will undermine or weaken the Affordable Care Act, Medicare, Medicaid, or the Veteran's Health Administration." Foreign investment has been a high priority for the United States in its FTA negotiations, especially regarding the right of establishment by foreign goods and services providers in the territory of a partner-country. Negotiators likely are discussing such issues as nondiscriminatory treatment of foreign investment and investors; minimum standard of treatment; rules on expropriation; transfer of payments of the foreign investor out of the host territory; exceptions for identified nonconforming measures; state-to-state and investor-state dispute settlement (ISDS) procedures; and prohibitions on performance requirements, such as mandatory export levels and local content stipulations. These provisions generally are based on the current iteration of the U.S. model bilateral investment treaty (BIT). One issue that has become contentious is whether to include an ISDS provision, which allows for private foreign investors to seek international arbitration against host governments to settle claims over alleged violations of foreign investment provisions under the agreement. Except for the FTA with Australia, U.S. FTAs have included an investor-state arbitration provision. The investor-state provision is designed to protect foreign investors from the vagaries of domestic judicial systems, particularly in developing countries, for example, in such cases as government expropriation of foreign-held assets. Critics have argued that investor-state procedures give foreign investors greater protection than domestic investors and infringe on the sovereignty of the host government in protecting the health and safety of its citizens. However, provisions in the KORUS and other U.S. FTA on the shared understanding of expropriation states that "nondiscriminatory regulatory actions by a Party that are designed and applied to protect legitimate public welfare objectives, such as public health, safety, the environment, and real estate price stabilization…do not constitute indirect expropriation. Nonetheless, some maintain that the threat of such suits may serve as a "chilling effect" preventing nation states from considering such regulations. Until recently, Australia has argued against including an investor-state dispute settlement mechanism—although it too has investor-state provisions in many of its FTAs—thus generating disagreement with other TPP partners. Opposition to ISDS may stem in part from an attempt by Philip Morris International to use an investor state provision in an Australian-Hong Kong bilateral investment treaty to take the Australian government to arbitration for its requirement for plain packaging for cigarettes, which the company believes expropriates its trademarks. Philip Morris filed the suit from its Asian operations headquartered in Hong Kong. Australia's blanket opposition to ISDS, however, appears to have evolved under the conservative government of Prime Minister Tony Abbott. Australia now has indicated that it will consider ISDS provisions in FTAs on a case-by-case basis. For example, Australia did negotiate ISDS provisions in its FTA with South Korea, but not in its FTA with Japan, both concluded in 2014. Another investment-related issue that has raised some concerns relates to the ability of governments to impose controls on capital outflows, particularly in times of financial crises. Previous U.S. FTAs contain clauses which call for the free flow of capital in order to facilitate trade and investment. They also allow for the "prudential exception" whereby controls are imposed to alleviate short-term balance of payments problems in order to protect the stability of the financial system, among other prudential measures. Some Members of Congress have raised concerns that in light of global financial crises, the language in FTAs might not adequately preserve governmental discretion to impose controls when they see fit. A new approach on the issue by the International Monetary Fund (IMF), which has pointed to the usefulness of short-term capital controls in potentially ameliorating the effects of capital volatility during periods of economic instability, may also affect the outcome of the negotiations. National competition laws and regulations are intended to protect consumers by ensuring that one firm does not so dominate a sector of the economy as to inhibit market entry and stifle competition. Some U.S. FTAs have included provisions to limit the trade-distorting effects of such laws. Among other things, U.S. FTAs require that the United States and the partner country(ies) inform persons from a partner country, who may be subject to administrative actions under domestic antitrust laws, of related hearings and provide them the opportunity to make their case. Under these FTAs, the partner countries agree to cooperate in enforcing competition laws through the exchange of information and consultation. In addition, designated monopolies and state-enterprises are to operate in conformance with the agreement and in accordance with commercial considerations. The November 2011 framework indicates that the TPP partners are discussing language for a chapter on competition policy to "promote a competitive business environment, protect consumers and ensure a level playing field for TPP companies." The text will include language "on the establishment and maintenance of competition laws and authorities, procedural fairness in competition law enforcement, transparency, consumer protection, private rights of action, and technical cooperation." The U.S. business community has indicated that the provisions on competition policy will be critical in dealing with state-owned enterprises (SOEs), particularly in addressing issues concerning their financing, regulation, and transparency, to ensure that they are not provided an unfair competitive advantage. Trade remedies are measures designed to provide relief to domestic industries that have been injured or threatened with injury by imports. They are regarded by many in Congress as an important trade policy tool to mitigate the adverse effects of unfairly traded imports and import surges on U.S. industries and workers. The three most commonly used trade remedies are: (1) antidumping (AD) remedies, which are designed to provide relief from the adverse price effects of imports sold at less than fair-market value; (2) countervailing duty (CVD) remedies, which are used to counter the adverse effects of foreign government subsidies to imports; and (3) safeguard actions, which are employed to permit temporary relief so that domestic industries can adjust to the adverse effects of surges in fairly-traded imports. These actions are sanctioned by the WTO as long as they are undertaken in a fair manner and are consistent with rules specified in WTO agreements. Congress has insisted that the United States retain the right to use trade remedies to counter unfair trade practices and import surges and has expressed this requirement as a priority in trade negotiating authority legislation. It is also reflected in existing U.S. FTAs. TPP participants are discussing the possibility of including such provisions in the TPP that make trade remedy investigations and actions more transparent and provide due process in their implementation. One of the more controversial issues that the TPP partner countries are addressing pertains to the scope and depth of provisions on worker rights. Supporters of strong worker rights, such as labor unions and certain nongovernment organizations (NGOs), are concerned that failure to promote and implement these rights, including collective bargaining, could lead to the imposition of low wages and poor conditions for workers by firms in those countries. In so doing, U.S. workers would be placed at a competitive disadvantage as they compete against low-cost, low-standard labor practices. The November 2011 TPP framework for negotiations indicates that the agreement will have a separate labor chapter. The language in the framework is ambiguous, stating only that the chapter would "include commitments on labor rights protection and mechanisms to ensure cooperation, coordination, and dialogue on labor issues of mutual concern." The original P-4 agreement includes commitments to cooperate on labor issues. The scope and depth of worker rights provisions in U.S. trade agreements have evolved over time. The North American Free Trade Agreement (NAFTA), included labor provisions in a side letter requiring all Parties to enforce their own labor standards. The provisions are enforced under a special dispute settlement procedure attached to, but outside of, the main agreement. Based on the 2002 Trade Act, all subsequent FTAs, included a similar provision, but within the body of the agreement. More recently, under the May 10 th Agreement, internationally-recognized labor principles were included in FTAs with Peru, Panama, South Korea, and Colombia (see text box above). The agreement stipulated that the four FTAs would require each of the Parties to adopt and to maintain five internationally-recognized worker rights contained in the ILO Declaration on Fundamental Principles and Rights at Work and Its Follow-Up (1998) (ILO Declaration)— the freedom of association; the effective recognition of the right to collective bargaining; the elimination of all forms of compulsory or forced labor; the effective abolition of child labor; and the elimination of discrimination in respect of employment and occupation. These provisions are enforceable under FTA dispute settlement procedures and violations are subject to potential trade sanctions. According to a recent USTR summary of negotiating objectives in the TPP, the United States is pursuing provisions similar to the May 10 th Agreement, as well as seeking provisions to prevent countries from waiving or derogating from labor provisions to attract trade and investment, and promoting the establishment of consultative mechanisms to monitor and address labor concerns. Some Members of Congress have expressed reservations about adopting the May 10 th Agreement provisions as the labor negotiating objectives going forward. They have argued that "expanding the scope of obligations could unduly expose the United States to potential unwarranted litigation and trade sanctions on a new and broader array of its labor laws and policies," and prefer to expand trade capacity building measures to improve labor rights in partner countries. However, the Bipartisan Congressional Trade Priorities Act (BCTPA) TPA legislation introduced in January 2014 includes labor negotiating objectives consistent with the May 10 th Agreement provisions (see "The May 10 th Agreement" and " Trade Promotion Authority " textboxes). Worker rights may also be controversial among the TPP partners. For example, Vietnam and Brunei reportedly have expressed opposition to having worker rights provisions subject to binding dispute settlement procedures. At the Lima Round in 2013, Canada tabled its approach modeled after its Canada-Panama labor cooperation agreement, which does not allow for the suspension of trade concessions as a resolution to a labor-related dispute. Instead, a dispute settlement panel would be limited to mandating the development of an "action plan" to remedy a dispute, and if the offending party fails to implement it, a monetary penalty capped at $15 million could be assessed. This issue is likely to continue to evolve as the negotiations proceed. The United States reportedly is negotiating a labor action plan (LAP) with Vietnam. This plan may be similar to the LAP negotiated in conjunction with the U.S. FTA with Colombia. That plan included benchmarks to be undertaken by the Colombian government to address perceived weaknesses in Colombian labor laws and practices within specified deadlines. It includes numerous commitments to protect union members and improve worker rights. On May 29, 2014, 153 House Democrats wrote to USTR Froman requesting that the United States negotiate LAPs with Brunei, Malaysia, and Mexico as well. One issue concerning the LAPs is the stage in which they are implemented: prior to signing the agreement, or before, during, or after any potential congressional consideration of TPP. Like the U.S. position on worker rights, environmental provisions in U.S. FTAs have evolved over time. As with worker rights, environmental provisions were originally placed in side-letters in the NAFTA agreement, and "enforce your own laws" provisions were placed in subsequent FTAs with limited dispute settlement based on the Trade Act of 2002. The May 10 th Agreement provisions (see above) added an affirmative obligation to adhere to multilateral environmental agreements (MEAs) and allowed for environmental disputes under the FTAs to access the full dispute settlement provisions of the agreements. According to USTR, it has pushed for the incorporation of the May 10 th Agreement as well as long-standing provisions in the TPP environmental talks. The U.S. position seeks commitments to fully enforce domestic environmental laws and laws to implement MEAs; not to waive or derogate from environmental protections to encourage trade or investment; provisions to combat wildlife trafficking, illegal logging, and fishing subsidies; and consultative mechanisms to assure stakeholder participation to challenge member state's adherence to the provisions. For these obligations, the United States has sought binding commitments to be enforced with the same dispute mechanism as other provisions of the agreement. Subjecting the provisions of the environmental chapter to binding dispute settlement has proved controversial, reportedly even among countries that have signed U.S. FTAs with—albeit narrower—environmental chapters with dispute settlement provisions. A secretary's draft text of the environmental chapter was leaked in January 2014. Reportedly, this text, prepared by Canada, provides for a special dispute resolution process distinct from one applied to commercial disputes that would not result in trade sanctions. It also merely affirms each party's intention to implement the MEAs it has signed. Both of these positions diverge from reported U.S. positions in the talks. USTR Ambassador Froman responded: U.S. negotiators have made clear where we don't agree with weaker TPP proposals on environmental provisions, and just how serious we are about making sure that the obligations in the environmental chapter are subject to the same enforcement processes as obligations elsewhere in the TPP, including recourse to trade sanctions. It's true that U.S. negotiators are fighting alone on some of these issues – but that's exactly what we're doing: pressing harder, not retreating. However, press reports suggest that a subsequent leaked document from February 2014 indicates that the United States has sought to replace language on trade and climate change with text on "transition to a low-emission economy" and has sought less comprehensive language on trade and biodiversity. According to the November 2011 framework, the TPP partners are negotiating provisions that would establish rules and procedures for trade in goods and services conveyed by the Internet and other electronic means. The text of the framework states that the provisions would address impediments to such trade, including customs duties, the digital environment, authentication of electronic transactions, consumer protection, localization requirements, and other provisions to ensure the free flow of information. The United States considers these provisions important with the growth of the use of electronic commerce in an increasingly globalized economy. Recently-concluded U.S. FTAs, such as the U.S.-South Korea FTA, included e-commerce provisions. They are designed to ensure that services distributed electronically benefit from the same protections as services distributed by other means. In addition, no customs duties are to be imposed on digital products, whether distributed electronically or via a physical medium, such as a disk, and digital products are to be treated in a nondiscriminatory manner. The agreement also includes provisions prohibiting unnecessary barriers to the free flow of information. In the TPP talks, the U.S. proposals reportedly contain language that would prohibit countries from blocking cross-border flows of data over the Internet. If adopted, these provisions could also have implications for a member state's ability to engage in censorship of the Internet. U.S. high technology groups have supported unfettered cross-border data flows and opposed localization requirements that require data or servers to be located in-country in order to promote Internet-based services and cloud-computing. They claim that companies already have their own mechanisms in place to protect privacy and that privacy would not be undermined by open borders on data flows. However, TPP partners, such as Australia and New Zealand, reportedly have expressed concern that prohibitions on local data storage could run up against their national privacy laws. Australia reportedly has argued that private-sector based controls would not be sufficient to protect privacy and has suggested alternative language to the U.S. proposal that would give governments more discretion on controlling data flows across borders. Vietnam and Malaysia reportedly have local content restrictions, either for mercantile or censorship reasons. Customs valuation and trade facilitation have been long-standing, if unheralded, provisions in U.S. FTAs that aim to ease and expedite the passage of goods over borders, and reduce associated transaction costs. These issues, often the nuts and bolts of how goods move from country to country, which, along with custom valuation have figured prominently WTO negotiations and the WTO Trade Facilitation Agreement. Such provisions have taken on new significance as global supply chains have increased the number of times intermediate goods cross borders and hence the cost of customs bottlenecks to the world economy. Generally, the United States indicates that it is seeking efficiencies and cooperation in this chapter. Common rules of origin are stressed, but those negotiations are being conducted in a separate chapter. Efficiencies are in the form commitments for the quick release of goods; expedited release of express shipments; advanced ruling on tariff classifications, valuations duties, or other issues; electronic processing of customs documentation, inspections based on risk-management techniques. The United States also seeks cooperative commitments to prevent smuggling, illegal transshipment, and duty evasion. In addition to treating certain existing issues in new or different ways, the TPP also seeks disciplines on certain activities not heretofore addressed in FTAs. These include not only horizontal or cross-cutting issues that address best practices in several negotiations, such as with regulatory coherence, but also issues not generally addressed in previous U.S. FTAs, such as regulatory coherence, supply chain competitiveness, and small- and medium-sized enterprises. While some of the commitments relating to these issues are in stand-alone chapters, others are included, as appropriate, in other chapters of the agreement. The issue of regulatory coherence represents one of the new cross-cutting trade issues added to the TPP negotiations. The goal of regulatory coherence is to ease the conditions and costs of trade between TPP countries while affirming the rights of TPP countries to regulate their economies to promote legitimate policy objectives. According to the USTR, this initiative stems from the proliferation of regulatory and nontariff barriers, which have become a major hurdle for business gaining access to foreign markets. Some of the goals of the effort are to "improve regulatory practices, eliminate unnecessary barriers, reduce regional divergence in standards, promote transparency, conduct regulatory processes in a more trade-facilitative manner, eliminate redundancies in testing and certification, and promote cooperation on specific regulatory issues." Issues related to regulatory coherence are covered in various chapters, including a stand-alone chapter on regulatory coherence as well as in SPS, TBT, and other chapters. The regulatory coherence chapter recommends that TPP partner countries "endeavor" to establish domestic regulatory structures similar to the U.S. Office of Information and Regulatory Affairs in the Office of Management and Budget, a venue to vet proposed regulations, and their compliance with domestic law and policy, as well as with trade agreements and other international obligations. Aside from seeking to assure regulatory consistency among various domestic agencies, the proposed mechanism would be encouraged to conduct regulatory impact assessments (RIA) that would assess the need for a given regulation, conduct cost-benefit analysis, and assess alternatives to regulation. The established body, process, or mechanism would also seek to assure transparency and openness in the rule-making process. The draft also recommends the establishment of a regulatory coherence committee among TPP members. It is unclear, how much, if any, of these provisions would be subject to dispute settlement. Broadly speaking, state-owned enterprises (SOEs) are businesses directly or indirectly owned or influenced by a government. As such, governments may provide these businesses with advantages—such as subsidies, low cost credit, preferential access to government procurement, and trade protection—not enjoyed by their private counterparts, thereby hindering competition and market access. Such advantages may also be directed toward companies not owned but significantly favored or supported by the government. This concern over potential anti-competitive behavior and restrictive trade has shaped texts by the United States regarding SOEs in the proposed TPP agreement. In the context of the current TPP negotiations, the SOE presence in Vietnam—estimated to represent 40% of output—may warrant particular attention, although Malaysia and Singapore also have important SOE sectors. In addition, as the TPP could become a template for a larger Asia-Pacific FTA or future WTO negotiations, wider applicability of these provisions to SOEs in other countries, particularly China, may be envisioned. In light of these concerns about fair competition, SOEs are addressed, though not extensively, in several existing U.S. FTAs. NAFTA and subsequent U.S. FTAs with Australia, Chile, Colombia, Peru, and South Korea have similar language on SOEs. Though the specific details vary among these agreements, most contain national treatment, nondiscrimination, and transparency provisions, while upholding the prerogative of countries to establish and maintain SOEs. The U.S.-Singapore FTA includes somewhat more extensive provisions on SOEs, but they largely apply only to Singapore and not the United States. Though some business groups, government officials, and labor groups have all expressed an interest in strong SOE provisions in the TPP, it remains unclear what form such provisions may take. Such measures may include provisions that seek to ensure that SOEs operate on a commercial basis, and to address potential trade and investment barriers. SOE disciplines may be enforced based on a harm test similar to that used in the WTO subsidies agreement. Broadly, these provisions will likely seek to achieve competitive neutrality with regard to SOEs. Competitive neutrality, a concept supported by both U.S. government and business groups, refers to an environment in which SOEs receive no competitive advantages beyond those enjoyed by private sector companies. Not all policy observers, however, agree on the appropriate strength or even necessity of SOE provisions in the TPP. Though the scale and the nature of their behavior differ, SOEs exist in some form in all TPP countries. In the United States for example, organizations such as the Federal National Mortgage Association (Fannie Mae), and the U.S. Postal Service are operated by the government and provide market-oriented products. Therefore, as with most trade negotiations, the U.S. position on SOEs likely seeks to balance both U.S. defensive and offensive interests. Some observers suggest that existing regulations may already adequately temper advantages of SOEs (e.g., subsidies, financing), while others maintain that additional provisions, particularly regarding transparency, will only make existing disciplines more effective. The United States first tabled its SOE proposal in late 2011. Australia tabled alternative SOE language in 2013. TPP partner countries have reportedly generally agreed on a definition of and general provisions regarding SOEs, but negotiations continue over what exceptions will be allowed. Some countries such as Vietnam may be seeking exceptions for a significant portion of their SOEs. Negotiators have reportedly acknowledged that SOEs operate in all TPP countries and are working to craft disciplines that do not prevent their proper operations. Trade in intermediate goods is an increasingly important component of international trade for many firms. These intermediate goods, which serve as inputs in the production of final goods, accounted for more than half of all nonfuel merchandise traded in 2009. Such intermediate goods represent stages along a global supply chain—the path a good takes as it is transformed from its basic components into a final product used by consumers. This path often crosses multiple international borders, sometimes more than once. U.S. imports from China, for example, may contain components sourced from other parts of East Asia, Europe, Latin America, and elsewhere, including from the United States. The U.S. International Trade Commission (USITC) estimates that 8.3% of the value of U.S. imports is actually U.S. components that have been incorporated into other goods abroad and re-imported into the United States. It is unclear exactly how the TPP will address supply chains, although the issue will be addressed in a stand-alone chapter as well as in other chapters covering issues related to supply chains. The broad range of issues affecting supply chains involve many chapters already included in U.S. FTAs. Business groups have encouraged negotiators to consider several aspects that may affect the flow of goods into and out of TPP countries, and, hence the competitiveness in global supply chains of firms in TPP countries. These include harmonization of standards, adequate infrastructure (ports, roads, etc.) to facilitate trade; simplification of rules of origin; and greater customs efficiency. Competitive supply chains and strong rules of origin may not always be mutually consistent goals. As a regional FTA, some international supply chains may be encompassed by the current negotiating partners. Other supply chains, however, may incorporate intermediate goods that have moved into TPP countries at some point in the production process. These supply chains that incorporate goods originating outside TPP countries, such as apparel production in Vietnam that uses Chinese fabric, may present a challenge to negotiators as they try to develop rules of origin that balance a desire for a TPP that ensures competitiveness and cost efficiency with concerns over outside countries benefitting from the TPP agreement without adhering to its requirements. Small- and medium-sized enterprises (SMEs) (firms with less than 500 employees by the U.S. definition) account for the majority of firms involved in international trade (about 97%), but they account for a much smaller share of the value of U.S. trade (about 30%). In fact, in 2009, eight firms alone accounted for more than 10% of all U.S. exports. SMEs, however, also participate in trade indirectly as suppliers, feeding parts and components into the supply chain of larger, finished products that can be exported. Though SMEs represent a relatively small share of U.S. trade, they employ approximately half of the U.S. workforce in the nonfarm private sector. In addition, academic studies have shown that small businesses create disproportionately more jobs than large businesses, though this may be due more to their age than their size—small firms are typically also young firms. The characteristics of SMEs and their relatively small presence in U.S. trade have led to government efforts to improve SME access to international markets. The USTR commissioned a series of reports from the ITC regarding the role of SMEs in U.S. exporting activities. Those reports identified barriers limiting SME access to foreign markets, and surveyed SMEs for suggestions on policy changes that could ease SME exporting activities. An increased focus on FTAs and other trading agreements was among the top three most frequent responses provided. The proposed TPP agreement includes a stand-alone chapter on SMEs, although provisions related to SMEs are included in other chapters. This chapter may focus on SME's capacity to take advantage of the enhanced trading opportunities gained through the potential FTA. Though details of the agreement remain sparse, the TPP country trade ministers' statement suggests that the agreement will address concerns SMEs "have raised about the difficulty in understanding and using FTAs." For example, a representative from USTR suggested that the agreement will attempt to address informational challenges SMEs have cited, such as access to foreign country tariff schedules and regulations affecting imports. The negotiations on the SME chapter were concluded during the Dallas round in May 2012. The quick conclusion on this topic may represent both a broad consensus among the negotiating partners and relatively uncontroversial provisions. The proposed TPP likely will contain provisions related to dispute settlement and governance of the agreement. Given that the proposed TPP is being touted as a "living agreement," being open to new members, formal procedures may be established for new members to accede to the agreement. The existence or characteristics of a secretariat for the proposed TPP may be under consideration during the negotiations. Generally, U.S. FTAs have had minimal structures. From NAFTA onward, they have included a commission co-chaired by USTR and trade ministers of the respective parties to the agreement. Primarily, they have been tasked with: (1) supervising the implementation of the agreement; (2) resolving disputes arising from its interpretation or application (see dispute settlement, below); and (3) supervising work of committees established under the agreement. The commission meets regularly once a year, and by special session at the request of a party. The agreements often have created committees on specific issues. KORUS has working-level committees on outward processing zones and fisheries. However, U.S. agreements do not have free-standing secretariats, and activities are carried out by staff in member's respective trade ministries. Similarly, the P-4 agreement has a commission, but does not have a standing secretariat, although New Zealand serves a repository of documents. However, other economic organizations in the Asia-Pacific region, such as ASEAN and APEC, do have secretariats that engage in trade capacity building and technical assistance activities, as well as conduct studies for and about their members. Negotiators may debate the question of whether having a formal secretariat is necessary or desirable to implement this agreement, especially given the number of participants. Previous U.S. FTAs as well as the P-4 agreement provide options to resolve disputes arising under the agreement. These are in addition to procedures with regard to investor-state dispute resolution (discussed above), or specialized provisions for certain disputes—for example, motor vehicles in the U.S.-Korea FTA. In general, these agreements are designed to resolve disputes in a cooperative manner. A party first seeks redress of a grievance through a request for consultation with the other party. These steps include initial consultations; meeting of the joint committee representing Cabinet-level trade officials of each parties; and establishment of a dispute settlement panel. In previous agreements, panels have been composed of three arbiters, of which each side appoints one and the third is appointed by mutual consent, or failing that, by lot from a list of individuals not nationals of either side. After the panel makes its decision, the unsuccessful party would be expected to remedy the measure or practice under dispute. If it does not, compensation, suspension of benefits, or fines have been traditional remedies. In addition, WTO dispute settlement may also be used in instances where the dispute is common to both WTO and FTA rules. Although State-State dispute settlement has been infrequent under U.S. FTAs, the size of the potential agreement, the inclusion of new members, and the negotiation of new provisions may cause negotiators to scrutinize existing models of FTA dispute settlement to meet the challenges this agreement may bring. One question is whether dispute settlement will cover all the provisions of the agreement. The May 10 th Agreement stipulated that labor and environmental provisions would be fully enforceable under U.S. FTAs, and dispute settlement to those provisions in the Colombia, Peru, Panama, and South Korea FTAs. Whether these provisions apply to the TPP have proven controversial both domestically, and among TPP partners in the negotiations. The TPP has been envisaged as a "living agreement," one that is both open to new members willing to sign up to its commitments and open to addressing new issues as they evolve. Thus far, the manner in which new members are added while the negotiations are still under way, as with the case of Canada, Mexico, and Japan, has followed a process agreed by current members informally, with each aspiring candidate being approved with the consensus of the other parties. In practice, the aspiring participant must not only agree to negotiate saying that "everything is on the table," but must show in words, deeds, or perception that there is a genuine willingness to negotiate on issues sensitive to others and to commit to the standards of the eventual agreement. This has led to months of bilateral consultations on issues of interest to the other parties and confidence building measures in areas of the greatest sensitivity. In the case of Canada, the United States, Australia, and New Zealand had concerns about Canada's supply management system for dairy and poultry. The United States was also interested in leveraging action on Canada's then-languishing legislation to modernize its copyright laws. In return for entry in the talks, Canada and Mexico reportedly agreed not to seek to reopen chapters already agreed in the TPP, or possibly, sub-chapters that contained areas of agreement. Japan, meanwhile, agreed to commitments regarding its beef, auto, and insurance sectors, in order to become a negotiating partner in the TPP talks. While the expansion of the group has been publicly contemplated, as a trans-Pacific agreement, to date it has focused first on APEC countries. Of these, there are many potential candidates, from relatively advanced economies such as South Korea and Taiwan, to middle-income states with dynamic economies and youthful populations like Thailand or the Philippines. Other countries beyond APEC, such as Colombia and Costa Rica, have expressed interest, and it is conceivable that additional countries or trade blocs beyond the Pacific shores could link up to the agreement in the future. No new members are expected to join the negotiations at this stage, but may accede later to the final agreement. For example, South Korea has expressed interest in participating in the talks, but U.S. Administration officials suggest this would most likely occur after existing negotiations conclude. Some observers have suggested that South Korea could also join the TPP after the negotiations conclude but before the agreement is implemented. The accession process raises the question of whether a country, especially one with political or economic heft, can be expected to simply join an agreement already negotiated or whether it should have input on the existing agreement, especially if the goal is to produce a free trade area for the Asia-Pacific, or beyond. Yet, reopening the agreement's substantive provisions with each new entrant—as opposed to its market access provisions which presumably would need to be negotiated with each existing member anyhow—offers up its own difficulties. The WTO accession process, whereby countries agree to the established WTO trade rules but negotiate on market access, could serve as a template. Differences of opinion exist among the participants as to how best and to what extent the TPP will serve to harmonize trade rules among the parties. They have agreed to pursue a single set of TPP rules of origin, which will be key to achieving this goal. However, they are pursuing different approaches to developing a TPP tariff schedule. The United States has maintained that it is negotiating market access bilaterally and only with the TPP participants with which it does not have FTAs: Brunei, Japan, Malaysia, New Zealand, and Vietnam. Other participants have sought to negotiate plurilateral market access schedules. While the participants have agreed to conduct the tariff negotiations as they choose, they have agreed to develop a single TPP tariff schedule that will support the goal of facilitating trade. However, it is known that some participants seek to reopen the market access provisions of their prior FTAs with the United States or others. For example, Australia is known to seek a better market access for its sugar in the United States than it received in its FTA. Through TPA, or other vehicle, Congress may wish to make its views known about the architecture of the agreement. Congress has taken a strong interest in the TPP negotiations since the negotiations were launched in 2008. Hearings have been held, and many Members have expressed views on the negotiations through letters and consultations with the Administration and with stakeholder groups. As the negotiations proceed, a number of issues important to Congress are emerging. An issue for U.S. policy makers in general, and Congress in particular, is whether the United States will be able to achieve its objective of creating a "comprehensive, high-standard" agreement that encompasses a broad spectrum of trade and trade-related issues. As the largest FTA negotiated by the United States, it brings together a large and expanding group of countries representing various levels of development. Likewise, with multiple chapters under negotiation, it is the most comprehensive agreement in terms of breadth and depth of commitment undertaken by the United States. At the same time, the United States and the other TPP partners are aiming for a comprehensive agreement to provide a structure for trade within the Asia-Pacific region in the 21 st century, and to approach other issues not currently being addressed at the WTO. Members of Congress have already presented differing views on which countries should be included in a TPP, and on what constitutes "high-standards" in such areas as worker rights, intellectual property rights, protection for pharmaceuticals, and investor rights. In addition, some Members of Congress have expressed an interest in broadening the negotiations to include issues such as exchange rates, which the Administration acknowledges as important, but has to date preferred to address through other venues. Likewise, outside the United States, the course of the negotiations has revealed differences on the meaning of "high-standard" among the negotiating partners. This emerging debate may presage a vigorous debate within Congress on the TPP as the process proceeds and Members continue to weigh in with their views. Any trade agreement that the United States reaches with TPP partners would have to be approved by Congress through the passage of implementing legislation, presumably under TPA procedures (see text box on TPA). The latest TPA expired on July 1, 2007, although the Obama Administration has proceeded to negotiate the proposed TPP as if TPA were in effect. It has consulted with Congress and followed TPA's procedural steps. For example, former USTR Ron Kirk formally notified Congress of the Administration's intention to enter into negotiations with the TPP countries on December 14, 2009, 90 days prior to beginning the negotiations, as stipulated under the expired TPA. Although the Administration has been consulting Members and congressional staff, Congress, as a whole, formally has yet to weigh in in the form of negotiating objectives embedded in TPA authorizing statutes. In the past, these objectives have included reducing barriers to various types of trade (e.g., goods, services, agriculture, electronic commerce); protecting foreign investment and intellectual property rights; encouraging transparency, fair regulatory practices, and anti-corruption; ensuring that countries protect the environment and worker rights; providing for an effective dispute settlement process; and protecting the U.S. right to enforce its trade remedy laws. However, over the years, Congress has revised and expanded the negotiating objectives as policy issues have evolved and the global trading system has become more complex. In any renewal of TPA, Congress may wish to establish new negotiating objectives to reflect 21 st -century trade policy, including issues currently under negotiation such as state-owned enterprises, regulatory coherence, digital technology, and trade in green technologies, among other areas. At the same time, the objectives would likely have to be flexible enough to allow the Administration to negotiate a "living agreement" that can change and be kept current with an evolving international trading system. The timing of TPA may also have an impact on the negotiations and potential congressional consideration of the TPP. Observers have asserted that TPP partners will not engage in serious negotiations on the most sensitive issues without the assurance that U.S. commitments are credible and cannot be amended by Congress. Some officials from TPA partner countries have stated that TPA is necessary to conclude the TPP negotiations, while others have been reluctant to remark on what they see as a domestic U.S. political process. Meanwhile, some Members of Congress, including Chairman Hatch of the Senate Finance Committee, view TPA as critical for the conclusion of TPP, suggesting at a recent trade policy hearing that "it would be a grave mistake for the administration to close TPP before Congress enacts TPA," while others, such as Ranking Member Levin of the House Committee on Ways and Means, would like to focus on the substance of the TPP provisions before considering TPA. In July 2013, President Obama requested that Congress reauthorize TPA. Bicameral legislation ( H.R. 3830 / S. 1900 )—the Bipartisan Congressional Trade Priorities Act of 2014 (BCTPA)—was introduced in the 113 th Congress but not considered. The President reiterated his request for TPA in his January 2015 State of the Union address to the new Congress. At this time no TPA legislation has been introduced in the 114 th Congress, but Chairman Ryan of the House Committee on Ways and Means and Chairman Hatch of the Senate Finance Committee have both announced TPA as a top legislative priority. In addition, Congress may wish to consider the institutional structure of a future TPP agreement. It may wish to consider the manner in which the agreement can be expanded, or the terms to which it is willing to agree to expand to new members. As well as attracting new members, new content may be negotiated, or existing content renegotiated. In the manner of accession of new members, Congress may consider whether it would approve each new member, or whether U.S. approval would be handled in a manner similar to WTO accessions. In terms of content, Congress may also wish to consider whether the TPP, if concluded, would have a Secretariat or other body that could serve as a venue for continuing negotiations. A successfully concluded TPP agreement may shape the future course of multilateral trade liberalization. After 10 years of negotiations, the Doha Round of multilateral trade negotiations is at an impasse, and WTO members are developing new approaches to address global trade issues. TPP may offer an opportunity for a group of countries dedicated to concluding a comprehensive, high-standards FTA to break new ground on issues thus far not negotiated at the multilateral level. Past FTAs, such as NAFTA, incorporated new trade policy ideas, such as dispute settlement and intellectual property rights, that were concurrently being negotiated in the Uruguay Round. NAFTA was approved first, and the approval of NAFTA among Canada, Mexico and the United States helped push the Uruguay Round to conclusion. Today, the approval of a comprehensive, high-standard TPP agreement could signal to recalcitrant members of the WTO that trade liberalization can proceed without them and might spur action at the multilateral level. However, the world trading system is much different than it was in the early 1990s when NAFTA signatories (United States and Canada) made up half of the so-called "Quad-countries" (United States, Canada, the European Union, and Japan) that decided the Uruguay Round. Developing countries, such as Brazil, India, and China, that now exercise their interests in the WTO, may be more assertive in pursuing their own interests. Yet, as an alternative venue promoting trade liberalization at the time when the WTO is not seen to be doing so, it may attract additional countries to the negotiations. The U.S. pursuit of the TPP and the possible outcome of the negotiations raise other questions regarding its possible impact on the status and shape of current and future U.S. trade policy. For example, how will the TPP talks and potential final agreement relate to the recently launched U.S.-EU FTA negotiations (Trans-Atlantic Trade and Investment Partnership or T- TIP)? If both negotiations concluded successfully could they be eventually be merged? Similarly, the TPP raises the issue of the United States and the future of the WTO as a major force for trade liberalization. Some may argue, for example, that the United States has signaled the death knell of future rounds of multilateral agreements in favor of regional pacts. Others might assert that the TPP could serve as a building block for a more viable multilateral trade system that responds to trade challenges of the 21 st century. Some may even say that the TPP may become the predominant force for trade liberalization going forward, that is, if it can be agreed to by the current parties. Another issue for possible consideration is: What would be the impact on U.S. trade policy if the TPP negotiations are not completed successfully or are delayed indefinitely? Some could argue that such an outcome would indicate that it is not feasible to negotiate a comprehensive set of rules with a diverse group of countries and that the United States would have to tailor its ambitions. In addition, some might assert that such an outcome would signify a temporary, if not permanent setback to the notion of a Free Trade Area of the Asia-Pacific (FTAAP). Still others may conclude that such result could force the United States to retreat from negotiating trade agreements altogether. The potential Trans-Pacific Partnership agreement has strategic policy implications for the United States, including with respect to trade policy, but the substance of the proposed agreement and its future remain undecided. The agreement is ambitious in at least three ways: (1) in terms of its size—it would be the largest U.S. FTA by trade flows and could expand in a region that represents over half of all U.S. trade; (2) the scope and scale of its liberalization—the negotiating partners have expressed an intent to comprehensively reduce barriers in goods, services, and agricultural trade as well as rules and disciplines on a wide range of topics including new policy issues that neither the WTO nor existing FTAs yet cover; and (3) its flexibility—this "living agreement" has been and may continue to be expanded in terms of its membership and its trade and investment disciplines. Due to this level of ambition, however, achieving such an agreement may be difficult. Differences in opinion exist, both domestically and among the negotiating partners, on precisely what form the agreement's provisions should take. A broad range of U.S. interests groups view the TPP as a way to "correct" flaws in previous U.S. FTAs, but changes that some groups consider improvements to U.S. trade policy others see as unwarranted intrusions into public policy, or as factors that contribute to economic insecurity for some Americans. Even challenges with "20 th -century" trade issues, such as market access for goods, have yet to be resolved among the TPP partners. Yet, the partner countries have expressed their commitment to achieving this ambitious agreement and the negotiators remain positive about the progress being made. This group of countries has self-selected into the negotiations presumably because it sees the TPP as a catalyst to greater economic growth and prosperity, especially if it is expanded to include other countries. In addition, the large network of existing FTAs among the members could be seen as an indicator of their willingness to cooperate on trade issues and may imply that some of the challenging issues have already been addressed.

The Trans-Pacific Partnership (TPP) is a proposed regional free trade agreement (FTA) being negotiated among the United States, Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. U.S. negotiators and others describe and envision the TPP as a "comprehensive and high-standard" FTA that aims to liberalize trade in nearly all goods and services and include rules-based commitments beyond those currently established in the World Trade Organization (WTO). The broad outline of an agreement was announced on the sidelines of the Asia-Pacific Economic Cooperation (APEC) ministerial in November 2011, in Honolulu, HI. If concluded as envisioned, the TPP potentially could eliminate tariff and nontariff barriers to trade and investment among the parties and could serve as a template for a future trade pact among APEC members and potentially other countries. Congress has a direct interest in the negotiations, both through influencing U.S. negotiating positions with the executive branch, and by considering legislation to implement any resulting agreement. The TPP negotiations have been ongoing for nearly five years and may be concluded in the near term, although several challenging issues remain unresolved. These issues are likely the most sensitive for negotiating parties and may require political-level decisions to reach final agreement. The negotiating dynamic itself is complex. For example, decisions on key market access issues on auto, dairy, sugar, and textiles and apparel may depend on the outcome of rules negotiations involving intellectual property rights or state-owned enterprises, among other issues. Nearly 30 chapters are under discussion in the negotiations, and reports indicate that 9 have been finished. The United States is negotiating market access for goods, services, and agriculture with countries with which it does not currently have FTAs: Brunei, Japan, Malaysia, New Zealand, and Vietnam. Negotiations are also being conducted regarding disciplines on intellectual property rights, trade in services, government procurement, investment, rules of origin, competition, labor, and environment, among other issues. In many cases, the rules being negotiated are intended to be more rigorous than comparable rules found in the WTO. Some topics, such as state-owned enterprises, regulatory coherence, and supply chain competitiveness, may break new ground in FTA negotiations. As the countries that make up the TPP negotiating partners include advanced industrialized, middle income, and developing economies, the TPP, if implemented, may involve restructuring and reform of the economies of some participants. It also has the potential to spur economic growth in the region. As a leading trade policy initiative of the Obama Administration, the TPP serves several strategic goals. It is a manifestation of the Administration's "rebalance" to the Asia-Pacific, and if concluded, may serve to shape the economic architecture of the region. It has the potential to harmonize existing agreements with U.S. FTA partners, attract new participants, and establish regional rules on new policy issues facing the global economy—possibly providing impetus to future multilateral liberalization under the WTO. As the negotiations proceed, a number of issues important to Congress have emerged. One is whether the United States can balance its vision of creating a "comprehensive and high standard" agreement with a large and expanding group of countries, while not insisting on terms that other countries will reject. Another issue is how Congress will consider the TPP, if concluded. The present negotiations are not being conducted under the auspices of formal trade promotion authority (TPA)—the latest TPA expired on July 1, 2007—although the Administration informally is following the procedures of the former TPA. Different views exist regarding the appropriate timing of potential TPA legislation relative to the possible conclusion of the TPP. Other issues include whether the current chapters included in the agreement appropriately address congressional trade policy concerns and how the potential agreement may impact the multilateral trading system and other trade negotiations, including for a proposed U.S.-EU Trans-Atlantic Trade and Investment Partnership (T-TIP) agreement.

The earned income tax credit (EITC), when first enacted in 1975, was a modest tax credit providing financial assistance to low-income working families with children. (It was also initially a temporary tax provision.) Today, the EITC is one of the federal government's largest antipoverty programs, having evolved through a series of legislative changes over the past 40 years. Since the EITC's enactment, Congress has shown increasing interest in using refundable tax credits for a variety of purposes, from reducing the tax burdens of families with children (the child tax credit), to helping families afford higher education (the American opportunity tax credit), to subsidizing health insurance premiums (the premium assistance tax credit). The legislative history of the EITC may provide context to current and future debates about refundable tax credits. The report first provides a general overview of the current credit. The report then summarizes the key legislative changes to the credit and provides analysis of some of the congressional intentions behind these changes. An overview of the current structure of the EITC can be found in Appendix A at the end of this report. For more information about the EITC, see CRS Report R43805, The Earned Income Tax Credit (EITC): An Overview . Major legislative changes to the EITC over the past 40 years can generally be categorized in one of two ways: those that increased the amount of the credit by changing the credit formula or those that changed eligibility rules for the credit, either expanding eligibility to certain workers (for example, certain servicemembers) or denying the credit to others (for example, workers not authorized to work in the United States). Together, these changes reflect congressional intent to expand this benefit while also better targeting it to certain recipients. A summary of some of the major changes to the EITC can be found in Table 1 . A summary of the growth in the EITC in terms of both the amount of the credit and the number of claimants over time can be found in Figure 1 , which includes the dates of key legislative changes to the credit. The origins of the EITC can be found in the debate in the late 1960s and 1970s over how to reform welfare—known at the time as Aid to Families with Dependent Children (AFDC). During this time, there was increasing concern over the growing numbers of individuals and families receiving welfare. In 1964, fewer than 1 million families received AFDC. By 1973, the AFDC rolls had increased to 3.1 million families. Some policymakers were interested in alternatives to cash welfare for the poor. Some welfare reform proposals relied on the "negative income tax" (NIT) concept. The NIT proposals would have provided a guaranteed income to families who had no earnings (the "income guarantee" that was part of these proposals). For families with earnings, the NIT would have been gradually reduced as earnings increased. Influenced by the idea of a NIT, President Nixon proposed in 1971 the "family assistance plan" (FAP) that "would have helped working-poor families with children by means of a federal minimum cash guarantee." Senator Russell Long, then chairman of the Senate Finance Committee, did not support FAP because it provided "its largest benefits to those without earnings" and would, in his opinion, discourage people from working. Instead, Senator Long proposed a "work bonus" plan that would supplement the wages of poor workers. Senator Long stated that his proposed "work bonus plan" was "a dignified way" to help poor Americans "whereby the more he [or she] works the more he [or she] gets." Senator Long also believed his "work bonus plan" would "prevent the social security tax from taking away from the poor and low-income earners the money they need for support of their families." The "work bonus plan" proposal was passed by the Senate in 1972, 1973, and 1974, but the House did not pass it until 1975. The "work bonus plan" was renamed the earned income tax credit and was enacted on a temporary basis as part of the Tax Reduction Act of 1975 ( P.L. 94-12 ). As originally enacted, the credit was equal to 10% of the first $4,000 in earnings. Hence, the maximum credit amount was $400. The credit phased out between incomes of $4,000 and $8,000. The credit was originally a temporary provision that was only in effect for one year, 1975. In addition to encouraging work and reducing dependence on cash welfare, the credit was also viewed as a means to encourage economic growth in the face of the 1974 recession and rising food and energy prices. As the Finance Committee Report on the Tax Reduction Act of 1975 stated: This new refundable credit will provide relief to families who currently pay little or no income tax. These people have been hurt the most by rising food and energy costs. Also, in almost all cases, they are subject to the social security payroll tax on their earnings. Because it will increase their after-tax earnings, the new credit, in effect, provides an added bonus or incentive for low-income people to work, and therefore, should be of importance in inducing individuals with families receiving Federal assistance to support themselves. Moreover, the refundable credit is expected to be effective in stimulating the economy because the low-income people are expected to spend a large fraction of their disposable incomes. The same report also emphasized that the EITC's prime objective should be "to assist in encouraging people to obtain employment, reducing the unemployment rate, and reducing the welfare rolls." One indication of the extent to which this credit was meant to replace cash welfare was that the bill had originally included a provision that would have required states to reduce cash welfare by an amount equal to the aggregate EITC benefits received by their residents. This provision was ultimately dropped in the conference committee. In addition, since the EITC was viewed in part as an alternative to cash welfare, it was generally targeted to the same recipients—single mothers with children. (Childless low-income adults would not receive the EITC until the 1990s, discussed subsequently.) The credit was extended several times before being made permanent by the Revenue Act of 1978 ( P.L. 95-600 ). This law also increased the maximum amount of the credit to $500. In summary materials of that bill, the Joint Committee on Taxation (JCT) stated that the credit was made permanent because "Congress believed that the earned income credit is an effective way to provide work incentives and relief from income and Social Security taxes to low-income families who might otherwise need large welfare payments." The modest increase in the amount of the credit in 1978 was seen as a way to take into account the increase in the cost of living since 1975 (the credit was not adjusted for inflation). Subsequent increases in the amount of the credit in 1984 ( P.L. 98-369 ) and 1986 ( P.L. 99-514 ) were also viewed as a way to adjust the credit for cost-of-living increases, as well as increases that had occurred to Social Security taxes. (The 1986 law also permanently adjusted the credit annually for inflation going forward.) In the early 1990s, legislative changes again increased the amount of the EITC. Eligibility for the credit was also expanded to include childless workers. Several years later, in light of concerns related to the increasing cost of the EITC, as well as concerns surrounding noncompliance, additional changes were made to the credit with the intention of reducing fraudulent claims, better targeting benefits, and improving administration. Over time, policymakers began to turn to the EITC as a tool to achieve another goal: poverty reduction. A 1989 Wall Street Journal article described the EITC as "emerging as the antipoverty tool of choice among poverty experts and politicians as ideologically far apart as Vice President Dan Quayle and Rep. Tom Downey, a liberal New York Democrat." Unlike other policies targeted to low-income workers, like the minimum wage, the EITC was viewed by some as better targeted to the working poor with children. In addition, unlike creating a new means-tested benefit program, the EITC was administered by the IRS. This may have appealed to some policymakers who did not wish to create additional bureaucracy when administering poverty programs. In order to function more as a poverty reduction tool, the formula used to calculate the credit was modified. As previously discussed, the EITC as originally designed did not vary by family size. Thus, as family size increased, the credit became less effective at helping families meet their needs. The EITC was restructured to vary based on family size beginning with the Omnibus Reconciliation Act of 1990 (OBRA90; P.L. 101-508 ) and greatly expanding with the Omnibus Reconciliation Act of 1993 (OBRA93, P.L. 103-66 ). Specifically, following these legislative changes, the EITC was calculated such that at any given level of earnings, the credit was one size for a taxpayer with one child and larger for taxpayers with two or more children. OBRA93 also—for the first time—extended the credit to childless workers. Unlike the expansion of the credit to workers with more than one child, the main rationale for this "childless EITC" was not poverty reduction. Instead the credit was intended to partly offset a gasoline tax increase included in OBRA93. The credit for childless workers was smaller than the credit for individuals with children—a maximum of $323 as opposed to $2,152 for those with one child and $3,556 for those with two or more children in 1996. The childless EITC was also only available to adults aged 25 to 64 who were not claimed as dependents on anyone's tax return. Notably, aside from inflation adjustments, the formulas for the childless EITC and the EITC for individuals with one or two children have remained unchanged since OBRA93. Other legislation passed later in the 1990s—The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA; P.L. 104-193 ) and the Taxpayer Relief Act of 1997 ( P.L. 105-34 )—included modifications to the EITC intended to reduce fraud, limit eligibility to individuals authorized to work in the United States, prevent certain higher-income taxpayers from claiming the credit, and improve administration of the credit. Before and during consideration of PRWORA, Congress was increasingly concerned with the rising cost of the credit. Some policymakers attributed the increasing cost of the program to the significant legislative expansions that had occurred earlier in the decade and the expansion of EITC eligibility to childless workers. In addition, there were concerns, as Speaker of the House Newt Gingrich stated, that "as the EITC becomes more generous, it invite[s] fraud and abuse." A 1994 GAO report had identified significant amounts of the credit claimed in error. Other policymakers were concerned that the credit was available to certain higher-income taxpayers—specifically those with little earned income, but significant unearned income (like interest income, dividends, and rent and royalty income). Finally, "Congress did not believe that individuals who are not authorized to work in the United States should be able to claim the credit." Ultimately, PRWORA addressed these concerns by "tighten[ing] compliance tax rules and mak[ing] it harder for some people to qualify for the credit." These changes included expanding the definition of "investment income" above which an individual would be ineligible for the credit, expanding the definition of income used to phase out the credit so certain taxpayers with capital losses would be ineligible for the credit, and denying the EITC to individuals who did not provide an SSN for work purposes. One year after PRWORA, Congress modified the EITC again with the intention of both improving administration and further limiting the ability of certain higher-income taxpayers to claim the credit. The Taxpayer Relief Act of 1997 (TRA97; P.L. 105-34 ) created penalties for taxpayers who claimed the credit incorrectly, including denying the credit to individuals for 10 years if they claimed the credit fraudulently, that were intended to improve administration of the credit. And if after this period of time, the taxpayer ultimately was eligible for the credit and wished to claim it, they would need to provide the IRS with additional information (as established by the Treasury) to prove eligibility. According to the JCT, these new penalties were enacted because "Congress believed that taxpayers who fraudulently claim the EITC or recklessly or intentionally disregard EITC rules or regulations should be penalized for doing so." In addition, TRA97 included new requirements of paid tax preparers that were also meant to improve administration and reduce errors. Finally, TRA97 expanded the definition of income used in phasing out the credit, by including additional categories of passive (i.e., unearned) income. The rationale for this change, according to the JCT, was that "Congress believed that the definition of AGI used currently [prior to TRA97] in phasing out the credit [was] too narrow and disregard[ed] other components of ability-to-pay." In the 2000s, additional changes to the EITC credit formula were enacted by Congress. These legislative changes expanded the credit for certain recipients—namely married couples and larger families. At the beginning of 2000, there was bipartisan congressional interest in reducing tax burdens of married couples generally (although the means by which they intended to achieve this goal varied). For low-income taxpayers with little or no tax liability, a marriage penalty is said to occur when the refund the married couple receives is smaller than the combined refund of each partner filing as unmarried. (Marriage bonuses also arise in the U.S. federal income tax code. ) In 2001, the JCT identified the structure of the EITC as one of the primary causes of the marriage penalty among low-income taxpayers. Specifically, the JCT found that the phaseout range of the credit and its variation based on number of children could result in smaller credits among married EITC recipients than the combined credits of two singles. As the JCT stated in 2001, Because the [earned income credit] EIC increases over one range of income and then is phased out over another range of income, the aggregation of incomes that occurs when two individuals marry may reduce the amount of EIC for which they are eligible. This problem is particularly acute because the EIC does not feature a higher phase out range for married taxpayers than for heads of households. Marriage may reduce the size of a couple's EIC not only because their incomes are aggregated, but also because the number of qualifying children is aggregated. Because the amount of EIC does not increase when a taxpayer has more than two qualifying children, marriages that result in families of more than two qualifying children will provide a smaller EIC per child than when their parents were unmarried. Even when each unmarried individual brings just one qualifying child into the marriage there is a reduction in the amount of EIC per child, because the maximum credit for two children is generally less than twice the maximum credit for one child. The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA; P.L. 107-16 ) reduced the EITC marriage penalty by increasing the income level at which the credit phased out for married couples. This "marriage penalty relief" was scheduled to gradually increase to $3,000 by 2008. In 2009, the American Recovery and Reinvestment Act (ARRA; P.L. 111-5 ) temporarily increased EITC marriage penalty relief to $5,000. In addition to expanding marriage penalty relief, ARRA also temporarily created a larger credit for families with three or more children by increasing the credit rate for these families from 40% to 45%. A larger credit rate of 45% (as opposed to 40%), while leaving other EITC parameters unchanged (earned income amount and phaseout threshold), resulted in a larger credit for families with three or more children. These two ARRA modifications to the EITC were originally enacted as part of legislation meant to provide temporary economic stimulus. There was debate surrounding whether these temporary modifications should be further extended. After these changes were enacted in 2009, the Obama Administration proposed making these provisions permanent as part of its budget proposals. , During negotiations on the "fiscal cliff" legislation at the end of 2012 (The American Taxpayer Relief Act [ATRA; P.L. 112-240 ]), some Senators expressed a desire to have the EITC modification made permanent. ATRA extended these modifications for five years, through the end of 2017. Ultimately, increased marriage penalty relief and the larger credit for families with three or more children were made permanent by the Protecting Americans from Tax Hikes Act (PATH Act; Division Q of P.L. 114-113 ). Additional changes were made to the administration of the EITC with the intention of reducing improper payments of the credit. Improper payments are an annual fiscal year measure of the amount of the credit that is erroneously claimed and not recovered by the IRS. Improper payments can be due to honest mistakes made by taxpayers as well as fraudulent claims of the credit. The Protecting Americans from Tax Hikes Act (PATH Act; Division Q of P.L. 114-113 ) included a variety of provisions intended to reduce improper payments of refundable credits, including improper payments of the EITC. First, the law included a provision that would prevent retroactive claims of the EITC after the issuance of Social Security numbers. As previously discussed, a taxpayer must provide an SSN for themselves, their spouses (if married), and any qualifying children. The law stated that the credit will be denied to a taxpayer if the SSNs of the taxpayer, their spouse (if married), and any qualifying children were issued after the due date of the tax return for a given taxable year. For example, if a family had SSNs issued in June 2017, the family could (if otherwise eligible) claim the EITC on its 2017 income tax return (which is due in April 2018), but could not amend its 2016 income tax return and claim the credit on its 2016 return (which is due in April 2017). In addition, the law also included a provision requiring the IRS to hold income tax refunds until February 15 if the tax return included a claim for the EITC (or the additional child tax credit, known as the ACTC). This provision was coupled with a requirement that employers furnish the IRS with W-2s and information returns on nonemployee compensation (e.g., 1099-MISCs) earlier in the filing season. These legislative changes were made "to help prevent revenue loss due to identity theft and refund fraud related to fabricated wages and withholdings." With more time to cross-check income on information returns with income used to determine the amount of the EITC, it is believed that this will help reduce erroneous payments of the EITC by the IRS. Previous research by the IRS has indicated that the most frequent EITC error was incorrectly reporting income, and the largest error (in dollars) was incorrectly claiming a child for the credit. Appendix A. Current Structure of the EITC There are eight formulas currently in effect to calculate the EITC (four for unmarried individuals and four for married couples, depending on the number of children they have), illustrated in Table A-1 . For any of the eight formulas, the credit has three value ranges similar to those illustrated in Figure A-1 , for an unmarried taxpayer with one child. First, the credit increases to its maximum value from the first dollar of earnings until earnings reach the "earned income amount." Over this "phase-in range" the credit value is equal to the credit rate multiplied by earnings. When earnings are between the "earned income amount" and the "phaseout threshold"—referred to as the "plateau"—the credit amount remains constant at its maximum level. For each dollar over the "phaseout threshold," the credit is reduced by the phaseout rate until the credit equals zero. This final range of income over which the credit falls in value is referred to as the "phaseout range."

The earned income tax credit (EITC), when first enacted on a temporary basis in 1975, was a modest tax credit that provided financial assistance to low-income, working families with children. After various legislative changes over the past 40 years, the credit is now one of the federal government's largest antipoverty programs. Since the EITC's enactment, Congress has shown increasing interest in using refundable tax credits for a variety of purposes, from reducing the tax burdens of families with children (the child tax credit), to helping families afford higher education (the American opportunity tax credit), to subsidizing health insurance premiums (the premium assistance tax credit). The legislative history of the EITC may provide context to current and future debates about these refundable tax credits. The origins of the EITC can be found in the debate in the late 1960s and 1970s over how to reform welfare—known at the time as Aid to Families with Dependent Children (AFDC). During this time, there was increasing concern over growing welfare rolls. Senator Russell Long proposed a "work bonus" plan that would supplement the wages of poor workers. The intent of the plan was to encourage the working poor to enter the labor force and thus reduce the number of families needing AFDC. This "work bonus" plan, renamed the earned income tax credit, was enacted on a temporary basis as part of the Tax Reduction Act of 1975 (P.L. 94-12). As originally enacted, the credit was equal to 10% of the first $4,000 in earnings. Hence, the maximum credit amount was $400. The credit phased out between incomes of $4,000 and $8,000. The credit was also viewed as a means to encourage economic growth in the face of the 1974 recession and rising food and energy prices. Over the subsequent 40 years, numerous legislative changes have been made to this credit. Some changes increased the amount of the credit by changing the credit formula. Major laws that increased the amount of the credit include the following: P.L. 101-508, which adjusted the credit amount for family size and created a credit for workers with no qualifying children; P.L. 103-66, which increased the maximum credit for tax filers with children and created a new credit formula for certain low-income, childless tax filers; P.L. 107-16, which increased the income level at which the credit phased out for married tax filers in comparison to unmarried tax filers (referred to as "marriage penalty relief"); and P.L. 111-5, which increased the credit amount for families with three or more children and expanded the marriage penalty relief enacted as part of P.L. 107-16. Other legislative changes changed the eligibility rules for the credit. Major laws that changed the eligibility rules of the credit include the following: P.L. 103-66, which expanded the definition of an eligible EITC claimant to include certain individuals who had no qualifying children; P.L. 104-193, which required tax filers to provide valid Social Security numbers (SSNs) for work purposes for themselves, spouses if married filing jointly, and any qualifying children, in order to be eligible for the credit; and P.L. 105-34, which introduced additional compliance rules to reduce improper claims of the credit. Together, these changes reflect congressional intent to expand this benefit while also better targeting it to certain recipients.

Human rights conditions in the People's Republic of China (PRC) remain a central issue in U.S.-China relations. For many U.S. policy-makers, progress in this area represents a test of the success of U.S. engagement with China, particularly since permanent normal trade relations (PNTR) status was established in 2000. Some analysts contend that the U.S. policy of engagement with China has failed to produce meaningful political reform, and that without fundamental progress in this area, the bilateral relationship will remain unstable. Others argue that U.S. engagement has helped to accelerate economic and social change and build social and legal foundations for democracy and the advancement of human rights in the PRC. Many observers argue that violations of civil liberties and cases of political and religious persecution in China have increased in recent years, the leadership remains authoritarian, and economic development, based largely upon trade with the United States, has strengthened the Communist government rather than empowered the people. Other analysts and many Chinese citizens contend that economic and social freedoms have grown considerably, the government's control over most aspects of people's lives has receded, opportunities for providing opinions on policy have increased, and rights activism has sprouted. Disagreements over whether progress has been made often stem from differences over which indicators are emphasized, such as central government policies, local government actions, civil society, or short-term versus long-term trends. In many ways, growing government restrictions on political, religious, and other freedoms and greater assertion of civil rights have occurred simultaneously. This findings of this report reflect the following themes: A crackdown on dissent in 2011 has been attributed to the government's nervousness about continued outbreaks of social unrest, growing rights activism, the upcoming PRC leadership change in 2012-2013, and the potential for Arab Spring-inspired anti-government demonstrations. Some analysts also blame decreasing leverage by the United States on Chinese human rights policies. It is not yet clear how recent PRC government actions will affect social stability, civil society, public opinion, and political reform in China in the medium term. Some experts view the crackdown as representing one of the largest setbacks for liberalization in China since an attempt to launch a new political party, the China Democracy Party, was squelched and its leaders were imprisoned in 1998. Other observers argue that due to the greater political assertiveness of the Chinese people compared to a decade ago, the government likely will seek to avoid a popular backlash, by limiting its repressive actions to selected key activists and dissidents. The PRC government has compromised little, if at all, on popular demands that it perceives to represent challenges to its authority. Serious human rights abuses continue in many areas. The PRC government has shown itself to be particularly intolerant of political dissent, freedom of speech, independent social and religious organizations, resistance to government policies from Tibetans, Uighurs, and Falun Gong adherents, and challenges to the official verdict of the 1989 Tiananmen democracy movement. Many Chinese citizens have experienced some marginal improvements in human rights protections and rights activism has increased. These changes have come about through both government policies and the development of civil society. The government has enacted laws to acknowledge or try to prevent some of the most egregious violations of human rights and abuses of power, strengthened the legal system, and occasionally publicly sympathized with aggrieved citizens. Social groups have engaged in protests to defend their rights, often aided by journalists, lawyers, and activists whose activities put them at risk of physical harm, loss of their professional licenses, harassment of themselves and their families, and imprisonment. The Internet has provided Chinese citizens with unprecedented amounts of information and the opportunity to express opinions publicly. Due to government censorship and other controls and to the non-political nature of most web activity in China, the Internet has proven to be less of a political factor than many observers had expected or hoped. Nonetheless, the Internet has made it impossible for the government to restrict information as fully as before. In many cases, news disseminated independently online has helped to hold government officials more accountable than in the past. The following social variables could potentially provide impetus for political reform in China: A shift in public concerns from local and economic issues to national and political ones; the growth of protest activity that includes not only socially and economically marginalized groups, such as farmers, workers, and migrant laborers, but also the urban middle class, professionals, and private entrepreneurs; linkages among social groups; and the development of new communications media and counter-censorship technologies. The U.S. government has developed a comprehensive array of tactics and programs aimed at promoting democracy, human rights, and the rule of law in China, but their effects have been felt primarily along the margins of the PRC political system. Some experts argue that these policies have had little impact, and are constrained by the overarching policy of U.S. diplomatic and economic engagement with China. Other observers contend that U.S. human rights and engagement policies have helped to set conditions in place in China that are necessary for progress and have helped the U.S. government to remain involved in the process. The People's Republic of China is an authoritarian state in which the permanent leadership role of the Chinese Communist Party (CCP) is inscribed in the Constitution, and the legislative and judicial branches lack the power to check the CCP and the state. Recent speeches by PRC leaders have indicated that the CCP fully intends to maintain its monopoly in power. Although Premier Wen Jiabao, who is thought to be relatively liberal, has advocated deepening political reforms and expanding direct popular elections at the local levels, he has not called for radical change, but rather for incremental progress under the leadership of the CCP. The PRC Constitution protects many civil liberties, including the freedoms of speech, press, association, assembly, and religious belief, but these rights for the most part are not respected in practice. The government regards these ends as subordinate to the CCP's authority and to the policy goals of maintaining state security and social stability, promoting economic development, and providing for economic and social rights. The CCP leadership denounces foreign criticisms of its human rights policies as interference in China's internal affairs, and asserts that perspectives on human rights vary according a country's level of economic development and social system." Under the leadership of CCP General Secretary and President Hu Jintao and Premier Wen Jiabao, both in office since 2003, the PRC government has developed along the lines of what some scholars call "responsive authoritarianism." It has striven to become more responsive, accountable, and law-based. Chinese leaders also have become more sensitive to popular views, particularly those expressed on the Internet. However, the government has rejected political reforms that might challenge its monopoly on power, and continued to respond forcefully to signs and instances of social instability, autonomous social organization, and independent political activity. Although the government has made some progress in enacting laws aimed at curbing some of the most egregious human rights abuses, it has not created or adequately strengthened institutions that would help enforce these laws, such as checks and balances and genuine popular elections beyond the village level. Furthermore, many lawyers, activists, and journalists seeking to protect people's rights or expose violations of them have been harassed or imprisoned by authorities. PRC leaders have tolerated some mass demonstrations against government officials and policies, particularly at the local level, but also have arrested protest leaders. Communist Party and state officials have retained a significant degree of arbitrary authority, and corruption has negated many efforts to improve governance. Many experts and policy makers have sharply disagreed over the best policy approaches and methods to apply toward human rights issues in China. Differing U.S. goals include promoting fundamental political change in the PRC and supporting incremental progress. Possible approaches range from placing human rights conditions upon the bilateral relationship to inducing democratic change through bilateral and international engagement. Policy tools include private discussions; sanctions; open criticism of PRC human rights policies; coordinating international pressure; support of and contact with dissidents; bilateral dialogue; human rights, democracy, and related programs; promoting Internet freedom; public diplomacy efforts; and monitoring and highlighting human rights abuses. Since the end of the 1980s, successive U.S. administrations have employed broadly similar strategies for promoting human rights in China. Some analysts have referred to the U.S. foreign policy approach of promoting democracy in China through diplomatic and economic engagement, without directly challenging Communist Party rule, as a strategy of "peaceful evolution." President Bill Clinton referred to this policy as "constructive engagement" – furthering diplomatic and economic ties while pressing for open markets and democracy, calling it "our best hope to secure our own interest and values and to advance China's." President George W. Bush also came to view U.S. engagement as the most effective means of promoting U.S. interests and freedom in China. As China's importance in global economic, security, environmental, and other matters has grown, both the Bush and Obama Administrations aimed to forge bilateral cooperation on many fronts, while disagreeing deeply with Beijing on many human rights issues. In remarks during the summit with PRC President Hu Jintao in January 2011, President Obama referred to the universality of the freedoms of speech, assembly, and religion, a point frequently made by President Clinton. Echoing a theme evoked by President Bush in his second term, President Obama also suggested that greater respect for human rights in China would benefit China's success and global stability. In December 2009, Secretary of State Hillary Clinton described the Administration's human rights policy as one of "principled pragmatism." This policy is based upon the premise that tough but quiet diplomacy is both less disruptive to the overall relationship and more effective in producing change than public censure. Some policy observers have admonished President Obama for reducing the prominence of human rights in U.S. policy toward China and favoring other concerns, such as economic, security, and environmental issues. Other analysts have argued that Sino-U.S. cooperation in these areas creates greater and more favorable opportunities for promoting human rights in the PRC. Some critics have pointed to a number of actions (or inactions) by the Administration, including the postponement of a White House meeting with the Dalai Lama until after President Obama's trip to China in November 2009, and Secretary Clinton's February 2009 statement that pressing Beijing on human rights issues "can't interfere" with other key areas of the relationship. Some policy makers also have criticized the Administration for producing too few concessions, such as political prisoner releases, by the PRC government. Nonetheless, the Administration has pressed China on human rights issues, both privately and openly. During his visit to China in November 2009, President Obama briefly spoke about human rights and Internet freedom during a town hall meeting with university students in Shanghai. Although the broadcast of the speech was limited to Shanghai and transcripts on the Internet were censored, thousands of Chinese reportedly accessed the White House website and cheered Obama's appeal for Internet freedom. Secretary Clinton has spoken out on human rights issues, including criticizing China's Internet censorship and alleged hacking of U.S. companies in January 2010, demanding Nobel laureate Liu Xiaobo's release from prison in October 2010, calling for the release of dissident artist Ai Weiwei in April 2011, and discussing China's human rights record, calling it "deplorable," in a June 2011 interview. In July 2011, President Obama met with the Dalai Lama at the White House and reiterated his support for human rights in Tibet and for dialogue between the Dalai Lama and Beijing. The U.S. Congress has been at the forefront of maintaining human rights as a pillar of U.S. policy toward the PRC, through such measures and efforts as sanctions, resolutions, hearings, and democracy assistance in support of human rights in China and in Tibet. Congress legislated sanctions following the Tiananmen military crackdown in 1989 and has withheld support for United Nations Population Fund programs in China. Members of Congress have introduced resolutions calling attention to human rights abuses in the PRC, including the imprisonment and detention of political, religious, and minority figures; persecution of Tibetans, Uighurs, and Falun Gong adherents; censorship of the Internet and other mass media; coercive abortions; and China's deportation of North Korean refugees. Congressional committees, the Tom Lantos Human Rights Commission, the Congressional-Executive Commission on China, the U.S. Commission on International Religious Freedom, and other congressionally mandated bodies and fora have investigated, publicized, and reported on human rights conditions in China. Foreign operations appropriations measures have authorized and funded democracy, human rights, and rule of law programs in the PRC; economic, cultural, and environmental programs in Tibet; and Internet freedom efforts in China and other countries. In the winter and spring of 2011, the PRC government intensified efforts to suppress China's increasingly active civil society, including rights defenders, activist lawyers, bloggers and other critical voices, non-governmental organizations (NGOs), independent churches, restive ethnic minority groups, and others whom it deemed threatening to social and political stability. Chinese security forces reportedly detained, arrested, or held incommunicado between 50 and 100 people, including 20 who face prosecution for subversion, and placed another roughly 200 people under heavy surveillance for political reasons. According to many experts, the breadth and intensity of the crackdown in 2011 is unprecedented under the current PRC leadership. Recent major events and cases include large police presences in Beijing and Shanghai in February 2011 in attempts to head off Middle East-inspired anti-government demonstrations, and the April 2011 arrest of one of China's best-known artists and government critics, Ai Weiwei, for tax evasion and other charges. (Ai was released on June 22, 2011.) The Congressional-Executive Commission on China provides a list of people targeted in the crackdown. The recent spate of arrests appeared to be part of a broader and longer-term policy of adapting to and regulating a fast-changing and increasingly dynamic society while selectively applying tactics of intimidation and coercion against individuals and groups that the state perceives to be challenging or publicly questioning its authority or control. Several indicators support this trend. The number of people arrested for endangering state security, the most serious political crime, was over 950 in 2010, according to one estimate, of which a majority were Tibetans and Uighurs charged with "splittism" and related crimes. This number represents a 44% decline from 2008, when protests in Tibetan regions and preparations for the Beijing Olympics gave rise to many arrests, but still a substantial increase from pre-2008 levels. PRC public security officials reportedly issued statements in 2009-2010 in support of an "indefinite extension of a security crackdown" aimed at "safeguarding social stability," while the government has bolstered the budget and capacity of the police forces. State control methods reportedly have increasingly made use of coercive, extra-judicial tactics, including physical harassment or beatings by plain-clothes agents, forced disappearances, and threats against and harassment of family members. The PRC government's recent attempts to silence its critics and subdue social forces have been widely attributed to the recent political unrest in the Middle East and the CCP's fear of similar, large-scale protests at home. Some experts argue that the PRC government has done a better job of satisfying public demands for economic opportunity and social justice than many Middle Eastern governments, and that political movements on a national scale are unlikely. Nonetheless, China's leaders, who face a leadership transition in 2012-2013, have reason to be concerned about their ability to respond to democratic forces in the society. Deep and manifold popular grievances against mostly local government officials are well-documented—roughly 90,000-100,000 "mass protests" have been reported annually in the past several years. In 2010, there were 72 "major" incidents of social unrest, according to a Chinese study, a 20% increase from the previous year. Awareness of legal and human rights among Chinese citizens, in some ways promoted by the government, continues to grow, while a small but increasing number of activists, lawyers, journalists, and others has continued to champion human rights causes. In February 2011, an online appeal that appeared to be authored by Chinese activists overseas called on people in China to take part in a "Jasmine Revolution"—peaceful "protest walks" in major cities on consecutive Sundays—to highlight the desire for greater democracy in China in light of popular movements sweeping the Middle East. Although a few hundred protesters reportedly were turned away by public security forces from the main city square in Shanghai, uniformed and plainclothes police and curious onlookers appeared to far outnumber demonstrators in Beijing, while in other cities there was little if any protest activity. Government authorities reportedly detained dozens of human rights activists and lawyers, charged several prominent dissidents with subversion, and physically assaulted and threatened foreign reporters. In October 2010, the Nobel Committee awarded Liu Xiaobo, formerly a professor at Beijing Normal University and a long time political dissident, activist, and writer, the Nobel Peace Prize for his "long and non-violent struggle for fundamental human rights." He had spent three years in prison for his role in the 1989 democracy movement and three years in a labor camp (1996-1999) for openly questioning Communist Party rule. From 2003 to 2007, Liu served as President of the Independent Chinese PEN Center, which advocates freedom of speech and press, and experienced frequent harassment by local authorities. In December 2008, Liu helped draft "Charter '08" commemorating the 60 th anniversary of the United Nations' adoption of the Universal Declaration of Human Rights. The document, signed by 300 Chinese citizens and posted on the Internet, called for human rights and fundamental changes in China's political system. It eventually garnered roughly 10,000 additional signatures online. The PRC government shut down the Charter's website, harassed, interrogated, or denied career benefits to dozens of signatories, and arrested Liu. In December 2009, a Beijing court sentenced Liu to 11 years in prison on charges of "inciting subversion of state power." Following the announcement of the Nobel Peace Prize, the PRC government harassed, detained, interrogated, placed under house arrest, denied visas to, and confiscated the computer equipment of dozens of fellow Chinese dissidents, political activists, and family members. It barred members and representatives of Liu's family from traveling to Oslo to accept the prize, and blocked western news media in the days leading up to the awards ceremony. The PRC government also reportedly lobbied foreign governments, warning them not to send diplomats to the Nobel ceremony. In the spring and summer of 2010, China experienced a surge in labor disputes and unrest, including three dozen strikes at Foxconn, Honda, Hyundai, and other foreign-owned factories in Guangdong province. In addition, many less-noticed labor incidents occurred "everywhere" and in "all kinds of enterprises." These developments indicated an evolving relationship between workers, enterprises, and the government. Wage pressures—caused by China's economic development, a shortage of young workers due to demographic changes, the rising value of the renminbi , and greater enforcement of the 2008 Labor Contract Law—coupled with widening income disparities, a growing awareness of rights, and rising expectations among China's new generation of workers, helped to fuel the unrest. At Taiwan electronics giant Foxconn, known as the world's largest supplier of components for global brands such as Apple, Microsoft, and Hewlett-Packard, strikes in some of its factories in China were preceded by the suicides of 11 Chinese employees earlier in the year. Many observers and labor activists attributed the suicides to highly demanding and stressful working conditions. Most labor protesters sought higher wages, improved working conditions, and enforcement of PRC labor laws, although some workers also demanded the right to elect their own union representatives or form their own unions. Some Chinese labor experts and official sources expressed support for higher wages, a greater advocacy role for China's official union, the All China Federation of Trade Unions (ACFTU), and the process of collective bargaining. Some legislative proposals at the provincial and national levels supported the right to strike. Compared to past labor movements in China, the strikes of 2010 were unusual for several reasons: the official media covered them; they resulted in positive results for many workers, such as substantial pay raises; labor organizers skillfully used Internet social networking tools; and, in some cases, management negotiated directly with strike leaders. However, as in the past, the activism of workers did not represent a national labor or political movement. For the most part, workers did not organize on a long-term basis or build linkages between enterprises, and their aims were narrow or focused on wages and working conditions. Moreover, strikers at some enterprises exploited nationalistic or anti-Japanese sentiment, thereby reducing antagonism between labor and the government. China's leaders, meanwhile, remain vigilant against the development of a national labor movement, do not allow the formation of independent unions or democratic elections for ACFTU representatives, and have not adopted proposals to formally allow strikes. Roughly two dozen labor activists are known to be in jail. The past few years have witnessed a mixed picture regarding human rights conditions in China. On the one hand, human rights organizations and commissions have reported worsening and deteriorating conditions in China. None of the groups known to suffer the greatest persecution by the PRC government has experienced real improvement in overall treatment, according to reports. These groups include Tibetans and ethnic Uighur (Uygur) Muslims, leaders of unsanctioned Christian churches, Falun Gong practitioners, political dissidents, and human rights defenders. The Nobel Committee's award of the 2010 Peace Prize to jailed dissident Liu Xiaobo, which the PRC government denounced as a western political ploy to weaken China, highlighted the Chinese leadership's deep resistance to change. On the other hand, the PRC government has continued to enact laws and policies aimed at reducing some of the most egregious human rights abuses, protecting property and labor rights, and promoting government transparency and citizen input. Moreover, the official press has become more critical of some human rights abuses. Major, ongoing human rights violations in China include the following: excessive use of violence by security forces and their proxies; unlawful and abusive detention; torture; arbitrary use of state security laws against political dissidents; coercive family planning policies; state control of information; harassment and persecution of people involved in unsanctioned religious activities, including worship in unregistered Protestant "house churches" and Catholic churches that express loyalty to the Pope; and mistreatment and deportation of North Korean refugees. Many Tibetans, Uighurs, and Falun Gong adherents have been singled out for especially harsh treatment. The following ongoing human rights abuses, some of which are discussed at greater length elsewhere in this report, represent a selection of human rights issues in China. Harassment, beatings by public security forces and government agents, house arrest, and unlawful detentions of petitioners, protest leaders, human rights attorneys, journalists, dissidents, and others. Unlawful killings of persons in state custody; family members generally are not allowed to investigate the causes of such deaths. Physical abuse and the use of torture by the state against political detainees and criminal suspects, often resulting in forced confessions or renunciations of faith, despite government efforts to reduce such practices. Arbitrary use of state security laws against political dissidents, Tibetans, Uighur Muslims, Internet bloggers, and others. Sporadic reports of coercive abortions, forced sterilizations, and other related, unlawful government actions against women. Strict controls over and punishments for public speech, discussion, and reporting of politically sensitive topics, such as the Tiananmen events of 1989, Taiwan relations, Tibet, Falun Gong, and the legitimacy of the Chinese Communist Party. Harassment and arrests of Christians worshipping in unofficial churches. Detention and arrests of Tibetans and Uighur Muslims suspected of engaging in "splittist" and other anti-government activities. Persecution of Falun Gong adherents. Repatriation of North Korean nationals residing in China, who likely face severe forms of punishment after returning North Korea, in violation of the U.N. Refugee Convention and its protocols. The Dui Hua Foundation , a non-profit organization that reports on human rights issues and monitors prisoners of conscience—political and religious prisoners and detainees—in China, estimates that there are roughly 25,000 such individuals in prisons, reeducation through labor (RTL) centers, and other facilities. The vast majority were sentenced for involvement with "cults" such as Falun Gong, endangering state security, or committing "counterrevolutionary" crimes. Sentences for state security crimes are relatively lengthy (5-15 years or longer), while many Falun Gong detainees have served one or more terms of up to 3-4 years in RTL camps. Many petitioners, generally citizens from rural areas who file complaints at petition offices in Beijing and provincial capitals seeking redress for government abuses and misconduct, reportedly are sent to secret detention centers or "black jails," where they lack legal protections and face a variety of abuses. In Beijing alone, thousands of people reportedly are detained illegally in such facilities, which number between 50 and 73, each year. Many petitioners, activists, dissidents, underground religious worshippers, Falun Gong practitioners, and others reportedly also have been held in psychiatric ( ankang ) hospitals for the criminally insane, where they have been forced to take medications, denied contact with their families, and subjected to rights abuses. In 2010, more than 100 Chinese lawyers reportedly urged the government to end the practice of detaining sane people in mental health facilities. Reeducation through labor ( laojiao ) or RTL, an administrative measure, empowers the police to sentence persons found guilty of minor or non-criminal offenses, such as petty theft, prostitution, unlawful religious activity, and "disrupting social order," to a maximum of three to four years in labor camps without trial. Approximately 300 RTL centers holding roughly 250,000 people have absorbed large numbers of individuals deemed by the state to be a threat to social or political stability. According to some estimates, normally between 2% and 10% of the RTL population are being held for political reasons. Many Falun Gong adherents were sent to RTL camps during the height of the crackdown a decade ago, at one time reportedly constituting up to half of all inmates. The National People's Congress and Party officials have openly discussed reforming the RTL system, including reducing the use of the measure, shortening terms, improving conditions, providing better legal protections for detainees, particularly minors, and providing better judicial oversight. In 2010, two Chinese legal scholars debated reforming the RTL system in a series of editorials. Xue Feng, a China-born, naturalized U.S. citizen, was arrested in Beijing in 2007 on charges related to his acquisition of a Chinese database on China's oil industry while working for an American firm. In July 2010, after having been held incommunicado for a period and allegedly tortured, Xue was sentenced to eight years in prison for providing state secrets to foreigners. Xue claimed that he had believed the database to be commercially available. U.S. consular officials have had regular contact with Xue, although U.S. officials were denied access to Xue's November 2010 appeal hearing, in violation of the 1980 U.S.-China Consular Convention. Another naturalized U.S. citizen, David Wei Dong, was sentenced in 2005 to 13 years in prison on the charge of espionage (spying for Taiwan). He is said to be in poor health. Dong's sentence was reduced by 18 months in 2010. While the government led by President Hu Jintao and Premier Wen Jiabao has placed more emphasis upon social stability and economic development than political reform, it has enacted major laws aimed at reducing some of the most serious patterns of human rights abuse. In 2004, the phrase, "the State respects and protects human rights" was added to the PRC Constitution. New laws and regulations designed to protect or promote human rights include those related to criminal defendants, the use of torture, the death penalty, labor conditions, private property, and government transparency and responsiveness. The PRC government's 9 th White Paper on Human Rights reported that in 2009, procuratorial organs found 22,268 unlawful actions related to people in detention and prison and urged corrective actions to be taken on 337 cases of excessive detention. Rights of the Accused: In July 2006, the state enacted prohibitions on specific acts of torture and requirements that interrogations of criminal suspects be video-recorded. These regulations followed a 2004 law forbidding the use of torture to obtain confessions. In 2010, the PRC government issued new rules and regulations intended to reduce physical abuses of detainees and inmates, including rejecting evidence obtained through torture, raising the accountability of state personnel for deaths and injuries sustained by people in their custody, and punishing police misconduct. However, many reports of torture continue, and state compensation for wrongful detention and physical and mental abuse suffered by detainees remains the exception rather than the rule. Organ Transplants: In 2006 and 2007, PRC regulations banning trade in human organs went into effect. They stipulated that the donation of organs for transplant be free and voluntary. These restrictions followed growing evidence and international criticism of a booming and unregulated international trade in organs of executed Chinese prisoners, including what one report claimed were "large numbers" of Falun Gong practitioners. State Secrets Law: In 2010, the PRC government amended legislation to reduce arbitrary use of the "state secrets" law and to make it easier for citizens to obtain compensation due to state negligence or abuse of power. However, according to most observers, the law remains vague and still can be used broadly against political dissidents and others. The Death Penalty: According to Amnesty International and other groups, China is believed to execute several thousands of people each year. In March 2007, the Supreme People's Court was granted sole power to review and ratify all death sentences, following four years of discussion among the CCP leadership. In 2010, the National People's Congress amended the Criminal Law to reduce the number of crimes punishable by death from 68 to 55. In May 2011, the Supreme People's Court instructed lower courts to suspend death sentences for two years for "all cases that don't require immediate execution." Labor Rights: In March 2007, China's legislature passed the Labor Contract Law to help enforce the rights of workers. The law, which went into effect in January 2008, reportedly spurred an initial dramatic rise in labor dispute arbitration cases and strikes. After a period in which enforcement was weakened due to the global economic crisis, the law was a catalyst for a new surge in labor unrest in 2010. Property Rights: In March 2007, the National People's Congress passed a constitutional amendment designed to protect property rights that had been debated since 2002. The new property law helps to protect private entrepreneurs, urban home owners, and farmers whose crop lands often risk seizure by government-backed real estate developers. In October 2008, the government issued new measures allowing farmers to lease and sell rights to use the property allocated to them by the state. Government Transparency: In April 2007, the PRC government announced new rules requiring greater disclosure of official information. In addition, institutional and legal mechanisms were established to provide for greater government responsiveness and accountability. In part, these measures represented attempts to compel local governments to reveal financial accounts related to land takings in rural areas. Government Responsiveness: During the past several years, the government has sought greater public input on policy questions through consultation with experts and think tanks, public hearings, the Internet, and other channels. The Chinese Communist Party also has begun experimenting with soliciting recommendations on candidates for local Party positions. Human Rights Action Plan: In April 2009, the PRC State Council released a two-year "action plan" that pledged an increased government commitment to human rights, including farmers' rights over land use, due process, freedom from torture, and expanded citizen participation and consultation. The government declared that its policy was designed to help bring China up to international standards as prescribed in the PRC Constitution, the Universal Declaration of Human Rights, and the International Covenant on Civil and Political Rights. As the plan expired on December 31, 2010, many human rights activists criticized its limited scope, its emphasis on economic and social rather than political and civil rights, and continued human rights violations in China. In July 2011, the State Council Information Office announced that the government was drawing up a four-year human rights plan which, as some analysts suggested, appeared designed primarily to address economic and social grievances. Although the Party remains the final, undisputed authority, non-state actors play a small but growing role in policy-making, political discourse, and social activity. In some cases, the state has promoted civil society as a way to help promote social welfare. In other cases, civil society activists have pushed the boundaries of permissible social activity at great personal risk. Lawyers, journalists, and activists have been at the forefront in helping to protect and promote human rights and the public interest, although they have faced severe restrictions. They may form the beginnings of a small, loosely organized, and still largely latent human rights movement, in which "civil elites" work with grass roots groups to safeguard and promote rights. The PRC government has expressed both an appreciation for the public contributions of social or civil society organizations (CSOs) and a wariness about their potential autonomy, intentions, and foreign contacts. Social organizations, which generally are required to be sponsored by a government agency, face complicated challenges related to their legality, financing, and political survival. According to PRC official estimates, China has over 430,000 registered social organizations, compared to 288,000 in 2004. When CSOs that are not officially registered are included, the total number of social organizations is estimated to be several million. These groups include those that are state-administered, those that are formed outside of the government but have an official sponsor, those that register as businesses because they cannot secure a state sponsor, and unregistered student, community, and grassroots organizations. Environmental groups have been at the forefront of the development of social organizations in China. Other areas in which CSOs operate include legal aid, public health, education, poverty alleviation, and rural development. In the middle of the last decade, after nearly a decade of steady growth, Beijing began to tighten restrictions on social organizations while expressing suspicions about foreign funding and foreign NGOs operating in China. The government has been especially fearful of the potential for foreign NGOs to help foment political unrest, and reportedly established an office to monitor foreign NGOs and their Chinese partners. PRC leaders expressed the fear that China's fledgling civil society, combined with foreign "democracy assistance" and the involvement of international NGOs, could bring about a "color revolution." In 2010, the PRC government continued to apply pressure on civil society groups through the "selective enforcement of regulations." The PRC government limits the potential growth and influence of civil society organizations through legal and extra-legal means. For example, PRC laws prohibit social organizations from establishing branches and engaging in public fundraising. Many CSOs have come to rely heavily upon foreign grants. However, in 2010, the State Administration for Foreign Exchange issued a new set of requirements for accepting foreign donations, making it difficult for non-officially registered social organizations to accept foreign funding. The new rules also warned that such donations "shall not go against social morality or damage public interests and the legitimate rights and interests of other citizens." The government has forbidden grants from some foreign democracy groups, and has punished politically provocative social organizations. The industrial city of Shenzhen, bordering Hong Kong, has roughly 3,500 social organizations, more than double the national average per capita. In 2009, the municipality began to carry out reforms, in partnership with the Ministry of Civil Affairs, which have been debated but not enacted at the national level. The city has begun to ease legal restrictions on CSOs, allowing them to register without direct supervision by a government entity, to solicit funding within China and overseas, and to hire foreigners. Some labor groups in Shenzhen, however, reported that they were denied the right to register as social organizations. China's legal system has made significant strides since the Cultural Revolution (1966-1976), when legal and judicial institutions were severely weakened and heavily politicized. According to some analysts, legal reforms may ultimately provide foundations for far-reaching social and political change in China. The state still wields disproportionate power against citizens and legal activists and continues to interpret the law arbitrarily in many cases. However, due to the development of the legal system, the government has been compelled to acknowledge at least some claims regarding violations of legal rights. Although some experts suggest that most Chinese still do not place much faith in the nation's courts, other analysts contend that PRC citizens have rising expectations that the state will honor basic legal rights. According to many reports, rising legal awareness and the development of laws have resulted in the growth of legal activity. Chinese citizens increasingly are turning to the courts to assert claims and even to sue public officials. More than 150,000 cases are filed annually against the government, although the rate of success remains low. Some reports point to a trend of modest growth in cases and a more dramatic growth in the number of appeals. PRC lawyers also have begun to file "public interest" cases in growing numbers. Though rarely successful, these cases often draw publicity through the mass media and help to further spread legal consciousness. China's legal profession has grown quickly from a small base. The country reportedly has roughly 190,000 lawyers, an increase from 110,000 in 2005, or about one for every 7,000 people. This ratio compares to about one lawyer for every 6,000 people in Japan and every 300 in the United States. China's changing legal environment has provided an opening for human rights attorneys, albeit one that is fraught with personal risks. In the past decade, several dozen lawyers in China have made names for themselves by taking on sensitive rights cases against government entities or economic enterprises. Law firms and lawyers who have pursued prominent human rights or politically sensitive cases have faced a range of troubles, however, including closure of law offices, disbarment, unlawful detention, house arrest, and prison sentences. Many human rights and defense lawyers have been harassed by officials or abducted and beaten by agents of local governments or economic interests. In recent years, the PRC government has stepped up its harassment of many lawyers and law firms that work on prominent human rights or politically sensitive cases. In 2010, the licenses of about a dozen attorneys who had accepted human rights cases were suspended. In 2008, an amended Law on Lawyers went into effect. Legal reforms included permitting defense lawyers to meet with clients without first seeking permission from judicial authorities; banning police from observing conversations between lawyers and clients; reducing restrictions on access to case files and obtaining evidence; and exempting statements made by lawyers in the courtroom from prosecution. The PRC court system also has implemented programs to strengthen the competence and professionalism of judges and the effectiveness of the judicial system. Although the new legal provisions provide some protections for attorneys and their clients, defense lawyers remain highly vulnerable, and continue to complain of the "three difficulties of criminal defense"—gaining access to detained clients, reviewing prosecutors' case files, and collecting evidence. Furthermore, pursuant to Article 306 of China's Criminal Law, any defense lawyer accused of fabricating evidence or inducing a witness to change his testimony can be immediately detained, arrested and prosecuted for perjury. Hundreds of lawyers reportedly have been prosecuted under Article 306, although the majority of them have been acquitted. Despite reforms around the edges, the legal and judicial systems in China remain fundamentally flawed. The Communist Party does not accept the notion of a fully independent judiciary. Although there appears to be an increasing number of cases that are dismissed by PRC courts due to insufficient evidence, the government continues to place a heavy emphasis on establishing the guilt of defendants. There is no adversarial process, no presumption of innocence, no protection against double jeopardy, and no law governing the type of evidence that may be introduced. In many instances, police, prosecutors and judges disregard the protections that Chinese law does offer. In criminal and political cases, sentences are decided not by judges but by a court committee named by the Party. The conviction rate for criminal defendants, most of whom did not have legal counsel, was over 99% in 2009. China has the largest number of Internet users in the world, with roughly 450 million people online, including over 300 million mobile Internet users and tens of millions of bloggers. According to one estimate, the number of micro-bloggers in China is expected to reach 100 million in 2011. Although most Internet users in China do not view the medium as a political tool, it has provided many netizens with unprecedented amounts of information, news, and opportunities to express opinions, as well as means to organize protests. While the PRC government generally has managed to prevent politically sensitive information from being disseminated on the Internet or used for political purposes, it has not been able to control all information all the time. The PRC government employs a variety of methods to control online content and expression, including website (URL) blocking and keyword filtering; regulating Internet service providers, Internet cafes, and university bulletin board systems; registering websites and bloggers; and occasionally arresting high profile "cyber dissidents." The state routinely blocks many websites, including Radio Free Asia, international human rights websites, and many Taiwan news sites. Nervous about social media as a tool for political organization, the government filters international social networking, blogging and micro-blogging, video, and file sharing sites, such as Facebook, Blogger, Twitter, and YouTube, and offers Chinese versions of them, which it can better control. The government reportedly also has hired thousands of students to express pro-government views on websites, bulletin boards, and chat rooms. Some analysts argue that the PRC government cannot control all Internet content and use, but its selective targeting of users and services creates an undercurrent of fear and promotes self-censorship. In July 2010, major Chinese Internet portals reportedly shut down the blogs of at least 100 prominent scholars, lawyers, and activists. In 2010, according to Reporters Without Borders, 30 reporters and 74 "cyber dissidents" were in prison in China. Many international English news sites, such as the WashingtonPost.com , NYTimes.com , CNN.com , and Voice of America (English) are generally not jammed, while many Internet users in China circumvent government filtering through the use of proxy servers or virtual private networks using special software. Such methods have enabled many Chinese to access Twitter—dissident artist Ai Weiwei was an avid user before his arrest—despite government censorship of the site. The state has the capability to block news of events and to partially shut down the Internet. In the Xinjiang Uighur Autonomous Region, following the ethnic unrest that erupted there in July 2009, the government blocked the Internet for ten months. Nonetheless, the sheer volume of information on the Internet means that the state often acts after news is already disseminated, if only fleetingly, online. Bulletin and comment boards, chat rooms, blogs, and social networking and other outlets have allowed for an unprecedented amount of information and public comment on social issues. Although periodically blocked by the government, blogs have daringly pushed the limits of public discourse. Twitter and domestic micro-blogging sites helped to spread word about Nobel award winner Liu Xiaobo until government censors caught up with the online traffic. One study found that 61% of blogs carried "critical" opinions, including those related to society, government, corporations, and public figures, while 36% of blogs demonstrated "pluralism" or two or more different perspectives. The blogosphere reportedly has been an important forum for discussion about the ecological damage thought to have been caused by the Three Gorges Dam. Internet and cellular technologies have enhanced the abilities of activists and aggrieved citizens to assemble and to record and publicize social protests and the actions of government officials. In the summer of 2010, the Internet and cell phones helped disgruntled and striking workers throughout China to communicate domestically and internationally, expose human rights abuses, learn from each other's protest strategies, and research relevant labor laws. The threat of public exposure and condemnation reportedly has compelled some government officials to conduct affairs more openly. The PRC government has referred positively to the "Internet's role in supervision." One report lists a growing number of cases in which large-scale "Internet protests" have resulted in the punishment of errant officials or retractions of policies. Several government departments have set up "informant websites" to facilitate the reporting of corrupt or negligent officials. Furthermore, official news outlets have become much quicker to report on news events, albeit the government's version of the stories, in order to respond to news that has been spread independently on the Internet. The PRC government has displayed a growing nervousness about the Internet's influence on Chinese society and politics, although it has attempted to enact and enforce restrictions judiciously and selectively, and to induce self-censorship, in order to avoid provoking an uproar among China's online and foreign business communities. In recent years, the government has attempted to impose greater surveillance upon Internet users. Although this effort ostensibly has focused upon curtailing Internet pornography and other illegal content, it also has had a chilling effect on political content and discourse. New guidelines include requiring users to provide their real names and official identification numbers when they post online comments or patronize Internet cafes and public libraries. Applicants for ".cn" domain names now must provide a color headshot photo as well as other forms of personal identification. Internet cafes are obligated to install software to track online activity, although they reportedly have been somewhat lax regarding obtaining personal information. The Ministry of Industry and Information Technology has increased pressure on Internet service providers to monitor the content and online activities of individuals and webmasters, including the transfer of state secrets. In May 2011, the PRC government created a new central agency, the State Internet Information Office, to better coordinate the myriad agencies that oversee the Internet in China. The Internet has proven to be less of a political factor than many observers had expected or hoped. Users who mine the Internet for political information reportedly make up a small minority, and between 2% and 8% of Internet users in China access proxy servers to get around government-erected firewalls. For many of China's educated elite who frequent English-language sites, the availability of foreign news to a minority of Chinese citizens is not nearly as critical as the ability to seek political change on the basis of such information. Such ability remains substantially curtailed. Furthermore, some analysts suggest that the limited amount of Internet freedom in China defuses political activism by allowing people to vent their opinions online. Finally, many Chinese Internet users support the idea of censorship, particularly the government's efforts to ban online pornography, gambling, illegal commerce, phishing, and spam. Nonetheless, the State Department reported that in the past year, a small community of dissidents and political activists "continued to use the Internet to advocate and call attention to political causes such as prisoner advocacy, political reform, ethnic discrimination, corruption, and foreign policy concerns." In January 2010, Google, at the time the second-most popular search engine in the PRC after China's Baidu , and reportedly the least censored, claimed that Chinese hackers had attacked its Gmail service and corporate network as well as the computer systems of many other large U.S. corporations in the PRC. Google's chief legal officer announced that the company would no longer censor results on Google.cn, even if that meant having to shut down its search engine, and potentially its offices, in China. The PRC government accused Google of violating a written promise to filter its search engine and abide by Chinese laws, after the company began re-routing users automatically to its Hong Kong site, which Google does not censor. In July 2010, China renewed Google's license, after the company set up a link on its landing page to its Hong Kong search engine, rather than continuing to automatically re-direct Chinese customers to the Hong Kong site. Although Google does not censor its Hong Kong search engine, the PRC government can block sites or search results that it deems undesirable for Internet users in mainland China. Some analysts regarded this as a compromise—Google can still be accessed in China (through Hong Kong), but there is no direct link to the Hong Kong site. Google's share of China's search-engine market fell to 19.6% in the fourth quarter of 2010 from 30% a year earlier, according to research company Analysys International. Baidu's market share rose to 75.5% from 58% at the end of 2009. In June 2011, Google claimed that hackers likely originating in China attempted to access hundreds of Gmail accounts, including those of U.S. government officials. The PRC government denied involvement in both the 2009 and 2011 hacking incidents. The state directly controls the largest mass media outlets, pressures other media enterprises regarding major or sensitive stories, and imposes severe measures against its critics. However, overall, the PRC government exercises less control over news and information than it did a decade ago, and in the past year, the "range of permissible public discourse continued to expand, with significant exceptions." One scholar characterizes state control of the media as evolving from one of "omnipresence to selective enforcement." The greater volume and variety of news reporting has not translated into fundamental advances in freedom of expression, but nor have new regulations and policies affecting journalists and other critical voices significantly curbed the flow of information, thanks in large part to the Internet. In some cases, the government has supported journalistic efforts to expose official corruption and incompetence, particularly at the local level. The press has become more open about issues related to food safety, highlighted the challenges facing social organizations, lawyers, petitioners, and Internet users, and documented and broached sensitive issues, such as social unrest, abuses of detainees, and the network of black jails. Increasingly commercialized media outlets negotiate a delicate balance between responding to growing public demands for information and remaining within the bounds of what authorities will allow and advertisers will support. Under the economic reform policies of the past two decades, a burgeoning private media industry has developed, pushing the limits of social, cultural and, to a small extent, political content. Traditional state media have had to provide more probing and provocative fare in order to attract readers, stay competitive, and respond to news and public opinion appearing on the Internet. The chief editor of a major official publication explained that he is pressured by both the market and his Communist Party bosses: "I live between them. But the market has a bigger and bigger influence." However, another study suggests that reporting that is too provocative may risk not only government sanction but also a loss of advertising revenue. The tug-of-war between the state's attempts to maintain social and political control, on the one hand, and, on the other hand, society's demand for news and information, is likely to continue. China's leaders still view the ultimate duty of reporters and the mass media as serving the state. In 2010, new requirements for journalists included knowledge of "Communist Party journalism and Marxist views of news." The state intimidates journalists and authors through criminal prosecution and civil lawsuits, as well as violence, detention, and other forms of harassment. Newspaper editors continue to face possible punishment for publishing major stories of controversy. In March 2010, the top editor of the independent Economic Observer was dismissed after sponsoring an editorial published in 13 newspapers, including his own, that was critical of China's household registration system ( hukou ), which restricts migration within the country. Growing numbers of Internet users reportedly are chafing against information controls and expressing such frustrations online. Journalists are increasingly willing to speak out in support of their right to report stories, if not "press freedom" per se, particularly regarding corporate scandals and, occasionally, local corruption. In one survey, while 40% of journalists in a sample believed that the news media should play a watchdog role, only 19% believed that the their organization emphasized this function. In October 2010, a group of prominent Party elders posted an open letter online calling for the end to restrictions on speech and the press. The extent of religious freedom and activity in China varies widely by region and jurisdiction. Hundreds of millions of Chinese openly practice one of five officially recognized religions (Buddhism, Protestantism, Roman Catholicism, Daoism, and Islam) and religious organizations are playing growing roles in providing social and charitable services. The PRC Constitution protects "normal" religious activities and those that do not "disrupt public order, impair the health of citizens or interfere with the educational system of the state." The government officially disapproves of religious groups that are not incorporated into official bodies. Although in many localities, unsanctioned religious congregations receive little state interference, they still are vulnerable to arbitrary restrictions and possible shutdown by authorities. The PRC government imposes especially draconian policies and measures upon many unofficial Christian churches, Tibetan Buddhists, Uighur Muslims, and Falun Gong practitioners, largely due to the potential for these groups to become independent social forces and cultivate foreign support. The Department of State has identified China as a "country of particular concern" (CPC) for "particularly severe violations of religious freedom" for 12 consecutive years (2000-2011). Despite restrictions, Christian worship has continued to grow. According to some estimates, roughly 30 million Chinese Christians worship in state-sanctioned, "official" churches, while over 70 million Chinese practice their faith in unregistered, mostly Protestant congregations. Unofficial churches, or "house churches," lack legal protections and remain highly vulnerable to human rights abuses by local officials. In some areas, particularly in the more affluent southeastern provinces, many unofficial congregations reportedly experience little state interference. In other areas, however, such groups often face harassment by government authorities, their leaders have been beaten, detained, and imprisoned, and their properties have been destroyed. Many problems involving house churches stem from ambiguities over registration requirements and distrust between unofficial congregations and the State Administration for Religious Affairs. Many Chinese Protestants have rejected the official church, known as the Three Self Patriotic Movement, for political or theological reasons, while some house churches claim that their attempts to apply for official status have been rejected by the local religious affairs bureau. In some cases, government officials have claimed that foreign missionaries have discouraged unofficial churches from registering with the state. Catholics in China are divided between those who follow the Pope and those who belong to the official Chinese Catholic Patriotic Association , which does not recognize the Pope's authority. Beijing and the Vatican have long been at odds regarding which side has the authority to appoint bishops, although most Chinese bishops have received approval from both Beijing and the Holy See. According to ChinaAid, an organization that monitors human rights abuses against Christians in China, the persecution of Christians has worsened for five consecutive years, and the number of Christians arrested soared by nearly 43% (from 389 to 556 people), between 2009 and 2010. In the past year, PRC authorities reportedly temporarily detained over 500 members of unofficial churches and stepped up efforts to prevent unsanctioned congregations from worshipping. At least 40 unregistered Chinese bishops reportedly are under surveillance, in hiding, in detention, confined to their homes, or have disappeared. Beijing authorities refused to allow the 1,000-member Shouwang Protestant church, one of the largest unofficial congregations in China, to occupy the premises that it purchased in 2009, and in April 2011 evicted the congregation from its rented space. The government has placed some Shouwang church leaders under house arrest and detained members who have attempted to gather outside on Sundays. Many Tibetans have long resented PRC political controls and intrusions into their religious beliefs and practices. Other sources of grievance for Tibetans include the loss of their traditional culture and language, the domination of the local economy by Han Chinese (the majority ethnic group in China), limitations on international contacts, and the adverse environmental effects of Beijing's development projects in the region. Han Chinese form a minority in the Tibet Autonomous Region (TAR), about 8% of the total population of roughly 3 million people, but constitute about half of the population of Lhasa, the Tibetan capital. Many Han Chinese believe that the PRC government has brought positive economic and social development to the region. On March 11, 2008, the 49 th anniversary of the 1959 Tibetan uprising against Chinese rule, 300 Buddhist monks demonstrated peacefully to demand the release of Tibetan prisoners of conscience. These demonstrations sparked others by monks and ordinary Tibetans demanding independence from China or greater autonomy, one of the most sensitive political issues for Beijing. On March 15, demonstrations in Lhasa turned violent as Tibetan protesters confronted PRC police and burned Han shops and property. Other Tibetan protests erupted in Tibetan areas of neighboring Gansu, Qinghai, and Sichuan provinces. Official PRC news sources, emphasizing Han Chinese casualties, reported that 19 persons died in the riots. The government blamed the Dalai Lama, the exiled Tibetan spiritual leader, for instigating the riots and labeled his followers "separatists." From India, where he is based, the Dalai Lama denied involvement and appealed to both the Chinese government and his followers to refrain from violence. In the aftermath of the unrest, an estimated 100 to 218 persons were killed in Tibet and other Tibetan areas, likely in conflicts with PRC security forces, and 76 people, mostly Tibetans, were sentenced to prison terms ranging from three years to life. In 2010, there reportedly were 824 known Tibetan prisoners of conscience. The government also expanded and intensified "patriotic education" campaigns in monasteries and nunneries. China's leaders have bolstered efforts to spur economic development in Tibet, provide greater economic opportunities for Tibetans, and improve social services. However, they have displayed little, if any, flexibility on the questions of greater autonomy and religious freedom. Some Chinese scholars and lower level officials reportedly have continued to criticize government policies in Tibetan regions. The eighth round of dialogue between Beijing and envoys of the Dalai Lama since 2002, which took place in November 2008, failed to bring about any fundamental progress on the issue of greater autonomy for Tibet. The ninth round took place in January 2010, with the Dalai Lama's representatives pledging respect for the authority of the Chinese central government, but continuing to push for "genuine autonomy" for the Tibetan people within China. Both sides indicated that the meetings produced no breakthroughs. The government clampdown on the Kirti Tibetan monastery in Sichuan province reportedly continues following unrest there earlier in the year. In April 2011, PRC security forces sealed off the monastery and cultural center after a monk there set himself on fire in protest against government policies toward Tibetans. Police reportedly detained 300 monks and forcefully dispersed local Tibetans who attempted to prevent them from being taken into custody, resulting in the deaths of two elderly people. In April 2011, Tibetan exiles in India elected a Harvard academic, Lobsang Sangay, as their new prime minister. He is expected to assume some of the political duties of the Dalai Lama, who announced his retirement from his political role in March 2011, although the Dalai Lama's representatives will continue to represent the Tibetan exiles in the dialogue with Beijing. The Chinese government has vowed not to conduct any talks with the new prime minister and his government, arguing that they represent an illegal organization. According to some experts, most Muslim communities in the western Ningxia Hui Autonomous Region, and Gansu, Qinghai, and Yunnan Provinces coexist relatively peacefully with non-Muslims and experience little conflict with local authorities. However, social and political tensions and harsh religious policies have long plagued China's far northwestern Xinjiang Uighur Autonomous Region (XUAR), which is home to 8.5 million Uighur Muslims, a Turkic ethnic group. Once the predominant group in the region, they now constitute an estimated 40% of its population as many Han Chinese have migrated there, particularly to the capital, Urumqi. Uighurs and human rights groups have complained of PRC religious policies that restrict the training and role of imams, the celebration of Ramadan, and participation in the hajj . Uighur children are forbidden from entering mosques and government workers and teachers are not allowed to openly practice Islam. Other grievances include a loss of ethnic identity, economic discrimination, and a lack of democracy. Government efforts to demolish the old city of Kashgar, ostensibly to build new housing and improve public safety, have angered many Uighurs. Many long time Kashgar residents, who say they have not been adequately consulted on the redevelopment plans, argue that the policy is aimed at controlling the local population. Many Han Chinese agree with government assertions that PRC policies have benefitted Uighurs, that Muslims receive preferential treatment due to special policies toward minority groups, and that firm policies are necessary to prevent terrorism. The Chinese government fears not only Uighur demands for greater religious freedom but also Uighurs' links to Central Asian countries and foreign Islamic organizations. The Chinese government claims that the East Turkestan Islamic Movement (ETIM), a Uighur organization that advocates the creation of an independent Uighur Islamic state, has been responsible for small-scale terrorist attacks in China and has ties to Al Qaeda. ETIM is on the United States' and United Nations' lists of terrorist organizations. Due to perceived national security-related concerns, the PRC government has imposed stern constraints on the religious and cultural practices of Uighurs in Xinjiang, often conflating them with subversive activities or the "three evils of religious extremism, splittism, and terrorism." On July 5, 2009, an estimated several hundred to a few thousand Uighur demonstrators gathered peacefully in Urumqi to demand that PRC authorities prosecute those responsible for the deaths of two Uighur men involved in a brawl between Han and Uighur factory workers in Guangdong province. Paramilitary police reportedly attacked the demonstrators after they refused to disperse, which eventually provoked a riot and acts of violence against government property, Han residents, and Han shops. In response, bands of Han Chinese sought retribution against Uighurs. The Chinese government blamed Uighur "separatists" and exile groups for planning the riots, particularly the World Uygur Congress led by exiled Uighur leader and former PRC political prisoner Rebiya Kadeer. The Xinjiang government reported nearly 200 deaths, about two-thirds of them Han, and 1,700 people injured. The State Department reported that at the end of 2010, 26 people had been sentenced to death and nine received suspended death sentences. Of these individuals, three were Han and the rest Uighur. Following the July 2009 unrest, the government further restricted speech, assembly, religious activity, information, and international communication in Uighur areas, including blocking Internet access for ten months. The Xinjiang government also has intensified the use of Mandarin in schools. Over 1,000 people in Xinjiang, including Uighur journalists and webmasters who had published sensitive information, reportedly have been arrested in the past two years on charges related to state security. The whereabouts of 20 Uighur asylum seekers repatriated from Cambodia to China remained unknown at the end of 2010. Government efforts to address social instability in Xinjiang have focused upon economic development and cultural preservation, rather than religious and political freedoms. Falun Gong combines an exercise regimen with meditation, moral values, and spiritual beliefs. The practice and beliefs are derived from qigong , a set of movements said to stimulate the flow of qi — vital energies or "life forces"—throughout the body, and Buddhist and Daoist concepts. The spiritual exercise reportedly gained tens of millions of adherents across China in the late 1990s. On April 25, 1999, thousands of practitioners gathered in Beijing to protest the government's growing restrictions on their activities. Following a crackdown that began in the summer of 1999 and deepened in intensity over a period of roughly two years, the group, which the government labeled a dangerous or "evil" cult, ceased to practice or demonstrate in the open. Nonetheless, government efforts to suppress the group continued. Overseas Falun Gong organizations reported that the government intensified its persecution of Falun Gong during the period of the 2008 Olympics and 2009 Shanghai World Expo. Many practitioners who did not renounce their beliefs reportedly were held in reeducation through labor camps and subjected to torture and other abuses. According to the Congressional-Executive Commission on China, citing CCP documents, the PRC government has launched a three-year campaign (2010-2012) to "transform" Falun Gong adherents, calling upon local governments, Party organizations, businesses, and individuals to step up efforts to reeducate practitioners and persuade or compel them to denounce their beliefs. Gao Zhisheng, a rights lawyer who had defended Falun Gong adherents, was apprehended by PRC police in 2009 and remains missing. Another lawyer who had defended Falun Gong practitioners, Wang Yonghang, was sentenced to seven years in prison on the charge of "using a cult organization to undermine the implementation of the law." According to some sources, Falun Gong adherents constitute an estimated two-thirds of all prisoners and detainees of conscience in China, or roughly 15,000 people. Since 1999, over 6,000 Falun Gong adherents reportedly have served time in prison. During the initial crackdown on the group, the proportion of Falun Gong adherents in reeducation through labor camps may have been as high as one-quarter to one-half of all RTL inmates, or 70,000 to 125,000 people. Estimates of the number of those who died in state custody have ranged from several hundred to a few thousand. Falun Gong groups claim to have documented nearly 3,500 deaths in custody between 1999 and 2011, and they assert that the number of undocumented cases could be much higher. These deaths have been concentrated in seven provinces—Heilongjiang, Hebei, Liaoning, Jilin, Shandong, Sichuan, and Hubei. Daily incidences of social unrest in China highlight the rising rights consciousness of PRC citizens, widening disparities of income and power stemming from rapid economic change, and the inability of China's political institutions and legal system to adequately resolve social grievances. The government has applied a carrot-and-stick approach toward disgruntled social groups, often sympathizing with them and pressuring local authorities to give in to some demands, while arresting protest leaders, intimidating activists, and thwarting linkages among them. The developing rights awareness of many Chinese citizens, combined with small but passionate networks of lawyers, journalists, and activists, suggests that social pressures for advancing human rights are likely to continue. In the past decade, major types of social unrest have included the following: state-owned enterprise workers demonstrating against layoffs; migrant laborers protesting lack of pay; farmers objecting to unfair taxation and usurious fees, confiscation of land for development projects, and loss of agricultural land due to environmental degradation; and homeowners opposing forcible evictions related to urban development. In cases of land confiscation and home evictions, much popular anger has been directed at collusive deals between local officials and private investors and the lack of fair compensation to ordinary citizens. Relatively new sources of social unrest have included farmers claiming ownership of land; the closing of thousands of factories due to climbing labor and energy costs and the rising value of the Chinese currency; consumer price inflation; and coercive enforcement of the one-child policy. Another potential source of unrest is the high unemployment rate among recent college graduates in China, which is estimated to be around 26%. Resentment toward government restrictions of ethnic and religious practices, anger against the economic dominance of Han Chinese, and the lack of political participation remain deep-seated problems in Tibet and Xinjiang. In May 2011, student demonstrations broke out in Inner Mongolia over the deaths of two Mongolians involved in earlier protests. So far, numerous but scattered social protests have not evolved into broad-based political movements. Rather than perceiving local problems in national, political terms, aggrieved citizens generally have demonstrated against local officials and enterprise managers for not acting in accordance with the law, while often viewing central government leaders as well-intentioned. When protest groups have attempted to join forces, China's leaders have quashed such linkages. Although generally supportive of the status quo, the urban middle class has begun to engage in narrowly targeted demonstrations. The growing involvement of the middle class is potentially significant, given their effectiveness in organizing and articulating interests and their importance to the central government's legitimacy. However, the middle class has demonstrated a reluctance to identify and join forces with other social strata. Many political theorists and policy makers have argued that the growth of the middle and entrepreneurial classes in developing market economies creates pressures for democracy. According to these hypotheses, demands for rights and democracy stem from desires to protect economic interests and political influence, a growing sense of entitlement, and confidence in their capacity to affect or participate in decision-making. However, some studies suggest that social groups in China that have benefitted from economic reforms value incremental over dramatic or potentially disruptive political change. Many members of China's rising middle class, who are predominantly educated city dwellers, have displayed either a lack of interest in politics or a preference for political stability rather than rapid reform. They have been careful not to jeopardize their hard-won economic gains, and have expressed some fear of grassroots democracy. Findings based upon surveys of urban Chinese indicate that the middle class is assertive about clean and responsive government and politically aware but also dependent upon the state for its economic well-being and somewhat politically conservative. According to one survey, urban residents can be critical of the state regarding economic issues, but they are not prone to agitate for democracy if they perceive their economic needs as being served. Although members of the China's middle class support civil liberties, they are not especially interested in exercising political rights through multi-party elections. They are less inclined than other classes to participate in demonstrations and more inclined to accept government decision-making. However, they are supportive of existing, somewhat informal processes of contacting and petitioning local officials. According to recent studies conducted by a government think tank, the Chinese Academy of Social Sciences, the Chinese middle class, which comprises nearly 25% of the population according to some estimates, is especially critical of political corruption and crony capitalism which affect their economic opportunities. The middle class wants access to information, to feel that its voice is being heard, and opportunities to engage in social action. But it also is defensive about China's achievements and resentful of international criticism. Similarly, many Chinese youth reportedly are liberal in outlook and assertive regarding their rights, but also are career-oriented, politically pragmatic, and fiercely patriotic. Although Chinese youth often are critical of their own government, many are quick to reject Western criticism of their country. Rather than asserting its independence from the state, China's business sector has remained heavily dependent upon it. Many entrepreneurs seek close relations with government agencies that ensure their survival. The Chinese Communist Party, in turn, has welcomed business persons into the Party. The PRC government wields influence over the private sector not only through its authority over business transactions, but also through its controls over many other areas of the economy, such as finance and property. Furthermore, the weakness of China's legal system means that many business persons must seek relations with government officials in order to protect their assets or enforce contracts. According to several studies, private entrepreneurs favor strengthening the legal system and support long-term political reform, but also value social stability and are satisfied with the current, slow pace of change. In the past two decades, successive U.S. administrations have developed a comprehensive array of tactics and programs aimed toward promoting democracy, human rights, and the rule of law in China, but their effects have been felt primarily along the margins of the PRC political system. The U.S. government has pressured China from without through monitoring and openly criticizing the country's human rights record and calling upon the PRC leadership to honor the rights guaranteed in its constitution, bring its policies in line with international standards, release prisoners of conscience, and undertake political reforms. Washington also has supported programs within China that aim to strengthen the rule of law, civil society, government accountability, and labor rights. It has supported U.S.-based NGOs and Internet companies that monitor human rights conditions in China and help enable Chinese Internet users to access Voice of America, Radio Free Asia, and other blocked websites. Some experts argue that diplomatic and economic engagement with China have failed to set any real political change in motion. In this context, some observers believe, U.S. efforts to promote democracy and human rights have been largely ineffectual. Many policy makers suggest that tangible improvements in PRC human rights policies should be a condition for full diplomatic and economic relations with China as well as cooperation on other issues. Other observers counter that Washington has little direct leverage on China's internal policies, and that U.S. engagement and human rights efforts have helped to set conditions in place that are conducive for progress. They contend that sanctions and linking bilateral cooperation to PRC improvements in human rights have not been very effective. Many U.S. experts and policy makers have disagreed over the best policy approaches, priorities, and methods to apply toward promoting democracy and human rights in China. Differing U.S. goals include effecting fundamental political change in China, on the one hand, and supporting incremental progress, on the other. Possible approaches range from placing human rights conditions upon the bilateral relationship to inducing change through bilateral and international engagement. Policy tools include private discussions; sanctions; open criticism of PRC human rights policies; coordinating international pressure; support of and contact with dissidents; bilateral dialogue; human rights, democracy, and related programs in the PRC; promoting Internet freedom; public diplomacy efforts; and monitoring and highlighting human rights abuses. Many U.S. sanctions on the PRC in response to the Tiananmen military crackdown in 1989 remain in effect, including some foreign aid-related restrictions, such as required "no" votes or abstentions by U.S. representatives to international financial institutions regarding loans to China (except those that meet basic human needs). Since 2004, Congress has required that U.S. representatives to international financial institutions support projects in Tibet only if they do not encourage the migration and settlement of non-Tibetans into Tibet or the transfer of Tibetan-owned properties to non-Tibetans. Foreign operations appropriations measures have prohibited assistance to the United Nations Population Fund from being used to support related programs in China. Some analysts argue that the U.S. government should take principled stands against China's human rights abuses more frequently, openly, and forcefully, while others believe that such methods can undermine human rights efforts. Many prominent dissidents and former prisoners of conscience have claimed that international pressure or attention protected them from harsher treatment by PRC authorities. While some members of civil society groups have welcomed a more assertive U.S. human rights policy, others have cautioned that the Chinese government often has restricted their activities when they were viewed as tied to foreign democracy efforts. In some cases, the PRC government has made small concessions in order to help reduce or avoid open U.S. or global criticism. Some analysts suggested that Beijing's agreement to restart the U.S.-China human rights dialogue in 2008 was linked to the U.S. State Department's decision not to include the PRC in a list of "worst human rights violators." In other cases, the Chinese leadership has reacted angrily or responded in a "tit for tat" manner when the U.S. government has publicly denounced its human rights policies, as when Beijing suspended the human rights dialogue in 2004 after the Bush Administration sponsored an unsuccessful U.N. resolution criticizing China's human rights record. Congressional actions publicizing China's human rights violations have included numerous resolutions, bills, hearings, and visits to the PRC. Various resolutions have called attention to the imprisonment and detention of political, religious, and minority figures; persecution of Tibetans, Uighurs, and Falun Gong adherents; censorship of the Internet and other mass media; coercive abortions; and China's deportation of North Korean refugees. Some bills have aimed to restrict U.S.-China trade on the basis of PRC human rights abuses. In July 2008, Representatives Chris Smith and Frank Wolf traveled to Beijing in an effort to discuss human rights issues with PRC and U.S. officials. They also attempted to meet with several Chinese human rights lawyers, whom PRC security personnel prevented from seeing the congressmen. In the 112 th Congress, among other actions, Representative Chris Smith introduced the China Democracy Promotion Act of 2011 ( H.R. 2121 ), "To deny the entry into the United States of certain members of the senior leadership of the Government of the People's Republic of China and individuals who have committed human rights abuses in the People's Republic of China, and for other purposes." Senator Robert Menendez introduced a resolution calling for an end to the persecution of Falun Gong practitioners in China ( S.Res. 232 ). On May 13, 2011, the Subcommittee on Africa, Global Health, and Human Rights of the House Committee on Foreign Affairs held a hearing entitled "China's Latest Crackdown on Dissent." Representative Kevin Brady has publicly called for the release of U.S. citizen Xue Feng, a constituent from Houston, who remains imprisoned in China. The PRC remains highly sensitive to foreign criticism, but has often been able to employ its soft power—diplomatic and economic influence—in international fora in order to reduce international pressure to improve its human rights policies. The United Nations Human Rights Council was formed in 2006 to replace the U.N. Commission on Human Rights (UNCHR), which had been faulted for being unduly influenced by non-democratic countries. The United States had sponsored several resolutions at the UNCHR criticizing China's human rights record, but none were successful; China was able to thwart voting on most resolutions through "no-action motions." The Bush Administration had opposed the formation of the Council and declined to become a member, arguing that it did not offer improvements over the UNCHR and that it placed too much focus on Israel. The Obama Administration sought and was granted a seat on the Human Rights Council in June 2009. The United Nations established the Universal Periodic Review (UPR) mechanism by which the Human Rights Council would assess the human rights records of all U.N. members once every four years. The UPR Working Group conducted a periodic review of China in February 2009. Representatives of some countries voiced serious concerns about China's human rights record, while representatives of some developing and non-democratic countries expressed support of China. The United States participated as an observer, but not yet a member, of the Council during China's review. The U.S.-China human rights dialogue was established in 1990. It is one of eight government-to-government dialogues between China and other countries on human rights. Beijing formally suspended the process in 2004 after the Bush Administration sponsored an unsuccessful U.N. resolution criticizing China's human rights record. The talks were resumed in May 2008, the first round in six years. The Obama Administration has participated in two rounds, the fourteenth round held in May 2010 in Washington and the fifteenth round in May 2011 in Beijing. Both were co-chaired by U.S. Assistant Secretary of State for Democracy, Human Rights, and Labor Michael Posner and PRC Ministry of Foreign Affairs, Department of International Organizations Director General Chen Xu. In the 2010 meetings, topics included Chinese political prisoners, freedom of religion and expression, labor rights, the rule of law, and conditions in Tibet and Xinjiang. The Chinese delegation also visited the U.S. Supreme Court and were briefed on ways in which human rights issues are handled in the United States. During the 2011 talks, Assistant Secretary Posner raised the Obama Administration's deep concerns about the PRC crackdown on rights defenders and government critics. Discussions of China's "backsliding" on human rights reportedly dominated the talks, which the U.S. side described as "tough" and Chinese officials portrayed as "frank and thorough." Posner characterized the dialogue process, however, as a forum for candid discussion, not negotiation. Although no breakthroughs or concrete outcomes were reported during the latest rounds, Administration officials have continued to perceive the dialogue as an important means by which to emphasize and reiterate U.S. positions on human rights issues. They have suggested that, given the deep disagreements on human rights and other contentious issues, the holding of the dialogue and the agreement to continue them represent positive steps. Furthermore, some observers have contended, the absence of the dialogue would undermine other U.S. efforts to promote human rights in China. Some analysts have expressed concern that separating the human rights dialogue from the comprehensive Security and Economic Dialogue (S&ED) has marginalized human rights issues. Some human rights experts have argued that the talks, which the PRC government has referred to as serving to "enhance mutual understanding," enable Beijing to deflect international criticism on human rights. They have suggested that the dialogue should be more transparent and made conditional upon measurable human rights improvements in China. During the past decade, the U.S. Department of State and the U.S. Agency for International Development (USAID) have administered a growing number and range of programs in China using foreign assistance funds. Between 2001 and 2010, the United States government authorized or made available nearly $275 million for such programs, of which $229 million was devoted to human rights, democracy, rule of law, and related activities, Tibetan communities, and the environment. U.S. program areas include the following: promoting the rule of law, civil society, and democratic norms and institutions; training legal professionals; building the capacity of judicial institutions; reforming the criminal justice system; supporting sustainable livelihoods and cultural preservation in Tibetan communities; protecting the environment; and improving the prevention, care, and treatment of HIV/AIDS in China. The direct recipients of State Department and USAID grants have been predominantly U.S.-based non-governmental organizations and universities. Established by the U.S. government in 1983 to promote freedom around the world, the National Endowment for Democracy (NED) is a private, non-profit organization that receives an annual appropriation from Congress. NED has played a major role in promoting democracy in China since the mid-1980s. Activities of NED and its core institutes include supporting Chinese pro-democracy organizations in the United States and Hong Kong, helping to advance the rule of law in China, promoting the rights of workers and women, and assisting the development of Tibetan communities. The Endowment's China programs have received support through the annual foreign operations appropriation for NED (an estimated $118 million in FY2010) and congressional earmarks to NED for democracy-related programs in the PRC and in Tibet. In addition, the Department of State has provided direct grants to NED's core institutes. The U.S. government has encouraged PRC adherence to international labor standards. U.S. officials monitor PRC compliance with the 1992 U.S.-China Memorandum of Understanding and 1994 Statement of Cooperation on safeguarding against the export of products made by prison labor. In 2000, the law granting permanent normal trade relations (PNTR) status to China authorized the Department of Labor to establish programs to promote rule of law training and technical assistance related to the protection of worker rights. Since 2002, the Department of Labor has supported the following activities in China: rule of law development, labor rights, legal aid, labor dispute resolution, mine safety, occupational safety and health, and HIV/AIDS education. In addition, the governments of the United States and China, including the U.S. Departments of State and Labor, the PRC Ministry of Human Resources and Social Security, and the All China Federation of Trade Unions, have conducted exchanges and discussions on wage and hour (payroll) administration, unemployment insurance, pension security, labor market statistics, law enforcement, collective bargaining, and other issues. The U.S. government has undertaken efforts to promote Internet freedom, particularly in China and Iran. In 2006, the Bush Administration established the Global Internet Freedom Task Force (GIFT). Continued under the Obama Administration, GIFT's duties are to monitor Internet freedom around the world; respond to challenges to Internet freedom; and expand global access to the Internet. Congress appropriated $50 million for global Internet freedom efforts between 2008-2010 and $20 million in 2011. Program areas include censorship circumvention technology, Internet and mobile communications security, media training and advocacy, and public policy. The principal or target countries of such efforts are China and Iran. The Broadcasting Board of Governors supports counter-censorship technologies that help enable Internet users in China, Iran, and other countries to access Voice of America and other censored U.S. governmental and non-governmental websites. In March 2010, representatives Chris Smith and David Wu launched the Global Internet Freedom Caucus to promote online freedom of information and expression, followed by the founding of the Senate Global Internet Freedom Caucus, chaired by Senators Ted Kaufman and Sam Brownback. On April 6, 2011, the Global Online Freedom Act of 2011 ( H.R. 1389 ) was introduced, "To prevent United States businesses from cooperating with repressive governments in transforming the Internet into a tool of censorship and surveillance, to fulfill the responsibility of the United States Government to promote freedom of expression on the Internet, to restore public confidence in the integrity of United States businesses, and for other purposes." U.S. public diplomacy programs expose Chinese educated elites and youth to U.S. politics, society, culture, and academia; sponsor exchanges; and promote mutual understanding. According to the Department of State, approximately one-third of all Chinese citizens participating in U.S.-sponsored professional exchange programs work in field related to democracy, rights, and religion. In 2009, 541 U.S. citizens and 948 PRC citizens participated in U.S. educational and cultural and exchange programs. The Voice of America (VOA) and Radio Free Asia (RFA) provide external sources of independent or alternative news and opinion to Chinese audiences. The two media services play small but unique roles in providing tastes of U.S.-style broadcasting, journalism, and public debate in China. VOA, which offers mainly U.S. and international news, and RFA, which aims to serve as a source for domestic news that Chinese media are prevented by censorship from covering, often have reported on critical world and local events to Chinese audiences. The PRC government regularly jams and blocks VOA and RFA Mandarin, Cantonese, Tibetan, and Uighur language broadcasts and Internet sites, while VOA English services receive less interference. Both VOA and RFA are making efforts to upgrade their Internet services and circumvention or counter-censorship technologies. Surveys commissioned by the Broadcasting Board of Governors (BBG) have confirmed that its reach in China is relatively narrow but significant. Based upon 2009 data, the BBG estimates that roughly 0.1% of China's population listens to or views VOA radio, television, and Internet programs, or about 1.3 million people weekly. VOA "Special English" international news programs, aimed at intermediate learners of English, are popular with many young, educated, and professional Chinese. RFA's more targeted, politically oriented audience is estimated to be one-third to one-half of VOA's. Among foreign broadcasters, Phoenix (Hong Kong) satellite television enjoys the greatest public awareness (46%), followed by VOA (12%). RFA is viewed in many dissident and ethnic minority communities in China as a vital source and outlet for news.

This report examines human rights conditions in China, including the 2011 crackdown on rights activists and dissent; ongoing human rights abuses; recent PRC efforts to protect human rights; and the development of civil society. Ongoing human rights problems in China include the excessive use of violence by public security forces, unlawful detention, torture of detainees, arbitrary use of state security laws against political dissidents, coercive family planning policies, state control of information, and religious and ethnic persecution. Tibetans, Uighur Muslims, and Falun Gong adherents have been singled out for especially harsh treatment. For additional, comprehensive information about human rights conditions in China, see the Congressional-Executive Commission on China, Annual Report 2010, and the U.S. Department of State, 2010 Human Rights Report: China. The Chinese leadership's resistance to major political reform and fuller support of civil liberties has been driven largely by its fears of social unrest and political instability. Moreover, some public opinion surveys suggest that many Chinese people, while wanting greater freedoms, do not support rapid political change. Nonetheless, Chinese society has become more assertive. Incidents of social protests are frequent, numerous, and widespread. Economic, social, and demographic changes have given rise to labor unrest. PRC citizens have become increasingly aware of their legal rights, while emerging networks of lawyers, journalists, and activists have advanced the causes of many aggrieved individuals and groups. The mass media continues to push the boundaries of officially approved discourse, and the Internet has made it impossible for the government to restrict information as fully as before. The PRC government has attempted to respond to some popular grievances, develop the legal system, and cautiously support the expansion of civil society, while suppressing activists who attempt to organize mass protests and dissidents who openly question sensitive policies or call for fundamental political change. This approach has produced modest improvements in some human rights conditions, but also allowed for continued, serious abuses. In recent months, the government has intensified efforts to suppress legal activists, rights defenders, and other individuals and groups whom it has deemed to be threatening to social and political stability. The United States government has developed a comprehensive array of policy tools aimed toward promoting democracy, human rights, and the rule of law in China, but their effects have been felt primarily along the margins of the PRC political system. U.S. government efforts to promote human rights in China have included sanctions; openly criticizing PRC human rights policies and calling for the release of political prisoners; bilateral dialogue; "quiet diplomacy;" and hearings and investigations. The U.S. Congress has appropriated funding for democracy, human rights, rule of law, environmental, and other programs in China, including Tibet, and supported Internet freedom and public diplomacy efforts aimed at the PRC. Some policy makers contend that U.S. engagement with China has failed to produce meaningful political reform and improvements in human rights conditions. Other experts argue that engagement has helped to advance economic and social change in China, to develop social and legal foundations for democracy and human rights, and to open channels through which to directly communicate U.S. concerns.

In cases of significant differences with the President over foreign policy, especially deployments of U.S. military forces abroad, Congress has generally found that use of its Constitutionally-based "power of the purse" to be the most effective way to compel a President to take actions regarding use of U.S. military force overseas that he otherwise might not agree to. Thus, on various occasions since the Vietnam War era, Congress has used funding cutoffs or significant restrictions on the use of funds as a means of ending or circumscribing the use of U.S. military personnel for foreign operations. As the examples set out below indicate, the use of funding cutoffs and restrictions to curtail or terminate the President's use of U.S. military force abroad has proven to be much more efficacious in giving effect to Congress's policy views in this area than has the War Powers Resolution. During the last years of the Vietnam War, there were a number of efforts in Congress to attach amendments to legislation to restrict military actions by the United States in the Indochina region, as part of a larger effort to compel the withdrawal of U.S. military forces from the area. Nearly all of these proposals did not pass more than one House of Congress due to vigorous opposition from the President to them. Those that did succeed in enactment into law are as follows: On December 22, 1970, Congress cleared the Special Foreign Assistance Act of 1971, H.R. 19911, for the President's signature. P.L. 91-652; 84 Stat. 1942 was signed on January 1, 1971. Section 7(a) of this Act prohibited the use of funds authorized or appropriated by it or any other Act "to finance the introduction of United States ground combat troops into Cambodia or to provide U.S. advisors to or for Cambodian military forces in Cambodia." As part of the compromise between Congress and the President that led to the enactment of H.R. 19911, similar curbs that had been placed in other legislation in 1970—specifically H.R. 15628, P.L. 91-672 (the Foreign Military Sales Act), and H.R. 19590, P.L. 91-668 (the Department of Defense Appropriations Act), were deleted. On July 1, 1973, the President signed H.R. 9055 , P.L. 93-50 ; 87 Stat. 99, the second Supplemental Appropriations Act for FY1973. This legislation contained language cutting off funds for combat activities in Indochina after August 15, 1973. Section 307 of P.L. 93-50 specifically states that "None of the funds herein appropriated under this act may be expended to support directly or indirectly combat activities in or over Cambodia, Laos, North Vietnam, and South Vietnam by United States forces, and after August 15, 1973, no other funds heretofore appropriated under any other act may be expended for such purpose." In a related action, the President signed H.J.Res. 636 , P.L. 93-52 , 87 Stat. 130, the Continuing Appropriations Resolution for FY1974 on July 1, 1973. This legislation contained language similar to that in H.R. 9055 ( P.L. 93-50 ). Section 108 of P.L. 93-52 specifically states that "Notwithstanding any other provision of law, on or after August 15, 1973, no funds herein or heretofore appropriated may be obligated or expended to finance directly or indirectly combat activities by United States military forces in or over or from off the shores of North Vietnam, South Vietnam, Laos or Cambodia." On December 30, 1974, S. 3394 , P.L. 93-559 , 88 Stat 1795, the Foreign Assistance Act of 1974 was signed. Section 38(f)(1)set a total U.S. personnel ceiling for (civilians and military) in Vietnam of 4,000 six months after enactment and a total ceiling of 3,000 Americans within one year of enactment. More recent examples of congressional funding limitations aimed at preventing or reducing U.S. military deployments overseas relate to Somalia and to Rwanda. These enacted limitations are as follows. Section 8151 of the Department of Defense Appropriations Act for FY1994, P.L. 103-139 ;107 Stat 1418, signed November 11, 1993, approved the use of U.S. Armed Forces for certain purposes, including combat forces in a security role to protect United Nations units in Somalia, but cut off funding after March 31, 1994, except for a limited number of military personnel to protect American diplomatic personnel and American citizens, unless further authorized by Congress. Additionally, section 8135 of the Department of Defense Appropriations Act for FY1995, P.L. 103-335 ; 108 Stat. 2599, signed September 30, 1994, stated that "None of the funds appropriated by this Act may be used for the continuous presence in Somalia of United States military personnel, except for the protection of United States personnel, after September 30, 1994." Through Title IX of the Department of Defense Appropriations Act for FY1995, P.L. 103-335 108 Stat. 2599, signed September 30, 1994, Congress stipulated that "no funds provided in this Act are available for United States military participation to continue Operation Support Hope in or around Rwanda after October 7, 1994, except for any action that is necessary to protect the lives of United States citizens." Since its enactment in 1973, there is no specific instance when the Congress has successfully utilized the War Powers Resolution to compel the withdrawal of U.S. military forces from foreign deployments against the President's will. Every President from President Nixon forward has taken the position that the War Powers Resolution is an unconstitutional infringement on the authority of the President, as Commander-in-Chief, to utilize the Armed Forces of the United States to defend what he determines are the vital national security interests of the United States. It should be noted, however, that through a compromise with the Congress in September 1983, President Reagan agreed to the Multinational Force in Lebanon Resolution, P.L. 98-119 , that determined that the requirements of section 4(a)(1) of the War Powers Resolution became operative on August 29, 1983, and that Congress authorized the continued participation of the U.S. Marines in the Lebanon Multinational Force for 18 months. President Reagan signed P.L. 98-119 on October 12, 1983. Soon after enactment of P.L. 98-119 , 241 U.S. Marines in Lebanon were killed on October 23, 1983 by a suicide truck bombing. On February 7, 1984, President Reagan announced the Marines would be redeployed and on March 30, 1984, reported to Congress that U.S. participation in the Multinational Force in Lebanon had ended. It is also important to note that beginning in August 1990, following the Iraqi invasion of Kuwait, President Bush over a period of months deployed a substantial number of U.S. military personnel to Saudi Arabia to defend U.S. friends in the region, and, in an effort to induce Iraq to withdraw its military forces from Kuwait. These actions were taken without express authorization by Congress under the War Powers Resolution or any other Act of Congress. Months later in January 1991, Congress passed H.J.Res. 77 , the Authorization for Use of Military Force Against Iraq Resolution, P.L. 102-1 , which President Bush signed on January 14, 1991. In that legislation Congress declared that H.J.Res. 77 constituted specific statutory authorization for the President to use United States Armed Forces to achieve objectives set out in various cited United Nations Resolutions relating to Iraq's aggression against Kuwait, if he made a certification to Congress that such use of force was necessary. Congress also noted in this bill that it constituted the authorization contemplated by section 5(b) of the War Powers Resolution. However, in his signing statement regarding H.J.Res. 77 , President Bush noted the following: "As I made clear to congressional leaders at the outset, my request for congressional support did not, and my signing this resolution does not, constitute any change in the long-standing positions of the executive branch on either the President's constitutional authority to use the Armed Forces to defend vital U.S. interests or the constitutionality of the War Powers Resolution. I am pleased, however, that differences on these issues between the President and many in the Congress have not prevented us from uniting in a common objective." The President, in short, did not characterize a request for "congressional support" for his actions as a request for "congressional authorization" of them. Although, Congress, for its part, characterized its action as a requisite "authorization." More recently, controversy over U.S. military involvement in Kosovo led to an effort to use the War Powers Resolution as a means to address the question of whether the President could order U.S. combat activity abroad in the absence of Congressional authorization to do so. This debate began in earnest when on March 26, 1999, President Clinton notified the Congress "consistent with the War Powers Resolution", that on March 24, 1999, U.S. military forces, at his direction and in coalition with NATO allies, had commenced air strikes against Yugoslavia in response to the Yugoslav government's campaign of violence and repression against the ethnic Albanian population in Kosovo. The President's action, taken in the absence of Congressional authorization, led to efforts to use the War Powers Resolution as a vehicle to either support or overturn the President's actions. Congress also attempted to use denial of funding for the Kosovo operation. On April 28, 1999, the House of Representatives passed H.R. 1569 , by a vote of 249-180. This bill would have prohibited the use of funds appropriated to the Defense Department from being used for the deployment of "ground elements" of the U.S. Armed Forces in the Federal Republic of Yugoslavia unless that deployment was specifically authorized by law. On that same day the House defeated H.Con.Res. 82 , by a vote of 139-290. This resolution would have directed the President, pursuant to section 5(c) of the War Powers Resolution, to remove U.S. Armed Forces from their positions in connection with the present operations against the Federal Republic of Yugoslavia. On April 28, 1999, the House also defeated H.J.Res. 44 , by a vote of 2-427. This joint resolution would have declared a state of war between the United States and the "Government of the Federal Republic of Yugoslavia." The House on that same day also defeated, on a 213-213 tie vote, S.Con.Res. 21 , the Senate resolution passed on March 23, 1999, that supported military air operations and missile strikes against Yugoslavia. On April 30, 1999, Representative Tom Campbell and 17 other members of the House filed suit in Federal District Court for the District of Columbia seeking a ruling requiring the President to obtain authorization from Congress before continuing the air war, or taking other military action against Yugoslavia. The Senate, on May 4, 1999, by a vote of 78-22, tabled S.J.Res. 20 , a joint resolution, sponsored by Senator John McCain, that would authorize the President "to use all necessary force and other means, in concert with United States allies, to accomplish United States and North Atlantic Treaty Organization objectives in the Federal Republic of Yugoslavia (Serbia and Montenegro)." The House, on May 6, 1999, by a vote of 117-301, defeated an amendment by Representative Ernest Istook to H.R. 1664 , the FY1999 defense supplemental appropriations bill, that would have prohibited the expenditure of funds in the bill to implement any plan to use U.S. ground forces to invade Yugoslavia, except in time of war. Congress, meanwhile, on May 20, 1999 cleared for the President's signature, H.R. 1141 , an emergency supplemental appropriations bill for FY1999, that provided billions in funding for the existing U.S. Kosovo operation. On May 25, 1999, the 60 th day had passed since the President notified Congress of his actions regarding U.S. participation in military operations in Kosovo. Representative Tom Campbell, and those who joined his suit, noted to the Federal District Court that this was a clear violation of the language of the War Powers Resolution stipulating a withdrawal of U.S. forces from the area of hostilities occur after 60 days in the absence of congressional authorization to continue, or a presidential request to Congress for an extra 30 day period to safely withdraw. The President did not seek such a 30 day extension, noting instead that the War Powers Resolution is constitutionally defective. On June 8, 1999, Federal District Judge Paul L. Friedman dismissed the suit of Representative Campbell and others that sought to have the court rule that President Clinton was in violation of the War Powers Resolution and the Constitution by conducting military activities in Yugoslavia without having received prior authorization from Congress. The judge ruled that Representative Campbell and others lacked legal standing to bring the suit ( Campbell v. Clinton , 52 F. Supp. 2d 34 (D.D.C. 1999)). Representative Campbell appealed the ruling on June 24, 1999, to the U.S. Court of Appeals for the District of Columbia. The appeals court agreed to hear the case. On February 18, 2000, the appeals court affirmed the opinion of the District Court that Representative Campbell and his co-plaintiffs lacked standing to sue the President. (Campbell v. Clinton, 203 F.3d 19 (D.C. Cir. 2000). On May 18, 2000, Representative Campbell and 30 other Members of Congress appealed this decision to the United States Supreme Court. On October 2, 2000, the United States Supreme Court, without comment, refused to hear the appeal of Representative Campbell thereby letting stand the holding of the U.S. Court of Appeals. (Campbell v. Clinton, cert. denied , 69 U.S.L.W. 3294 (U.S. Oct. 2, 2000)(No. 99-1843). Although not directly analogous to efforts to seek withdrawal of American military forces from abroad by use of funding cutoffs, Congress has used funding restrictions to limit or prevent foreign activities of a military or paramilitary nature. As such, these actions represent alternative methods to affect elements of presidentially sanctioned foreign military operations. Representative examples of these actions are in legislation relating to Angola and Nicaragua, which are summarized below. In 1976, controversy over U.S. covert assistance to paramilitary forces in Angola led to legislative bans on such action. These legislative restrictions are summarized below. The Defense Department Appropriations Act for FY1976, P.L. 94-212 , signed February 9, 1976, provided that none of the funds "appropriated in this Act may be used for any activities involving Angola other than intelligence gathering...." This funding limitation would expire at the end of this fiscal year. Consequently, Congress provided for a ban in permanent law, which embraced both authorization and appropriations acts, in the International Security Assistance and Arms Export Control Act of 1976. Section 404 of the International Security Assistance and Arms Export Control Act of 1976, P.L. 94-329 , signed June 30, 1976, stated that "Notwithstanding any other provision of law, no assistance of any kind may be provided for the purpose, or which would have the effect, of promoting, augmenting, directly or indirectly, the capacity of any nation, group, organization, movement, or individual to conduct military or paramilitary operations in Angola, unless and until Congress expressly authorizes such assistance by law enacted after the date of enactment of this section." This section also permitted the President to provide the prohibited assistance to Angola if he made a detailed, unclassified report to Congress stating the specific amounts and categories of assistance to be provided and the proposed recipients of the aid. He also had to certify that furnishing such aid was "important to the national security interests of the United States." Section 109 of the Foreign Assistance and Related Programs Appropriations Act for FY1976, P.L. 94-330 , signed June 30, 1976, provided that "None of the funds appropriated or made available pursuant to this Act shall be obligated to finance directly or indirectly any type of military assistance to Angola." In 1984, controversy over U.S. assistance to the opponents of the Nicaraguan government (the anti-Sandinista guerrillas known as the "contras") led to a prohibition on such assistance in a continuing appropriations bill. This legislative ban is summarized below. The continuing appropriations resolution for FY1985, P.L. 98-473 , 98 Stat. 1935-1937, signed October 12, 1984, provided that "During fiscal year 1985, no funds available to the Central Intelligence Agency, the Department of Defense, or any other agency or entity of the United States involved in intelligence activities may be obligated or expended for the purpose or which would have the effect of supporting, directly or indirectly, military or paramilitary operations in Nicaragua by any nation, group, organization, movement or individual." This legislation also provided that after February 28, 1985, if the President made a report to Congress specifying certain criteria, including the need to provide further assistance for "military or paramilitary operations" prohibited by this statute, he could expend $14 million in funds if Congress passed a joint resolution approving such action.

This report provides background information on major instances, since 1970, when Congress has utilized funding cutoffs to compel the withdrawal of United States military forces from overseas military deployments. It also highlights key efforts by Congress to utilize the War Powers Resolution to force the withdrawal of U.S. military forces from foreign deployments. It will be updated should developments warrant.

For years, many observers have characterized the annual pay packages awarded to the executives and chief executive officers (CEOs) of the nation's largest firms as excessive. According to one estimate, the total median CEO pay at the nation's 350 largest publicly owned firms grew from $2.7 million in 1995 to $6.8 million in 2005. The overall increase in CEO pay has outstripped inflation and the growth in non-managerial pay over the same period, fueling criticism of executive compensation packages. Among the quite vociferous critics of executive pay are public officials, academics, shareholders, and some Members of Congress. For example, William J. McDonough, chairman of the Public Company Accounting Oversight Board, has said that there is "... nothing in economic theory to justify the levels of executive compensation that are widely prevalent today." Warren Buffett has observed that "...it's difficult to overpay the truly extraordinary CEO of a giant enterprise. But this species is rare." Former Securities and Exchange Commission (SEC) Chairman Arthur Levitt, Jr. has written that "these huge paydays, I believe, undermine corporate governance and send a signal that boards are willing to spend shareholders' money lavishly..." In addition, a 2006 survey found that 90% of institutional investors, who are the largest owners of outstanding domestic corporate shares, said that executives at most companies are overpaid. There are also a number of current examples of congressional concerns over executive pay. For example, the version of H.R. 2 (the minimum wage bill) passed by the Senate on February 1, 2007, included several tax provisions, one of which applies to executive pay. Current tax rules permit individuals to defer taxes on income that is held in non-qualified deferred compensation plans. Under the Senate version of H.R. 2 , an individual could defer no more than $1,000,000 annually from taxable income by contributing to such a plan. The version passed by the House had no similar provision. Arguing for the cap, Chairman Max Baucus of the Senate Finance Committee, which unanimously passed the tax provisions that became part of the Senate version of H.R. 2 , observed: Rank-and-file workers generally have to pay taxes on their compensation when they earn it. The exception is deferred compensation provided through qualified retirement plans with statutory limits on contributions and benefits. A 401(k) is the best example. Management, on the other hand, has no limit on the amount that can be deferred to nonqualified arrangements—no limit... With respect to CEO pay, Chairman Barney Frank of the House Financial Services Committee said that: I do not think the boards of directors work as effective independent checks. They are not the fox guarding the hen house. They are the hens guarding the rooster. And I think the time has come to say we need the shareholders to do this.... In the 110 th Congress, Representative Frank has introduced the Shareholder Vote on Executive Compensation Act ( H.R. 1257 ), which was approved by the House on April 19, 2007. Soon afterwards, Senator Obama introduced an identically named companion bill, S. 1181 . The bills would require publicly held companies to hold annual non-binding shareholder votes on their executive compensation plans and any new "golden parachute" compensation offered to executives during mergers and acquisitions. Critics argue that excessive executive pay can be significantly traced to the fact that the members of corporate boards are not sufficiently independent of managerial influence. In this view, boards formulate executive pay packages that often allow executives to extract hefty compensation deals that bear little relationship to their contribution to the firms. In addition, if corporate executives are overpaid, other potentially significant concerns include the following: Issues over pay inequality and worker productivity. According to one estimate, between 1994 and 2005, the ratio of annual median CEO pay to median production worker pay nearly doubled, growing from 90 to 1 to 179 to 1. Indeed, for many workers, the perceived excessiveness of executive pay has become the most visible embodiment of growing pay inequality, contributing to a feeling that workers have not shared in the gains from economic growth. For example, adjusted for inflation, average worker pay rose 8% from 1995 to 2005; median CEO pay at the 350 largest firms rose about 150% over the same period. And while it is very difficult to quantify the impact of executive pay packages on worker morale and productivity, there are concerns that both could be affected detrimentally. For example, there have been several high profile stories of executives who have laid off employees at the same time their own compensation was rising. A potentially negative direct impact on shareholder returns. If executive compensation has been receiving a share of corporate resources that far exceeds the executives' contribution to the firm's value, shareholder returns may be compromised. Although not directly addressing the issue of whether increases in executive pay have been accompanied by commensurate increases in their value to the firms, one study compared the total pay given to the top five executives relative to corporate earnings at S&P 1500 firms between 1993-1995 and 2001-2003. It found that the ratio of executive pay to aggregate corporate earnings doubled between the two periods. A potential proxy for sub-par board performance in monitoring executives. When a corporate board is unable to get a handle on excessive CEO pay, it may be a sign of the board's failings in its central role of corporate governance. A purported link between excessive executive pay and the corporate scandals of recent years. Critics argue that a misalignment of incentives from executive pay helps explain the occurrence of scandals involving stock options backdating, accounting fraud, and earnings manipulation. But this "managerial power" perspective of how flawed corporate governance serves to inflate CEO pay is at odds with an alternative notion that the increase has largely been a function of natural market-driven changes in the demand and supply for CEOs. For example, during a 2006 interview with The Wall Street Journal , then Treasury Secretary John Snow observed that "in an aggregate sense... [CEO pay] reflects the marginal productivity of CEOs.... Until we can find a better way to compensate CEOs, I'm going to trust the marketplace." Like Secretary Snow, others argue that market forces are more likely than government to solve any problems that do exist with excessive pay. In his state of the economy address on January 31, 2007, President Bush said: Government should not decide the compensation for America's corporate executives, but the salaries and bonuses of CEOs should be based on their success at improving their companies and bringing value to their shareholders. America's corporate boardrooms must step up to their responsibilities. You need to pay attention to the executive compensation packages that you approve. You need to show the world that American businesses are a model of transparency and good corporate governance. Whether or not policy intervention is merited to tackle the issue of executive pay will depend on whether the managerial power or the market-based view of executive pay is the accurate one. Given congressional concerns with the potentially serious implications of excessive executive pay, this report examines critical and supportive evidence surrounding the premise that the executives are generally overpaid from an economic perspective. The report also provides a brief history of executive pay regulation and analyzes policy options. But first, the report looks more closely at the available data. Median CEO pay began its rapid rise in 1993. As seen in Figure 1 , which goes to 2005, it rose 35% in 2001 alone, which would later prove to be the high point. The current economic expansion has not been as favorable to CEOs. Contrary to popular belief, executive pay does not always rise—following the large decline in stock prices, median pay fell 13% from 2001 to 2002. Since then it has made up lost ground, and median pay in 2005 was nearly equal to its 2001 peak. The 1990s were not the first time that CEO pay had risen rapidly; it also rose by about one half from 1982 to 1987. As important as the trend in the level of CEO pay is the trend in the composition of CEO pay. Since 1995, median annual cash salary has risen relatively slowly, from $0.7 million in 1995 to about $1 million in 2006. But over the same period, median performance-based pay, which includes stock and stock option grants, grew 13% a year, from $1.3 million to $4.1 million. As will be discussed later, the role of stock and stock options in executive pay helps explain why it rose so quickly in the 1990s, and why it fell in 2002. The disparity between the pay given to U.S. executives relative to the compensation awarded to CEOs in other nations is often mentioned as evidence that American executives are overpaid. For example, controlling for various firm characteristics such as size, one study examined pay for CEOs in the United States and the United Kingdom (UK) in 2003. It found that CEO pay in the United States to be about 1.3 times that of CEOs in the UK and argued that a significant portion of the greater U.S. CEO pay could be attributed to the higher proportion of equity-based pay, such as stock options, in the United States, and the higher risk premiums associated with such pay. Research on Japanese executives found that after controlling for firm size, their pay constituted about a third of the pay of their U.S. counterparts in 2004. However, in Japan, the UK, and many other nations of the developed world, there are reports that CEO pay levels abroad have been slowly converging with the United States over time. High and rising executive pay could be a cause for policy concern on efficiency grounds or on equity grounds. Current pay levels would be economically inefficient if they resulted from a market failure that prevented pay levels from reflecting an equilibrium between supply and demand in the labor market for executives. If so, a policy response might be justified on the grounds that resources could be allocated in the economy more efficiently. However, even if pay levels were the result of perfect competition, policymakers could still be concerned that high executive pay resulted in an inequitable distribution of wealth that had negative social ramifications. The grounds for concern about executive pay matters greatly in determining the appropriate policy response. If current pay levels are economically efficient, then policy responses that disrupted the market outcome would lead to a misallocation of resources and deadweight loss by distorting people's career choices. Rather than targeting executive pay specifically, a more economically efficient response to address equity concerns would be through the normal channels of government redistribution, such as the progressivity of the tax system and social welfare spending (although it should be noted that these channels create efficiency tradeoffs of their own). Equity concerns are, at heart, matters of competing societal values for which economic theory cannot offer definitive answers. The non-economic gains of policies to improve equity would need to be balanced against their economic costs. Some economists argue that the trend in executive pay is not just an equity issue, it is the result of market imperfections that allow executives to manipulate the market outcome. If this is the case, then executive pay is causing resources to be misallocated to an extent that is, arguably, non-negligible. For example, one study estimated that the compensation of the top five executives averaged 6.6% of total corporate earnings from 1993 to 2003. Other economists argue that, despite its flaws, the market for executive pay delivers results that are close enough to efficiency that potential policy changes run the risk of doing more harm than good. This section first describes how the market would determine executive pay under perfect competition (the so-called "neo-classical approach"), and then considers real-world deviations from that model. Readers who would first like a brief description of the mechanics of setting executive pay should read " How Executive Compensation Is Set ," in the box below. In a "neo-classical" model of perfect competition, the compensation of an executive (or any worker) is determined by the executive's marginal product. In other words, the executive will be paid just as much as the revenue he contributes to the firm. If the firm tries to pay him less than his marginal product, he will seek employment elsewhere. If the firm tries to pay him more, it will be undercut by competitors (who are paying their executives at a competitive rate) and become unprofitable. A number of economists and business experts believe this world view is a reasonable facsimile of reality. For example, Roy Smith, a professor of finance at New York University, has written that The best chief executives have proven track records demonstrating management ability in large, complex corporate situations. Such people are always in demand. But most get only one shot at being a CEO, and they want to make the most of it. They also know that the rate of CEO turnover at large corporations has increased significantly in recent years, and that 50 percent of departures are the result of mergers or performance issues. If things go wrong, their contracts may be all they have to hang on to, so they negotiate the best ones they can going in.... Today's CEOs are paid well when they deserve to be (and sometimes when they don't), but most corporate directors will tell you that over the past 20 years, public companies have become better managed, with increased profit margins, productivity and returns on investment... In this model, high pay is not a sign of an executive being overpaid, it is a sign that the executive is highly productive. It therefore follows that the burden of proof should be on critics to show that the high level of executive pay is not simply a reflection of the executive's strong skills, hard work, and successful business strategies. Nor, from this perspective, is the relative increase in executive pay compared to worker pay necessarily a sign of excessive pay. The superior performance of U.S. firms on average over the past decade, relative to foreign firms and U.S. firms in the past, could be taken as evidence in favor of the neo-classical model. It could also be that the increase in pay is driven by a relative increase in the demand for executives. If running a company requires more skill now than in the past—because, for example, markets are now more competitive or firms are more complex—it would be expected in a neo-classical world that firms would be willing to pay more now in order to attract these skills. For example, economists have described a "superstar effect," where the pay of entertainment celebrities rose once their market draw increased through the development of mass media. Because so much of the market is captured by a few individuals, small differences in talent or public preferences lead to large differences in pay. Some economists have suggested a similar effect may be at work in the market for executives: as firms have gotten larger and begun to operate in a global rather than domestic market, the value that executives can add to a firm has increased, and their compensation has followed suit. Using this logic, one study concluded that "the six-fold increase of CEO pay between 1980 and 2003 can be fully attributed to the six-fold increase in market capitalization." In the neo-classical model, executive pay is held in check not just by competition in the labor market for executives, but also by competitive forces in capital markets and the firm's product markets. The key point made by this model is that for an executive to be overpaid, the firm must be generating excess profits that the executive is able to skim off, and in a world of perfect competition, no excess profits (profits beyond a normal, risk-adjusted rate of return) exist for the executive to capture. (It could be argued that the amount the executives are skimming off is too negligible to affect the firm's profitability; but, if so, excessive compensation is presumably of rather minor importance.) There is ample evidence that capital markets and most product markets are efficient, so for executives to be overpaid without placing their firms at a competitive disadvantage, there must be something in the compensation arrangement that is placing most firms at the same disadvantage. Otherwise, the company would be unable to raise sufficient capital or become vulnerable to a hostile takeover. In a world of perfect competition, there is no need to try to measure whether executives are overpaid, because excessive pay is an unsustainable outcome that would be driven out by market forces. For executives to be overpaid, something must be impeding the efficient market allocation of resources. Economists who have argued that executives are overpaid have pointed to the principal-agent problem as the market failure that could lead to executives being widely overpaid. The principal-agent problem is a well-known market failure that exists when a principal's (owner's) interests are represented by an agent (in this case, the CEO) whose goals or incentives diverge from the principal, and the principal is unable to closely enough monitor the agent to keep their interests aligned. The agent could be pursuing any number of private interests, including minimizing his own effort, maximizing his own reputation (by unprofitably expanding the firm, for example), covering up his own mistakes, minimizing risk, and so on. The key point is that the agent is not always pursuing the principal's goal: profit maximization. Profit maximization is in the agent's self-interest only insofar as it maximizes his own compensation or well-being. Yet there is a tradeoff, since an increase in the agent's pay decreases the company's profits, all else equal. For a publicly listed corporation, the principal-agent problem is particularly hard to avoid because of another well-known market failure: the free-rider problem. For a publicly listed corporation, the (collective) principal is the firm's thousands of shareholders. Assuming for a moment that barriers to shareholder action (which will be discussed below) did not exist, it is still unlikely that shareholders could avoid the principal-agent problem because it would be highly costly for any individual shareholder or group of shareholders to monitor the agent. Any benefits that resulted from monitoring the executives would not be captured solely by the shareholders undertaking the monitoring; they would flow to all shareholders. Hence, it is in any individual shareholder's self-interest to leave monitoring the executives to other shareholders since that will lead to the same benefit with none of the cost of personal monitoring. As a result, every shareholder chooses not to monitor, and this is the essence of the free-rider problem. In theory, the firm's board of directors is meant to safeguard the shareholders' interests and monitor the firm's executives: the free-rider problem has been overcome by the shareholders banding together and appointing a board to represent them. But does the board really represent the shareholders' interests? For the board faces a principal-agent problem of its own: since each board member's financial stake in the firm typically makes up a negligible share of the firm's total value, the board members may also have an incentive to pursue private interests other than profit maximization. This incentive opens the door to a number of ways in which the executives could "capture" the board so that the board members were not truly "independent," as will be discussed below. In this context, it is easy to see how an endemic problem of overpaying executives could potentially arise. Since neither the executives nor the board are acting solely in the shareholders' interests, they may agree to pay the executive more than his marginal product. Since executives at competing firms are also overpaid, the firm's performance would not fall behind its competitors. If the burden of proof is on critics to prove that the real world outcome does not match the neo-classical ideal, then the "managerial power" critique, discussed in the following section, attempts to make a comprehensive case that the principal-agent problem has led to excessive executive pay. Does the neo-classical or the principal-agent model more accurately describe executive pay setting in the United States today? In support of the principal-agent model, law professors Bebchuk and Fried (hereafter, BF) have set out a "managerial power" critique, which identifies the numerous ways in which the structure of executive pay and the relationship between the executive and the board differs from the neo-classical ideal. Although the managerial power critique cannot numerically estimate how much executives are overpaid, BF argue it is prima facie evidence that executives are paid excessively and pursue the goal of maximizing pay rather than shareholder value. The primary elements of the managerial power critique are laid out below. The neo-classical model assumes that executive pay is determined through "arm's length contracting": in negotiating the executive's pay, the board of directors (typically through its compensation committee) is charged with driving the best bargain it can obtain on behalf of shareholders. BF argue that the typical board structure has little in common with this ideal. In many corporations, the CEO is also the chairman of the board and other company "insiders," who may be loyal to the CEO, serve on the board. BF argue these arrangements are susceptible to the boards being "captured" by the executives. Some fears of board capture were allayed in 2003 when the NYSE required that boards of its listed companies have a majority of outside directors, and the boards' nominating, compensation, and audit committees consist solely of outside directors. (The NASDAQ has similar rules, except for those pertaining to the compensation and nominating committees.) But even "outsiders" who serve on the board may owe their positions—and hence, BF argue, their allegiance—to the CEO. For example, the only candidates who appear in the official proxy given to shareholders for election are individuals selected by the board's nominating committee. It is commonly perceived that the CEO strongly influences the nominating committee's selections. Shareholders can withhold support from a director but cannot vote against a director, which means that a director technically needs only one favorable vote to be elected. There are few ways that the shareholders can directly select members of the board. Alternative directors proposed by shareholders are costly, difficult, and rare. Board members may feel that they must keep on the CEO's "good side" in order to be re-nominated when their terms expire. Furthermore, board members are frequently executives at other corporations, which may make them predisposed to view executive compensation requests favorably and may make them hesitant to be critical board members since their criticisms could be used against them at their own companies. Boards are also dependent on executives to furnish them with information and advice in order to fulfill their duties, and must maintain the executives' good will in order to receive this information. In fact, the CEO compensation packages that boards approve typically originate from the company's human resources department, which, of course, is subordinate to the CEO. If boards are captured by the executives, one would expect that arm's length bargaining would be compromised. There is evidence that less independent boards are correlated with higher executive pay, all else equal. Some studies have shown that CEO pay is 20%-40% higher when the CEO is also the chairman of the board. One study showed that executive compensation is higher when the CEO picked the board's outside directors. There are studies that found that executive pay is lower in situations where shareholders have more influence over the board—for example, when there is a single large shareholder or institutional shareholders with a significant ownership position. Companies often hire outside compensation consultants to help them determine the level and characteristics of the executive compensation package. But BF argue that these consultants can also be "captured" by management because the consultants are eager for more business from the firm (including business unrelated to executive compensation); as a result, they tell the executives what they want to hear. If shareholders thought that the board was allowing executives to be overpaid, institutional barriers would limit their influence over the board. The general terms of the company's overall performance-based compensation packages, such as stock options plans, may be subject to an up or down vote by the shareholders, but shareholders cannot modify the details of the package or offer alternatives. Only fifteen of 2000 options plans were voted down by shareholders from July 1997 to June 1998. Shareholders can introduce resolutions on executive pay, but even if they attract a majority of voters, the resolutions may not be binding. BF argue that one of the main constraints on executive compensation levels are "outrage costs"—a fear on the part of executives that if their compensation is too excessive they will face hostility from shareholders and negative publicity from the media. BF argue that outrage costs have two effects. First, they reduce executive compensation levels below what they would otherwise be. (This factor works to the extent that outrage exists—BF argue one reason why executive pay rose in the late 1990s is because CEOs were exalted during the stock market boom, causing outrage costs to diminish.) Second, they encourage executives to seek "stealth compensation"—compensation delivered in a form that is difficult for shareholders and the public to understand—in order to avoid outrage. "Golden parachutes," generous severance or retirement packages (details of which do not have to be disclosed beforehand), "golden hellos" (additional incentives to join a company), life insurance, deferred compensation, personal loans (before the Sarbanes-Oxley Act), bonuses that are not linked to company performance, and company-provided perks in the form of vehicles, aircraft, and club memberships are all examples of stealth compensation. BF believe that the rapid growth in executive stock options is explained by the desire for stealth compensation. From a neo-classical perspective, it is difficult to understand why stock options are awarded rather than stock—when the options are too far "underwater" (the stock price is below the option's strike price), there is no incentive effect, and when it is close to the strike price, executives may be extremely risk averse for fear that the option will fall below the strike price. After they are exercised, options cease to have any influence on executives' behavior. And options, unlike stock, are not necessarily aligned with the shareholder's interest since they discourage the payment of dividends (i.e., the money can be used to buy back the stock to boost its price instead). But BF argue that from the managerial power perspective, the prevalence of stock options is logical because accurately pricing options at the time they are granted is complex and controversial. Until recently, options were not expensed on a firm's balance sheet, so some argued this treatment made their effect on shareholder value less transparent. Stock options may also be a way to increase compensation without generating as much shareholder outrage since options are worth more when the stock price is high and shareholders are doing well, without exposing the executives to any risk when the share price falls below the strike price. BF also attribute the "ratcheting up" of executive pay to outrage costs. Executive pay is often set relative to some (self-selected) peer group, typically identified by the compensation consultant. To justify compensation levels, the board sets CEO pay somewhat higher than the industry average, reasoning that its executive is an above average performer (which critics have compared to the mythical "Lake Wobegon," where all of the children were above average). Of course, it is mathematically impossible for everyone's performance to be above average, but as long as compensation is close to the industry norm, shareholders are unlikely to complain and the company is unlikely to attract unwanted publicity. But if each executive is having their pay set above the average, then the average will rise over time—inadvertently, the practice will cause pay to be ratcheted up to levels that may have little to do with marginal product. If pay levels are set based on peer groups, they will also be insensitive to performance, the subject of the next section. In the 1980s and early 1990s, many academics complained that executives were well compensated regardless of whether their firm performed well or poorly. In a much cited article, Jensen and Murphy argued The relentless focus on how much CEOs are paid diverts public attention from the real problem— how CEOs are paid. In most publicly held companies, the compensation of top executives is virtually independent of performance.... Is it any wonder then that so many CEOs act like bureaucrats rather than the value-maximizing entrepreneurs that companies need...? According to their estimates, a $100 increase in firm value led to a 26 cents median increase in CEO wealth, of which cash compensation rose only 4 cents. They argued that the way to solve the principal-agent problem was to align executive incentives with profit maximization by making compensation more sensitive to the firm's performance. (They estimated executive compensation was no more sensitive to firm performance than workers' wages.) One way to accomplish this goal was through performance-based bonuses. Another way was by compensating executives with firm stock or stock options, so that when executives made decisions that made the firm more profitable, the firm's stock price would rise, causing the value of the executive's compensation to rise. In theory, executives would no longer wish to pursue private goals that undermine firm profitability because it would reduce their compensation. The authors argued that if pay were more closely linked to performance, average pay would probably rise because bad executives would be forced out, more talented individuals would be drawn to managing, executives would be motivated to work harder, and firm performance would improve. In addition, pay would need to be higher if it were riskier (since incentive-based pay would fall if the executive missed the performance benchmarks) because individuals must be compensated to take on risk. They argued that performance-based pay could exacerbate inequality but society as a whole would be better off overall. While most studies confirmed that cash pay and bonuses were fairly unresponsive to firm performance, the literature is divided about the relation of total pay to performance, once executive stock holdings and stock options are included. For example, Hall and Liebman argue that pay for performance rose throughout the 1980s and early 1990s because of the rising share of compensation that consisted of stock and stock options. They estimate that CEO wealth rose about sixty cents for every $100 increase in firm value in 1994, significantly higher than Jensen and Murphy's earlier estimate. Furthermore, they argue that executive pay is much more sensitive to performance than Jensen and Murphy's measure implies because the firms involved are so large that even if the ratio of the change in wealth and the change in firm value is small, the dollar change in wealth is very large. For example, they estimated that a CEO who increased the performance of his company from below average to above average would increase the median value of his stock holdings by $4 million, all else equal. Similarly, Core et al. estimated that the median portfolio value of an S&P 500 CEO's own firm holdings was $30.1 million in 2003, and a 1% change in the firm's stock price would cause the median portfolio value to change by $430,000. In the context of this report, this shift to so-called "performance-based" pay turns out to be important because it was the source of most of the rise in executive pay in the 1990s and 2000s. The estimated value of options granted to CEOs (at the time of the grant) increased nine-fold from 1992 to 2000, while other types of compensation rose three-fold over that period. BF argue that the growing share of non-cash executive compensation should not be taken as a sign that pay is now tied more closely to performance. The managerial power critique identifies several standard components of executive pay that may appear to be performance-based pay, but arguably allow executives to circumvent the link between pay and performance in practice. For example, severance packages often handsomely reward executives for leaving their jobs, on good or bad terms. These packages have only negative effects on incentives since they send the message that regardless of whether an executive succeeds or fails, he will be rewarded after the fact. Bonuses should be an important part of performance-based pay, but studies have found that instead they are often paid for reasons unrelated to profit maximization. BF identify several common characteristics of stock options that seem inconsistent with the pay for performance mantra. Stock options are almost always designed to reward absolute performance rather than relative performance. For example, if a company's stock price rises by just as much as the overall market, then the executive's compensation will have risen because of trends largely beyond his control. Even if a company is outperformed by its competitors, the options could still have value in a bull market since "a rising tide lifts all ships." Furthermore, stock options are usually granted "at the money" (they have a strike price equal to the market price at the time the option is granted). Since stocks usually rise over time, this will generally reward executives for doing nothing, a phenomenon Warren Buffett characterized as "a royalty for the passage of time." Once exercised (usually after a vesting period), the options no longer provide executives with any incentives. There is also a more basic question to ask: in instances where firms offered incentive-based pay, why did it typically supplement rather than substitute for cash salary? The thrust of the pay for performance argument was that executives should be paid differently, but in practice they were also paid more. Instead of rewarding good executives and punishing incompetent executives as many academic obeservers prescribed, everyone was made better off. Besides pay, some argue that executives have a degree of job security that is at odds with the pay for performance mantra. For example, Murphy found that the correlation between firm performance and CEO turnover was low and fell in the 1990s to a statistically insignificant relationship. CEOs also have more contractual job protection than employees: Schwab and Thomas found that only 25 of 375 of the CEOs they examined served "at will," like regular employees, while the remainder could only be dismissed without penalty for "just cause." The corporate scandals of recent years have brought greater scrutiny to executive pay practices, particularly stock-based and option-based compensation. Linking compensation to the stock price can only mitigate the principal-agent problem if the stock price is an accurate proxy for firm value. The assumption that it is a good proxy is at the heart of the efficient market hypothesis, and most economists would consider it true over long periods of time. But it is difficult to argue that the stock price is a good proxy for firm value over short time periods when stock prices tend to fluctuate widely and unpredictably, implying that the value of the firm can fluctuate by millions or even billions of dollars in a matter of days. If it is not a good proxy, a potential problem arises because the agent's incentive is linked to a goal that is not perfectly aligned with the principal's interests. In other words, the agent can increase his compensation by taking advantage of—or even causing—short-term changes in the firm's stock price, which could be detrimental to the long-term performance of the firm. Unsurprisingly, the agent may decide to take actions that boost the short-term stock price when the firm's long-term prospects are bleak. In this situation, the large stock and stock option holdings of the typical executive arguably offer a powerful incentive to take actions to boost the stock price long enough to divest one's stock holdings. In this context, performance-based pay exacerbates the principal-agent problem. This problem was the essence of many of the corporate scandals that followed the 2001 recession. Some of the scandals involved executives pumping up the firm's stock price by manipulating reported earnings in order to increase their performance-based pay (or prevent it from falling). Other scandals revolved around executives attempting to hide financial problems from the public to prevent their stock and option holdings from losing value. In other cases, executives used inside information to exercise their options before the firm's share price fell. Likewise, the ongoing scandal involving the backdating of stock options revolves around executives retroactively manipulating the timing of the option grant to a day when the firm's stock price was unusually low in order to increase the option's value when it is exercised. These scandals suggest that, on balance, the principal-agent problem seems to have survived the shift to performance-based pay intact. In fact, the growth of performance based pay and accounting problems seems to have gone hand-in-hand—700 firms issued financial restatements from 1997 to 2000, compared with 11 from 1992 to 1993, when performance-based pay was less prevalent. Burns and Kedia find that firms whose executives have a higher share of option-based compensation are more likely to restate their earnings. While the incentives for executives to manipulate earnings seems straightforward, the rationale for the board's failure to prevent it seems less clear: the board would not profit substantially from manipulation and could face high costs if the manipulation is detected, unless "board capture" has occurred or the board is operating under the same short-term time horizon as the executives. Of course, the board may have been unaware of the executives' actions, but that may raise the question of why it did not monitor the executives more closely. There may also be a human tendency to use less scrutiny when results appear positive. Although the corporate scandals that have unfolded over the past few years may not be proof of the managerial power theory, they can be shown to be consistent with it. Boosting pay through accounting fraud and earnings smoothing is consistent with executives' desire for stealth pay. Bergstresser and Philippon show that at firms that appear to have managed earnings, executives exercise options and sell stock at a higher rate than average and have a greater share of performance-based pay. The failure of the board to prevent such activities is consistent with board capture. Allowing executives to exercise their options at their discretion (after a vesting period) is primarily what made accounting fraud and manipulation profitable, yet there is little purpose in allowing options to be exercised at will if the options are meant to keep the executive's interests aligned with the shareholders' on an on-going basis. It is also difficult to see why firms would allow backdated options except to mask the true size of executive compensation (relative to the "performance" required to earn the compensation). Firms could have legally paid executives just as much by either issuing them more options or options with a lower strike price, but doing so would have drawn more attention from shareholders and the media. One study found that favorably dated option grants, potentially caused by backdating, was one-third more likely at firms where independent directors did not make up a majority of the board. Criticisms of the managerial power theory can be split into two broad categories, disagreements with BF's findings and alternative explanations for the phenomena that BF identify. On their findings, critics have disagreed with the following: If pay were determined by managerial power, then executives hired from the outside should not receive the same generous pay packages as insiders, but they do. BF reply that the board and compensation consultants have the same incentive to reward someone who will have influence over their welfare in the future as they do over someone who can influence it now. BF's claim that executive pay is not well linked to performance. As noted above, some studies have argued that executive pay is highly sensitive to performance because of their large holdings of their firm's stocks and options, which gives them powerful incentives to maximize the firm's profitability. BF's ability to explain the change in executive pay over time. First, BF's theory depends on the CEO's ability to "capture" the board so that it does not act in the shareholders' interests. Yet boards have become more independent and active in recent years. For example, in 2003 the NYSE and Nasdaq required that a majority of a company's directors must be independent in order to be listed on their exchanges. Second, changes to SEC rules required more disclosure of options granted to executives in 1992—at the very time that options began to increase in value. This pattern seems at odds with BF's argument that executives prefer options because they are a form of stealth compensation. Third, Murphy argues that outrage costs were much higher in the early 1990s, with the introduction of legislation and new regulations to curb pay, than the late 1990s, when compensation escalated. Although executive pay is higher in the United States than abroad, that could be evidence in favor of efficient markets since the United States stock market has consistently outperformed foreign stock markets. This finding casts doubt on BF's claim that excessive pay is undermining firm profitability. Alternative explanations have been offered for several of the phenomena that the managerial power theory describes. Some of them are related to the incentives offered by accounting rules. For example, the shrinking share of executive compensation being paid in cash wages has been attributed to the million dollar cap on pay that corporations are able to deduct from taxes, which is described below. Similarly, certain standard characteristics of options (such as setting the strike price equal to the actual price at time of issue and using options that reward absolute instead of relative changes in the stock price) were encouraged by accounting rules that, until recently (see below), did not require that options with those characteristics be expensed. Hall and Murphy have argued that the managerial power theory cannot adequately explain the recent burgeoning of stock option compensation because most stock options (90% in 2002) are paid to non-executives. They offer a "perceived cost theory" of why stock options have become so popular: because stock options do not require the company to outlay any cash when granted and were not expensed in the company's accounting statements before the rule change in 2005, they argue that options became popular because they appeared costless to issue. On the contrary, options do have a cost—they dilute the existing shareholders' ownership position when they are realized. The shortcoming of this explanation is it begs the question of whom Hall and Murphy believed were being duped into thinking the options were costless—the board or the shareholders? In the former case, BF argue that "...if directors had so little financial sophistication, then the board-monitoring model of corporate governance is in even worse shape than our analysis suggests." In the latter case, the perceived cost argument is consistent with, but not proof of, the managerial power view that options are a form of stealth compensation. Alternatively, the perceived cost view could be rejected on the grounds of market efficiency. For example, although options were not expensed, information about the options were included in the footnotes to corporations' financial statements. If market actors use all of the information available to them, as market efficiency requires, then the stock price would already reflect the information presented in the footnotes, and the stock price would decline, all else equal, when options were granted. Otherwise, market participants who were aware of the real costs associated with options could systematically profit by short-selling firms that offered employees overly generous stock options. It has also been suggested that there are alternative explanations to the managerial power theory for why executive compensation could exceed marginal product. In a well-known article, Lazear and Rosen argued that executive pay could be much higher than the executive's marginal product and still be economically efficient from the perspective of the overall firm. They argued that this could be true if the firm's pay structure is likened to a tournament. If the firm has no easy way to accurately identify each of its workers' marginal product, then the most efficient way to induce maximum effort from its workers could be to attach a large monetary incentive to the "winner" of each promotion. At the top of this ladder is the CEO, with a correspondingly larger prize each step of the way to motivate workers to strive for further promotions. As long as the CEO's high pay motivates his subordinates to work harder to strive to some day replace him, it will be profitable for the firm to compensate him at that rate regardless of his marginal product. Anabtawi argues that the tournament model explains why executive pay is not more closely linked to performance (because reductions would weaken incentives of subordinates to try to win the tournament). The decision to base executive stock options in the 1990s on absolute performance rather than relative performance had important implications during the stock market boom of the 1990s. When the board chooses how much stock option compensation to award to an executive, it is basing its decision on the ex ante expected value of the options. But actual executive pay depends on what happens to the stock price ex post . For example, if an executive were granted one option with a strike price of $40, and the board expected the stock price to rise to $50 when the executive exercised it, the executive's expected pay gain ex ante would be $10. But if the stock price actually rose to $60, his actual pay increase would be $20—double what the board expected him to earn. A strong case can be made that since the sharp appreciation in stock prices in the 1990s was largely unexpected, much of the pay increase tied to the stock price or other metrics of firm performance was also unexpected windfalls. For example, in the 50 years preceding December 1995, the inflation-adjusted annual appreciation rate of the Standard & Poor's 500 stock index averaged 2.3%. From December 1995 to December 1999, the average real rate of appreciation was 22.8%. Figure 2 shows the expected value (based on the historical average) and actual value for a stock option issued in December 1994 and exercised at any point from December 1995 to 1999. If the company set the strike price at the firm's current stock price and expected the stock price to follow the historical average, then the company would expect the nominal stock price to rise about 26% by 1999. Instead, the average stock over that period rose by 214% in nominal value. Assuming a strike price at the firm's current stock price, the actual payment from options over that period would be over eight times higher than expected for the average firm. Figure 2 suggests that much of the increase in pay in the 1990s may have been unrelated to competitive forces or managerial power, but instead was unanticipated on the part of executives and board directors. In a rapidly rising market, almost all executives, regardless of talent or effort, arguably profited from being in the right place at the right time. But even if the windfall was unintentional, that begs the question of why executive pay did not fall further in the 2000s when the stock market declined by nearly one half. It would be expected that boards would react to the stock option windfalls received by executives in the 1990s by offering less generous stock options from that point on or tying future options to relative rather than absolute performance. Indeed, even if directors had made no changes to ex ante option packages, one might expect sharp declines in option-based pay from 2000 to 2003 since stock prices were falling. Instead, overall pay fell by only 11% between 2001 and 2003 (which was still higher than it was in 2000) and returned to its previous peak in 2004, which seems difficult to reconcile with the neo-classical model. While windfalls are consistent with arm's length contracting in a world of uncertainty, executives would not be expected in a neo-classical world to permanently lock in windfall payments after the source of the windfall had disappeared. This experience does seem consistent with the managerial power theory, however. Shareholder satisfaction with the large stock market returns of the 1990s may have greatly reduced the outrage costs associated with the corresponding increase in executive stock options. Executives may have been able to maintain those pay increases in the 2000s despite the fall in the stock market by using past pay levels as a benchmark for future pay as a way to limit outrage. Excessive pay might be defined from an equity perspective in terms of material need or in relation to the pay of others in society. In economic discussions concerning the efficient allocation of resources, these definitions are not likely to be useful. From an economic perspective, the starting point for determining whether pay is excessive is likely to be whether or not pay exceeds marginal product. Unfortunately, economists have no way to directly measure an executive's marginal product (what monetary value should be placed on, say, decision making?), so there is no way to directly determine whether executives are being overpaid in absolute terms. (In the neo-classical model, that is not a concern since nobody is overpaid.) All that can be measured is what specific executives are being paid relative to others, and how their firms have performed (based on profitability, rate of return, stock price, and so on) relative to others. Many economists have attempted to determine whether executive pay is correlated with firm success. In these studies, executives with above average compensation can be thought to have "earned it" if their firm outperformed its rivals. As useful as this exercise may be, it should be noted that it does not attempt to answer the underlying question of whether, overall, executives are excessively paid on average, and whether firms could achieve the same results if they paid their executives less. Some economists define excessive pay more broadly than the marginal product definition, defining it in terms of executives who are capturing economic rents. Taken literally, an economic rent is defined as any level of pay above the worker's reservation wage, which is the lowest wage the worker would be willing to accept to work. Thus, according to this definition, an executive could be paid less than the value he adds to the firm (i.e., his marginal product), but still be overpaid since he would have been willing to perform the same job for less. This broader definition is somewhat problematic from a measurement perspective—since the reservation wage cannot be observed, classifying an executive as overpaid becomes purely subjective. In a perfectly competitive labor market, one would expect the reservation wage to converge with marginal product since there are a very large number of interchangeable workers for any job, and jobs for any worker. In the market for executives, where the candidates and openings are limited and not perfectly substitutable, a wedge between the reservation wage and marginal product could theoretically exist. But it would be expected that the wedge would ultimately be limited by the fact that any executive paid less than his marginal product could be profitably snatched away by another firm willing to pay slightly more. Furthermore, the rent will exist whether it is captured by the executive or the firm's shareholders. Therefore, equating the executive's capture of the rent with excessive pay (and all the negative connotations that entails) implies that one views capital (shareholders) as a more deserving recipient of the rent than labor. Defining excessive pay as pay above marginal product remains less controversial, since it has clearer implications for economic efficiency. Arguments about efficiency mostly come down to incentive effects—the fear that attempts to curb executive compensation would also reduce executive productivity. This would be true if current compensation levels are needed to entice the best possible candidates to become executives instead of pursuing other career paths that would not maximize these individuals skills. Given the wide gulf between executive pay and pay in nearly any other profession (although some elite members of the financial, legal, and medical professions are comparably paid), some might be skeptical that a pay cut that left a portion of the gulf intact would scare off suitable candidates. For example, one economist recently pointed out that one CEO with a net worth of $16 billion would need to spend $30 million per week just to keep his net worth from rising. But most would agree that some reward is needed to compensate for job attributes such as stress and long hours that are expected of executives. Perhaps also implicit in efficiency concerns is the neo-classical assumption that higher pay leads to higher levels of utility. In other words, individuals are motivated to work harder to earn more because earning more makes them happier. Thus, policymakers looking to curb executive pay may need to weigh the loss of welfare it would cause as one of the costs of such a proposal. But recent empirical evidence on compensation and welfare suggests that this might not be the case. This research suggests that after a certain point, people are not made happier by further increases in absolute income. That is because when income increases, people quickly adapt to their new circumstances, and any temporary rise in happiness caused by greater income dissipates. Rather, the research suggests that people are made permanently happier by increases in relative income, a sentiment captured in the saying "keeping up with the Joneses." According to this theory, the ratcheting up in executive pay in recent years has not made anyone better off since all executives' pay is rising simultaneously. It also suggests that, hypothetically, if there were a costless way to reduce executive pay across the board (admittedly, an unrealistic assumption), it might not make anyone worse off (once individuals had adapted to their new circumstances) as long as enough of the gulf between executive pay and other professions were maintained to leave a sufficient superiority in relative income intact. Executives may also derive utility from non-material aspects of their job, such as fame and power, that could be unaffected by an absolute decline in income. Obviously, across-the-board changes would require some type of collective action; if any single board decided to reduce executive pay, those executives would lose utility since their income relative to their peers would fall. A corporation's bylaws lay out the general rules regarding a company's corporate governance protocol, including procedures for the determination of executive pay. In turn, the general parameters of a firm's corporate governance are principally dictated by the state corporate law that prevails in the state in which a company is incorporated. By some estimates, about half of publicly traded companies are incorporated in the state of Delaware, giving its corporate laws a disproportionately large influence in this area. Delaware's influence also extends to the Delaware Chancery Court, which is widely viewed as the preeminent national legal forum for corporate disputes. In spite of the primacy of state law in this area, the federal government and regulatory entities, like the SEC and the nation's securities exchanges, have also promulgated policies in this area. The existing rules governing CEO pay have developed through a variety of legislation, executive branch regulation, and regulation by independent, self-governing bodies. Most regulation involves disclosure of pay, and does not set compensation levels. The following legislative and regulatory developments have affected CEO pay, although that was not always their primary focus. Starting with the earliest developments, they are listed in chronological order. Corporations can generally deduct employee pay, including executive pay, from their corporate income subject to taxation. In 1993, in response to outrage at executive pay levels, OBRA ( P.L. 103-66 ) added section 162 (m), titled "Certain Excessive Employee Remuneration," to the Internal Revenue Code. It imposes a $1 million cap on the deductibility of compensation that applies to the CEO and the four next highest-paid officers. (Pay itself is not capped, only the deduction of pay from corporate income.) No tax deduction for compensation above the $1 million limit is permitted except for "performance-based" pay, such as commissions or stock options, where the ultimate compensation received by the executive depends on the stock price, reported sales or profits, or some other financial indicator. To qualify for the exception, the goals underlying the performance-based compensation must have been determined by a compensation committee that is comprised solely of two or more outside directors. The terms under which the performance-based compensation is to be paid, including the performance goals, must be disclosed to shareholders and approved by a majority shareholder vote. Executives' cash compensation, the type of pay most directly affected by OBRA, increased slowly after OBRA took effect. But this provision in OBRA is widely believed to have contributed to the growing importance of stock options in CEO compensation in the mid and late 1990s. As a result of this trend, overall compensation grew even more quickly than before, so OBRA may have had the unintended consequence of increasing CEO pay if stock options played the enabling role in excessive pay that critics claim. Enacted in the wake of accounting scandals at firms like Enron and WorldCom, the Sarbanes-Oxley Act of 2002 ( P.L. 107-204 ) contains a broad range of corporate governance and accounting reforms, two of which are particularly relevant to executive pay: Prohibition on Personal Loans to Executives. Section 402 of the law makes it unlawful for any public company, directly or indirectly, to extend credit, maintain credit, or arrange for the extension of credit in the form of a personal loan to, or for the benefit of, any director or executive officer. More Timely Reporting of Corporate Insider Stock-Based Transactions. Section 403 of the law requires insiders (defined as officers, directors, and shareholders owning at least 10% of outstanding stock) to file reports of their trades of the issuer's stock and stock options with the SEC before the end of the second business day on which the trade occurred. Previously, option grants did not have to be disclosed until 45 days after the end of the fiscal year. In 2003, the SEC approved changes to the listing standards for firms listed on the New York Stock Exchange (NYSE) and the NASDAQ Stock Market that require shareholder approval of almost all equity-based compensation plans. Firms must disclose the material terms of their stock option plans prior to the shareholder vote. The required disclosures include the terms on which stock options will be granted and whether the plan permits options to be granted with an exercise price that is below the market value of the company's stock on the date of the grant. While the regulation requires shareholder approval of the overall compensation plan, it does not require shareholder approval of the specific amount of compensation received by individual executives. In 2003, the SEC also approved other changes to the listing standards for firms listed on the NYSE. The standards require companies listed on the NYSE to have a compensation committee that is entirely composed of outside directors. In addition, if a compensation consultant is to be used to assist in the evaluation of director, CEO, or senior executive officer compensation, the compensation committee is required to have the sole authority to retain the consultant and approve the consultant's fees. In 2004, the Financial Accounting Standards Board (FASB), a private sector entity that writes accounting standards, released accounting directive FAS 123R, which requires companies to "expense" (count as a cost) the value of employee stock option grants in their income statements in their next fiscal year, beginning in June 2005 for large companies and December 2005 for small companies. Recognition of the cost of options has the effect of reducing the corporation's reported earnings, which may make granting options less desirable to companies. Previously, most companies had simply noted the value of options grants in the footnotes to the financial statements, which had no effect on earnings. Thus, FAS 123R may constrain executive pay even though that was not its primary intent. The requirement that publicly traded companies disclose how much they pay top executives dates from the 1930s. The SEC has modified the disclosure format several times, as the forms of CEO pay have become more varied and complex. In 1992, the SEC required that proxy statements include tables setting out several categories of pay for the top five executives. These included base salaries, bonuses, deferred, and incentive-based compensation, including stocks and stock options. Corporations were required to place an estimated value on options granted to executives. By 2006, the SEC had concluded the 1992 disclosure rules were, in the words of SEC Chairman Christopher Cox, out of date.... [They] haven't kept pace with changes in the marketplace, and in some cases disclosure obfuscates rather than illuminates the true picture of compensation.... We want investors to have better information, including one number—a single bottom line figure—for total annual compensation. In July 2006, for the first time since 1992, the SEC adopted major changes to executive disclosure rules contained in public companies' registration and proxy statements. The disclosure requirements apply to the CEO, the chief financial officer (CFO), and the next three most highly compensated executive officers. The rules require the disclosure of the executives' total compensation, the fair value of their stock option grants, estimates of potential post-employment payments and benefits, and tabular disclosure of director pay. It requires that statements include a Compensation Discussion and Analysis (CD&A), which is a narrative that must explain the objectives and implementation of a company's executive pay program. And in response to the stock option grant backdating controversy, the rules require detailed information about a company's option grant practices in the both the CD&A and a supplemental table. The rules also require the disclosure of directors' compensation figures for the preceding fiscal year. The disclosure requirements went into effect in 2007. SEC officials have said that the central contribution of the disclosure reform is the provision of enhanced transparency with respect to executive pay. They may also be intimating that the new disclosure requirements could at least indirectly help improve shareholders' ability to exert pressure on management to temper executive pay: By restraining executives from self-indulgent behavior—and using salary, bonuses, options, long term benefits, and other financial incentives in very purposeful ways—compensation committees acting on behalf of the shareholders can increase management's incentives to improve corporate performance. So our purpose in this very aggressive new executive compensation rule is very straightforward: It is to protect and advance the interests of shareholders. But those who would hope that the reform will have a dampening effect on executive pay levels may not be encouraged, at least so far: a survey of directors at 110 firms, conducted at the conclusion of 2006 by Mercer Human Resource Consulting, found that 70% planned only minimal changes to their executive compensation programs as a result of the new SEC rules. Only 15% of the directors said that the reform would have a substantial impact on their approach to executive compensation. In the theoretical neo-classical world, executive pay would be determined by marginal product. Since the outcome would already be economically efficient, any policy response that created a wedge between executive pay and executives' marginal product would reduce economic efficiency. Those who believe that market forces are the best curb on excessive pay argue that government should be doing less, not more, in this area because government cannot determine appropriate levels or forms of executive pay more accurately than shareholders or boards. The managerial power critique makes the case that executive pay is not determined by arm's length contracting. It suggests a number of reforms to bring executive pay closer to an arm's length contracting ideal. These reforms could be promoted by shareholders, board members, or in some cases, mandated by the government, through legislation or regulation. They fall under three broad categories: improving the transparency of executive pay, strengthening board independence to reduce the potential for board capture, and strengthening shareholder control over the board and management. Proponents often argue that they are not trying to interfere with market forces, but to level the playing field for shareholders in their interactions with management. Some of the reforms they promote do not affect executive pay directly (e.g., not allowing the CEO to be chairman of the board); rather, their stated intent is that reforms that strengthen shareholders' rights or board independence should lead to lower pay (or pay that is more sensitive to performance). But a few proposals do affect executive pay directly, and are analyzed below. Some observers favor the status quo, arguing that Congress should continue to defer to more specialized regulatory bodies, such as the SEC, with an expertise in corporate governance. The regulatory bodies have focused on making occasional minor policy modifications to enhance transparency and align boards' incentives more closely with shareholders' interests. In this view, hasty policy changes in reaction to rising pay levels would risk undermining the current system that, on the whole, is effective at rewarding good executive performance. In 1993, OBRA added Section 162(m) to the Internal Revenue Code, which limited a company's tax deduction for what it pays each of its top executives to $1 million, but exempted "performance-based" pay like stock options. Supporters of the neo-classical model argue that the million dollar deduction limit is a good example of how government intervention in markets can have unintended consequences that cause a policy to backfire. Despite the deduction limit, overall executive compensation continued to rise rapidly, and the limit may have contributed to the rapid growth of executive stock options, which critics argue are at the heart of the corporate scandals. Critics see this as an example of a policy with unintended consequences, in which government regulation encourages behavior that circumvents the regulation's original intent. Tax policy may be too blunt a tool to effectively encourage these goals. Since the deduction limit failed to curb the growth in executive pay, some would argue that it should be eliminated or scaled back. Alternatively, if the purpose of the deduction limit is to curb overall executive pay levels, others would argue the limit would be more effective if expanded to cover all forms of pay (perhaps at a different deduction level). Some research found that the deduction limit appears to have been a factor in the growth in executive stock options and overall executive pay. But other research concluded that the statute had little to do with subsequent increases in the sensitivity of overall executive pay to performance-based components like stock options. Factors that may have played a larger role in the growth of stock options include the bull market of the 1990s, not having to treat stock options as a corporate expense, and pressure on firms to provide executive pay that better aligned their interests with those of shareholders. Alternative research concluded that while the million dollar cap may have initially helped to compress executive salaries around the $1 million level, it did not appear to have had a significant impact on total compensation and other components of pay, such as bonuses and stock option awards. Some critics of executive pay have advocated changing Section 162(m) of the Internal Revenue Code to prohibit businesses from taking tax deductions for compensation provided to executives when the ratio of executive pay to that of its employees exceeds a certain level. The ratio could be set relative to, say, the average employee's pay or the lowest-paid employee's pay. A very few firms have voluntarily implemented such a policy. For example, the CEO of Whole Foods Markets limits his pay to no more than 14 times the pay of the firm's average employee. Using the tax code to mandate such a policy might arguably help address some concerns with the erosion of pay equity and growing income inequality. Supporters of this policy argue that discouraging excessive pay through tax disincentives is preferable to—and less disruptive than—prohibiting excessive pay directly. Critics could argue that the growing ratio between worker and CEO pay owes itself in part to an unrelated development—the moribund growth in worker pay. Critics could also argue that the reform could undermine the core investor concern of whether a CEO receives compensation commensurate with his or her performance. Furthermore, wage levels vary by company primarily because different companies hire different types of workers. For example, the average pay at a software company is likely to exceed average pay at a chain of fast food restaurants. Under this proposal, the fast food company would face higher taxes if it wanted to pay its executives a comparable wage to the software company. As with complaints about the OBRA cap, such a cap could result more in maneuvering by businesses to avoid the cap than fulfillment of its intended goal—for example, any such cap would have to delve into the complexities of what forms of employee and executive compensation should or should not fall under the cap, creating incentives for stealth pay. Detractors could also cite research that concluded that the tax deductibility of executive compensation tends to have a minimal impact on firm's ultimate profitability, raising additional questions about the ability of such a policy to help constrain executive pay. Outside compensation consultants are generally hired to help boards craft the firm's executive compensation packages. In a number of cases, the consultants are part of larger companies that furnish additional consultation services to the firms. It could be argued that when firms provide multiple consultancies to individual firms, there is a conflict of interest that makes it difficult for their compensation consultant subsidiaries to resist pressure to recommend favorable executive pay packages. Two possible options to address such concerns would be (1) an SEC requirement that a firm's proxy statements disclose all of the services it receives from companies that offer it compensation consulting services; or (2) a law to ban outfits that furnish executive compensation consulting services to a firm from offering other consultant services to them, similar to the Sarbanes-Oxley Act of 2002's proscription on auditors providing certain ancillary services to the firms they audit. If the latter alternative were pursued, some companies might stop offering compensation consulting services. These reforms might not lead to any change in behavior, however, because the basic incentive to recommend high pay remains even if compensation consulting is the firm's sole business, for reasons discussed earlier. While directors must be approved by shareholders, the nominees are typically chosen by the board or management. At present, shareholders can nominate directors, but the process is arduous, expensive (estimates range up to $1 million), and thus rarely pursued. To ease the process, the SEC proposed a rule in July 2003 that would have allowed shareholders with more than 5% of a company's voting securities to under certain conditions have their board nominees included in a company's proxy materials, which carry the management's slate of board nominees. A response to widespread concerns over the accountability of corporate directors after a number of corporate scandals, the proposal received the support of various observers, including some institutional investors. They argued that the integrity of corporate boards would be enhanced because the reform would result in boards being populated with a greater number of outside directors who are less beholden to management and better able to provide independent oversight and scrutiny of executive compensation practices and excesses, such as backdating. Although publicly listed firms are required to have outside directors, some critics have questioned the independence of outside directors recommended by management. For example, one study found that large numbers of outside directors inexplicably appear to have been the beneficiaries of options manipulation. Opponents of shareholder access reform argue that it could potentially result in antagonistic directors, and thus dysfunctional boards. Shareholders may also be less able to identify the most qualified candidates for the position. In the end, the SEC did not adopt the proposed 2003 shareholder proxy reform rule, a decision that many ascribe to vehement business opposition. But the issue re-emerged in August 2006, when the United States Court of Appeals for the Second Circuit reached a decision in American Federation of State, County and Municipal Employees Pension Plan v. American International Group, Inc. This ruling was the appeal's courts response to an earlier petition by the American Federation of State, County and Municipal Employees (AFSCME) to reverse the American International Group's (AIG) rejection of its effort to place a binding shareholder proposal in the company's proxy materials that would have changed its bylaws to facilitate shareholder nomination of directors. Historically, the SEC has generally allowed firms to exclude shareholder proposals relating to an election from their proxies, as it did in this case. However, the Second Circuit found the SEC's policy in this area to be historically inconsistent and asked the agency to clarify it. After the decision, the SEC basically chose not to rule on proxy access petitions, which Chairman Cox said injected a note of uncertainty into the proxy process for 2007. In July 2007, the SEC proposed two quite divergent policy proposals. One proposal, the short proposal, would essentially codify longstanding SEC practices of denying shareholder-proposed candidates for board director positions to be included in company proxy statements (called proxy access). The proposal, which the agency eventually adopted in late November of the year, appears to have been a response to the uncertainty that prevailed after the AIG decision. The second proposal, the so-called long proposal was not adopted. It would have allowed shareholders or shareholder coalitions with greater than 5% of outstanding shares to propose binding bylaw provisions that could permit specified shareholders to nominate directors and require the company to include the nominees in the company's proxy statement. Generally, business interests applauded the agency's decision to adopt the short proposal, while shareholder interests derided it. Chairman Christopher Cox claimed that the agency's vote would create legal certainty for the upcoming annual proxy season in spring of 2008, but conceded that investor advocacy groups and others would be disappointed. He has, however, indicated that the agency will probably revisit the subject of shareholder proxy access in 2008 when the Commission has its full complement of Democratic members. After the SEC's vote, Senate Banking Chairman Dodd said that he might try to offer legislation to reverse the decision, saying that he did not think it was a fair decision. And Barney Frank, Chairman of the House Financial Services Committee, expressed disappointment that the SEC would deny shareholders the right to offer proxy-access proposals. Chairman Frank also stressed that the SEC should have deferred action until it was at full strength. While shareholders are required to vote on a company's overall equity-based compensation programs, they do not vote on pay packages for individual executives. The managerial power critique has fueled growing interest in giving shareholders a non-binding vote on individual executive pay packages. Along these lines, there is Representative Frank's Shareholder Vote on Executive Compensation Act ( H.R. 1257 ), which was approved by the House on April 19, 2007, and Obama's companion and identically named bill ( S. 1181 ). Furthermore, in anticipation of the 2007 annual corporate meetings, activist investors have submitted shareholder proposals at about 60 companies seeking the right to have a non-binding vote on executive pay. Proponents believe that votes against individual pay packages, or merely the threat, could raise outrage costs, thus prompting directors to exercise greater restraint in pay setting and to be more conscientious in linking pay to performance. They argue that the vote would not overly burden or restrict the board since the vote would be non-binding. Several countries, including the United Kingdom, Australia, and Sweden, have given their shareholders the right to such a non-binding vote. Domestically, at least one firm, the insurer Aflac, has reportedly agreed to provide its shareholders with such a vote. Many other firms, however, are publicly opposed to the idea. Two main arguments are made in opposition to a mandatory non-binding shareholder vote on pay. First, to the extent that current levels of executive pay are largely explained by legitimate market forces, as some have argued, giving shareholders a non-binding vote on pay might inject undesirable distortions into the pay setting process and the demand and supply of CEOs. Second, the minutiae of CEO compensation packages can be difficult enough for corporate directors to master. Thus, it has been argued that expecting shareholders with relatively limited resources available for comprehending such things to be a knowledgeable presence in the pay setting process would be unrealistic. If the underlying concern with executive pay is equity, not efficiency, then the policy goal may be to reduce inequality in the least economically costly way. A more progressive tax system is widely considered to be the least costly way to redistribute income, in terms of lost economic efficiency. Of course, the tax code cannot target executives specifically without also affecting other high income individuals. Thus, while progressive taxation can be viewed as an effective way to promote equity goals, it is not well targeted toward reducing potential efficiency losses that result from the principal-agent problem that affects executive compensation. Given the importance of stocks and stock options in executive pay, policymakers attempting to increase the tax code's progressivity could consider reducing the tax preference currently given to capital income compared to labor income. For example, capital gains and dividends are taxed at a lower marginal rate than labor income and a sizeable portion of capital income tax can be deferred through tax-preferred savings vehicles. Stock options are taxed at regular income rates but receive favorable treatment because tax liability is deferred until gains are realized. Economists are divided over whether taxing labor and capital at the same rate would be economically efficient, but given the unequal distribution of financial assets in the United States, it would undoubtedly increase the tax code's progressivity. A stock option allows the holder the right to buy a company's stock at a predetermined fixed price, called the strike price , regardless of the stock's price at the date of purchase. The holder exercises the option when he subsequently buys the stock. After the option is granted, the company's stock could either rise above or fall below the strike price. If the market price fell below the strike price, the option would have no value and would not be exercised (because the holder could buy the stock for less on the open market). An option with a strike price above the market price is said to be under water . If the market price rose above the strike price, the value of the option would be equal to the difference between the strike price and the actual price (because the holder can buy the stock at the strike price and then sell it at the market price). For example, if a person was granted an option to purchase company X's stock in one year at $100, and the stock turns out to be worth $125 in one year, then he would earn $25 by exercising the option in a year. Alternatively, if the stock turns out to be worth $75 in one year, he would not exercise the option and would neither gain nor lose any money. Thus, the option's value can never fall below zero. Because the future is uncertain, economists and accountants must use complex formulas to place a value on an option when it is granted that takes into account how much value, if any, the option is expected to have when it is ultimately exercised. There is a consensus among economists that the expected value at issuance is the amount that should be included in measures of executive pay. The value of the option when it is ultimately exercised is unlikely to be the same as its expected value when it is issued, however. Generally, stock options can be bought and sold on the open market by anyone. There are a subset of stock options called employee stock options in which firms issue their own stock to their workers and executives. Employee stock options cannot be sold to others, and often the holder must wait until a vesting period is over before being able to exercise them in order to encourage employees to stay with the firm. Usually, the strike price for employee stock options is set at the firm's current price. The firm does not have to outlay any cash when it grants employees stock options. For this reason, employee stock options are particularly popular with start-up firms with limited cash flow and high growth prospects. However, when the options are exercised, new stock is created, which dilutes the ownership of the existing stockholders. The firm can offset this dilution by buying back an equivalent amount of outstanding stock from the open market, which would require a cash outlay at that point. The prevalence of employee stock options is somewhat puzzling to economists because if employees, firms, and shareholders acted rationally, they would each have reasons not to prefer them. Employees should prefer cash wages to options since the options expose them to risk, and people are generally risk averse. (Options do have tax advantages for the executives, however, which are particularly valuable for executives facing high marginal tax rates). For firms, options can be thought of as a loan from employees (in the form of forgone wages) that must be paid back when the option is exercised. If capital markets are efficient, it should be cheaper for the firm to borrow on the open market than through their employees. For shareholders, options are undesirable since they dilute their ownership position. In light of these drawbacks, BF see the popularity of options as evidence of their "managerial power" theory. Alternatively, some economists have argued that the popularity of employee stock options is the result of the perceived cost of options being lower than their actual cost, because they require no cash outlay and because until recently they did not have to be expensed (were not counted as a cost) on the firm's balance sheet.

In the past ten years, the pay of chief executive officers (CEOs) has more than doubled, and the ratio of median CEO to worker pay has risen to 179 to 1. High and rising executive pay could be an issue of public concern on two different grounds. First, it is contributing to widening income inequality that may be of concern from an equity perspective. Second, it could be the result of economically inefficient labor markets. It is difficult to determine whether executive pay is excessive across the board since executives' marginal product cannot be directly observed. An upward trend in pay over time is not sufficient proof that the market is not efficient since factors determining supply and demand, such as the skills required of the position, can change over time. To show that pay is excessive from an economic perspective, one must first demonstrate that there is a market failure that is preventing the market from functioning efficiently. The market failure could originate in the division in large modern firms between management and ownership, which is typically dispersed among millions of shareholders. Shareholders' interests are represented by a board of directors. Critics of executive pay have argued that boards have all too often been "captured" by the executive and are no longer negotiating pay packages that are in the shareholders' best interests. They point to a number of common practices that they call "stealth compensation" which are inconsistent with arm's length contracting. These include "golden parachutes," generous severance packages, company-provided perks, and bonuses that are unrelated to firm performance. Stock options have been the fastest growing portion of executive pay since the 1990s, and critics believe this pattern can also be explained through the prism of stealth compensation. Rewarding executives with employee stock options was often justified in terms of the "pay for performance" mantra, but options are usually designed to reward absolute, not relative, performance. This means that in the bull market of the 1990s, when virtually all stock prices were rising, a company could fall behind its competitors and its executives could still receive handsome options payouts. Indeed, a sizeable portion of the increase in executive pay in the 1990s was likely due to options that turned out to be much more valuable than expected because of the unprecedented price increases of the bull market. Many of the recent corporate scandals appear consistent with stealth compensation as well. Stock options backdating, earnings manipulation, and accounting fraud might have been motivated by attempts to covertly increase executive pay. If short-term fluctuations in the stock price are not good proxies of firm performance, then tying compensation to the stock price can create incentives for executives to engage in activities that are detrimental to shareholders. Policy proposals mostly focus on improving transparency, increasing board independence, and strengthening shareholder control rather than attempting to curb pay directly. S. 1181 (Obama) and H.R. 1257 (Frank), which the House approved on April 19, 2007, would give shareholders a non-binding vote on executive pay. Another proposal would modify the limit on deductibility of executive pay from corporate taxation. More broadly, income inequality could be reduced by increasing the progressivity of the tax system. For current developments and legislation, see CRS Report RS22604, Excessive CEO Pay: Background and Policy Approaches.

The Library Services and Technology Act (LSTA) was originally adopted as part of the Museum and Library Services Act of 1996, which was enacted on September 30, 1996, as part of P.L. 104-208 , the Omnibus Consolidated Appropriation Act of 1997. The LSTA's authorization expired at the end of FY2002; however, funding was not interrupted. P.L. 108-81 , the Museum and Library Services Act of 2003 (MLSA), reauthorized the LSTA as Title II, Library Services and Technology (LST), of the MLSA. P.L. 108-81 authorized $232 million for Library Services and Technology in FY2004, and such sums as may be necessary for FY2005-FY2009. The bulk of LST funding is distributed to states via formula grants. Funding is also provided for library services for Native Americans, and for national leadership projects. LST grants to the states are allocated to state library administrative agencies (SLAAs), and may be used for the following basic purposes: (a) expanding services for learning and access to information in a variety of formats in all type of libraries, developing and improving electronic or other linkages and networks connecting providers and consumers of library services and resources; and/or (b) targeting library services to under served or disadvantaged populations, such as persons with disabilities, those with limited literacy skills, or children from poor families. Although the bulk of funds appropriated for LST are used for state grants , a percentage of total funds is reserved for national activities, Native Americans , and federal administration . Out of total LST appropriations for a given year, 3.75% must be reserved for national activities . The latter may include competitively awarded grants or contracts for research, demonstrations, preservation, and conversion of materials to digital form, plus education and training for librarians. Congressionally directed grants have also been included in this category, and President Bush's Librarians for the 21 st Century program (described below) is included under this heading. In addition, 1.75% of appropriations is reserved for services to Native Americans (including Indian tribes, Alaskan Natives, and Native Hawaiians), and up to 3.5% of appropriations may be used for federal administration of LST programs. Of the total funding reserved for state grants, each state receives a "flat grant" of $340,000 ($40,000 in the case of outlying areas); remaining funds are allocated on the basis of total population in each state. The federal share of the total costs of assisted activities is 66% in all cases. If there is no year-to-year decline in federal funding for LST, states must maintain levels of spending for library programs, or their LST grants will be reduced in proportion to the reduction in state funding. P.L. 108-81 provides for an increase in minimum state allotments for library services and technology to $680,000, if the amount appropriated for a year, and available for state allotments, exceeds the amount of allotments to all states in FY2003. In addition, minimum state allotments for outlying areas are increased to $60,000, if appropriations in a given year are sufficient to meet the higher state minimums of $680,000. If remaining funds are insufficient to reach $60,000, they are to be distributed equally among outlying areas receiving such funds. However, the level of FY2004 and FY2005 appropriations for the IMLS were not sufficient to trigger the higher state grant amounts authorized by P.L. 108-81 . Participating states are required to develop five-year plans that set goals and priorities consistent with the purposes of LST grants (i.e., to enhance information-sharing networks and target library services to disadvantaged populations). The plans must provide for independent evaluations of federally assisted library services. A wide variety of types of libraries—public, public school, college or university, research (if they provide public access to their collections), and (at state discretion) private libraries—may receive LST aid, not just the public and research libraries eligible for aid under the predecessor legislation, the Library Services and Construction Act (LSCA). No more than 4% of each state's grant may be used for administration; however, there is no limit on the share of funds that can be used at the state level to provide services, as opposed to being allocated to local libraries. Library Services and Technology grants are intended to provide states with considerable latitude in the use of funds. LST funds are allocated within states on a competitive basis by the SLAA. LST is administered by the Institute of Museum and Library Services (IMLS). The IMLS was created through expansion of the previous Institute of Museum Services (IMS). The IMLS contains an Office of Museum Services (OMS) and an Office of Library Services (OLS). The IMLS is under the general aegis of the National Foundation on the Arts and the Humanities, which also includes the National Endowment for the Arts (NEA) and the National Endowment for the Humanities (NEH). Nevertheless, the Institute acts as an independent agency. The IMLS directorship alternates between persons with "special competence" in library and information services or in museum services. The current IMLS director is Robert Martin, who includes in his past professional experience service as a Director and Librarian of the Texas Library and Archives Commission. At all times, an Office of Library Services within the IMLS is directed by a Deputy Director with a graduate degree in library science, and expertise in library and information services. Table 1 below, shows the FY1997-FY2007 appropriations for Library Services and Technology (LST). For FY2006, LST was funded at $210.597 million. The Administration has requested increasing that funding to $220.855 million in FY2007. The House Committee on Appropriations has recommended $220.855 million in funding for FY2007; the Senate Committee on Appropriations has recommended funding of $213.337 million. The FY2006 budget includes $23.8 million for an initiative first funded in FY2003 to train and recruit librarians, provide scholarships, support distance learning in under served rural areas, and enhance the diversity of librarians to better serve communities. Beginning in FY2003, the OMS and the OLS were combined in one appropriation account within the Labor, Health and Human Services, and Education (L-HHS-ED) Appropriations bill. In the past there had been two funding streams, one account for OMS within the Department of the Interior Appropriations and one for OLS within the L-HHS-ED Appropriations. The federal government has provided direct aid for public libraries since initial adoption of the Library Services and Construction Act (LSCA) in 1956. The 104 th Congress considered legislation to extend and amend LSCA programs, as well as to consolidate these programs with separate authorizations of federal aid to elementary and secondary school and college libraries. The Library Services and Technology Act consolidated and replaced a number of programs under Title VII, Subtitle B of the L-HHS-ED Appropriations Act of 1997 within P.L. 104-208 . These programs included the LSCA, plus library assistance programs authorized by Title II of the Higher Education Act (HEA), and Title III, Part F, of the Elementary and Secondary Education Act (ESEA). P.L. 108-81 , the Museum and Library Services Act of 2003 (MLSA), reauthorized the LSTA as Title II, Library Services and Technology (LST), of the MLSA. While states have had a large degree of discretion in selecting grantees and deciding how funds are to be used under both the former LSCA and the current LST, overall state discretion would appear to be increased under the current program. At the same time, some funds—particularly aid for construction under the former LSCA Title II—were intended for specific purposes that are not authorized for LST grants. In fact, P.L. 108-81 includes a provision explicitly prohibiting the use of funds for construction. The library services and technology provisions of P.L. 108-81 also focus more thoroughly on relatively new forms of information sharing and networking, such as the Internet, than the LSCA. Issues that were discussed during the reauthorization of the LSTA included the adequacy of minimum state grants and overall authorization levels; the need for additional funding to provide for evaluations of the LSTA; and new provisions disallowing grants for projects deemed obscene. On September 25, 2003, the Museum and Library Services Act of 2003 was signed into law ( P.L. 108-81 ). The LSTA was reauthorized as Title II, Library Services and Technology of the MLSA. The major changes regarding Library Services adopted in the reauthorized Museum and Library Services Act of 2003 include the following: prohibiting the funding of projects deemed obscene; defining "obscene" and the term "determined to be obscene"; requiring the Director of the IMLS to establish procedural standards for reviewing and evaluating grants; increasing minimum state allotments for library services to $680,000 if the amount appropriated for a year, and available for state allotments, exceeds the amount of allotments to all states in FY2003 (the level of FY2004 appropriations for the IMLS is not sufficient to trigger the higher state grant amounts authorized by P.L. 108-81 ); increasing minimum state allotments for outlying areas to $60,000, if appropriations in a given year are sufficient to meet the higher state minimums of $680,000. If remaining funds are insufficient to reach $60,000, they are to be distributed equally among outlying areas receiving such funds; authorizing $232 million for Library Services and $38.6 million for Museum Services for FY2004, and such sums as may be necessary for FY2005-FY2009; locating advisory functions (which for libraries were previously delegated to the National Commission on Libraries and Information Sciences) within a new National Museum and Library Services Board (previously solely a Museum Services Board) in the IMLS; making the Chairman of the National Commission on Library and Information Science a member (nonvoting) of the national Museum and Library Services Board; requiring the Director to carry out and publish analyses of the impact of museum and library services, and increasing from 3% to 3.5% the amount available for federal administrative costs, to provide funding for this new function; prohibiting the use of IMLS funds for construction; and permitting the Director of the IMLS to make national awards for library service, in addition to the already authorized national awards for museum service. H.R. 13 (Hoekstra), a bill to reauthorize Library Services and Technology within the Museum and Library Services Act of 2003, was introduced on January 7, 2003, and was reported favorably by the House Committee on Education and the Workforce on February 13, 2003. H.R. 13 was passed by the full House on March 6, 2003. H.R. 13 , as passed by the House, would have changed the authorization for Library Services and Museum Services to $210 million and $35 million, respectively, for FY2004 and such sums as may be necessary for 2005 through 2009. H.R. 13 contained new provisions that would have required the IMLS Director to establish procedural standards for reviewing and evaluating grants, including a provision prohibiting the funding of projects determined to be obscene. New provisions in H.R. 13 also provided a definition of "obscene" and of the term "determined to be obscene." It would have required the Director to carry out and publish analyses of the impact of museum and library Services, and would have increased from 3% to 3.5% the amount available for federal administrative costs, to provide funding for this new function. H.R. 13 would have located advisory functions (which for libraries were previously delegated to the National Commission on Libraries and Information Sciences) within a new National Museum and Library Services Board (previously solely a Museum Services Board) in the IMLS. It would have permitted the Director of the IMLS to make national awards for library service, in addition to the already authorized national awards for museum service. It would have increased minimum state allotments for Library Services to $680,000, if the amount appropriated for a year, and available for state allotments, exceeded the amount of allotments to all states in FY2003. Finally, the bill would have increased minimum state allotments for outlying areas to $60,000 if appropriations in a given year were sufficient to meet the higher state minimums of $680,000. S. 888 (Gregg), was introduced on April 11, 2003, and reported favorably by the Senate Committee on Health, Education, Labor, and Pensions on May 14, 2003. On August 1, 2003, the Senate incorporated S. 888 into H.R. 13 and passed H.R. 13 in lieu of S. 888 with an amendment by unanimous consent. Authorization levels for FY2004 contained in the Senate passed bill were reduced from the authorization levels contained in S. 888 as reported by the Senate Committee on Health, Education, Labor, and Pensions (from $250 million to $232 million for Library Services and Technology; and from $41.5 to $38.6 million for Museum Services). The Senate-passed bill included the following provisions that were contained in S. 888 as reported by the Senate Committee on Health, Education, Labor, and Pensions, but were not contained in H.R. 13 as passed by the House: provisions that would have made the Chairman of the National Commission on Library and Information Science a member (nonvoting) of the National Museum and Library Services Board; a prohibition against using IMLS funds for construction; and provisions that would have raised liability amounts in the Arts and Artifacts Indemnity Act. S. 238 (Reed) was introduced on January 29, 2003, and was referred to the Senate Committee on Health, Education, Labor and Pensions. The Library Services and Technology provisions of this bill were essentially the same as those in S. 2611 (Reed), introduced in the 107 th Congress. Authorization levels in S. 238 were $350 million for Library Services and Technology and $65 million for Museum Services. S. 238 , however, unlike S. 2611 , also included amendments raising liability amounts in the Arts and Artifacts Indemnity Act.

Legislation reauthorizing the Library Services and Technology Act (LSTA) as Title II—Library Services and Technology, of the Museum and Library Services Act of 2003 (MLSA), was signed into law ( P.L. 108-81 ) on September 25, 2003. The LSTA's authorization had expired at the end of FY2002; however, funding was not interrupted. Library Services and Technology (LST) is administered by the Institute of Museum and Library Services (IMLS). The IMLS contains an Office of Museum Services (OMS) and an Office of Library Services (OLS). Beginning in FY2003, the OMS and the OLS were combined in one appropriation account within the Labor, Health and Human Services, and Education (L-HHS-ED) Appropriations bill. In the past there had been two funding streams, one account for OMS within the Department of the Interior Appropriations, and one for OLS within the L-HHS-ED Appropriations. P.L. 108-81 authorized $232 million for LST in FY2004, and such sums as may be necessary for FY2005-FY2009. The bulk of LST funding is distributed to states via formula grants. Funding is also provided for library services for Native Americans, and for national activities. Participating states are required to develop five-year plans that set goals and priorities consistent with LST purposes (i.e., to enhance information-sharing networks and target library services to disadvantaged populations). The plans must provide for independent evaluations of federally assisted library services. A wide variety of types of libraries—public, public school, college or university, research (if they provide public access to their collections), and (at state discretion) private libraries—may receive LST aid. P.L. 108-81 provides for an increase in minimum state allotments for library services to $680,000, if the amount appropriated for a year, and available for state allotments, exceeds the amount of allotments to all states in FY2003. In addition, minimum state allotments for outlying areas are increased to $60,000, if appropriations in a given year are sufficient to meet the higher state minimums of $680,000. Library Services received funding of $210.597 million in FY2006; the Administration has requested increasing that funding to $220.855 million for FY2007. The House Committee on Appropriations has recommended $220.855 million in funding for FY2007; the Senate Committee on Appropriations has recommended funding of $213.337 million. This report will be updated in response to legislative developments.

As the Global Peace Operations Initiative (GPOI) completes the last of its five planned years in FY2009, the 111 th Congress has begun consideration of continued funding through this program for training foreign military and police forces, and for other purposes. For FY2010, the Obama Administration has requested $96.8 million for GPOI. This request follows the decision of the George W. Bush Administration's White House to continue the program. In October 2008, the National Security Council's Deputies Committee approved a five-year renewal of GPOI's mandate. The Obama Administration affirmed this decision once it took office, according to a State Department official. Previous Congresses have generally endorsed the concept of this program, but also have questioned whether the program is as well-managed as possible and whether it will achieve its goals. The 111 th Congress may wish to consider whether its concerns, stated in past legislation, have been met. On June 10, 2009, the House passed the Foreign Relations Authorization Act, Fiscal Years 2010 and 2011 ( H.R. 2410 ), which contains a provision authorizing the Secretary of State to carry out and expand GPOI programs and activities (Section 1108). Established to train 75,000 international peacekeepers by 2010, GPOI was the George W. Bush Administration's signature initiative to build international peacekeeping capacity. (State Department officials express confidence that the goal of 75,000 peacekeepers-trained will be achieved by early 2010.) The Administration launched the five-year $660 million (in FY2005-FY2009 funds) initiative in mid-2004 as a means to alleviate the perceived shortage worldwide of trained peacekeepers and "gendarmes," as well as to increase available resources to transport and sustain them ("Gendarmes," also known as constabulary police or stability police, are police with a combination o f policing and military skills considered vital to the semi-stable environments of peace operations, where the potential for outbreaks of rioting and other violence creates a need for specially-trained police forces.). While the United States has provided considerable support to implement several peace processes and to support peacekeepers in the field from a variety of budget accounts for well over a decade, until GPOI it had provided relatively little funding to build up foreign military capabilities to perform peacekeeping operations. In plans for GPOI after 2010, State Department officials state that the program's emphasis would shift from direct training to building the capacity of foreign nations to develop their own peacekeeping infrastructure and capabilities. As of the end of January 2009, GPOI funds have supported the training of 54,245 military troops as peacekeepers and of 3,350 military personnel to train others in peacekeeping skills. Of those trained, GPOI reports that as of January 30, 2009, some 46,115 troops from 21 countries were deployed to 18 peacekeeping operations and 1 election observer mission, and another 4,860 troops were in the process of being deployed. In addition, GPOI has supported the training of 1,932 police trainers from 29 countries at the Italian-run Center of Excellence for Stability Police Units (CoESPU) in Vicenza, Italy. In addition to training peacekeepers, GPOI supports a variety of institutions specializing in or contributing to peacekeeping operations. These include 22 peace operations training centers around the world, as well as the African Union and the Economic Community of West African States (ECOWAS). GPOI also provides funds for the Transportation Logistics Support Arrangement (TLSA), which has supported troops deploying to several peacekeeping missions, and other GPOI deployment equipment funding has supported troops deploying to some of these and other missions. In total, as of January 30, 2009, GPOI had contributed $65.4 million to provide equipment to and transport troops deployed to seven missions, according to GPOI officials. In total, all GPOI-funded activities helped deploy 46,115 troops from 21 countries to 18 peacekeeping operations and 1 election observer mission, as of January 30, 2009, with an additional 4,860 troops about to deploy at that time. Through FY2008, GPOI funding totaled $374.46 million. GPOI funding for FY2009 totals $105.95 million, plus $3.0 million in State Department International Narcotics Control and Law Enforcement (INCLE) funding. (The Bush Administration's FY2009 request called for $106.2 million in peacekeeping operations funds.) With these funds, GPOI has provided for the training of 57,595 peacekeepers and peacekeeping trainers as of January 31, 2009. (For a breakdown of this number by country, see Table 2 , below.) Before mid-2004, the United States provided peacekeeping capacity-building assistance to foreign militaries primarily under two programs, the African Contingency Operations Training and Assistance program (ACOTA) and its predecessor program, and the Enhanced International Peacekeeping Capabilities program (EIPC). Both ACOTA and EPIC have been subsumed under the GPOI budget line. ACOTA is still the term used to refer to the Africa component of GPOI, however, and is implemented by the State Department's Africa Bureau. Overall responsibility for GPOI rests with the State Department Bureau of Political-Military Affairs' Office of Plans, Policy, and Analysis (PM/PPA). (Information about GPOI is available at http://www.state.gov/t/pm/ppa/gpoi .) PM/PPA works closely with DOD offices to plan and carry out the program. Impetus for GPOI came from the Department of Defense (DOD), where officials in the Office of Special Operations and Low-Intensity Conflict (SO/LIC) worked with the State Department for over a year and a half to develop the proposal. Officials in SO/LIC's section on peacekeeping developed the plan as a means to expand and improve the ACOTA program—with more and better exercises and more equipment—as well as to extend the program beyond Africa to other parts of the world. Policymakers hoped that the availability of peacekeeping training would encourage more countries to participate in peacekeeping operations, enable current donors to provide a greater number of troops, and increase the number of countries which potentially could serve as lead nations, according to some analysts. The GPOI budget is part of the Foreign Operations Appropriations Peacekeeping (PKO) account, also known as the "voluntary" Peacekeeping account, under the Military Assistance rubric. The PKO account funds activities carried out under Section 551 of the Foreign Assistance Act of 1961, as amended (FAA). Section 551 authorizes the President to provide assistance for peacekeeping operations and other programs to further U.S. national security interests "on such terms and conditions as he may determine." (This provides some flexibility to the President, but is not tantamount to the discretion that he can exercise when funding is provided "notwithstanding any other provision of law.") In his September 21, 2004 address to the opening meeting of the 59 th session of the U.N. General Assembly, President Bush asserted that the world "must create permanent capabilities to respond to future crises." In particular, he pointed to a need for "more effective means to stabilize regions in turmoil, and to halt religious violence and ethnic cleansing." A similar rationale prompted the Clinton Administration to formulate the ACRI training program in 1996 and underlies the current search for new strategies and mechanisms to prevent and control conflicts. To accomplish these ends, the Bush Administration set three major GPOI goals: Train some 75,000 troops worldwide, with an emphasis on Africa, in peacekeeping skills by 2010. Support Italy in establishing a center to train international gendarme (constabulary) forces to participate in peacekeeping operations (see section below); and Foster an international deployment and logistics support system to transport peacekeepers to the field and maintain them there. Through GPOI, the State Department also promotes the exchange of information among G-8 donors on peace operations training and exercises in Africa. This is accomplished through donors meetings which serve as a "clearinghouse" to facilitate coordination. The first of these State Department meetings was held in Washington, D.C. on October 7-8, 2004. The United Kingdom hosted a second meeting in February 2006, the Russian Federation hosted a third in June 2006, Germany hosted a fourth in March 2007, Japan hosted the fifth in April 2008, and Italy is hosting the sixth in April 2009. Through GPOI, the State Department also supports a G8++ Global Clearinghouse information exchange to build peacekeeping capabilities worldwide. The first Global Clearinghouse meetings was held in Washington, D.C., in October 2007, and the second in the United Kingdom in December 2008. For many analysts, a continued effort to improve the peacekeeping skills of African and other military forces is an important step towards controlling devastating conflicts, particularly in Africa. In the mid-1990s, several developed nations provided most of the peacekeepers. The perception that developed nations would not be able to sustain the burden indefinitely, as well as the perception that the interests of those nations in Africa were not sufficient to ensure needed troop commitments there, led international capacity-building efforts to focus on Africa. As of the end of December 2004, shortly after GPOI first started up, almost 25,000 of the nearly 58,000 military personnel who were participating in the current 17 U.N. peacekeeping operations were from the 22 African troop-contributing nations. (African nations provided over half of the military personnel—roughly 24,000 of 47,000—in the seven U.N. peacekeeping operations in Africa.) Africa's military contribution to U.N. peacekeeping at the end of 2004 was over double that at the end of 2000; five of the top ten African contributors, who provided some 98% of the military contribution, received training under the ACRI/ACOTA program. African contributions to the U.N. international civilian police pool (CIVPOL) remained just about the same over those four years: 1,213 in December 2004 (of a total of 6,765 from all nations) compared to 1,088 in December 2000. African militaries also participate in regional peacekeeping operations under the auspices of the Economic Community of Western African States (ECOWAS) and the African Union (AU). (The first ECOWAS peacekeeping mission was deployed to Liberia in 1990. Subsequent missions were deployed to Liberia once again, Guinea Bissau, Sierra Leone, the Côte d'Ivoire, Sudan, and Somalia. The AU deployed its first peacekeepers to Burundi in 2003 and Sudan in 2004. All missions eventually became U.N. operations. Both organizations are trying to develop an African stand-by peacekeeping force, comprised of contributions from five regional organizations, by 2010. Under GPOI, the United States will work to enhance and support the command structures and multilateral staff of ECOWAS and the AU. A second capability in short supply is the specialized units of police with military skills to handle temporary hostile situations such as unruly crowds. Several countries have such forces (e.g., the Italian carabinieri , the French gendarmerie , and the Spanish Guardia Civil , among others). In the United States these forces generally have been referred to in the past as constabulary forces; in the context of peacekeeping and stabilization operations they are currently referred to as "stability police" or gendarme forces. The United Nation refers to such forces as "formed police units" or FPUs. From 1996 through 2004, the United States provided field and staff training to develop military capabilities for peacekeeping through the African Crisis Response Initiative (ACRI) and its successor program, ACOTA. Early in FY2005, ACOTA was subsumed under GPOI. Under ACRI/ACOTA, the United States trained some 16,000 troops from 10 African nations: Benin, Botswana, Côte d'Ivoire, Ethiopia, Ghana, Kenya, Malawi, Mali, Mozambique, Senegal, and Uganda. (It also trained a small number of gendarmes who received the same training as the others.) The United States also provided non-lethal equipment to the militaries that it trained. This included communications packages, uniforms, boots, generators, mine detectors, Global Positioning Systems (GPS), and medical and water purification equipment. Initially, under ACRI, U.S. soldiers provided field training and oversaw classroom training provided by private contractors. Because of the demand for U.S. soldiers in Iraq and Afghanistan, private contractors also began to conduct field training. By the time GPOI was initiated, private contractors, many of whom reportedly were retired military personnel and reservists, conducted most of the training, while U.S. active duty military officers and non-commissioned officers were much less involved overall, but did provide mentoring. This remains true today. Funding for ACRI, which like ACOTA was provided under the State Department's Peacekeeping Operations (PKO) account, totaled $83.6 million during its six fiscal years (FY1997-FY2002). (Additional support for ACRI was provided through the Foreign Military Financing program.) ACOTA was funded at $8 million in FY2003 and $15 million in FY2004. Other support for classroom training of foreign militaries was provided through the EIPC, a "train the trainer" program which began in FY1998 and was subsumed under the GPOI rubric. EIPC provided assistance to selected countries—some 31 as of early 2005—by designing and implementing a comprehensive, country-specific peacekeeping and humanitarian assistance training and education program to enhance a nation's institutional structure to train and deploy peacekeepers. EIPC funding, provided under the Foreign Military Financing Program, totaled about $31.5 million through FY2004. GPOI was designed as a program with worldwide reach, but its emphasis was always intended to remain on Africa. In FY2005, only a few hundred peacekeeper trainees were from outside Africa, and thus far the great majority of trainees are Africans. (For a detailed account of the number of trainees from each country, see Table 2 at the end of this report. This table provides the number of trainees trained using the funds from each fiscal year, not the number of trainees actually trained in that fiscal year. Because training is still being conducted with previous fiscal year funds, these numbers will change.) Training in Africa continues to be conducted under the ACOTA program, which is implemented by the State Department's Africa Bureau. In GPOI's first funding year, during FY2005, some 12,080 African troops from 13 partners were trained using funds initially appropriated for ACOTA under the regular budget and additional funds appropriated for GPOI. This number included pre-deployment training for five battalions from Senegal that were then deployed to specific peacekeeping missions. The 12 other ACOTA partners whose troops were trained using FY2005 funds were Benin, Botswana, ECOWAS, Gabon, Ghana, Malawi, Mali, Mozambique, Nigeria, Rwanda, South Africa, and Zambia. GPOI's Africa ACOTA component now consists of 24 partners: 22 partner countries and two partner organizations. The states are Benin, Botswana, Burkina Faso, Burundi, Cameroon, Ethiopia, Gabon, Ghana, Kenya, Malawi, Mali, Mauritania, Mozambique, Namibia, Niger, Nigeria, Rwanda, Senegal, South Africa, Tanzania, Uganda, and Zambia. (However, as the State Department has suspended military assistance to Mauritania and Niger, no GPOI assistance is being provided to those countries at this time.) In addition, GPOI provides assistance to the African Union and ECOWAS, which are also partners. This assistance includes sponsoring retired U.S. Army officers contracted as advisors to these institutions. As of February 23, 2009, GPOI funds have provided training under the ACOTA program for 55,263 peacekeepers, according to the State Department GPOI office. Of these, some 45,606 have been deployed or where in the process of deploying to a UN or other peace operation as of that date. In addition, since FY2005, ACOTA has trained 12,627 more peacekeepers from GPOI partner countries using other PKO funds and funds from the Netherlands. Of those, 12,127 have been deployed or were in the process of deploying as of February 23, 2009. In addition, GPOI supports five peace operations training centers in Sub-Saharan Africa. These are located in Ghana, Kenya, Mali, Nigeria, and South Africa. In July 2005, the State Department initiated a training and equipping program for countries outside of Africa (informally referred to at the time as the "Beyond Africa" program) in order to extend GPOI training to three new regions: Latin America, Europe, and Asia. (As in Africa, some equipment is provided during training, but only that needed for the training itself. Trained troops are not provided with equipment needed for operations until they deploy.) The number of partner countries outside of Africa has grown to 31. The largest number of partners outside Africa are in Asia/South Asia and the Pacific Islands, where there are 14 partner states. Eleven partner countries are in the Western Hemisphere, six in Europe and Eurasia, and one in the Middle East. The Latin American program began in Central America, where GPOI funds were initially used to train and equip soldiers from El Salvador, Guatemala, Honduras, and Nicaragua, as well as to upgrade an existing facility in order to establish a peacekeeping training center in Guatemala. Through this support, Central American countries were able to stand up a battalion of about 600 Central American troops, as part of the Conferencia de Fuerzas Armadas Centroamericanas (CFAC). There are now 11 Western Hemisphere partner countries: Belize, Bolivia, Chile, Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, Paraguay, Peru, and Uruguay. Some 1,867 peacekeepers and trainers from Western Hemisphere partner countries and 5 from Canada (which is not a partner) received GPOI training, as of January 31, 2009. Although Bolivia is a partner country, it has not yet participated in GPOI activities. GPOI supports eight peace operations training centers in the Western Hemisphere. These are located in Belize, the Dominican Republic, Guatemala, Honduras, Nicaragua, Paraguay, Peru, and Uruguay. The U.S. Southern Command (SOUTHCOM) runs major peacekeeping exercises under GPOI auspices. In 2009, the PKO of the Americas will be held in multiple phases geared to the needs of each participant. Events are to be held in March and May at six locations, with additional events in June or July. In Asia, the first countries to be extended train-and-equip assistance and provided some logistical support were Bangladesh, Malaysia, Mongolia, and Thailand (which was subsequently suspended because of a military coup and reinstated in February 2008). GPOI funds were also used establish and install a communications network among partner countries in the region, called the Peace Support Operations Collaboration Center (PSOCC) in Mongolia. Currently, there are 14 partner countries in good standing in these regions: Bangladesh, Cambodia, Indonesia, Kazakhstan, Malaysia, Mongolia, Nepal, Pakistan, Philippines, Sri Lanka, Tajikistan, Thailand, Tonga, and Vietnam. In addition, Fiji is a partner country, but it is currently under sanctions and not eligible for GPOI assistance. India chose not to join GPOI as a partner, but Indian personnel have participated in some GPOI training events through the use of non-GPOI funds. Personnel from Australia, Brunei, Japan, Laos, Papua New Guinea, Republic of Korea, New Zealand, and Singapore have also participated in GPOI training events, although GPOI did not fund the travel and accommodations for personnel from these countries. In all, some 3,287 peacekeepers and peacekeeping trainers from those regions have been trained using GPOI funds. GPOI supports peacekeeping operations training centers in five countries in these regions: Bangladesh, Cambodia, Indonesia, Mongolia, and Thailand. In Europe, the first countries whose troops were offered training and other support under GPOI were Albania, Bosnia-Hercegovina, and the Ukraine. Bosnia was provided information technology support for its training center and a U.S. instructor with FY2005 funds. Currently, GPOI has six partner countries in greater Europe: Albania, Bosnia and Herzegovina, Croatia, Romania, Macedonia, and the Ukraine. Some 323 peacekeepers and peacekeeping trainers from this area have participated in GPOI training events, including 13 from France, Germany, Italy and the United Kingdom, which are not partner countries. GPOI funds supports peace operations training centers in three countries in Greater Europe: Albania, Bosnia and Ukraine. GPOI also has provided deployment equipment to SEEBRIG, the seven-member multinational South East Europe Brigade, composed of personnel from Albania, Bulgaria, Italy, Greece, Macedonia, Romania, and Turkey. GPOI's first and currently only Middle Eastern partner country is Jordan, which was added in FY2006. Two peacekeepers from Jordan have participated in GPOI training. (One person from Lebanon also participated in GPOI training, but his participation was not funded by GPOI.). GPOI funds support a peacekeeping operation center in Jordan. Morocco is to be added as a GPOI partner country in FY2009. When the Bush Administration launched GPOI in 2004, it intended it as a stimulus for increased multilateral efforts to build worldwide peacekeeping capacity, with a focus on Africa. At the time, several countries had their own significant programs supporting peacekeeping in Africa. In addition, through the G8, the major industrialized democracies had indicated increasing support for peace efforts in Africa. In June 2002, the G8 Summit at Kananaskis, Canada, adopted a broad Africa Action Plan that contained sections on conflict resolution and peace-building efforts. The more specific Joint Africa/G8 Plan to Enhance African Capabilities to Undertake Peace Support Operations was developed over the next year and presented at the June 2003 Summit at Evian-les-baines, France. At their June 2004 summit meeting at Sea Island, GA, G8 leaders adopted a third Africa peacekeeping action plan: Action Plan on Expanding Global Capability for Peace Support Operations . European and other countries continue their assistance to African peacekeeping. In addition to the United States, France and the United Kingdom (UK) conduct bilateral training programs with African militaries. Germany and the UK provided the assistance necessary to launch the regional Kofi Annan International Peacekeeping Training Center in Ghana, which opened in 2004, and Germany is providing continuing assistance. The European Union and other countries, most prominently Canada, Italy, France and the Netherlands, have also assisted the Center. Italy supports international peacekeeping capacity building efforts with its Center of Excellence for Stability Police Units (CoESPU), an international "train the trainer" school for police to learn and transfer peacekeeping policing skills. Italian carabinieri , who are widely viewed as a leading model and have played a prominent role in providing gendarme forces to peacekeeping and stabilization operations established CoESPU at Vicenza in March 2005. Italy is providing not only the facility, but also most of the staff . As of mid-2006, some 145 carabinieri were attached to CoESPU, of which about 25 were instructors and training staff. (At the same point, two U.S. military service members were attached to the center, one serving as Deputy Director. ) CoESPU's goal, by 2010, is to train 3,000 mid-to-high ranking personnel at Vicenza and an additional 4,000 in formed units in their home countries. The United States is CoEPSU's primary foreign supporter. Currently, there is one U.S. service member at CoESPU, serving as the Deputy Director, and the United Sates is considering staffing additional positions through U.S. military personnel, civilian personnel, or contractors. A U.S. contribution of $10 million for the school's operation and training programs was transferred to Italy in late September 2005; its contributions through FY2009 total $15 million. (According to CoESPU officials in 2006, the U.S. contribution covers about one-third the cost of running the school.) Several other countries have contributed. Canada, France, and Russia have provided instructors for certain courses. CoESPU offers high-level courses (for staff officers ranking from Lt. Colonels to Colonels and their civilian equivalents) consisting of four-and-a-half weeks of classes (approximately 150 classroom hours) in international organizations, international law (including international humanitarian law), military arts in peace support operations, tactical doctrine, operating in mixed international environments with hybrid chains of command, and the selection, training, and organization of police units for international peace support operations. The Center also offers a course for junior officers and senior non-commissioned officers (sergeant majors to captains) and their civilian equivalents. This course covers the materials taught in the high-level course with an emphasis on training in the more practical aspects, including checkpoint procedures, VIP security and escorts, high-risk arrests, border control, riot control, election security, and police self-defense techniques. (The first high-level class graduated 29 officers on December 7, 2005. The first class consisted of officers from Cameroon, India, Jordan, Kenya, Morocco, and Senegal. A pilot course for the middle-management level began on January 13, 2006, and seven weeks later graduated about 100 officers. Students for this course were drawn from the same six countries as those at the first-high level course.) CoESPU also has worked on developing a lessons-learned and doctrine writing capability in order to serve as an interactive resource for Stability Police Units (SPUs). An early intention was to develop a coherent and comprehensive SPU doctrine to promote interoperability in the field, to ensure that doctrine is the basis of training standards and methods, and to respond to questions from SPU commanders in the field, as well as to support pre-mission and in-theater training exercises. Recently, the United Nations has taken on the task of spearheading the development of SPU (or in U.N. terms, Formed Police Unit/FPU) doctrine; CoESPU is supporting this initiative. Funding for GPOI totaled $374.46 million from FY2005 through FY2008. Initial dedicated funding of $96.7 million in FY2005 was contained in the Consolidated Appropriations Act for FY2005 ( H.R. 4818 / P.L. 108-447 ), split between the Department of State (almost 20%) and the DOD (80% as funds to be transferred to State) budgets. For FY2006, the State Department allocated $100.4 million to GPOI, which was slightly more than half of the total PKO account, but some $14 million below the President's request. For FY2007, the Administration requested $102.6 million for GPOI funding. House and Senate action signaled some discontent with the program. The final continuing resolution that funded most government operations and programs through FY2007, including GPOI, left the decision on the amount of GPOI funding for FY2007 largely to the State Department, albeit in the context of a reduced availability of funds. The State Department's FY2007 GPOI obligations totaled $81 million (i.e., $1 million less than provided for in the House-passed FY2007 Foreign Operations bill, H.R. 5522 ). (An earlier version of the Continuing Resolution had set the House-passed amount as the level for FY2007 GPOI funding.) For FY2008, Congress fully funded the Bush Administration's budget request for $92.5 million in GPOI funding. (This funding was contained in the omnibus Consolidated Appropriations Act, 2008 [ H.R. 2764 , Division J; P.L. 110-161 , signed into law December 26, 2007]). The State Department allocated almost $4 million more. State Department allocations for GPOI for FY2009 total $105.95 million from PKO funds and an expected additional amount of some $3 million from INCLE funding (see Table 1 and notes, below). The State Department allocated these funds from appropriations in the Omnibus Appropriations Act, 2009 ( P.L. 111-8 , signed into law March 11, 2009). The Bush Administration's FY2009 budget request called for $106.2 million in PKO funds for GOPI. In its May 2009 budget request for FY2010, the Obama Administration has requested $96.8 million for the Global Peace Operations Initiative (GPOI). According to budget request documents, the FY2010 funds "will continue to provide training, equipment, and sustainment of peacekeeping troops," but the program emphasis will shift to "strengthening partner country capabilities to train their own peacekeeping units." To that end, GPOI will focus on developing indigenous peacekeeping trainer cadres, peacekeeping training centers, and on other programs, events, and activities to encourage self-sufficiency. Through FY2010 funds, the United States will continue to provide lift and sustainment to peacekeeping troops worldwide, and to support the evaluation of GPOI, including measures of effectiveness. As in previous years, funding for GPOI is requested under the State Department Peacekeeping Operations (PKO) account. In its first action on GPOI during the 111 th Congress, the House passed legislation which would authorize the Secretary of State to carry out and to expand GPOI programs and activities. Section 1108 of the Foreign Relations Authorization Act, Fiscal Years 2010 and 2011 ( H.R. 2410 ), as passed by the House on June 10, 2009, specifies eight GPOI functions, including five that GPOI has carried out since its inception and three new functions. In support of this proposed authorization, Section 1108 finds that the United States has "a vital interest in ensuring" that U.N. peacekeeping operations are successful because countries in conflict threaten U.S. national security and economic interests, and because conflicts result in deplorable human suffering. Section 1108 also finds that the United States benefits from U.N. peacekeeping because, in general, the costs of U.N. operations are lower than the potential cost of a similar U.S. peacekeeping operation. Of the three new functions that Section 1108 would authorize, two reaffirm the State Department's concept of GPOI's future direction. These functions are (1) "enhancing the capacity of regional and sub-regional organizations to plan, train for, manage, conduct, sustain and obtain lessons-learned from" peace operations; and (2) helping partner nations become self-sufficient in developing and sustaining peacekeeping capabilities, as well as in furnishing troops and equipment for and carrying out peace operations (see Section 1108(c)(1)). The third new GPOI function that Section 1108, as passed by the House, would authorize is financing the refurbishment of helicopters for use in U.N. peacekeeping operations or U.N. Security Council-authorized regional peacekeeping operations. A Sense of Congress statement (Section 1108(c)(2)) would direct the Secretary of State to prioritize helicopter refurbishment, to set a goal of refurbishing no fewer than three helicopters by the end of FY2011, and to seek additional refurbishment funds from other countries. In the report accompanying H.R. 2410 ( H.Rept. 111-136 ), the House Foreign Affairs Committee (HFAC) states that the addition of helicopter refurbishment to GPOI's functions is intended to respond to current critical shortfalls in air assets in ongoing peacekeeping operations in Darfur, the Democratic Republic of Congo, and Chad, as well as to potential new operations "which would likely face similar shortfalls ... " (p. 167) The bill finds that a shortfall of over 50 helicopters critically hampers those three peacekeeping operations. H.R. 2410 , as reported by the committee and passed by the House, does not authorize a specific funding amount for GPOI programs and activities, including helicopter refurbishment. Instead, Section 1108 would authorize the appropriation of the funds necessary in FY2010 and FY2011 to carry out that section. In H.Rept. 111-136 , HFAC encourages appropriators "to allot such funds as may be necessary above the President's request" of $96.8 million in order to refurbish helicopters. The Congressional Budget Office (CBO) estimates that the cost of refurbishing one medium-lift utility helicopter is about $2 million, and that the total cost of implementing GPOI programs and activities over the FY2010-FY2014 period, including the refurbishment of three helicopters by the end of 2011, would be about $195 billion. ( H.Rept. 111-136 , p. 103). Over the past few years, the State Department responded to concerns of the 109 th and the 110 th Congresses to strengthen GPOI. Its steps included producing a strategic plan (the executive summary of which is publically available), facilitating procedures to speed planning and implementation, and implementing an evaluation program. As of 2008, Congress requested that the Government Accountability Office (GAO) investigate a number of remaining issues: the GAO expressed several concerns about GPOI performance and management in a June 2008 report. Among the points the Congress requested the GAO to address were (1) the extent to which contributing and participating countries maintain records and databases; (2) the quality and sustainability of the training of individuals and units; (3) the extent to which those trained are equipped and remain equipped to deploy in peace operations; (4) participating countries capacity to mobilize those trained; (5) the extent to which trained individuals are deployed; and (6) the extent to which contractors are used and the quality of their results. The committee also requested an assessment of whether GPOI is achieving its goals and recommendations as to whether a country's participation in GPOI "should require reciprocal participation." In its June 2008 report, the GAO doubted, based on information available to it in its investigation, that GPOI would be able to reach its goal of training 75,000 peacekeepers by 2010. The GAO stated, however, that it could not evaluate information that the State Department subsequently provided to demonstrate that GPOI would reach its goal. As of February 2008, GPOI officials are stating that 75,000 will be trained by early 2010. GPOI officials also state that the program will, as recommended by the GAO, ensure that plans for extending GPOI activities beyond 2010 identify the necessary resources for developing long-term peacekeeping skills and infrastructure in Africa. They point to plans to concentrate on building infrastructure in any post-2010 program. The GAO made several recommendations to improve human rights vetting, program management, and training content. The following bullets note the recommendations and the steps that GPOI is taking to meet them. Congress may wish monitor progress on the GAO recommendations. Noting that a number of foreign military troops who received GPOI training had not been properly vetted, the GAO recommended that the Secretary of State develop a system for monitoring all GPOI vetting activities and for ensuring that all individuals are vetted. According to GPOI officials, the recommendation applies not only to GPOI, but to State Department vetting in general. To improve the vetting system, according to those officials, the Department has secured funding to establish a database that will facilitate record-keeping and access to past vetting cases. GPOI program implementers will use the system when it is available. Judging that GPOI was unable to account for the delivery and transfer of nonlethal training equipment to partner countries, the GAO recommended that the Secretary of State monitor implementation, on an ongoing basis, of new procedures to account for delivery and transfer of nonlethal training equipment to partner countries. According to GPOI officials, the State Department GPOI Evaluation Team had identified this accountability problem before the GAO investigation. The ACOTA program has instituted a sole-source logistics contract to improve the entire logistics process from acquisition to delivery, and is establishing a mechanism with its African partners to manage joint inventories. The State Department is developing procedures with other stakeholders to better account for equipment that is commercially acquired through the State Department's Office of Acquisition Management's regional procurement support offices. Similarly, new procedures have been developed by the State Department and the Defense Security Cooperation Agency to account for training equipment provided through the Foreign Military Sales system, with the U.S. government retaining title to and custody of defense articles until a designated U.S. government agent confirms and documents delivery of GPOI material to a recipient country's authorized representative or agent. In order to improve training, GAO recommended that the Secretary of State develop, in consultation with DOD a training program for GPOI that uses standard military task lists and related training standards in order to establish program-wide criteria for evaluating the quality of training and measuring trainee proficiency. According to GPOI officials, a GPOI contractor, Detica, is working in close collaboration with key stakeholders and others, including the U.N. Department of Peacekeeping Operations, to develop a set of essential tasks for peace operations and corresponding training standards to improve training programs. In regard to U.S. support to CoESPU, GAO recommended that the State Department work with DOD in order to help Italy staff key unfilled positions in order to better evaluate progress and monitor results. GAO also suggested that GPOI provide additional guidance to U.S. missions to help the United States and Italy collect data on the training and deployment of CoESPU graduates. The State Department is looking into the possibility of using GPOI funds to provide additional staff at CoESPU who would help with evaluation and monitoring, including the development of an alumni database, outreach materials, and tracking mechanisms. Also, according to GPOI officials, U.S. Embassy staff and others have been asked to help administer a survey regarding the training activities and deployments of CoESPU graduates. The results may be available by mid-2009. Section 1108 of H.R. 2410 calls for a report (within 180 days of enactment) that would provide information related to monitoring progress on these recommendations.

In its May 2009 budget request for FY2010, the Obama Administration has requested $96.8 million for the Global Peace Operations Initiative (GPOI). GPOI was established in mid-2004 as a five-year program with intended annual funding to total $660 million from FY2005 through FY2009. (Actual funds allocated to the GPOI program from FY2005 through FY2009 totaled, as of April 2009, some $480.4 million.) The centerpiece of the Bush Administration's efforts to prepare foreign security forces to participate in international peacekeeping operations, GPOI's primary purpose has been to train and equip 75,000 military troops, a majority of them African, for peacekeeping operations by 2010. In October 2008, the National Security Council's Deputies Committee approved a five-year renewal of GPOI's mandate. Congressional approval of the FY2010 budget request would provide funding for the first year of this extension. To date, GPOI also provides support for the Center of Excellence for Stability Police Units (CoESPU), an Italian "train-the-trainer" training center for gendarme (constabulary police) forces in Vicenza, Italy. In addition, GPOI promotes the development of an international transportation and logistics support system for peacekeepers, and encourages information exchanges to improve international coordination of peace operations training and exercises. Through GPOI, the United States supports and participates in a G* Africa Clearinghouse and a G8++ Global Clearinghouse, both to coordinate international peacekeeping capacity building efforts. GPOI incorporates previous capabilities-building programs for Africa. From FY1997 to FY2005, the United States spent just over $121 million on GPOI's predecessor program that was funded through the State Department Peacekeeping (PKO) account: the Clinton Administration's African Crisis Response Initiative (ACRI) and its successor, the Bush Administration's African Contingency Operations Training and Assistance (ACOTA) program. (ACOTA is now GPOI's principal training program in Africa.) Some 16,000 troops from ten African nations were trained under the early ACRI/ACOTA programs. Some $33 million was provided from FY1998 to FY2005 to support classroom training of 31 foreign militaries through the Foreign Military Financing account's Enhanced International Peacekeeping Capabilities program (EIPC). Within a year after GPOI was initiated in late 2004, the Administration began expanding its geographical scope to selected countries in Central America, Europe, and Asia. In 2006 and 2007, the program was further expanded to countries in Asia, South Asia, and the Pacific. GPOI now includes 53 "partner" countries and two partner organizations throughout the world, although the emphasis is still on Africa. According to figures provided by the State Department, almost 57,600 peacekeeper trainees and peacekeeper trainers were trained as of January 31, 2009.. Congress has tended to view the concept of the GPOI program favorably, albeit sometimes with reservations. Over the years, the State Department has addressed various congressional concerns. In a June 2008 report, the Government Accountability Office (GAO) recommended several further improvements (GAO-08-754). In its first action on GPOI during the 111th Congress, the House passed legislation authorizing the Secretary of State to carry out and expand GPOI programs and activities (Section 1108 of the Foreign Relations Authorization Act, Fiscal Years 2010 and 2011, H.R. 2410, passed June 10, 2009).

Since 2007, violence perpetrated by warring criminal groups has wreaked havoc on Mexico, partially as a result of the weakness of the justice sector institutions responsible for combating them. Ineffective and often corrupt police forces, weak and unaccountable prosecutors, and an overcrowded and disorganized prison system have undermined anticrime efforts. Recent spikes in violence and criminality have overwhelmed Mexico's justice sector institutions, with record numbers of arrests rarely resulting in convictions. On average, fewer than 20% of homicides have been successfully prosecuted with convictions, suggesting high levels of impunity. Over the last five years, Congress has devoted considerable resources—close to $2 billion—and oversight attention to supporting Mexico's efforts to address a security crisis that has been fueled in part by U.S. drug demand and illicit southbound flows of weapons and money. U.S. assistance under the Mérida Initiative has increasingly focused on supporting Mexico's efforts to reform its justice sector institutions in order to reduce corruption and impunity. Judicial reform is one part of that effort. Policy analysts contend that until Mexico's judicial system is able to prosecute and punish crime, the effects of law enforcement efforts against criminal groups will be limited. The U.S. government is providing significant support for judicial reform efforts in Mexico at a time when those reforms are at a critical juncture. Progress has moved forward in many states, but is stalled at the federal level. Without political will and investment from the new Enrique Peña Nieto Administration, both the federal government and the states may not meet the 2016 constitutional deadline for implementing judicial reforms enacted in 2008. Should the reforms move forward, the U.S. Congress may consider how best to support them. Should the reforms falter, Congress may question the value of continuing U.S. assistance for judicial reform. Mexico's traditional criminal justice system evolved during a period when Mexico experienced 70 years of one-party rule under the Institutional Revolutionary Party (PRI) and presidential power predominated over a weak Congress and judiciary. Although the 1917 Mexican Constitution contained individual guarantees (for victims and the accused) and provided for the presumption of innocence and jury trials, many of those provisions were never implemented. Mexico developed a hybrid criminal justice system containing elements of inquisitorial criminal procedures but with the public prosecutor, rather than a judge, taking a central role in overseeing investigations and in determining a suspect's guilt or innocence. Without due process guarantees and an independent judiciary, some argue that the executive branch, acting through the public prosecutor, used the courts as a means of political control (i.e., a way of punishing its opponents). Under the traditional system, prosecutors have wide latitude during the investigatory stage of a case to gather evidence however they deem appropriate that is then submitted to judges in a written dossier that is rarely challenged. Dossiers often center on the confession of the accused, with potentially coerced confessions frequently occurring , or on unverified eyewitness identifications. Judges then render their decisions behind closed doors. Although 85-90% of crimes brought to trial result in a conviction, in fact, less than 25% of crimes in Mexico are reported and, of those, only a small number are investigated and prosecuted, implying that only a small portion of the country's crimes are seriously addressed (see Figure 1 ). The likelihood of a guilty verdict is particularly high for cases involving poor people who have committed minor offenses. The Mexican criminal justice system has been widely criticized for being opaque, inefficient, and corrupt. Two of its key actors—police and public prosecutors—are viewed by 66% and 43% of Mexicans respectively as frequently engaged in corruption. The judicial system itself has long been plagued by long case backlogs, high pre-trial detention rates, and an inability to secure convictions for serious crimes (see Figure 1 ). On average, fewer than 13% of cases are resolved at the state level (where more than 90% of cases are prosecuted). During the Felipe Calderón Administration (December 2006-November 2012), Mexico extradited record numbers of criminals to the United States, but its Attorney General's Office (PGR) proved unable to convict any major leaders of Mexican drug trafficking organizations. The PGR has also been unable to secure charges in many high-profile cases involving the arrests of politicians accused of collaborating with organized crime. Dysfunction in the judicial system has resulted in overcrowded prisons, particularly at the state level, that are in significant need of reform. Increasing arrests have caused prison populations to swell, as has the use of preventive detention. (See " Provisions on Organized Crime "). Some 40% of inmates in Mexico's prisons are awaiting trials, as opposed to serving sentences. As of July 2011, prisons were at 23% over-capacity. These problems in Mexico's judicial and penal systems are not new. They have been problematic for decades, but have been exacerbated by the recent uptick in violence and criminality in the country. For example, crime victimization surveys that have typically shown that fewer than 25% of crimes are reported in Mexico, evidence of the Mexican people's lack of faith in their justice system (see Figure 1 ). Surveys from 2012 show an even lower percentage of crimes being reported—just 13%. Communities in some states where the police and judicial systems are particularly weak have begun to form armed "self-defense" groups, which many, including Mexico's National Human Rights Commission, view as a worrisome development. The push for judicial reform in Mexico began in the 1990s at the federal and state level. Reforms enacted by President Ernesto Zedillo in 1994 aimed to strengthen the power and independence of the federal judiciary vis-à-vis the other branches of government. At the state level, reformist lawyers became increasingly concerned about the lack of due process in Mexico's judicial system, particularly for poor individuals who lacked access to legal counsel. The movement included lawyers, academics, and human rights advocates. It proved to be particularly strong in Nuevo León, which became the first state to introduce adversarial procedures in 2004. Chihuahua and Oaxaca states soon followed. Each of those early reform states received significant technical assistance from the U.S. Agency for International Development (USAID). In 2004, the first National Action Party (PAN) Administration of Vicente Fox (2000-2006) proposed comprehensive federal judicial reforms. Those reforms failed to pass, but drew popular attention to the weaknesses in Mexico's traditional criminal justice system. Support for federal level judicial reform grew over the next few years until it was enacted with broad, multiparty support in March 2008 under the PAN Administration of President Calderón. The reforms, which involved several constitutional changes, took effect on June 18, 2008. Both U.S. and Mexican officials assert that fully implementing the 2008 judicial reforms is a key goal and a focus of bilateral efforts under the Mérida Initiative, the bilateral security program begun in FY2008. (For more on the Mérida Initiative, see: " U.S. Assistance " section below). Under the judicial reforms, Mexico has until 2016 to replace its trial procedures at the federal and state level, moving from a closed-door process based on written arguments to an adversarial public trial system with oral arguments and the presumption of innocence until proven guilty. These changes should make the system more transparent, participatory (including a greater role for victims, judges, and defense attorneys), and impartial. In addition to oral trials, judicial systems are expected to adopt means of alternative dispute resolution, which should help make them more flexible and efficient, thereby relieving backlogs and ensuring that cases that go to trial are for serious crimes. In order to be successful, Mexico's transition to this New Criminal Justice System (NCJS) will require structural, cultural, and systemic changes to Mexico's law enforcement and judicial institutions, including fundamentally retraining justice sector operators. The transition could take decades to fully take hold. The NCJS will have to be carefully adapted in states with indigenous populations that have their own traditional justice systems. Mexico's judicial reforms seek to create a system that involves a more equal balance of power between prosecutors and defense attorneys and a more active role for judges. The reforms aim to check some of the discretionary power formerly held by public prosecutors. Under the NCJS, prosecutors are expected to present and defend the evidence they and the police whom they oversee have gathered at a public trial where it may be challenged by the defense. Defense attorneys are given the opportunity to challenge the evidence presented by the prosecution, cross-examine witnesses, and present evidence to support their client's innocence. The reforms also envision a more active and high-profile role for judges by, for example, requiring sentencing judges to arbitrate trial proceedings and then render their decisions out in the open. Key elements of the reforms include: Investigation . A greater role will be given to police in investigations under the guidance of the public prosecutor; evidence gathered can be contradicted in an oral, public trial, and convictions can no longer be made based upon confessions alone. This phase of the judicial process will be abbreviated and less formal. Pre-trial detention. The use of this will be limited to violent crimes. Creation of new judgeships for each stage of criminal proceedings. This aims to strengthen judicial impartiality by ensuring that the judge who decides that there is enough evidence to send a case to trial (the due process judge) is not the same judge who presides over the trial phase and issues the final verdict (the sentencing judge). While one judge will preside over most trials, some will function as grand juries and have three judges presiding. The reforms also create a sentencing implementation judge who is to determine when a prisoner has fulfilled the terms of his or her sentence and to monitor processes of restorative justice (including agreements between victims and perpetrators reached through alternative dispute resolution). Individual judges can play all three roles as part of their duties, but not on the same case. A lterna tive methods of resolving cases. This includes plea bargaining and alternative justice mechanisms that may result in compensation agreements between victims and perpetrators. Hearings and trials. Under this reform, hearings and trials are to be conducted in public; attended by judges, prosecutors, and public defenders; based on oral arguments; and videotaped for the record. Open trials and decisions. This reform requires judges to render decisions in public based on evidence presented at a public trial rather than issuing decisions behind closed doors based on written dossiers. Victim rights. This gives greater procedural rights to victims (including the ability to participate in the prosecution and/or to challenge a prosecutor who has declined to take up a case in court); requires that a victim be consulted before a case is suspended or concluded; makes restitution a requisite for alternative justice to be pursued; creates specialized units to protect and assist victims; and prioritizes efficiency. Defendant rights. introduces the presumption of innocence, prohibits torture, guarantees access to public defenders and requires that those defenders be lawyers, provides that only judges can issue search orders, excludes evidence obtained through illegal means, states that confessions made without the presence of a defendant's attorney lack evidentiary value, and provides for alternative sentencing (such as probation) with the goal of rehabilitating prisoners and reincorporating them into society. Mexico's 2008 constitutional reforms also included a number of measures aimed at strengthening the government's ability to combat organized crime that paved the way for subsequent legislation allowing wiretapping and asset forfeiture. Article 16 of Mexico's Constitution defines organized crime as an organization of three or more individuals whose goal is the commission of crimes in a permanent or repeated way, "as provided by the law on the matter," a reference to Mexico's Federal Statute Against Organized Crime. Under the constitutional reforms, those suspected of involvement in organized crime can be held by the authorities for 40 days without access to legal counsel, with a possible extension of another 40 days, a practice known as arraigo which has led to serious abuses by authorities. The law also permits prosecutors in organized crime cases to submit evidence gathered from witnesses during the investigatory phase of a criminal process; that evidence does not need to be presented in front of the judge and defense attorney at trial. Some analysts maintain that these new reforms created a system in which "normal" criminals have their rights protected, whereas those suspected of organized criminal activity have few constitutional rights or guarantees. Many analysts had predicted that progress in advancing judicial reform in Mexico was "likely to be very slow as capacity constraints and entrenched interests in the judicial system delay any changes." Others expressed concerns that the Calderón government appeared to be devoting more funding and political will toward modernizing the police than strengthening the justice system (including the courts and the PGR). Some analysts questioned whether it would be feasible to revamp the judicial system at a time when the government was under pressure to get tough on organized crime since accountability and due process within the judicial system are sometimes portrayed as impediments to law enforcement efforts. Almost five years into the reform process, judicial reform efforts at the federal level remain stalled. Former President Calderón did not propose a new federal criminal procedure code—a key element needed to guide reform efforts—until September 2011, three years after the reforms were enacted. The Mexican Congress did not enact a criminal procedure code during his term. Funding for the PGR lagged behind that of other agencies, as did budgetary support for SETEC, the Technical Secretariat of the Interior Ministry charged with overseeing implementation of the reforms. SETEC responded to requests for assistance from the states, but did not have the authority to push federal and state institutions to support the reform effort, although it did provide $34 million in subsidies to states to support judicial reform in 2012. Inaugurated in December 2012, President Enrique Peña Nieto of the PRI has vowed to advance judicial reforms at the federal level by introducing legislation to establish a new unified penal code (so that crimes would be classified uniformly across the country) and a code of criminal procedure that would annul all state codes. During Peña Nieto's governorship, the state of Mexico became one of only three states fully operating under the NCJS, albeit with some problems. According to the Pact for Mexico agreement that Peña Nieto signed with the two main opposition parties in December 2012, the President plans to introduce legislation to create a unified penal code and code of criminal procedure during the first legislative session of 2013, which runs through April 30, 2013. President Peña Nieto also included a budget increase for 2013 for SETEC's efforts to coordinate implementation of the NCJS and support states with their transitions to the new system. The Mexican Congress is also drafting legislation that would restrict the use of preventive detention for organized crime cases ( arraigo ) and the granting of amparos during this legislative session . In contrast to this lack of progress at the federal level, reforms have moved forward in many Mexican states. Since 93% of crimes in Mexico are prosecuted at the state level, observers have welcomed this progress as a positive sign. As of December 2012, 22 of Mexico's 32 states (67%) had enacted new criminal procedure codes, the first major step in the reform process (see Table 1 below). According to SETEC, the only two entities that did not have a criminal procedure code reform bill in their legislatures as of October 2012 were Nayarit and the Federal District that encompasses Mexico City. The Federal District may be waiting to enact its own code until a federal code passes, as some legal experts maintain that the federal code might cover the local courts there as well. According to an index developed by Professor Matthew Ingram of the University at Albany, while only 12 states (36%) had begun operating at least partially under the new system as of December 2012, most of those states are roughly on track to follow Chihuahua's pace to reach implementation (see Figure 2 on the next page). Chihuahua is often considered a model state in terms of implementing judicial reform due to its early adoption of a criminal procedure code and related reforms, its comprehensive approach to the reform process, and the speed at which it implemented the reforms across the state. From start to finish, Chihuahua's transition to the NCJS took roughly two and a half years. Some may consider Ingram's assessment too optimistic, however, given that there have been significant implementation delays in several states (such as Durango, Nuevo León, and Zacatecas) that have now been partially operating under the system for many years. A study commissioned by USAID, released in November 2012, compared the performance of five states that had operated under the reforms for at least one year (Chihuahua, Oaxaca, Zacatecas, State of Mexico, and Morelos) to states that had not yet implemented the reforms. Although outcomes have been uneven among states that have implemented the reforms, the study found positive effects of the new system on certain key indicators. The study found: Pre-trial detention rates have been reduced in reform states, while they have risen in non-reform states. Some 25,000 individuals have avoided pre-trial detention under the new system in the five reform states. Prosecutors in Chihuahua, Oaxaca and Zacatecas proved twice as efficient at resolving criminal cases as in non-reform states (40% of cases resolved vs. 20%); Reform states have been able to significantly reduce the time it takes to resolve a case. It takes less than 40 days to resolve a case through alternative justice mechanisms and 100 days to resolve a case in the courts compared to 170 days in non-reform states. Alternative Dispute Resolution (ADR) settlements are being fulfilled (89% in Oaxaca and 93% in Chihuahua) and are freeing up the courts to handle more serious crimes. Some 52% of rulings in reform states are for serious crimes compared to 37% in non-reform states. The system has helped increase the role of public defenders in trials and resulted in 100% of judges being present at trials, including at initial hearings. (Some 71% of victims in non-reform states say that a judge was not present at their initial hearing). Significant obstacles to state-level reform remain, both in terms of the level of support that the federal government has provided to back state-level efforts and in how the reform is being implemented in the states. In general, a lack of progress and leadership at the federal level has left states without clear guidance on how the reforms should be implemented. A failure to communicate the goals and prepare the Mexican people for the likely outcomes of the new system—including the possibility that some criminals would plea for lesser sentences—has led the public to believe the new system has been too "soft" on crime. Some commentators suggest that opposition to the new system from some justice operators, including judges and prosecutors fearful that the new system will cut into the power they now hold, has also proved challenging. At least until recently, federal funds available for the construction of new courts and other infrastructure and for technical assistance to states implementing the reforms had been limited. Implementing these judicial reforms has brought major challenges, including the need to revise federal and state criminal procedure codes, build new courtrooms, retrain legal professionals, update law school curricula, and improve forensic technology. At the state level, since there is no re-election in Mexico, some governors have been reluctant to invest in new court systems that they will not be around to see in operation. Others have delayed implementation of the new system due to concerns that it may hurt their popularity if it is perceived as being too "easy" on crime. This perception is understandable given that several state legislatures have rolled back aspects of the reform by, for example, broadening the scope of crimes that require pre-trial detention. There have also been some operational challenges in states that have implemented the new system. A reluctance to use plea bargaining and to refer even simple cases to ADR is overwhelming the court systems in some states. Weak police and prosecutorial capacity to gather the type of evidence required to build strong cases, combined with various institutions' unwillingness to work together, has kept conviction rates low. Courts are particularly ill-equipped to handle large numbers of serious crimes. For example, due to capacity constraints, Chihuahua can only process a few hundred homicide cases each year. The prosecution rate for homicide has actually declined in that state in recent years. Recent survey data gathered from the Mexican public as a whole, and from justice sector operators (judges, prosecutors, and public defenders) in nine states, provide important insights into the challenges facing the reform effort. In general, the surveys revealed a need for more public awareness campaigns, as well as outreach to system operators, on why the reforms were enacted and what positive changes they seek to bring about. While the general public expressed questions about what effects the reforms will have on violence and criminality, justice sector officials were divided about whether they would help reduce crime. The public seemed less concerned about protecting the rights of the accused (presumption of innocence and pre-trial release) than about protecting victims' rights and ensuring that guilty criminals are punished. The general public survey also revealed that 74% of those polled had little or no faith in the criminal justice system and that a similar percentage did not cooperate with law enforcement by reporting crime or participating in crime prevention programs. Some 89% of those surveyed knew nothing about the 2008 judicial reforms, much less how they seek to rectify problems in the old system. In Chihuahua and Morelos, two states that have already implemented the NCJS, the percentage of respondents who did not know their states had implemented a new justice system stood at 30% and 60% respectively, still rather high. When people are told about some of the key elements of the reforms (such as oral trials), 80% of those surveyed said they think the new system will function better than the old. However, there is still a perception that the new system favors the rights of the accused over those of the victims. Some 64% of victims surveyed who had been through the NCJS said that they did not feel treated in an impartial way as compared to 54% who had experienced the old system. Victims also expressed concern that the NCJS moved slower at the beginning than the old system, another challenge that needs to be addressed. Ensuring that people know how to access the justice system and that those whom they encounter when they do so are professional and courteous is another issue that merits attention. A majority of justice sector operators surveyed thought that the traditional system functioned adequately, with judges more likely to express that sentiment than prosecutors or public defenders. In fact, 40% of justice operators thought that the passage of judicial reforms in 2008 was the result of pressure from "foreign governments and organizations" that sought to discredit the old system. While those findings are disconcerting, 84% of those surveyed expressed some level of support for the 2008 reforms, with 79% of respondents agreeing with the importance of oral trials and 94% approving of the use of alternative dispute resolution. Although 70% of justice sector operators felt that the NCJS would help reduce corruption, they were evenly divided about whether the reform will help reduce criminality. Since the 1980s, Congress has provided significant funding for judicial reform projects in Latin America, with Mexico being one of the last countries to seek U.S. assistance. Mexico's federal structure makes its transition from an inquisitorial to an accusatorial system more complicated than in other countries where the United States has previously supported reform efforts. Some view Mexico's federalism as an advantage, however, as states can serve as incubators for reform, with successful experiences in certain states serving as models for others to follow. Mexico's middle income status also means that it is better equipped to scale up U.S.-funded efforts than other countries in Latin America should it choose to make judicial reform a top priority. Although USAID has been providing judicial reform assistance to Mexico since the late 1990s, U.S. support for judicial reform has increased significantly as a result of the Mérida Initiative, a bilateral security effort for which Congress appropriated $1.9 billion from FY2008-FY2012. The strategy behind the Mérida Initiative has evolved over time. That initial strategy was designed in response to the Calderón Administration's request for specific forms of U.S. equipment, training, and technical assistance to help Mexico combat drug trafficking and organized crime. In 2009, U.S. and Mexican officials began to revise the strategic framework underpinning bilateral efforts in order to seek to address some of the deeper causes of criminality in the country— institutional weakness, corruption, and a weak social fabric. The Mérida strategy now focuses on four pillars: (1) disrupting organized criminal groups; (2) institutionalizing the rule of law; (3) building a 21 st century border; and (4) building strong and resilient communities. Funding for "institutionalizing the rule of law" (pillar two) now dwarfs other types of U.S. assistance provided to Mexico under the Mérida Initiative. Nevertheless, while spending plans state that $590.5 million of the $1.9 billion in Mérida funding appropriated from FY2008-FY2012 went to support the purchase of aircraft and helicopters for security forces, it is difficult to parcel out how much of the $1.9 billion in aid has gone to support judicial reform. According to the State Department, total deliveries under pillar two of the Mérida strategy (which includes support for judicial reform) stood at $146.2 million as of November 2012. That total does not include the $104 million in Mérida pillar two aid that USAID is administering (discussed below). Ensuring that U.S. agencies are supporting judicial reform as part of broader justice sector reform efforts in Mexico has been a priority for congressional appropriators. In the first appropriation for the Mérida Initiative, for example, Congress earmarked funding to support Mexico's transition from an inquisitorial justice system to an accusatory system. Congress has since increased funding for rule of law programs; asked the State Department to report on how U.S. programs are helping to achieve judicial and police reform in Mexico ( H.Rept. 112-331 ), and expressed support for future rule of law funding. Congress has also conditioned Mérida assistance to the police and military on ensuring that the Mexican government is enforcing prohibitions against using evidence obtained through torture that were codified in Mexico's 2008 judicial reforms. U.S. rule of law programming is now focusing on supporting Mexico's transition to an oral, accusatorial justice system and helping Mexico address institutional weaknesses in its justice sector institutions. U.S. assistance is geared toward: 1) helping the federal and state governments adopt legislative frameworks to underpin the reform process; 2) providing in-depth training for justice sector operators on their roles in the new system at all levels of government; 3) building support for the reforms in Mexican civil society; and 4) addressing institutional and operational problems at all levels of government that may not directly relate to the reform process. It is also focusing on improving the analytic and quality control capacity of justice sector institutions and on expanding access to justice and victims' assistance. Since high turnover rates of personnel in justice sector institutions has limited the effectiveness of past U.S. training programs, future assistance may focus on helping institutions change their incentive structures, policies, and cultures so that the reforms can be sustained. The three main implementing agencies for the U.S. rule of law programs in Mexico are the State Department, the Department of Justice (DOJ), and USAID. The State Department's Bureau of International Narcotics and Law Enforcement Affairs (INL) is the lead funder and coordinator of rule of law programs. INL also implements law enforcement reform (police, forensics, and prisons) and anti-corruption efforts (helping institutions install better vetting and internal controls), while DOJ and USAID have been the lead implementers for justice reform. U.S. law enforcement training and equipment efforts initially focused largely on the Federal Police, but then expanded to support the Attorney General's police force and state-level academies in Chihuahua, Nuevo León, Puebla, and Sonora. State Department funding has helped provide training and equipment to build the forensic capacities of the Federal Police and the Attorney General's Office and to expand and improve the country's federal penitentiaries. The State Department is training Mexican federal and state police for the new investigatory roles they will be called upon to play in the NCJS. Anti-corruption efforts have spanned the full range of Mexican law enforcement and judicial institutions. DOJ is administering some $46 million in State Department funding. DOJ has supported justice reform at the federal level, including the adoption of a federal criminal procedure code. In 2012, DOJ worked with the PGR to design and implement a national training program known as Project Diamante through which prosecutors, investigators, and forensic experts were trained to work as a team rather than in isolation (as was customary). Upon completion of Phase I, in August 2012, 7,700 PGR prosecutors, investigators and forensic experts had been trained to work together to manage cases in the current inquisitorial system as well as together to function once Mexico transitions to an accusatorial system.  Project Diamante also established a cadre of over 200 instructors capable of replicating this and other training to new PGR personnel.  Until recently, U.S. assistance did not provide significant training and assistance for judges, a key constituency that must be convinced about the value of the reforms. DOJ has recently established the Judicial Studies Training Institute, a training program in Puerto Rico for Mexican federal judges. The nine-day training program focuses on building practical experience in the accusatory system with the goal of educating judges about the advantages that it provides. The future of DOJ programming in Mexico may depend upon the extent to which Mexico's Attorney General Jesús Murillo Karam embraces the Diamante model that began late in the Calderón Administration. Some states have reportedly expressed an interest in DOJ replicating the training they provided to federal officials at the state level, but it remains to be seen whether that will take place. Training for federal judges could also potentially be increased. USAID has concentrated most of its work in support of justice reform at the state level, but also sought to strengthen the capacity of SETEC, the federal entity coordinating the federal and state reform efforts, and ProVíctima, the federal entity providing victims' assistance services under the NCJS. USAID had been supporting code reform, judicial exchanges, alternative dispute resolution, and Citizen's Participation Councils, as well as training justice sector operators in five Mexican states since 2004. USAID has helped law enforcement and attorney generals in those states form partnerships with their U.S. counterparts that have involved training and mentoring. USAID expanded its rule of law efforts with roughly $104 million in FY2008-FY2012 Mérida assistance, a significant portion of which is supporting comprehensive judicial reform programs in seven of Mexico's 32 states. USAID has provided more limited help with drafting legislation and implementing policy changes in four additional states. USAID has also provided support to the American Bar Association to help Mexican law schools and bar associations change their curriculums and professional standards to reflect the new system. USAID appears to be trying to strike a balance between providing enough assistance to certain key states to demonstrate the merits of the NCJS and providing more limited assistance to a larger number of states to help Mexico reach its 2016 implementation targets. Although some have urged USAID to continue concentrating its efforts in key states, the agency is in the process of expanding its programs and activities into no less than 20 states. This state-level work will be accompanied by continued technical assistance to SETEC and ProVíctima, as well as increased support for civil society organizations. Mexico enacted historic judicial reforms in 2008 that have the potential to dramatically revamp the country's criminal justice system. Whether or not those reforms are fully implemented is ultimately up to the Mexican government and Mexican society as a whole to decide. The depth and breadth of U.S. assistance provided for judicial reform will in part depend upon whether the Peña Nieto government makes judicial reform a priority. Should Mexico make judicial reform more of a priority, as security experts have long recommended, U.S. technical assistance and training could play a significant role in supporting the reform process. During his confirmation hearing, Secretary of State John Kerry vowed to try to protect U.S. assistance under the Mérida Initiative from budget cuts, including support for judicial reform. However, if Mexico does not prioritize the judicial reforms, Congress may question whether funding for such programs in Mexico should be discontinued, scaled back, or made contingent upon the federal and state governments demonstrating political will to implement the reforms. Should the reforms continue to move forward, congressional funding and oversight of judicial reform programs in Mexico could continue for a number of years. As Congress considers President Obama's FY2014 budget request for Mexico, it may question how funding for judicial reform in particular, and justice sector reform more broadly, fits into bilateral security priorities, including efforts to combat criminal groups and punish corruption. Is the new criminal justice system more effective than the old system at convicting DTO leaders and corrupt politicians? Have any emblematic cases been resolved that might help improve Mexicans' perception of their criminal justice system and its capacity to deter and sanction crime? When faced with funding decisions, Congress may seek to balance the need to ensure that U.S. funds are provided in a way that is flexible enough to respond to changing events in Mexico, while also retaining adequate control over the way those funds are being spent. Congress may also consider weighing in on how implementing agencies divide the assistance provided for judicial reform between the federal and state level reform efforts. Finally, Congress may examine the extent to which U.S. agencies are balancing "top down" support for government entities engaged in the reform process with "bottom up" support to civil society groups. Many argue that the award-winning documentary film, Presumed Guilty , which was theatrically released in 2011, did more to galvanize support for the reforms than any government-sponsored efforts. The State Department used roughly $100,000 in International Narcotics Control and Law Enforcement (INCLE) funding to help promote the film in Mexico. Another area that could be expanded is U.S. support for culture of lawfulness programs that seek to educate all sectors of Mexican society on the importance of upholding the rule of law. Congress has closely monitored human rights conditions in Mexico and compliance with human rights conditions on Mérida assistance. Congress has an oversight interest in ensuring that, as implemented, the new criminal justice system is strengthening human rights protections. Some have urged Congress to make future conditions more specific by, for example, conditioning aid on whether Mexico is videotaping confessions and interviews with witnesses so as to prove that torture or other ill treatment is not occurring. Others have argued against changes to the conditions on U.S. assistance, preferring that the current conditions be more strictly enforced. Congress may also examine how best to ensure that U.S. implementing agencies correctly sequence and coordinate support to key actors within the criminal justice system (police, prosecutors/defense attorneys, courts). At the federal level, is the amount of assistance being provided to the PGR and the courts adequate when compared to the aid provided to the Interior Ministry (which now includes the Federal Police and penitentiary system)? If one federal entity seeks U.S. cooperation more aggressively than another, should that entity receive more assistance? At the state level, are USAID's judicial reform efforts being coordinated with the police assistance that the State Department is providing? Are police in states that have adopted or are close to adopting the new criminal justice system being adequately trained to carry out investigations in support of the public prosecutor? As foreign aid budgets tighten, congressional scrutiny of U.S. programs in Mexico may intensify. Past reports by the Government Accountability Office (GAO) and the Inspector General of USAID have criticized U.S. agencies for failing to develop "outcome" rather than "output" measures to gauge the efficacy of U.S. programs. USAID has adjusted its indicators in response to those criticisms and the State Department is in the process of establishing a Metrics Office in Mexico City that will develop indicators for its ROL programs. The results of those efforts to improve metrics may prove useful for congressional appropriators as they oversee current programs and consider future support for judicial reform in Mexico. Congress might also consider providing funding for more polling and surveys regarding attitudes toward the reforms, since this is an important means of evaluation and assessment of progress toward the reform. In sum, policy experts continue to recommend that Mexico hasten implementation of judicial reforms enacted in 2008 that are aimed at making its judicial system more transparent, efficient, and impartial. Implementing the reforms is a stated priority of both the Mexican and U.S. Administrations. Nevertheless, nearly five years into the reform process, implementation has lagged at the federal level and faced significant challenges in states that have begun operating under the new system. Congress is likely to closely monitor the actions taken by the Peña Nieto government and state governments in Mexico to advance the reform process as it oversees current U.S. justice sector programs and considers future support to Mexico.

Fostering security, stability, and democracy in neighboring Mexico is seen by analysts to be in the U.S. national security and economic interest. Reforming Mexico's often corrupt and inefficient criminal justice system is widely regarded as crucial for combating criminality, strengthening the rule of law, and better protecting citizen security and human rights in the country. Congress has provided significant support to help Mexico reform its justice system in order to make current anticrime efforts more effective and to strengthen the system over the long term. U.S. and Mexican officials assert that fully implementing judicial reforms enacted through constitutional changes in June 2008 is a key goal. Under the reforms, Mexico has until 2016 to replace its trial procedures at the federal and state level, moving from a closed-door process based on written arguments presented to a judge to an adversarial public trial system with oral arguments and the presumption of innocence until proven guilty. These changes are expected to help make the system less prone to corruption and more transparent and impartial. In addition to oral trials, judicial systems are expected to adopt means of alternative dispute resolution, which should help them be more flexible and efficient, thereby ensuring that cases that go to trial involve serious crimes. More than halfway into the reform process, judicial reform efforts in Mexico are at a critical juncture. As of December 2012, 22 of Mexico's 32 states had enacted new criminal procedure codes (67%), but only 12 states (36%) had begun operating at least partially under the new system. Reform states have seen positive initial results as compared to non-reform states: faster case resolution times, less pre-trial detention, and tougher sentences for cases that go to trial. Daunting challenges remain, however, including counter-reform efforts and opposition from some key justice sector operators (including judges). Although reform efforts have lagged at the federal level, President Enrique Peña Nieto, inaugurated in December 2012 to a six-year term, has said that advancing judicial reform will be a top priority. U.S. policymakers are likely to follow how the Peña Nieto government moves to enact a unified penal code and code of criminal procedure to hasten reform at the federal level and to increase support to states transitioning to the new system. The United States has been supporting judicial reform efforts in Mexico since the late 1990s, with assistance accelerating since the implementation of the Mérida Initiative in FY2008, an anticrime assistance program for which Congress has provided $1.9 billion. While the Mérida Initiative initially focused on training and equipping Mexican security forces, it now emphasizes providing training and technical assistance to help reform Mexico's justice sector institutions. Funding for "Institutionalizing the Rule of Law" now dwarfs other types of U.S. assistance to Mexico. This report provides an overview of Mexico's historic 2008 judicial reforms and an assessment of how those reforms have been implemented thus far. It then analyzes U.S. support for judicial reform efforts in Mexico and raises issues for Congress to consider as it oversees current U.S. justice sector programs and considers future support to Mexico. Also see CRS Report R41349, U.S.-Mexican Security Cooperation: The Mérida Initiative and Beyond, by [author name scrubbed] and Kristin M. Finklea.

Almost all commercial service airports in the United States are owned by local and state governments, or by public entities such as airport authorities or multipurpose port authorities. In 1996, Congress established the Airport Privatization Pilot Program (APPP) to explore the prospect of privatizing publicly owned airports and using private capital to improve and develop them. In addition to reducing demand for government funds, privatization has been promoted as a way to make airports more efficient and financially viable. Participation in the APPP has been very limited. Only two airports have completed the privatization process, and one of them later reverted to public ownership. Owners of other airports considered privatization, but eventually chose not to proceed. The lack of interest in privatization among U.S. airports could be the result of (1) readily available financing sources for publicly owned airports; (2) barriers or lack of incentives to privatize; (3) the potential implications for major stakeholders; and (4) satisfaction with the status quo. Privatization refers to the shifting of governmental functions, responsibilities, and sometimes ownership, in whole or in part, to the private sector. With respect to airports, "privatization" can take many forms up to and including the transfer of an entire airport to private operation and/or ownership. In the United States, most cases of airport privatization fall into the category of "partial privatization"; full privatization, either under or outside the APPP, has been very rare. Figure 1 illustrates four generic airport privatization models, from the least privatized, the award of service contracts to private firms, to the long-term transfer of an airport out of the public sector. Service Contracts. Many U.S. airports outsource some non-core operations to private firms that specialize in those functions. Examples of operations that are frequently outsourced are cleaning and janitorial services, airport landscaping, shuttle bus operations, and concessions in airport terminals. This is probably the most common type of privatization among U.S. airports. Management Contracts. Some airports engage the management expertise of the private sector by contracting out specific facilities or responsibilities, such as parking, terminal concessions, terminal operations, airfield signage, fuel farms, and aircraft refueling. In a few cases, a private management company has been awarded a contract to manage an entire airport for a specified term. This is a form of partial privatization. For example, Virginia-based AvPorts, a specialized aviation facilities company, has management services contracts with a number of airports, including Albany International Airport, NY (ALB) and Westchester County Airport, NY (HPN). Developer Financing/Operation. A wide range of contracts has been used to involve the private sector in providing financing, development, operation, and maintenance services. This is also known as the Design-Build-Finance-Operate-Maintain (DBFOM) model. Airport DBFOM examples include passenger terminals (notably Terminal 5 at Chicago O'Hare International Airport and Terminal 4 at New York John F. Kennedy International Airport), parking garages, and rental car facilities. Long-T erm Lease or Sale. Full privatization involves the sale or long-term lease of an airport to a private owner or operator. Under a long-term lease or concession agreement, the airport owner grants full management and development control to the private operator in exchange for capital improvements and other obligations such as an upfront payment and/or profit-sharing arrangements. Only two airports have successfully entered into long-term leases. Under a full sale, ownership and full responsibility for operation, capital improvements, and maintenance would be transferred to a private buyer. Several airports in Europe have been privatized in this way, but there have been no sales of commercial service airports in the United States. Airport privatization, especially in the case of long-term lease or sale, involves four major stakeholders: airport owners, which in the United States are mostly local or regional governments or public entities; air carriers; private investors; and the federal government. These stakeholders ultimately decide whether a privatization deal goes forward and they tend to have different objectives and, in many cases, divergent interests. Airline passengers may experience the effect of privatization via, for example, airport concession offerings, operational efficiency, and changes in prices and fees, but passenger interests are usually not represented formally in discussions of privatization. Airport owners, who are usually local governments , might opt for privatization if they could extract money for general use. However, federal regulations generally require that lease or sale revenue from airport privatization be used only for airport purposes (unless the majority of airlines agree otherwise, under the APPP). On the other hand, privatization involves surrendering control of an economically important facility. By reducing or eliminating responsibilities of the public agency or authority that owns the airport, it may lead to the loss of public-sector jobs. Hence, a public-sector owner may see few benefits from selling or leasing an airport to a private operator unless the facility is losing money—and in that case, private investors might not find the airport an attractive investment. The federal Airport Privatization Pilot Program, discussed below, is meant to encourage privatization by granting certain exemptions to public-sector owners with regard to revenue diversion and other obligations. Air carriers , including both scheduled passenger airlines and cargo airlines, would like to keep their costs low. They also want to have some control over how airport revenues are used, especially to ensure that the fees paid by themselves and their customers are used for airport-related purposes. Their interest in low landing fees and low rents for ticket counters and other facilities may be contrary to the interest of potential private operators in increasing revenue. At the same time, however, air carriers have an interest in ensuring that the airports they use are well maintained and carefully managed. They might have reason to support a proposed privatization if they thought it would result in lower charges, better airport services, or increased efforts to promote the airport. Private investors and operators expect a financial return on their investments. They will be looking above all at growth potential, such as opportunities to bring additional flights to the airport, to earn additional lease revenue by improving amenity offerings such as shopping and dining for passengers, or to draw more freight traffic by offering lower fees or improved facilities. If they attempt to increase profitability by raising landing fees or rents, that may bring them into conflict with air carriers using the airport. The federal government , represented by the Department of Transportation (DOT) and DOT's Federal Aviation Administration (FAA), has been directed by Congress to engage private capital in aviation infrastructure development and reduce reliance on federal grants and subsidies. However, FAA also has statutory mandates to maintain the safety and integrity of the national air transportation system and to enforce compliance with commitments, known as "grant assurances," that airports have made to obtain grants under the federal Airport Improvement Program (AIP). Thus, while FAA administers the APPP, it is likely to carefully examine privatization proposals that might risk closures of runways or airports or otherwise reduce aviation system capacity or that appear to favor certain airport users over others. The divergent interests of stakeholders are a significant issue in privatization. Striking a balance among these interests while facilitating privatization is one of the purposes of the Airport Privatization Program. The Federal Aviation Reauthorization Act of 1996 (49 U.S.C. §47134; Section 149 of the Federal Aviation Reauthorization Act of 1996, P.L. 104-264 ) established the APPP. The program was created to test a new concept for increasing private participation, especially private capital investment, in airport operations and development. The law authorizes the Secretary of the U.S. Department of Transportation and, through delegation, the FAA Administrator, to exempt participating airports from certain federal requirements. Specifically, the Administrator may exempt the airports from all or part of the requirements to use airport revenue for airport-related purposes, to repay federal grants, or to return airport property acquired with federal assistance upon the lease or sale of the airport deeded by the federal government. The law originally limited participation in the APPP to no more than five airports. The FAA Modernization and Reform Act of 2012 ( P.L. 112-95 ) increased the number of airports that may participate from 5 to 10. Only one large hub commercial airport may participate in the program and that airport may only be leased, not sold. Only general aviation airports can be sold under the APPP. (See the Appendix for definitions of airport types.) Table 1 provides a comparison of the requirements and regulations governing airport privatization under and outside the APPP. The APPP has had very limited success in increasing the number of privately run airports. Since its inception, 12 airports have applied to enter the APPP, but only 2 have completed the entire privatization process. One of these later reverted to public ownership. Table 2 lists the APPP applicants and their status. In 2000, Stewart International Airport in Newburgh, NY, became the first commercial service airport privatized under the APPP. National Express Group PLC, a U.K.-based transportation company, made an initial $35 million up-front payment to the owner, the state of New York, for a 99-year lease, and agreed to pay the state 5% of the airport's gross income on the lease's 10 th anniversary or after 1.38 million passengers used the airport, whichever occurred first. National Express Group also made $10 million in capital contribution during its operation of the airport. Unable to obtain airline approvals to use airport revenue for general purposes, the airport owner, the state of New York, agreed to use the lease payments for airport purposes and to recoup past subsidies for Stewart Airport and other state-owned airports in accordance with FAA's revenue use policy. National Express apparently was unsuccessful in increasing passenger traffic at Stewart; according to FAA data, the airport registered 274,126 enplanements in 2000, the year National Express assumed management, but only 156,638 six years later. The company's attempt to make the airport more attractive to passengers going to and from New York City by renaming it "New York-Hudson Valley International Airport" was abandoned amid local opposition. In 2006, National Express decided to focus its U.S. efforts on school bus operations, and moved to dispose of its lease on Stewart. The following year, the Port Authority of New York and New Jersey purchased the remaining term of the lease for $78.5 million. Although National Express never disclosed the profitability of its operation at Stewart, the Port Authority reported a $0.8 million loss in 2007, when it ran the airport for part of the year, and a $5.5 million loss in 2008, its first full year of operation. This suggests that the operation may not have been profitable for the private owner. However, National Express booked a profit of £16.2 million (approximately $33 million at the time) on the sale to the Port Authority, suggesting that it earned a significant return on its investment. The APPP slot reserved for a large hub commercial airport was once taken by Chicago Midway International Airport but its privatization efforts never materialized. The City of Chicago received airline approval to lease the city-owned airport to private investors. On October 3, 2006, FAA authorized the city to select a private operator, negotiate an agreement, and submit a final application under the pilot program. On October 8, 2008, the Chicago City Council agreed to a $2.52 billion, 99-year lease with Midway Investment and Development Corporation (MIDCo), a consortium led by Citigroup, Inc., John Hancock Life Insurance Co., and a unit of Vancouver (British Columbia) International Airport. The deal was delayed due to the inability of the selected consortium to secure financing in the credit market during the global economic crisis. The lease agreement was terminated when the group missed the April 6, 2009, payment deadline. MIDCo had to pay a $126 million penalty to the city. A renewed effort to lease Midway was abandoned in 2013 after one of the two bidding groups dropped out. The city then announced that it would suspend plans to lease the airport. On September 9, 2013, the City of Chicago withdrew its preliminary privatization application. This opened up the APPP slot reserved for a large hub airport. Luis Muñoz Marín International Airport, a medium hub airport in San Juan, Puerto Rico, is the only commercial service airport operating under private management after privatization under the APPP. FAA approved the final privatization contract in February 2013, and the airport was transferred to a private operator, Aerostar Airport Holdings (Aerostar), on February 25, 2013. Aerostar Airport Holdings paid $615 million in upfront proceeds to the Puerto Rico Ports Authority, and will pay a further estimated $550 million over the 40-year lease that includes an annual lease payment of $2.5 million for the first five years of the contract, 5% of gross airport revenues during the following 25 years, and 10% of gross airport revenues during the final 10 years of the lease. Aerostar also agreed to a $1.2 billion capital plan, including the remodeling and renovation of the terminal buildings. Aerostar reported that by the end of 2016 it had invested over $176 million in remodeling and renovations, as well as other improvements. Hendry County Airglades Airport in Clewiston, FL, a general aviation airport, received preliminary approval from FAA for privatization under the APPP in October 2010. In August 2014, FAA approved a management contract between the county and a private operator. As of August 2017, the airport is working with the proposed private operator to finalize its application. In December 2016, FAA accepted a preliminary application from Westchester County Airport. The airport is owned and operated by the County of Westchester and is in White Plains, NY, about 40 miles north of New York City. It serves an average of 1.75 million passengers a year. The preliminary application from St. Louis Lambert International Airport was accepted by FAA in April 2017. This medium-hub airport, once known as Lambert Field, is owned and operated by the City of St. Louis. The airport is located about 10 miles northwest of St. Louis and is the largest airport in the State of Missouri. Over its 20-year history, the APPP has not been successful in stimulating wide interest in airport privatization. The program's modest results appear to have several causes. Applying to privatize an airport under the APPP, as reported by FAA, makes the transfer from public to private ownership too "time consuming" and presents risks that could cause a potential deal to fail. The process may take years to complete. In the cases of Luis Muñoz Marín International Airport, more than three years elapsed from preliminary application to final FAA approval, and informal discussions with FAA may have consumed additional time prior to the filing of the preliminary applications. In the case of Hendry County Airglades Airport, more than six years have elapsed since the application was submitted to FAA. The application process begins with an airport filing a preliminary application for FAA approval, upon which one of the ten slots available under the APPP is reserved for that airport. The preliminary application must include a summary of privatization objectives; a description of the process and a timetable; current airport financial statements; and a copy of the airport owner's request for potential private operators to submit proposals. FAA has 30 days to review the preliminary application. Once an airport receives preliminary approval, it then may select a private operator from among those offering proposals, negotiate an agreement, and submit a final application to FAA. There is no timeline as to how quickly FAA must complete its review of the final application. After FAA gives notice of its proposed approval of the final application and lease agreement in the Federal Register , there is a 60-day public review and comment period. After that, FAA completes its review and prepares its Findings and Record of Decision (ROD), in which it addresses the public comments and publishes the details of its decision. Airport privatization under the APP has a number of regulatory requirements, some of which have been criticized as overly restrictive or vague. These requirements may have lessened airport owners' and/or investors' interest in privatization. They include the need for 65% of air carriers serving the airport to approve a lease or sale of the airport; restrictions on increases in airport rates and charges that exceed the rate of increase of the Consumer Price Index (CPI), and a requirement that a private operator comply with grant assurances made by the previous public-sector operator to obtain AIP grants. In addition, after privatization the airport will be eligible for AIP formula grants to cover only 70% of the cost of improvements, versus the normal 75%-90% federal share for AIP projects at publicly owned airports. This serves as a disincentive to privatize an airport, because it will receive less federal money after privatization. In surface transportation, a key purpose of privatization is to attract private capital to supplement public spending that is insufficient to provide the desired level of construction and maintenance. In general, lack of resources has been a far less important issue for airport operators than for highway and public transportation agencies. Publicly owned airports have access to five major sources of funding. The Airport Improvement Program (AIP) provides federal grants to airports for planning and development, mainly of capital projects related to aircraft operations, such as runways and taxiways. Local passenger facility charges of up to $4.50 per boarding passenger, imposed pursuant to federal law, can generate revenue for a broad range of projects, including "landside" projects on airport property such as passenger terminals and ground access improvements, and for interest payments. Tax-exempt bonds, often secured by airport revenue, offer less costly financing than is generally available to private entities. Tenant leases, landing fees, and other charges are important revenue sources at some airports. Many airports, especially smaller ones, also benefit from state and local grants. These financing arrangements have important implications for airport privatization. If a publicly owned airport were to be privatized outside the APPP, its private operator may not be eligible to receive AIP formula funds and may have to draw on its own resources to improve runways and taxiways. The operator would not be entitled to issue bonds with federal tax-exempt status, and would therefore have to pay higher interest rates on its bonds than a public-sector operator. On the other hand, the private operator would have relative freedom to impose passenger usage fees and to increase landing fees, rents, and other charges, so long as this was not done in a discriminatory fashion. An airport privatized under APPP would continue to have access to federal AIP grants, although the private operator would have to provide a 30% match, considerably more than the 10%-25% matches required of publicly owned airports. The operator would not be entitled to issue bonds with federal tax-exempt status, and would therefore have to pay higher interest rates on its bonds than a public-sector operator. It could continue to collect passenger facility charges, but could not impose charges higher than those authorized by federal law. Its ability to raise fees paid by air carriers would be constrained. These limitations are largely the consequence of federal laws. They may explain why airport privatization has been less attractive in the United States than in Europe and Canada. Several European countries and Canada have undertaken notable steps in airport privatization. Two factors that have facilitated privatization in other countries do not exist in the United States. First, many of the major airports that have been privatized in Europe and Canada were previously owned by national governments, not by local or provincial governments, so the decision to privatize did not need to be taken at multiple levels of government. Second, the tax-favored status of debt issued by state and local governments in the United States has no analogue in most other countries, so the shift from public to private ownership did not necessarily entail higher borrowing costs. Airport privatization started to build momentum when British Prime Minister Margaret Thatcher's administration privatized the former British Airport Authority (BAA). BAA had been part of the British Aviation Ministry from 1946 to 1966, and then became an independent government agency. The transfer of BAA to the private sector in 1987 transformed the airport sector in the United Kingdom and, eventually, around the world. By listing the shares of BAA plc on the London stock exchange, the government privatized the seven BAA airports, including London Heathrow, London Gatwick, and London Stansted. The British government initially owned a stake in BAA plc, but sold all its shares by 1996. It retained a "golden share," which entitled it to block a takeover by foreign investors, until 2003. Under the British approach to privatization, airports' charges were subject to economic regulation by the Civil Aviation Authority, a government agency, which had additional authority over the largest airports. Due to statutory changes enacted in 2012, only airports with more than 5 million annual passengers are now subject to government regulation of their charges. Heathrow, Gatwick, and Stansted have been deemed "designated" airports subject to closer regulatory supervision. The privatization of BAA has not been without its critics. Some economists argued that by selling BAA's seven airports all together, the U.K. government had, in effect, converted public assets into a regulated private monopoly. In 2009, the U.K. Competition Commission required BAA plc to divest Gatwick, Stansted, and either Edinburgh or Glasgow airports in order to maintain competition. In 2006, BAA plc was acquired for £10.1 billion by Airport Development & Investment Ltd (ADI), a consortium led by Ferrovial Aeropuertos S.A. of Spain. Ferrovial then sold BAA's non-U.K. airport stakes such as Budapest and a number of Australian airports. The name BAA was officially dropped on November 12, 2012, and the company was rebranded as Heathrow Airport Holdings Ltd (HAH). Following the transactions, Ferrovial remains the largest shareholder in HAH with a 25% stake. Not all airport privatizations in the United Kingdom have been successful. Cardiff Airport in Wales, formerly operated by a consortium of the Spanish companies Albertis and AENA, was purchased by the Welsh government for £52 million in March 2013. The private owners were interested in selling after annual passenger numbers fell from 2.1 million in 2007 to barely 1 million in 2012 and the airport became unprofitable. Prestwick Airport in Scotland, which BAA plc had sold to another private operator in 1992 and was most recently owned by the New Zealand company Infratil, was purchased by the Scottish government in November 2013 for the nominal amount of £1. As with Cardiff, several carriers had ceased service at Prestwick and passenger numbers had fallen sharply. Subsequent to the British privatization action of 1987, a number of governments in Europe privatized major airports, either fully or partially. Some of these private owners or operators then acquired full or partial ownership interests in other airports. At the same time, some public-sector airport operators expanded by providing management services at other airports. Entities such as AENA and Schiphol Group of the Netherlands are active internationally. Schipohl Group, of which the Dutch government is the majority owner, rebuilt and now operates Terminal 4 at Kennedy International Airport in New York. According to a 2016 study by Airports Council International—Europe, approximately 14% of European airports are owned by mixed public-private shareholders and 9% are fully privatized. The Canadian Air Transportation Administration (CATA) of the Department of Transport (later renamed Transport Canada) owned and managed most airports and air navigation facilities in Canada until the early 1990s. In 1992 the Canadian government started to devolve the operation, management, and development of airports in Canada from Transport Canada to local airport authorities (LAAs) that were set up as not-for-profit corporations. These airport authorities are fully responsible for funding all operating and infrastructure costs and must invest all profits back into the airports. As a first round of airport transfer, the federal government leased out four major airports in the summer of 1992—Calgary, Vancouver, Edmonton, and Montreal. In July 1994, Transport Canada announced a National Airports Policy (NAP) that grouped airports into 5 categories: 26 National Airports System (NAS) airports, 71 regional and local airports, 31 small airports, 13 remote airports, and 11 Arctic airports. The NAP required that ownership of regional and local airports be transferred from the federal government to regional or local interests such as provincial and local governments, airport commissions, and private businesses. The NAS airports—the 26 airports that handled more than 200,000 passengers per year or served provincial or territorial capitals—were leased to Canadian Airport Authorities (CAAs), not-for-profit and non-share corporations similar to LAAs, which are responsible for operations, management, and capital expenditures. The government retains ownership of the airports and receives rent payments from the CAAs and LAAs. The government removed operating subsidies from regional or local airports over a five-year period. In its place, an Airport Capital Assistance Program (ACAP) was established to provide federal funding for safety-related airside capital projects at these airports. Thirty of the 31 small airports have been transferred to local interests, per an NAP requirement that all small airports be transferred to local interests or closed. The government continues to support remote and Arctic airports that service isolated communities. Except for the airports operated by or on behalf of Transport Canada, the federal government does not regulate airport charges at airports already transferred to CAAs, LAAs, or local interests. The government permits airport authorities to determine airport charges as long as they are non-discriminatory and competitive. Airports are also free to impose local passenger fees as a way to generate revenues for capital improvements or infrastructure expansions. The airports pay hundreds of millions of dollars a year in rent to the federal government and hundreds of millions in "payments in lieu of tax" to municipal governments across Canada. For the 2014-2015 fiscal year, Transport Canada reportedly collected C$313 from NAS airports. Critics of Canada's "users pay" system question whether it has benefited aviation consumers. Some contend that these "quasi-independent" authorities, whose board members are often nominated by municipalities, often represent the interest of local stakeholders. A 2012 report prepared for the Standing Senate Committee on Transport and Communications indicated that passengers departing Canadian airports often pay 60% and 75% above the base airfare to cover taxes and charges, compared to between 10% and 18% in the United States. The Canadian Airports Council estimated that in 2011, 4.8 million Canadians chose to cross the U.S. border and fly from U.S. airports. For example, about 85% of the annual passengers at Plattsburgh International Airport in upstate New York, near the Canadian border, are Canadian residents. The report concluded that the burden of Canada's airport rents, fees, and other service charges was undermining the competitiveness of Canadian airports located near the U.S. border. Congress has been interested in airport privatization as a way to save money by making airports less dependent on federal assistance while also, in the long run, increasing the nation's aviation capacity to meet growing demand for air travel. However, under current federal law, privatization has struggled to achieve these goals. Federal AIP spending is ultimately determined via the budget process and therefore budget savings may or may not result from airport privatization. Privatization outside the framework of the APPP is generally unattractive to both airport owners and potential investors, as it is likely to result in higher financing costs and loss of federal AIP grants and will not provide the public-sector owner with revenues that can be used for other purposes. Privatization within the framework of the APPP may generate minor reductions in federal outlays due to the requirement for a privately run airport to match a larger share of federal AIP grants, but it is not clear that privatization serves the interests of public-sector owners or air carriers, except in cases where the airport is losing money or the owner can channel the proceeds of privatization into capital projects at other airports. Private investors' ability to earn money from an airport privatized under the APPP is limited by restrictions on passenger facility charges and limitations on increases in other airport fees. Air carriers, in most cases, will see advantages from privatization only if they can negotiate lower rents and landing fees in return for agreeing to it, but this would diminish the potential financial return to investors. Streamlining the APPP application and review process might make privatization somewhat more attractive by reducing the risks arising from a long application period, such as changes in economic and capital market conditions. However, significantly increasing interest in airport privatization is likely to require structural change to the existing airport financing system. Options might include the following: Offering the same tax treatment to private and public airport infrastructure bonds. This could be done by eliminating the current federal income tax exemption of interest on bonds issued by public-sector airport owners or by extending tax-exempt or tax-preferential treatment to airport infrastructure bonds issued by private investors. Either change would eliminate a major disincentive to shift airports from public to private ownership. On the other hand, removing the tax exemption on public-sector airport bonds would raise airports' financing costs, while extending it to private-sector bonds could have consequences for federal revenues. Changing AIP requirements. Reducing the percentage match private operators must provide to obtain AIP grants to the level of comparable public operators would make privatization more attractive to private investors, but would increase the share of federal funding. Relaxing AIP grant assurances. If private investors were freed from some of the requirements agreed to by the public owner in order to obtain AIP funds, privatization might become more attractive to investors. However, some of the changes that might be most attractive to investors, such as allowing the sale of airport property, might interfere with the federal interest in maintaining aviation system capacity and safety. Liberalizing rules governing fees. Allowing privatized airports more flexibility to impose passenger facility charges and to raise rents and landing fees would make privatization more attractive to investors. However, this might increase airline opposition to privatization and could lead to higher costs for passengers and air cargo shippers. Easing limits on use of privatization revenue. Reducing the obstacles for public-sector owners to use privatization revenue for non-airport purposes would stimulate local and state government interest in privatization. On the other hand, it could potentially lead to a lower level of investment in aviation infrastructure. The following types of airports are discussed in this report: Commercial Service Airports Publicly owned airports that receive scheduled passenger service and board at least 2,500 passengers each year. There are 509 commercial service airports. Primary Airports Commercial service airports that board more than 10,000 passengers each year. Large Hub Airports board 1% or more of system-wide passengers (30 airports, 72% of all enplanements). Medium Hub Airports board 0.25% but less than 1% of system-wide passengers (31 airports, 15% of all enplanements). Small Hub Airports board 0.05% but less than 0.25% of system-wide passengers (72 airports, 8% of all enplanements). Non-Hub Airports board more than 10,000 but less than 0.05% of system-wide passengers (249 airports, 4% of all enplanements). Non-primary Commercial Service Airports Board at least 2,500 but no more than 10,000 passengers each year (127 airports, 0.1% of all enplanements). General Aviation Airports General aviation airports do not receive scheduled commercial or military service but typically support business, personal, and instructional flying; agricultural spraying; air ambulances; on-demand air-taxies; and/or charter aircraft service (2,564 airports). Reliever Airports Airports designated by FAA to relieve congestion at commercial airports and provide improved general aviation access (259 airports).

In 1996, Congress established the Airport Privatization Pilot Program (APPP; 49 U.S.C. §47134; Section 149 of the Federal Aviation Reauthorization Act of 1996, P.L. 104-264) to increase access to sources of private capital for airport development and to make airports more efficient, competitive, and financially viable. Participation in the program has been very limited, in good part because major stakeholders have different, if not contradictory, objectives and interests. Only two U.S. commercial service airports have completed the privatization process established under the APPP. One of those, Stewart International Airport in New York State, subsequently reverted to public ownership. Luis Muñoz Marín International Airport in San Juan, Puerto Rico, is now the only airport with a private operator under the provisions of the APPP. As of August 2017, there are three active applicants in the APPP: Hendry County Airglades Airport in Clewiston, FL; Westchester County Airport in White Plains, NY; and St. Louis Lambert International Airport in St. Louis, MO. Increasing interest in airport privatization is likely to require a number of significant policy changes, including the following: Making privatization more attractive to public-sector owners by facilitating the use of privatization revenue for non-airport purposes. Providing similar tax treatment to bonds issued by public-sector and private-sector airport operators, as public-sector operators now have access to less costly long-term finance than private operators. Easing requirements for private owners to comply with assurances previously made by public-sector owners to obtain federal Airport Improvement Program (AIP) grants. Accelerating the application and approval procedures for the APPP.

The issue before Congress is whether to continue the federal prosecution of medical marijuana patients and their providers, in accordance with marijuana's status as a Schedule I drug under the Controlled Substances Act, or whether to relax federal marijuana prohibition enough to permit the medicinal use of botanical cannabis products when recommended by a physician, especially in those states that have created medical marijuana programs under state law. Two bills, versions of which have been introduced in prior Congresses, have been proposed again in the 111 th Congress. The Medical Marijuana Patient Protection Act ( H.R. 2835 ), which would allow the medical use of marijuana in states that permit its use with a doctor's recommendation, was introduced on June 11, 2009, by Representative Barney Frank. The bill would also move marijuana from Schedule I to Schedule II of the CSA and exempt from federal prosecution authorized patients and medical marijuana providers who are acting in accordance with state laws. The second bill, the Truth in Trials Act ( H.R. 3939 ), introduced by Representative Sam Farr on October 27, 2009, would make it possible for medical marijuana users and providers who are being tried in federal court to reveal to juries that their marijuana activity was medically related and legal under state law. The Cannabis sativa plant has been used for healing purposes throughout history. According to written records from China and India, the use of marijuana to treat a wide range of ailments goes back more than 2,000 years. Ancient texts from Africa, the Middle East, classical Greece, and the Roman Empire also describe the use of cannabis to treat disease. For most of American history, growing and using marijuana was legal under both federal law and the laws of the individual states. By the 1840s, marijuana's therapeutic potential began to be recognized by some U.S. physicians. From 1850 to 1941 cannabis was included in the United States Pharmacopoeia as a recognized medicinal. By the end of 1936, however, all 48 states had enacted laws to regulate marijuana. Its decline in medicine was hastened by the development of aspirin, morphine, and then other opium-derived drugs, all of which helped to replace marijuana in the treatment of pain and other medical conditions in Western medicine. All three branches of the federal government play an important role in formulating federal policy on medical marijuana. Significant actions of each branch are highlighted here, beginning with the legislative branch. Spurred by spectacular accounts of marijuana's harmful effects on its users, by the drug's alleged connection to violent crime, and by a perception that state and local efforts to bring use of the drug under control were not working, Congress enacted the Marihuana Tax Act of 1937. Promoted by Harry Anslinger, Commissioner of the recently established Federal Bureau of Narcotics, the act imposed registration and reporting requirements and a tax on the growers, sellers, and buyers of marijuana. Although the act did not prohibit marijuana outright, its effect was the same. (Because marijuana was not included in the Harrison Narcotics Act in 1914, the Marihuana Tax Act was the federal government's first attempt to regulate marijuana.) Dr. William C. Woodward, legislative counsel of the American Medical Association (AMA), opposed the measure. In oral testimony before the House Ways and Means Committee, he stated that "there are evidently potentialities in the drug that should not be shut off by adverse legislation. The medical profession and pharmacologists should be left to develop the use of this drug as they see fit." Two months later, in a letter to the Senate Finance Committee, he again argued against the act: There is no evidence, however, that the medicinal use of these drugs ["cannabis and its preparations and derivatives"] has caused or is causing cannabis addiction. As remedial agents they are used to an inconsiderable extent, and the obvious purpose and effect of this bill is to impose so many restrictions on their medicinal use as to prevent such use altogether. Since the medicinal use of cannabis has not caused and is not causing addiction, the prevention of the use of the drug for medicinal purposes can accomplish no good end whatsoever. How far it may serve to deprive the public of the benefits of a drug that on further research may prove to be of substantial value, it is impossible to foresee. Despite the AMA's opposition, the Marihuana Tax Act was approved, causing all medicinal products containing marijuana to be withdrawn from the market and leading to marijuana's removal, in 1941, from The National Formulary and the United States Pharmacopoeia , in which it had been listed for almost a century. With increasing use of marijuana and other street drugs during the 1960s, notably by college and high school students, federal drug-control laws came under scrutiny. In July 1969, President Nixon asked Congress to enact legislation to combat rising levels of drug use. Hearings were held, different proposals were considered, and House and Senate conferees filed a conference report in October 1970. The report was quickly adopted by voice vote in both chambers and was signed into law as the Comprehensive Drug Abuse Prevention and Control Act of 1970 (P.L. 91-513). Included in the new law was the Controlled Substances Act (CSA), which placed marijuana and its derivatives in Schedule I, the most restrictive of five categories. Schedule I substances have "a high potential for abuse," "no currently accepted medical use in treatment in the United States," and "a lack of accepted safety [standards] for use of the drug ... under medical supervision." Other drugs used recreationally at the time also became Schedule I substances. These included heroin, LSD, mescaline, peyote, and psilocybin. Drugs of abuse with recognized medical uses—such as opium, cocaine, and amphetamine—were assigned to Schedules II through V, depending on their potential for abuse. Despite its placement in Schedule I, marijuana use increased, as did the number of health-care professionals and their patients who believed in the plant's therapeutic value. The CSA does not distinguish between the medical and recreational use of marijuana. Under federal statute, simple possession of marijuana for personal use, a misdemeanor, can bring up to one year in federal prison and up to a $100,000 fine for a first offense. Growing marijuana is considered manufacturing a controlled substance, a felony. A single plant can bring an individual up to five years in federal prison and up to a $250,000 fine for a first offense. The CSA is not preempted by state medical marijuana laws, under the federal system of government, nor are state medical marijuana laws preempted by the CSA. States can statutorily create a medical use exception for botanical cannabis and its derivatives under their own, state-level controlled substance laws. At the same time, federal agents can investigate, arrest, and prosecute medical marijuana patients, caregivers, and providers in accordance with the federal Controlled Substances Act, even in those states where medical marijuana programs operate in accordance with state law. In September 1998, the House debated and passed a resolution ( H.J.Res. 117 ) declaring that Congress supports the existing federal drug approval process for determining whether any drug, including marijuana, is safe and effective and opposes efforts to circumvent this process by legalizing marijuana, or any other Schedule I drug, for medicinal use without valid scientific evidence and without approval of the Food and Drug Administration (FDA). With the Senate not acting on the resolution and adjournment approaching, this language was incorporated into the FY1999 omnibus appropriations act under the heading "Not Legalizing Marijuana for Medicinal Use." In a separate amendment to the same act, Congress prevented the District of Columbia government from counting ballots of a 1998 voter-approved initiative that would have allowed the medical use of marijuana by persons suffering from serious diseases, including cancer and HIV infection. The amendment was challenged and overturned in District Court, the ballots were counted, and the measure passed 69% to 31%. Nevertheless, despite further court challenges, Congress continued to prohibit implementation of the initiative until the rider known as the Barr Amendment was dropped from the FY2010 D.C. appropriations act ( H.R. 3288 ) in the 111 th Congress. In the first session of the 108 th Congress, in response to federal Drug Enforcement Administration (DEA) raids on medical cannabis users and providers in California and other states that had approved the medical use of marijuana if recommended by a physician, Representatives Hinchey and Rohrabacher offered a bipartisan amendment to the FY2004 Commerce, Justice, State appropriations bill ( H.R. 2799 ). The amendment would have prevented the Justice Department from using appropriated funds to interfere with the implementation of medical cannabis laws in the nine states that had approved such use. The amendment was debated on the floor of the House on July 22, 2003. When brought to a vote on the following day, it was defeated 152 to 273 (61 votes short of passage). The amendment was offered again in the second session of the 108 th Congress. It was debated on the House floor on July 7, 2004, during consideration of H.R. 4754 , the Commerce, Justice, State appropriations bill for FY2005. This time it would have applied to 10 states, with the recent addition of Vermont to the list of states that had approved the use of medical cannabis. It was again defeated by a similar margin, 148 to 268 (61 votes short of passage). The amendment was voted on again in the first session of the 109 th Congress and was again defeated, 161-264 (52 votes short of passage), on June 15, 2005. During floor debate on H.R. 2862 , the FY2006 Science, State, Justice, Commerce appropriations bill, a Member stated in support of the amendment that her now-deceased mother had used marijuana to treat her glaucoma. Opponents of the amendment argued, among other things, that its passage would undermine efforts to convince young people that marijuana is a dangerous drug. Despite an extensive pre-vote lobbying effort by supporters, the amendment gained only two votes in its favor over the previous year when it was debated and defeated, 163 to 259 (49 votes short of passage), on June 28, 2006. The bill under consideration this time was H.R. 5672 , the FY2007 Science, State, Justice, Commerce appropriations bill. In the first session of the 110 th Congress, on July 25, 2007, the amendment was proposed to H.R. 3093 , the Commerce, Justice, Science appropriations bill for FY2008. It was debated on the House floor for the fifth time in as many years and was again rejected, 165 to 262 (49 votes short of passage). The amendment's supporters framed it as a states' rights issue: A vote "yes" on Hinchey-Rohrabacher is a vote to respect the intent of our Founding Fathers and respect the rights of our people at the State level to make the criminal law under which they and their families will live. It reinforces rules surrounding the patient-doctor relationship, and it is in contrast to emotional posturing and Federal power grabs and bureaucratic arrogance, which is really at the heart of the opposition. Opponents argued that smoked marijuana is not a safe and effective medicine and that its approval would send the wrong message to young people. The first action on medical marijuana in the 110 th Congress occurred during consideration of legislation to reauthorize existing FDA programs and expand the agency's authority to ensure the safety of prescription drugs, medical devices, and biologics. On April 18, 2007, at markup of the Prescription Drug User Fee Act ( S. 1082 ), the Senate Committee on Health, Education, Labor, and Pensions adopted, in an 11-9 vote, an amendment offered by Senator Coburn designed to shut down state medical marijuana programs. The amendment stated: The Secretary of Health and Human Services shall require that State-legalized medical marijuana be subject to the full regulatory requirements of the Food and Drug Administration, including a risk evaluation and mitigation strategy and all other requirements of the Federal Food, Drug, and Cosmetic Act regarding safe and effective reviews, approval, sale, marketing, and use of pharmaceuticals. Herbal cannabis products are not, in fact, being marketed in the United States as pharmaceuticals, nor are they being developed as investigational new drugs due largely to federal restrictions on marijuana research. Because of this and other possibly complicating factors, the validity and actual effect of this amendment, if it had been signed into law, would have been unclear and would have been subject to legal interpretation and judicial review. The bill, as amended, cleared the Senate and was sent to the House on May 9. The Coburn Amendment, however, was not included in the version of the FDA amendments act ( H.R. 2900 ) that was approved by Congress and enacted into law ( P.L. 110-85 ) on September 27, 2007. In another action on medical marijuana, the House Judiciary Subcommittee on Crime, Terrorism, and Homeland Security held an oversight hearing on DEA's regulation of medicine on July 12, 2007. A DEA official testified that his agency would "continue to enforce the law as it stands and to investigate, indict, and arrest those who use the color of state law to possess and sell marijuana." A California medicinal cannabis patient and provider stated, "The well-being of thousands of seriously ill Americans backed by the opinion of the vast majority of their countrymen demands that medical marijuana be freed from federal interference." In his introduction of the patient, the subcommittee chairman observed, "Even if the law technically gives DEA the authority to investigate medical marijuana users, it is worth questioning whether targeting gravely ill people is the best use of federal resources." Two weeks later, on July 25, the whole House decided to continue to use federal resources against medical marijuana users when it rejected the Hinchey-Rohrabacher amendment, 165-262, as described above. In the second session of the 110 th Congress, on April 17, 2008, Representative Frank introduced H.R. 5842 , the Medical Marijuana Patient Protection Act, to provide for the medical use of marijuana in accordance with the laws of the various states. Introduced with four original co-sponsors—Representatives Farr, Hinchey, Paul, and Rohrabacher—the bill would have moved marijuana from schedule I to schedule II of the CSA and would have, within states with medical marijuana programs, permitted a physician to prescribe or recommend marijuana for medical use; an authorized patient to obtain, possess, transport, manufacture, or use marijuana; an authorized individual to obtain, possess, transport, or manufacture marijuana for an authorized patient; and a pharmacy or other authorized entity to distribute medical marijuana to authorized patients. No provision of the Controlled Substances Act or the Federal Food, Drug, and Cosmetic Act would have been allowed to prohibit or otherwise restrict these activities in states that have adopted medical marijuana programs. Also, the bill would not have affected any federal, state, or local law regulating or prohibiting smoking in public. In his introductory statement, Representative Frank said, "When doctors recommend the use of marijuana for their patients and states are willing to permit it, I think it's wrong for the federal government to subject either the doctors or the patients to criminal prosecution." Although differently worded, H.R. 5842 had the same intent as the States' Rights to Medical Marijuana Act, versions of which had been introduced in every Congress since the 105 th in 1997. The bill was referred to the House Committee on Energy and Commerce and saw no further action. Bills have been introduced in recent Congresses to allow patients who appear to benefit from medical cannabis to use it in accordance with the various regulatory schemes that have been approved, since 1996, by the voters or legislatures of 14 states. This legislative activity continues in the 111 th Congress with the reintroduction of two bills that would serve to relax somewhat the federal prohibition against the medical use of marijuana. The Medical Marijuana Patient Protection Act ( H.R. 2835 ), which would allow the medical use of marijuana in states that permit its use with a doctor's recommendation, was introduced on June 11, 2009, by Representative Barney Frank with 13 original cosponsors. The bill would move marijuana from Schedule I to Schedule II of the CSA and exempt from federal prosecution authorized patients and medical marijuana providers who are acting in accordance with state laws. Its wording is identical to H.R. 5842 as introduced in the 110 th Congress, and its provisions are described more fully above. H.R. 2835 was referred to the House Committee on Energy and Commerce, where it awaits further action. (Versions of this bill have been introduced in every Congress since 1997 but have not seen action beyond the committee referral process.) The second bill, the Truth in Trials Act ( H.R. 3939 ), was introduced by Representative Sam Farr on October 27, 2009. It would make it possible for medical marijuana users and providers who are being tried in federal court to reveal to juries that their marijuana activity was medically related and legal under state law. After the 2001 Supreme Court decision U.S. v. Oakland Buyers' Cooperative (discussed below), it was no longer permissible for medical marijuana defendants in federal court to introduce evidence showing that their marijuana-related activities were undertaken for a valid medical purpose under state law. H.R. 3939 would amend the Controlled Substances Act to make an affirmative defense possible for persons who provide or use marijuana in accordance with state medical marijuana laws. The bill also would limit the authority of federal agents to seize marijuana authorized for medical use under state law and would provide for the retention and return of seized plants pending resolution of a case involving medical marijuana. Introduced with nine original co-sponsors, the bill was referred to the Committee on the Judiciary and also to the Committee on Energy and Commerce. For the first time since District of Columbia residents approved a medical marijuana ballot initiative in 1998, a rider blocking implementation of the initiative was not attached to the D.C. appropriations act for FY2010 ( H.R. 3288 ), signed into law on December 16, 2009 ( P.L. 111-117 ), clearing the way for the creation of a medical marijuana program for seriously ill patients in the nation's capital. In 1975, a Washington, DC, resident was arrested for growing marijuana to treat his glaucoma. He won his case by using the medical necessity defense, forcing the government to find a way to provide him with his medicine. In 1978, FDA created the Investigational New Drug (IND) Compassionate Access Program, allowing patients whose serious medical conditions could be relieved only by marijuana to apply for and receive marijuana from the federal government. Over the next 14 years, other patients, less than 100 in total, were admitted to the program for conditions including chemotherapy-induced nausea and vomiting (emesis), glaucoma, spasticity, and weight loss. Then, in 1992, in response to a large number of applications from AIDS patients who sought to use medical cannabis to increase appetite and reverse wasting disease, the George H.W. Bush Administration closed the program to all new applicants. Several previously approved patients remain in the program today and continue to receive their monthly supply of government-grown medical marijuana. Made by Unimed, Marinol is the trade name for dronabinol, a synthetic form of delta-9-tetrahydrocannabinol (THC), one of the principal psychoactive components of botanical marijuana. It was approved in May 1985 for nausea and vomiting associated with cancer chemotherapy in patients who fail to respond to conventional antiemetic treatments. In December 1992, it was approved by FDA for the treatment of anorexia associated with weight loss in patients with AIDS. Marketed as a capsule, Marinol was originally placed in Schedule II. In July 1999, in response to a rescheduling petition from Unimed, it was moved administratively by DEA to Schedule III to make it more widely available to patients. The rescheduling was granted after a review by DEA and the Department of Health and Human Services found little evidence of illicit abuse of the drug. In Schedule III, Marinol is now subject to fewer regulatory controls and lesser criminal sanctions for illicit use. Congressional passage of the Controlled Substances Act in 1970 and its placement of marijuana in Schedule I provoked controversy at the time because it strengthened the federal policy of marijuana prohibition and forced medical marijuana users to buy marijuana of uncertain quality on the black market at inflated prices, subjecting them to fines, arrest, court costs, property forfeiture, incarceration, probation, and criminal records. The new bureaucratic controls on Schedule I substances were also criticized because they would impede research on marijuana's therapeutic potential, thereby making its evaluation and rescheduling through the normal drug approval process unlikely. These concerns prompted a citizens' petition to the Bureau of Narcotics and Dangerous Drugs (BNDD) in 1972 to reschedule marijuana and make it available by prescription. The petition was summarily rejected. This led to a long succession of appeals, hearing requests, and various court proceedings. Finally, in 1988, after extensive public hearings on marijuana's medicinal value, Francis L. Young, the chief administrative law judge of the Drug Enforcement Administration (the BNDD's successor agency), ruled on the petition, stating that "Marijuana, in its natural form, is one of the safest therapeutically active substances known to man." Judge Young also wrote: The evidence in this record clearly shows that marijuana has been accepted as capable of relieving the distress of great numbers of very ill people, and doing so with safety under medical supervision. It would be unreasonable, arbitrary and capricious for DEA to continue to stand between those sufferers and the benefits of this substance in light of the evidence in this record. Judge Young found that "the provisions of the [Controlled Substances] Act permit and require the transfer of marijuana from schedule I to schedule II," which would recognize its medicinal value and permit doctors to prescribe it. The judge's nonbinding findings and recommendation were soon rejected by the DEA Administrator because "marijuana has not been demonstrated as suitable for use as a medicine." Subsequent rescheduling petitions also have been rejected, and marijuana remains a Schedule I substance. NIH convened a scientific panel on medical marijuana composed of eight nonfederal experts in fields such as cancer treatment, infectious diseases, neurology, and ophthalmology. Over a two-day period in February, they analyzed available scientific information on the medical uses of marijuana and concluded that "in order to evaluate various hypotheses concerning the potential utility of marijuana in various therapeutic areas, more and better studies would be needed." Research would be justified, according to the panel, into certain conditions or diseases such as pain, neurological and movement disorders, nausea of patients undergoing chemotherapy for cancer, loss of appetite and weight related to AIDS, and glaucoma. In January 1997, shortly after passage of the California and Arizona medical marijuana initiatives, the Director of the Office of National Drug Control Policy (the federal drug czar) commissioned the Institute of Medicine (IOM) of the National Academy of Sciences to review the scientific evidence on the potential health benefits and risks of marijuana and its constituent cannabinoids. Begun in August 1997, IOM's 257-page report, Marijuana and Medicine: Assessing the Science Base, was released in March 1999. A review of all existing studies of the therapeutic value of cannabis, the IOM Report was also based on public hearings and consultations held around the country with biomedical and social scientists and concerned citizens. For the most part, the IOM Report straddled the fence and provided sound bites for both sides of the medical marijuana debate. For example, "Until a nonsmoked rapid-onset cannabinoid drug delivery system becomes available, we acknowledge that there is no clear alternative for people suffering from chronic conditions that might be relieved by smoking marijuana, such as pain or AIDS-wasting" (p. 179) and "Smoked marijuana is unlikely to be a safe medication for any chronic medical condition" (p. 126). For another example, "There is no conclusive evidence that marijuana causes cancer in humans, including cancers usually related to tobacco use" (p. 119) and "Numerous studies suggest that marijuana smoke is an important risk factor in the development of respiratory disease" (p. 127). The IOM Report did find more potential promise in synthetic cannabinoid drugs than in smoked marijuana (p. 177): The accumulated data suggest a variety of indications, particularly for pain relief, antiemesis, and appetite stimulation. For patients such as those with AIDS or who are undergoing chemotherapy, and who suffer simultaneously from severe pain, nausea, and appetite loss, cannabinoid drugs might offer broad-spectrum relief not found in any other single medication. In general, the report emphasized the need for well-formulated, scientific research into the therapeutic effects of marijuana and its cannabinoid components on patients with specific disease conditions. To this end, the report recommended that clinical trials be conducted with the goal of developing safe delivery systems. In response to a citizen's petition to reschedule marijuana submitted to the DEA in 1995, DEA asked the Department of Health and Human Services (HHS) for a scientific and medical evaluation of the abuse potential of marijuana and a scheduling recommendation. HHS concluded that marijuana has a high potential for abuse, no currently accepted medical use in treatment in the United States, and a lack of accepted safety for use under medical supervision. HHS therefore recommended that marijuana remain in Schedule I. In a letter to the petitioner dated March 20, 2001, DEA denied the petition. On April 20, 2006, the FDA issued an interagency advisory restating the federal government's position that "smoked marijuana is harmful" and has not been approved "for any condition or disease indication." The one-page announcement did not refer to new research findings. Instead, it was based on a "past evaluation" by several agencies within HHS that "concluded that no sound scientific studies supported medical use of marijuana for treatment in the United States, and no animal or human data supported the safety or efficacy of marijuana for general medical use." Media reaction to this pronouncement was largely negative, asserting that the FDA position on medical marijuana was motivated by politics, not science, and ignored the findings of the 1999 Institute of Medicine Report. In Congress, 24 House Members, led by Representative Hinchey, sent a letter to the FDA acting commissioner requesting the scientific evidence behind the agency's evaluation of the medical efficacy of marijuana and citing the FDA's IND Compassionate Access Program as "an example of how the FDA could allow for the legal use of a drug, such as medical marijuana, without going through the 'well-controlled' series of steps that other drugs have to go through if there is a compassionate need." Since 1968, the only source of marijuana available for scientific research in the United States has been tightly controlled by the federal government. Grown at the University of Mississippi under a contract administered by the National Institute on Drug Abuse, the marijuana is difficult to obtain even by scientists whose research protocols have been approved by the FDA. Not only is the federal supply of marijuana largely inaccessible, but researchers also complain that it does not meet the needs of research due to its inferior quality and lack of multiple strains. Other Schedule I substances—such as LSD, heroin, and MDMA (Ecstasy)—can be provided legally by private U.S. laboratories or imported from abroad for research purposes, with federal permission. Only marijuana is limited to a single, federally-controlled provider. In response to this situation, Dr. Lyle Craker, a professor of plant biology and director of the medicinal plant program at the University of Massachusetts at Amherst, applied in 2001 for a DEA license to cultivate research-grade marijuana. The application was filed in association with the Multidisciplinary Association for Psychedelic Studies (MAPS), a nonprofit drug research organization headed by Dr. Rick Doblin, whose stated goal is to break the government's monopoly on the supply of marijuana that can be used in FDA-approved research, thereby creating the proper conditions for a $5 million, 5 year drug development effort designed to transform smoked and/or vaporized marijuana into an FDA-approved prescription medicine. After being sued for "unreasonable delay" in the DC Circuit Court of Appeals, the DEA rejected the Craker/MAPS application in December 2004 as not consistent with the public interest. Upon appeal, nine days of hearings were held over a five-month period in 2005, at which researchers testified that their requests for marijuana had been rejected, making it impossible to conduct their FDA-approved research. On February 12, 2007, DEA's Administrative Law Judge Mary Ellen Bittner found that "an inadequate supply" of marijuana is available for research and ruled that it "would be in the public interest" to allow Dr. Craker to create the proposed marijuana production facility. Rulings by administrative law judges, however, are nonbinding and may be rejected by agency heads, which happened in this case. In the closing days of the Bush Administration, on January 7, 2009, the DEA Deputy Administrator signed an order denying Dr. Craker's application for a DEA certificate of registration as a manufacturer of marijuana. In response, Dr. Craker submitted to DEA a Motion to Reconsider, which, if rejected, would trigger an appeal that has been docketed by the U.S. Court of Appeals for the First Circuit in Boston. Most arrests in the United States for marijuana possession are made by state and local police, not the DEA. This means that patients and their caregivers in the states that permit medical marijuana mostly go unprosecuted, because their own state's marijuana prohibition laws do not apply to them and because federal law is not usually enforced against them. Federal agents have, however, moved against medical cannabis growers and distributors in states with medical marijuana programs. In recent years, especially during the George W. Bush Administration, DEA agents conducted many raids of medical marijuana dispensaries, especially in California, where the law states that marijuana providers can receive "reasonable compensation" on a nonprofit basis. The DEA does not provide statistics on its moves against medical marijuana outlets because the agency does not distinguish between criminal, non-medical marijuana trafficking organizations and locally licensed storefront dispensaries that are legal under state law. They are all felony criminal operations under the federal Controlled Substances Act. As a practical matter, however, the DEA reportedly was targeting larger, for-profit medical marijuana providers who were engaged in "nothing more than high-stakes drug dealing, complete with the same high-rolling lifestyles." A few high-profile medical marijuana patients were also being prosecuted under federal law. In July 2007, DEA's Los Angeles Field Division Office introduced a new enforcement tactic against medical marijuana dispensaries in the city when it sent letters to the owners and managers of buildings in which medical marijuana facilities were operating. The letters threatened the property owners and managers with up to 20 years in federal prison for violating the so-called "crack house statute," a provision of the CSA enacted in 1986 that made it a federal offense to "knowingly and intentionally rent, lease, or make available for use, with or without compensation, [a] building, room, or enclosure for the purpose of unlawfully manufacturing, storing, distributing, or using a controlled substance." The DEA letters also threatened the landlords with seizure of their property under the CSA's asset forfeiture provisions. In response, L.A. City Council members wrote a letter to DEA Administrator Karen Tandy in Washington urging her to abandon this tactic and allow them to continue work on an ordinance to regulate medical cannabis facilities "without federal interference." They also unanimously approved a resolution endorsing the Hinchey-Rohrabacher amendment, which would prohibit such DEA actions and which was about to be debated in the House, as discussed above. An editorial in the Los Angeles Times called the DEA threats to landlords a "deplorable new bullying tactic." In subsequent months, DEA expanded this enforcement mechanism to other parts of California, including the Bay Area. In one lawsuit challenging the right of landlords to evict marijuana dispensaries, a Los Angeles County Superior Court judge ruled, in April 2008, that federal law preempts California's Compassionate Use Act. If the ruling is affirmed on appeal, it would threaten the future of medical marijuana in California and elsewhere. DEA's actions against medical marijuana growing and distribution operations have provoked other lawsuits. In April 2003, for example, the city and county of Santa Cruz, CA, along with seven medical marijuana patients, filed a lawsuit in San Jose federal district court in response to DEA's earlier raid on the Wo/Men's Alliance for Medical Marijuana (WAMM). The court granted the plaintiffs' motion for a preliminary injunction, thereby allowing WAMM to resume growing and producing marijuana medications for its approximately 250 member-patients with serious illnesses, pending the final outcome of the case. The suit is said to be the first court challenge brought by a local government against the federal war on drugs. During the presidential campaign, candidate Barack Obama stated several times his position that moving against medical marijuana dispensaries that were operating in compliance with state laws would not be a priority of his administration. Nevertheless, the continuation of such raids during the early days of the Obama Administration created confusion regarding the medical marijuana policies of the new government. In mid-March, Attorney General Eric H. Holder, Jr., stated that such raids would cease. The new policy was finally formalized in a Justice Department memorandum to U.S. Attorneys dated October 19, 2009. Noting that "Congress has determined that marijuana is a dangerous drug, and the illegal distribution and sale of marijuana is a serious crime," the memo directs the U.S. Attorneys in states with medical marijuana programs not to focus their investigative and prosecutorial resources "on individuals whose actions are in clear and unambiguous compliance with existing state laws providing for the medical use of marijuana." The memo does not free medical marijuana providers from federal scrutiny, especially in cases where "state law is being invoked as a pretext for the production or distribution of marijuana for purposes not authorized by state law." The memo specifically states that "prosecution of commercial enterprises that unlawfully market and sell marijuana for profit continues to be an enforcement priority of the Department." The new directive, however, can be expected to result in fewer federal operations against medical marijuana providers than were conducted by the previous administration. Because Congress and the executive branch have not acted to permit seriously ill Americans to use botanical marijuana medicinally, the issue has been considered by the judicial branch, with mixed results. Three significant cases have been decided so far, and other court challenges are moving through the judicial pipeline. The U.S. Department of Justice filed a civil suit in January 1998 to close six medical marijuana distribution centers in northern California. A U.S. district court judge issued a temporary injunction to close the centers, pending the outcome of the case. The Oakland Cannabis Buyers' Cooperative fought the injunction but was eventually forced to cease operations and appealed to the Ninth Circuit Court of Appeals. At issue was whether a medical marijuana distributor can use a medical necessity defense against federal marijuana distribution charges. The Ninth Circuit's decision in September 1999 found, 3-0, that medical necessity is a valid defense against federal marijuana trafficking charges if a trial court finds that the patients to whom the marijuana was distributed are seriously ill, face imminent harm without marijuana, and have no effective legal alternatives. The Justice Department appealed to the Supreme Court. The Supreme Court held, 8-0, that "a medical necessity exception for marijuana is at odds with the terms of the Controlled Substances Act" because "its provisions leave no doubt that the defense is unavailable." This decision had no effect on state medical marijuana laws, which continued to protect patients and primary caregivers from arrest by state and local law enforcement agents in the states with medical marijuana programs. After the 1996 passage of California's medical marijuana initiative, the Clinton Administration threatened to investigate doctors and revoke their licenses to prescribe controlled substances and participate in Medicaid and Medicare if they recommended medical marijuana to patients under the new state law. A group of California physicians and patients filed suit in federal court, early in 1997, claiming a constitutional free-speech right, in the context of the doctor-patient relationship, to discuss the potential risks and benefits of the medical use of cannabis. A preliminary injunction, issued in April 1997, prohibited federal officials from threatening or punishing physicians for recommending marijuana to patients suffering from HIV/AIDS, cancer, glaucoma, or seizures or muscle spasms associated with a chronic, debilitating condition. The court subsequently made the injunction permanent in an unpublished opinion. On appeal, the Ninth Circuit affirmed, in a 3-0 decision, the district court's order entering a permanent injunction. The federal government, the opinion states, "may not initiate an investigation of a physician solely on the basis of a recommendation of marijuana within a bona fide doctor-patient relationship, unless the government in good faith believes that it has substantial evidence of criminal conduct." The Bush Administration appealed, but the Supreme Court refused to take the case. In response to DEA agents' destruction of their medical marijuana plants, two patients and two caregivers in California brought suit. They argued that applying the Controlled Substances Act to a situation in which medical marijuana was being grown and consumed locally for no remuneration in accordance with state law exceeded Congress's constitutional authority under the Commerce Clause, which allows the federal government to regulate interstate commerce. In December 2003, the Ninth Circuit Court of Appeals in San Francisco agreed, ruling 2-1 that states are free to adopt medical marijuana laws so long as the marijuana is not sold, transported across state lines, or used for nonmedical purposes. Federal appeal sent the case to the Supreme Court. The issue before the Supreme Court was whether the Controlled Substances Act, when applied to the intra state cultivation and possession of marijuana for personal use under state law, exceeds Congress's power under the Commerce Clause. The Supreme Court, in June 2005, reversed the Ninth Circuit's decision and held, in a 6-3 decision, that Congress's power to regulate commerce extends to purely local activities that are "part of an economic class of activities that have a substantial effect on interstate commerce." Raich does not invalidate state medical marijuana laws. The decision does mean, however, that DEA may continue to enforce the CSA against medical marijuana patients and their caregivers, even in states with medical marijuana programs. Although Raich was not about the efficacy of medical marijuana or its listing in Schedule I, the majority opinion stated in a footnote: "We acknowledge that evidence proffered by respondents in this case regarding the effective medical uses for marijuana, if found credible after trial, would cast serious doubt on the accuracy of the findings that require marijuana to be listed in Schedule I." The majority opinion, in closing, notes that in the absence of judicial relief for medical marijuana users there remains "the democratic process, in which the voices of voters allied with these respondents may one day be heard in the halls of Congress." Thus, the Supreme Court reminds that Congress has the power to reschedule marijuana, thereby recognizing that it has accepted medical use in treatment in the United States. Congress, however, does not appear likely to do so. Neither does the executive branch, which could reschedule marijuana through regulatory procedures authorized by the Controlled Substances Act. In the meantime, actions taken by state and local governments continue to raise the issue, as discussed below. The federal Data Quality Act of 2001 (DQA) requires the issuance of guidelines "for ensuring and maximizing the quality, objectivity, utility, and integrity of information (including statistical information) disseminated by Federal agencies" and allows "affected persons to seek and obtain correction of information maintained and disseminated by the agency that does not comply with the guidelines." In October 2004, Americans for Safe Access (ASA), a California-based patient advocacy group, formally petitioned HHS, under the DQA, to correct four erroneous statements about medical marijuana made by HHS in its 2001 denial of the marijuana rescheduling petition discussed above. Specifically, ASA requested that "there have been no studies that have scientifically assessed the efficacy of marijuana for any medical condition" be replaced with "[a]dequate and well-recognized studies show the efficacy of marijuana in the treatment of nausea, loss of appetite, pain and spasticity"; that "it is clear that there is not a consensus of medical opinion concerning medical applications of marijuana" be replaced with "[t]here is substantial consensus among experts in the relevant disciplines that marijuana is effective in treating nausea, loss of appetite, pain and spasticity. It is accepted as medicine by qualified experts"; that "complete scientific analysis of all the chemical components found in marijuana has not been conducted" be replaced with "[t]he chemistry of marijuana is known and reproducible"; and that "marijuana has no currently accepted medical use in treatment in the United States" be replaced with "[m]arijuana has a currently accepted use in treatment in the United States." The petition claimed that "HHS's statements about the lack of medical usefulness of marijuana harms these individuals [ill persons across the United States] in that it contributes to denying them access to medicine which will alleviate their suffering." Were HHS to accept the ASA petition, the revised statements would set the preconditions for placing marijuana in a schedule other than I. HHS denied the petition in 2005 and rejected ASA's subsequent appeal in 2006 on just those grounds: that HHS is already in the process of reviewing a rescheduling petition submitted to DEA in October 2002 and will be evaluating all of the publicly available peer-reviewed literature on the medicinal efficacy of marijuana in that context. In response, in February 2007, ASA filed suit in U.S. District Court for the Northern District of California to force HHS to change the four statements, which the organization believes are not science-based. The case is pending. In the face of federal intransigence on the issue, advocates of medical marijuana have turned to the states in a largely successful effort, wherever it has been attempted, to enact laws that enable patients to obtain and use botanical marijuana therapeutically in a legal and regulated manner, even though such activity remains illegal under federal law. Fourteen states, covering about 27% of the U.S. population, have enacted laws to allow the use of cannabis for medical purposes. These states have removed state-level criminal penalties for the cultivation, possession, and use of medical marijuana, if such use has been recommended by a medical doctor. All of these states have in place, or are developing, programs to regulate the use of medical marijuana by approved patients. Physicians in these states are immune from liability and prosecution for discussing or recommending medical cannabis to their patients in accordance with state law. Patients in state programs (except for New Mexico and New Jersey) may be assisted by caregivers—persons who are authorized to help patients grow, acquire, and use the drug. Nine of the 14 states that have legalized medical marijuana are in the West: Alaska, California, Colorado, Hawaii, Montana, Nevada, New Mexico, Oregon, and Washington. Of the 37 states outside the West, Michigan plus four other states, all in the Northeast—Maine, New Jersey, Rhode Island, and Vermont—have adopted medical cannabis statutes. Hawaii, New Jersey, New Mexico, Rhode Island, and Vermont have the only programs created by acts of their state legislatures. The medical marijuana programs in the other nine states were approved by the voters in statewide referenda or ballot initiatives, beginning in 1996 with California. Since then, voters have approved medical marijuana initiatives in every state where they have appeared on the ballot with the exception of South Dakota, where a medical marijuana initiative was defeated in 2006 by 52% of the voters. Bills to create medical marijuana programs have been introduced in the legislatures of additional states—Alabama, Arizona, Connecticut, Illinois, Maryland, Minnesota, and New Hampshire, among others—and have received varying levels of consideration but have so far not been enacted. Effective state medical marijuana laws do not attempt to overturn or otherwise violate federal laws that prohibit doctors from writing prescriptions for marijuana and pharmacies from distributing it. In the 14 states with medical marijuana programs, doctors do not actually prescribe marijuana, and the marijuana products used by patients are not distributed through pharmacies. Rather, doctors recommend marijuana to their patients, and the cannabis products are grown by patients or their caregivers, or they are obtained from cooperatives or other alternative dispensaries. The state medical marijuana programs do, however, contravene the federal prohibition of marijuana. Medical marijuana patients, their caregivers, and other marijuana providers can, therefore, be arrested by federal law enforcement agents, and they can be prosecuted under federal law. Determining exactly how many patients use medical marijuana with state approval is difficult, but the limited data available suggest the number is rising rapidly. According to a 2002 study published in the Journal of Cannabis Therapeutics , an estimated 30,000 California patients and another 5,000 patients in eight other states possessed a physician's recommendations to use cannabis medically. The New England Journal of Medicine reported in August 2005 that an estimated 115,000 people had obtained marijuana recommendations from doctors in the states with programs. Although 115,000 people might have been approved medical marijuana users in 2005, the number of patients who had actually registered was much lower. A July 2005 CRS telephone survey of the state programs revealed a total of 14,758 registered medical marijuana users in eight states. (Maine and Washington do not maintain state registries, and Rhode Island, New Mexico, Michigan, and New Jersey had not yet passed their laws.) This number vastly understated the actual number of medical marijuana users, however, because California's state registry was in pilot status, with only 70 patients so far registered. More recently, an estimate published by Newsweek early in 2010 found a total of 369,634 users in the 13 states with established programs, with California's estimated patient population of 253,800 alone accounting for 69% of the total. (It remains necessary to estimate California's number because registration is voluntary at both the state and county levels, and only a small fraction of patients choose to register. There were fewer than 33,000 registered patients as of March 2010, according to the state's medical marijuana program website. ) A brief description of each state's medical marijuana program follows. The programs are discussed in the order in which they were approved by voters or became law by actions of the state legislatures. Proposition 215, approved by 56% of the voters in November, removed the state's criminal penalties for medical marijuana use, possession, and cultivation by patients with the "written or oral recommendation or approval of a physician" who has determined that the patient's "health would benefit from medical marijuana." Called the Compassionate Use Act, it legalized cannabis for "the treatment of cancer, anorexia, AIDS, chronic pain, spasticity, glaucoma, arthritis, migraine, or any other illness for which marijuana provides relief." The law permits possession of an amount sufficient for the patient's "personal medical purposes." A second statute (Senate bill 420), passed in 2003, allows "reasonable compensation" for medical marijuana caregivers and states that the drug should be distributed on a nonprofit basis. Voters in November removed the state's criminal penalties for use, possession, and cultivation of marijuana by patients whose physicians advise that marijuana "may mitigate the symptoms or effects" of a debilitating condition. The law, approved by 55% of Oregon voters, does not provide for distribution of cannabis but allows up to seven plants per patient (changed to 24 plants by act of the state legislature in 2005). The state registry program is supported by patient fees. (In the November 2004 election, 58% of Oregon voters rejected a measure that would have expanded the state's existing program.) Voters in November approved a ballot measure to remove state-level criminal penalties for patients diagnosed by a physician as having a debilitating medical condition for which other approved medications were considered. The measure was approved by 58% of the voters. In 1999, the state legislature created a mandatory state registry for medical cannabis users and limited the amount a patient can legally possess to 1 ounce and six plants. Approved in November by 59% of the voters, the ballot initiative exempts from prosecution patients who meet all qualifying criteria, possess no more marijuana than is necessary for their own personal medical use (but no more than a 60-day supply), and present valid documentation to investigating law enforcement officers. The state does not issue identification cards to patients. Maine's ballot initiative, passed in November by 61% of the voters, puts the burden on the state to prove that a patient's medical use or possession is not authorized by statute. Patients with a qualifying condition, authenticated by a physician, who have been "advised" by the physician that they "might benefit" from medical cannabis, are permitted 1¼ ounces and six plants. There is no state registry of patients. In June, the Hawaii legislature approved a bill removing state-level criminal penalties for medical cannabis use, possession, and cultivation of up to seven plants. A physician must certify that the patient has a debilitating condition for which "the potential benefits of the medical use of marijuana would likely outweigh the health risks." This was the first state law permitting medical cannabis use that was enacted by a legislature instead of by ballot initiative. A ballot initiative to amend the state constitution was approved by 54% of the voters in November. The amendment provides that lawful medical cannabis users must be diagnosed by a physician as having a debilitating condition and be "advised" by the physician that the patient "might benefit" from using the drug. A patient and the patient's caregiver may possess 2 usable ounces and six plants. To amend the state constitution by ballot initiative, a proposed amendment must be approved by the voters in two separate elections. In November, 65% of Nevada voters passed for the second time an amendment to exempt medical cannabis users from prosecution. Patients who have "written documentation" from their physicians that marijuana may alleviate their health condition may register with the state Department of Agriculture and receive an identification card that exempts them from state prosecution for using medical marijuana. In May, Vermont became the second state to legalize medical cannabis by legislative action instead of ballot initiative. Vermont patients are allowed to grow up to three marijuana plants in a locked room and to possess 2 ounces of manicured marijuana under the supervision of the Department of Public Safety, which maintains a patient registry. The law went into effect without the signature of the governor, who declined to sign it but also refused to veto it, despite pressure from Washington. A 2007 legislative act expanded eligibility for the program and increased to nine the number of plants participants may grow. In November, 62% of state voters passed Initiative 148, allowing qualifying patients to use marijuana under medical supervision. Eligible medical conditions include cancer, glaucoma, HIV/AIDS, wasting syndrome, seizures, and severe or chronic pain. A doctor must certify that the patient has a debilitating medical condition and that the benefits of using marijuana would likely outweigh the risks. The patient may grow up to six plants and possess 1 ounce of dried marijuana. The state public health department registers patients and caregivers. In January, the state legislature overrode the governor's veto of a medical marijuana bill, allowing patients to possess up to 12 plants or 2½ ounces to treat cancer, HIV/AIDS, and other chronic ailments. The law included a sunset provision and was set to expire on July 1, 2007, unless renewed by the legislature. The law was made permanent on June 21, 2007, after legislators voted again to override the governor's veto by a wide margin. Passed by the legislature and signed into law by the governor in April, the Lynn and Erin Compassionate Use Medical Marijuana Act went into effect on July 1, 2007. It requires the state's Department of Health to set rules governing the distribution of medical cannabis to state-authorized patients. Unlike most other state programs, patients and their caregivers cannot grow their own marijuana; rather, it will be provided by state-licensed "cannabis production facilities." Approved by 63% of Michigan voters in the November 2008 presidential election, Proposal 1 permits physicians to approve marijuana use by registered patients with debilitating medical conditions, including cancer, HIV/AIDS, hepatitis C, multiple sclerosis, glaucoma, and other conditions approved by the state's Department of Community Health. Up to 12 plants can be cultivated in an indoor, locked facility by the patient or a designated caregiver. A bill passed by the legislature and signed by the governor allows for the regulated distribution of marijuana by state-monitored dispensaries. Doctors may recommend up to 2 ounces monthly to registered patients, who are not allowed to grow their own. Considered the most restrictive of the state programs approved to date, the law restricts usage to a specific set of diseases including cancer, AIDS, glaucoma, muscular dystrophy, multiple sclerosis, and other diseases involving severe and chronic pain, severe nausea, seizures, or severe and persistent muscle spasms. Arizona's law, approved by 65% of the voters in November, permits marijuana prescriptions, but there is no active program in the state because federal law prohibits doctors from prescribing marijuana. Patients cannot, therefore, obtain a valid prescription. (Other states' laws allow doctors to "recommend" rather than "prescribe.") Maryland's General Assembly became the second state legislature, after Hawaii, to protect medical cannabis patients from the threat of jail when it approved a bill, later signed by the governor, providing that patients using marijuana preparations to treat the symptoms of illnesses such as cancer, AIDS, and Crohn's disease would be subject to no more than a $100 fine. The law falls short of full legalization and does not create a medical marijuana program, but it allows for a medical necessity defense for people who use marijuana on their own for medical purposes. If patients arrested for possession in Maryland can prove in court that they use cannabis for legitimate medical needs, they escape the maximum penalty of one year in jail and a $1,000 fine. Laws favorable to medical marijuana have been enacted in 36 states since 1978. Except for the state laws mentioned above, however, these laws do not currently protect medical marijuana users from state prosecution. Some laws, for example, allow patients to acquire and use cannabis through therapeutic research programs, although none of these programs has been operational since 1985, due in large part to federal opposition. Other state laws allow doctors to prescribe marijuana or allow patients to possess marijuana if it has been obtained through a prescription, but the federal Controlled Substances Act prevents these laws from being implemented. Several states have placed marijuana in a controlled drug schedule that recognizes its medical value. State legislatures continue to consider medical marijuana bills, some favorable to its use by patients, others not. In Michigan, a medical marijuana initiative will be presented to the voters on the November 2008 ballot. In the nation's capital, 69% of voters approved a medical cannabis initiative to allow patients a "sufficient quantity" of marijuana to treat illness and to permit nonprofit marijuana suppliers. In every year since then, however, Congress attached a rider to the D.C. appropriations act blocking the Initiative 59 from taking effect, until Congress eliminated the ban in the FY2010 DC appropriations act ( H.R. 3288 , which was signed into law in December 2009 ( P.L. 111-117 ). More than 11 years after DC voters approved the medical marijuana measure, city officials were free to begin drafting legislation to create a medical marijuana program in the nation's capital. Any law passed by the DC Council and signed into law by the mayor would be subject to congressional approval. Medical cannabis measures have been adopted in several localities throughout the country. San Diego is the country's largest city to do so. One day after the Supreme Court's anti-marijuana ruling in Gonzales v. Raich was issued, Alameda County in California approved an ordinance to regulate medical marijuana dispensaries, becoming the 17 th locality in the state to do so. Localities in nonmedical marijuana states have also acted. In November 2004, for example, voters in Columbia, MO, and Ann Arbor, MI, approved medical cannabis measures. Since then, four other Michigan cities, including Detroit, have done the same. Although largely symbolic, such local laws can influence the priorities of local law enforcement officers and prosecutors. Majorities of voters in nine states have now approved medical marijuana initiatives to protect patients from arrest under state law. More broadly, national public opinion polls have consistently favored access to medical marijuana by seriously ill patients. ProCon.org, a nonprofit and nonpartisan public education foundation, has identified 23 national public opinion polls that asked questions about medical marijuana from 1995 to the present. Respondents in every poll were in favor of medical marijuana by substantial margins, ranging from 60% to 85%. Among recent opinion surveys, a January 2010 ABC News/Washington Post poll found that more than 8 in 10 Americans (81%) supported efforts to make marijuana legal for medical use, up from 69% in 1997. Given three choices as to who should be allowed to use it where it is legal, 56% of respondents chose the most lenient position of prescribing it "for any patient the doctor thinks it could help." Its use would be restricted to "patients who have serious but not fatal illnesses" by 21%, and another 21% would limit the drug "to patients who are terminally ill and near death." According to the pollsters' analysis, Medical marijuana … receives majority support across the political and ideological spectrum, from 68 percent of conservatives and 72 percent of Republicans as well as 85 percent of Democrats and independents and about nine in 10 liberals and moderates. Support slips to 69 percent among seniors, vs. 83 percent among all adults under age 65. The Journal of the American Medical Association analyzed public opinion on the War on Drugs in a 1998 article. The authors' observations concerning public attitudes toward medical marijuana remain true today: While opposing the use or legalization of marijuana for recreational purposes, the public apparently does not want to deny very ill patients access to a potentially helpful drug therapy if prescribed by their physicians. The public's support of marijuana for medical purposes is conditioned by their belief that marijuana would be used only in the treatment of serious medical conditions. In public opinion polls, then, the majority of Americans appear to hold that seriously ill or terminal patients should be able to use marijuana if recommended by their doctors. Fourteen state governments have created medical marijuana programs, either through ballot initiatives or the legislative process. Many other state governments, however, along with the federal government, remain opposed to the national majority in favor of medical marijuana. In the ongoing debate over cannabis as medicine, certain arguments are frequently made on both sides of the issue. These arguments are briefly stated below and are analyzed in turn. CRS takes no position on the claims or counterclaims in this debate. What follows is an attempt to analyze objectively the claims frequently made about the role that herbal cannabis might or might not play in the treatment of certain diseases and about the possible societal consequences should its role in the practice of modern medicine be expanded beyond the places where it is now permitted under state laws. For those interested in learning more about medical marijuana research findings, the Internet offers two useful websites. The International Association for Cannabis as Medicine (IACM), based in Germany, provides abundant information on the results of controlled clinical trials at http://www.cannabis-med.org . Information on peer-reviewed, double-blind studies on both animals and human subjects conducted since 1990 has been compiled by ProCon.org and is available at http://www.medicalmarijuanaprocon.org . Suitable and superior medicines are currently available for treatment of all symptoms alleged to be treatable by crude marijuana. —Brief of the Drug Free America Foundation, et al., 2004 The federal government—along with many state governments and private antidrug organizations—staunchly maintains that botanical marijuana is a dangerous drug without any legitimate medical use. Marijuana intoxication can impair a person's coordination and decision-making skills and alter behavior. Chronic marijuana smoking can adversely affect the lungs, the cardiovascular system, and possibly the immune and reproductive systems. Of course, FDA's 1985 approval of Marinol proves that the principal psychoactive ingredient of marijuana—THC—has therapeutic value. But that is not the issue in the medical marijuana debate. Botanical marijuana remains a plant substance, an herb, and its opponents say it cannot substitute for legitimate pharmaceuticals. Just because certain molecules found in marijuana might have become approved medicines, they argue, does not make the unpollinated bud of the female Cannabis sativa plant a safe and effective medicine. The Drug Free America Foundation calls the medical use of crude marijuana "a step backward to the times of potions and herbal remedies." The federal government's argument that marijuana has no medical value is straightforward. A drug, in order to meet the standard of the Controlled Substances Act as having a "currently accepted medical use in treatment in the United States," must meet a five-part test: (1) The drug's chemistry must be known and reproducible, (2) there must be adequate safety studies, (3) there must be adequate and well-controlled studies proving efficacy, (4) the drug must be accepted by qualified experts, and (5) the scientific evidence must be widely available. According to the DEA, botanical marijuana meets none of these requirements. First, marijuana's chemistry is neither fully known nor reproducible. Second, adequate safety studies have not been done. Third, there are no adequate, well-controlled scientific studies proving marijuana is effective for any medical condition. Fourth, marijuana is not accepted by even a significant minority of experts qualified to evaluate drugs. Fifth, published scientific evidence concluding that marijuana is safe and effective for use in humans does not exist. The same DEA Final Order that set forth the five requirements for currently accepted medical use also outlined scientific evidence that would be considered irrelevant by the DEA in establishing currently accepted medical use. These include individual case reports, clinical data collected by practitioners, studies conducted by persons not qualified by scientific training and experience to evaluate the safety and effectiveness of the substance at issue, and studies or reports so lacking in detail as to preclude responsible scientific evaluation. Such information is inadequate for experts to conclude responsibly and fairly that marijuana is safe and effective for use as medicine. The DEA and other federal drug control agencies can thereby disregard medical literature and opinion that claim to show the therapeutic value of marijuana because they do not meet the government's standards of proof. The official view of medical marijuana is complicated by the wider War on Drugs. It is difficult to disentangle the medical use of locally grown marijuana for personal use from the overall policy of marijuana prohibition, as the Supreme Court made clear in Raich . To make an exemption for medical marijuana, the Court decided, "would undermine the orderly enforcement of the entire regulatory scheme ... The notion that California law has surgically excised a discrete activity that is hermetically sealed off from the larger interstate marijuana market is a dubious proposition.... " It remains the position of the federal government, then, that the Schedule I substance marijuana is harmful—not beneficial—to human health. Its use for any reason, including medicinal, should continue to be prohibited and punished. Despite signs of a more tolerant public attitude toward medical marijuana, its therapeutic benefits, if any, will continue to be officially unacknowledged and largely unrealized in the United States so long as this position prevails at the federal level. [I]t cannot seriously be contested that there exists a small but significant class of individuals who suffer from painful chronic, degenerative, and terminal conditions, for whom marijuana provides uniquely effective relief. —Brief of the Leukemia & Lymphoma Society, et al., 2004 Proponents of medical marijuana point to a large body of studies from around the world that support the therapeutic value of marijuana in treating a variety of disease-related problems, including relieving nausea, increasing appetite, reducing muscle spasms and spasticity, relieving chronic pain, reducing intraocular pressure, and relieving anxiety. Given these properties, marijuana has been used successfully to treat the debilitating symptoms of cancer and cancer chemotherapy, AIDS, multiple sclerosis, epilepsy, glaucoma, anxiety, and other serious illnesses. As opponents of medical marijuana assert, existing FDA-approved pharmaceuticals for these conditions are generally more effective than marijuana. Nevertheless, as the IOM Report acknowledged, the approved medicines do not work for everyone. Many medical marijuana users report trying cannabis only reluctantly and as a last resort after exhausting all other treatment modalities. A distinct subpopulation of patients now relies on whole cannabis for a degree of relief that FDA-approved synthetic drugs do not provide. Medical cannabis proponents claim that single-cannabinoid, synthetic pharmaceuticals like Marinol are poor substitutes for the whole marijuana plant, which contains more than 400 known chemical compounds, including about 60 active cannabinoids in addition to THC. They say that scientists are a long way from knowing for sure which ones, singly or in combination, provide which therapeutic effects. Many patients have found that they benefit more from the whole plant than from any synthetically produced chemical derivative. Furthermore, the natural plant can be grown easily and inexpensively, whereas Marinol and any other cannabis-based pharmaceuticals that might be developed in the future will likely be expensive—prohibitively so for some patients. In recognition of the therapeutic benefits of botanical marijuana products, various associations of health professionals have passed resolutions in support of medical cannabis. These include the American Public Health Association, the American Nurses Association, and the California Pharmacists Association. The New England Journal of Medicine has editorialized in favor of patient access to marijuana. Other groups, such as the American Medical Association, are more cautious. Their position is that not enough is known about botanical marijuana and that more research is needed. The recent discovery of cannabinoid receptors in the human brain and immune system provides a biological explanation for the claimed effectiveness of marijuana in relieving multiple disease symptoms. The human body produces its own cannabis-like compounds, called endocannabinoids, that react with the body's cannabinoid receptors. Like the better known opiate receptors, the cannabinoid receptors in the brain stem and spinal cord play a role in pain control. Cannabinoid receptors, which are abundant in various parts of the human brain, also play a role in controlling the vomiting reflex, appetite, emotional responses, motor skills, and memory formation. It is the presence of these natural, endogenous cannabinoids in the human nervous and immune systems that provides the basis for the therapeutic value of marijuana and that holds the key, some scientists believe, to many promising drugs of the future. The federal government's own IND Compassionate Access Program, which has provided government-grown medical marijuana to a select group of patients since 1978, provides important evidence that marijuana has medicinal value and can be used safely. A scientist and organizer of the California medical marijuana initiative, along with two medical-doctor colleagues, has written: Nothing reveals the contradictions in federal policy toward marijuana more clearly than the fact that there are still eight patients in the United States who receive a tin of marijuana 'joints' (cigarettes) every month from the federal government.... These eight people can legally possess and use marijuana, at government expense and with government permission. Yet hundreds of thousands of other patients can be fined and jailed under federal law for doing exactly the same thing. Can you think of any other untested, home-made, mind-altering medicine that you self-dose, and that uses a burning carcinogen as a delivery vehicle? —General Barry McCaffrey, U.S. Drug Czar, 1996-2000 That medical marijuana is smoked is probably the biggest obstacle preventing its wider acceptance. Opponents of medical marijuana argue that smoking is a poor way to take a drug, that inhaling smoke is an unprecedented drug delivery system, even though many approved medications are marketed as inhalants. DEA Administrator Karen Tandy writes: The scientific and medical communities have determined that smoked marijuana is a health danger, not a cure. There is no medical evidence that smoking marijuana helps patients. In fact, the Food and Drug Administration (FDA) has approved no medications that are smoked, primarily because smoking is a poor way to deliver medicine. Morphine, for example has proven to be a medically valuable drug, but the FDA does not endorse smoking opium or heroin. Medical marijuana opponents argue that chronic marijuana smoking is harmful to the lungs, the cardiovascular system, and possibly the immune and reproductive systems. These claims may be overstated to help preserve marijuana prohibition. For example, neither epidemiological nor aggregate clinical data show higher rates of lung cancer in people who smoke marijuana. The other alleged harms also remain unproven. Even if smoking marijuana is proven harmful, however, the immediate benefits of smoked marijuana could still outweigh the potential long-term harms—especially for terminally ill patients. The therapeutic value of smoked marijuana is supported by existing research and experience. For example, the following statements appeared in the American Medical Association's "Council on Scientific Affairs Report 10—Medicinal Marijuana," adopted by the AMA House of delegates on December 9, 1997: "Smoked marijuana was comparable to or more effective than oral THC [Marinol], and considerably more effective than prochlorperazine or other previous antiemetics in reducing nausea and emesis." (p. 10) "Anecdotal, survey, and clinical data support the view that smoked marijuana and oral THC provide symptomatic relief in some patients with spasticity associated with multiple sclerosis (MS) or trauma." (p. 13) "Smoked marijuana may benefit individual patients suffering from intermittent or chronic pain." (p. 15) The IOM Report expressed concerns about smoking (p. 126): "Smoked marijuana is unlikely to be a safe medication for any chronic medical condition." Despite this concern, the IOM Report's authors were willing to recommend smoked marijuana under certain limited circumstances. For example, the report states (p. 154): Until the development of rapid-onset antiemetic drug delivery systems, there will likely remain a subpopulation of patients for whom standard antiemetic therapy is ineffective and who suffer from debilitating emesis. It is possible that the harmful effects of smoking marijuana for a limited period of time might be outweighed by the antiemetic benefits of marijuana, at least for patients for whom standard antiemetic therapy is ineffective and who suffer from debilitating emesis. Such patients should be evaluated on a case-by-case basis and treated under close medical supervision. The IOM Report makes another exception for terminal cancer patients (p. 159): Terminal cancer patients pose different issues. For those patients the medical harm associated with smoking is of little consequence. For terminal patients suffering debilitating pain or nausea and for whom all indicated medications have failed to provide relief, the medical benefits of smoked marijuana might outweigh the harm. Smoking can actually be a preferred drug delivery system for patients whose nausea prevents them from taking anything orally. Such patients need to inhale their antiemitic drug. Other patients prefer inhaling because the drug is absorbed much more quickly through the lungs, so that the beneficial effects of the drug are felt almost at once. This rapid onset also gives patients more control over dosage. For a certain patient subpopulation, then, these advantages of inhalation may prevail over both edible marijuana preparations and pharmaceutical drugs in pill form, such as Marinol. Moreover, medical marijuana advocates argue that there are ways to lessen the risks of smoking. Any potential problems associated with smoking, they argue, can be reduced by using higher potency marijuana, which means that less has to be inhaled to achieve the desired therapeutic effect. Furthermore, marijuana does not have to be smoked to be used as medicine. It can be cooked in various ways and eaten. Like Marinol, however, taking marijuana orally can be difficult for patients suffering from nausea. Many patients are turning to vaporizers, which offer the benefits of smoking—rapid action, ease of dose titration—without having to inhale smoke. Vaporizers are devices that take advantage of the fact that cannabinoids vaporize at a lower temperature than that required for marijuana to burn. Vaporizers heat the plant matter enough for the cannabinoids to be released as vapor without having to burn the marijuana preparation. Patients can thereby inhale the beneficial cannabinoids without also having to inhale the potentially harmful by-products of marijuana combustion. [T]he administrative law judge concludes that the provisions of the [Controlled Substances] Act permit and require the transfer of marijuana from Schedule I to Schedule II. The Judge realizes that strong emotions are aroused on both sides of any discussion concerning the use of marijuana. Nonetheless it is essential for this Agency [DEA], and its Administrator, calmly and dispassionately to review the evidence of record, correctly apply the law, and act accordingly. —Francis L. Young, DEA Administrative Law Judge, 1988 Proponents of medical marijuana believe its placement in Schedule I of the CSA was an error from the beginning. Cannabis is one of the safest therapeutically active substances known. No one has ever died of an overdose. Petitions to reschedule marijuana have been received by the federal government, and rejected, ever since the original passage of the Controlled Substances Act in 1970. Rescheduling can be accomplished administratively or it can be done by an act of Congress. Administratively, the federal Department of Health and Human Services (HHS) could find that marijuana meets sufficient standards of safety and efficacy to warrant rescheduling. Even though THC, the most prevalent cannabinoid in marijuana, was administratively moved to Schedule III in 1999, no signs exist that botanical marijuana will similarly be rescheduled by federal agency ruling anytime soon. An act of Congress to reschedule marijuana is only slightly less likely, although such legislation has been introduced in recent Congresses including the 111 th . The Medical Marijuana Patient Protection Act ( H.R. 2835 /Frank), which would move marijuana from Schedule I to Schedule II of the Controlled Substances Act, has seen no action beyond committee referral. Schedule II substances have a high potential for abuse and may lead to severe psychological or physical dependence but have a currently accepted medical use in treatment in the United States. Cocaine, methamphetamine, morphine, and methadone are classified as Schedule II substances. Many drug policy experts and laypersons alike believe that marijuana should also reside in Schedule II. Others think marijuana should be properly classified as a Schedule III substance, along with THC and its synthetic version, Marinol. Substances in Schedule III have less potential for abuse than the drugs in Schedules I and II, their abuse may lead to moderate or low physical dependence or high psychological dependence, and they have a currently accepted medical use in treatment in the United States. Rescheduling seems to be supported by public opinion. A nationwide Gallup Poll conducted in March 1999 found that 73% of American adults favored "making marijuana legally available for doctors to prescribe in order to reduce pain and suffering." An AARP poll of American adults age 45 and older conducted in mid-November 2004 found that 72% agreed that adults should be allowed to legally use marijuana for medical purposes if recommended by a physician. A January 2010 ABC News/Washington Post poll found that more than 8 in 10 Americans (81%) supported efforts to make marijuana legal for medical use. Few Members of Congress, however, publicly support the rescheduling option. The Medical Marijuana Patient Protection Act ( H.R. 2835 ), which would move marijuana from Schedule I to Schedule II of the Controlled Substances Act, as mentioned above, currently has 30 cosponsors. The natural extension of this myth [that marijuana is good medicine] is that, if marijuana is medicine, it must also be safe for recreational use. —Karen P. Tandy, DEA Administrator, 2005 It is the position of the federal government that to permit the use of medical marijuana affords the drug a degree of legitimacy it does not deserve. America's youth are especially vulnerable, it is said, and state medical marijuana programs send the wrong message to our youth, many of whom do not recognize the very real dangers of marijuana. Studies show that the use of an illicit drug is inversely proportional to the perceived harm of that drug. That is, the more harmful a drug is perceived to be, the fewer the number of people who will try it. Opponents of medical marijuana argue that "surveys show that perception of harm with respect to marijuana has been dropping off annually since the renewal of the drive to legalize marijuana as medicine, which began in the early 1990s when legalization advocates first gained a significant increase in funding and began planning the state ballot initiative drive to legalize crude marijuana as medicine." They point to the 1999 National Household Survey on Drug Abuse (NHSDA), which "reveals that those states which have passed medical marijuana laws have among the highest levels of past-month marijuana use, of past-month other drug use, of drug addiction, and of drug and alcohol addiction." Indeed, all 11 states that have passed medical marijuana laws ranked above the national average in the percentage of persons 12 or older reporting past-month use of marijuana in 1999, as shown in Table 2 . It is at least possible, however, that this analysis confuses cause with effect. It is logical to assume that the states with the highest prevalence of marijuana usage would be more likely to approve medical marijuana programs, because the populations of those states would be more knowledgeable of marijuana's effects and more tolerant of its use. It is also the case that California, the state with the largest and longest-running medical marijuana program, ranked 34 th in the percentage of persons age 12-17 reporting marijuana use in the past month during the period 2002-2003, as shown in Table 1 . In fact, between 1999 and 2002-2003, of the 10 states with active medical marijuana programs, five states (AK, HI, ME, MT, VT) rose in the state rankings of past-month marijuana use by 12- to 17-year-olds and five states fell (CA, CO, NV, OR, WA). Of the five states that had approved medical marijuana laws before 1999 (AK, AZ, CA, OR, WA), only Alaska's ranking rose between 1999 and 2002-2003, from 7 th to 4 th , with 11.08% of youth reporting past-month marijuana use in 2002-2003 compared with 10.4% in 1999. No clear patterns are apparent in the state-level data. Clearly, more important factors are at work in determining a state's prevalence of recreational marijuana use than whether the state has a medical marijuana program. The IOM Report found no evidence for the supposition that state medical marijuana programs lead to increased use of marijuana or other drugs (pp. 6-7): Finally, there is a broad social concern that sanctioning the medical use of marijuana might increase its use among the general population. At this point there are no convincing data to support this concern. The existing data are consistent with the idea that this would not be a problem if the medical use of marijuana were as closely regulated as other medications with abuse potential.... [T]his question is beyond the issues normally considered for medical uses of drugs and should not be a factor in evaluating the therapeutic potential of marijuana or cannabinoids. The IOM Report further states (p. 126): Even if there were evidence that the medical use of marijuana would decrease the perception that it can be a harmful substance, this is beyond the scope of laws regulating the approval of therapeutic drugs. Those laws concern scientific data related to the safety and efficacy of drugs for individual use; they do not address perceptions or beliefs of the general population. The IOM Report also found (p. 102): "No evidence suggests that the use of opiates or cocaine for medical purposes has increased the perception that their illicit use is safe or acceptable." Doctors can prescribe cocaine, morphine, amphetamine, and methamphetamine, but this is not seen as weakening the War on Drugs. Why would doctors recommending medical marijuana to their patients be any different? The so-called "Gateway Theory" of marijuana use is also cited to explain how medical marijuana could increase illicit drug use. With respect to the rationale behind the argument that marijuana serves as a "gateway" drug, the IOM Report offered the following (p. 6): In the sense that marijuana use typically precedes rather than follows initiation of other illicit drug use, it is indeed a "gateway" drug. But because underage smoking and alcohol use typically precede marijuana use, marijuana is not the most common, and is rarely the first, "gateway" to illicit drug use. There is no conclusive evidence that the drug effects of marijuana are causally linked to the subsequent abuse of other illicit drugs. A statistical analysis of marijuana use by emergency room patients and arrestees in four states with medical marijuana programs—California, Colorado, Oregon, and Washington—found no statistically significant increase in recreational marijuana use among these two population subgroups after medical marijuana was approved for use. Another study looked at adolescent marijuana use and found decreases in youth usage in every state with a medical marijuana law. Declines exceeding 50% were found in some age groups. These studies are consistent with the findings of a 2002 report by the Government Accountability Office that concluded that state medical marijuana laws were operating as voters and legislators intended and did not encourage drug use among the wider population. Concerns that medical cannabis laws send the wrong message to vulnerable groups such as adolescents seem to be unfounded. The DEA and its local and state counterparts routinely report that large-scale drug traffickers hide behind and invoke Proposition 215, even when there is no evidence of any medical claim. In fact, many large-scale marijuana cultivators and traffickers escape state prosecution because of bogus medical marijuana claims. Prosecutors are reluctant to charge these individuals because of the state of confusion that exists in California. Therefore, high-level traffickers posing as ' care-givers ' are able to sell illegal drugs with impunity. —" California Medical Marijuana Information," DEA Web page It is argued by many that state medical marijuana laws weaken the fight against drug abuse by making the work of police officers more difficult. This undermining of law enforcement can occur in at least three ways: by diverting medical marijuana into the recreational drug market, by causing state and local law enforcement priorities to diverge from federal priorities, and by complicating the job of law enforcement by forcing officers to distinguish medical users from recreational users. Marijuana grown for medical purposes, according to DEA and other federal drug control agencies, can be diverted into the larger, illegal marijuana market, thereby undermining law enforcement efforts to eliminate the marijuana market altogether. This point was emphasized by the Department of Justice (DOJ) in its prepublication review of a report by the Government Accountability Office (GAO) on medical marijuana. DOJ criticized the GAO draft report on the grounds that the "report did not mention that state medical marijuana laws are routinely abused to facilitate traditional illegal trafficking." GAO responded that in their interviews with federal officials regarding the impact of state medical marijuana laws on their law enforcement efforts, "none of the federal officials we spoke with provided information that abuse of medical marijuana laws was routinely occurring in any of the states, including California." The government also failed to establish this in the Raich case. (It is of course possible that significant diversion is taking place yet remains undetected.) Just as with many pharmaceuticals, some diversion is inevitable. Some would view this as an acceptable cost of implementing a medical marijuana program. Every public policy has its costs and benefits. Depriving seriously ill patients of their medical marijuana is seen by some as a small price to pay if doing so will help to protect America's youth from marijuana. Others balance the harms and benefits of medical marijuana in the opposite direction. Legal analyst Stuart Taylor Jr. recently wrote, "As a matter of policy, Congress as well as the states should legalize medical marijuana, with strict regulatory controls. The proven benefits to some suffering patients outweigh the potential costs of marijuana being diverted to illicit uses." Following the passage of the California and Arizona medical marijuana initiatives in 1996, federal officials expressed concern that the measures would seriously affect the federal government's drug enforcement effort because federal drug policies rely heavily on the state's enforcement of their own drug laws to achieve federal objectives. For instance, in hearings before the Senate Judiciary Committee, the head of the Drug Enforcement Administration stated: I have always felt ... that the federalization of crime is very difficult to carry out; that crime, just in essence, is for the most part a local problem and addressed very well locally, in my experience. We now have a situation where local law enforcement is unsure.... The numbers of investigations that you would talk about that might be presently being conducted by the [Arizona state police] at the gram level would be beyond our capacity to conduct those types of individual investigations without abandoning the major organized crime investigations. State medical marijuana laws arguably feed into the deprioritization movement, by which drug reform advocates seek to influence state and local law enforcement to give a low priority to the enforcement of marijuana laws. This movement to make simple marijuana possession the lowest law enforcement priority has made inroads in such cities as San Francisco, Seattle, and Oakland, but it extends beyond the medical marijuana states to college towns such as Ann Arbor, MI, Madison, WI, Columbia, MO, and Lawrence, KS. Federal officials fear that jurisdictions that "opt out" of marijuana enforcement "will quickly become a haven for drug traffickers." Police officers in medical marijuana states have complained about the difficulty of distinguishing between legitimate patients and recreational marijuana smokers. According to the DEA: Local and state law enforcement counterparts cannot distinguish between illegal marijuana grows and grows that qualify as medical exemptions. Many self-designated medical marijuana growers are, in fact, growing marijuana for illegal, "recreational" use. This reasoning is echoed in the Raich amici brief of Community Rights Counsel (p. 12): Creating an exception for medical use [of marijuana] could undermine enforcement efforts by imposing an often difficult burden on prosecutors of establishing the violator's subjective motivation and intent beyond a reasonable doubt. Given that marijuana used in response to medical ailments is not readily distinguishable from marijuana used for other reasons, Congress rationally concluded that the control of all use is necessary to address the national market for controlled substances. Patients and caregivers, on the other hand, have complained that their marijuana that is lawful under state statute has been seized by police and not returned. In some cases, patients and caregivers have been unexpectedly arrested by state or local police officers. A November 2002 GAO report on medical marijuana stated that "Several law enforcement officials in California and Oregon cited the inconsistency between federal and state law as a significant problem, particularly regarding how seized marijuana is handled." The failure of state and local law enforcement officers to observe state medical marijuana laws has especially been a problem in California. The California Highway Patrol (CHP) has, on numerous occasions, arrested patients or confiscated their medical marijuana during routine traffic stops. "Although voters legalized medical marijuana in California nearly nine years ago," reports the Los Angeles Times , "police statewide have wrangled with activists over how to enforce the law." As a result of a lawsuit brought against the CHP by a patient advocacy group, CHP officers will no longer seize patients' marijuana as long as they possess no more than 8 ounces and can show a certified-user identification card or their physician's written recommendation. The CHP's new policy, announced in August 2005, will likely influence the behavior of other California law enforcement agencies. The Committee on Drugs and the Law of the Bar of the City of New York concluded its 1997 report "Marijuana Should be Medically Available" with this statement: "The government can effectively differentiate medical marijuana and recreational marijuana, as it has done with cocaine. The image of the Federal authorities suppressing a valuable medicine to maintain the rationale of the war on drugs only serves to discredit the government's effort." Centuries of Anglo-American law stand against the imposition of criminal liability on individuals for pursuing their own lifesaving pain relief and treatment .... Because the experience of pain can be so subversive of dignity—and even of the will to live—ethics and legal tradition recognize that individuals pursuing pain relief have special claims to non-interference. —Brief of the Leukemia & Lymphoma Society, et al., 2004 Medical marijuana advocates believe that seriously ill people should not be punished for acting in accordance with the opinion of their physicians in a bona fide attempt to relieve their suffering, especially when acting in accordance with state law. Even if marijuana were proven to be more harmful than now appears, prison for severely ill patients is believed to be a worse alternative. Patients have enough problems without having to fear the emotional and financial cost of arrest, legal fees, prosecution, and a possible prison sentence. The American public appears to agree. The Institute of Medicine found that "public support for patient access to marijuana for medical use appears substantial; public opinion polls taken during 1997 and 1998 generally reported 60-70 percent of respondents in favor of allowing medical uses of marijuana." The federal penalty for possessing one marijuana cigarette—even for medical use—is up to one year in prison and up to a $100,000 fine, and the penalty for growing a cannabis plant is up to five years and up to a $250,000 fine. That patients are willing to risk these severe penalties to obtain the relief that marijuana provides appears to present strong evidence for the substance's therapeutic effectiveness. Although the Supreme Court ruled differently in Raich , the argument persists that medical marijuana providers and patients are engaging in a class of activity totally different from those persons trafficking in marijuana for recreational use and that patients should not be arrested for using medical marijuana in accordance with the laws of the states in which they reside. With its position affirmed by Raich , however, DEA continues to investigate—and sometimes raid and shut down—medical marijuana distribution operations in California and other medical marijuana states. DEA's position is that: [F]ederal law does not distinguish between crimes involving marijuana for claimed "medical" purposes and crimes involving marijuana for any other purpose. DEA likewise does not so distinguish in carrying out its duty to enforce the CSA and investigate possible violations of the Act. Rather, consistent with the agency's mandate, DEA focuses on large-scale trafficking organizations and other criminal enterprises that warrant federal scrutiny. If investigating CSA violations in this manner leads the agency to encounter persons engaged in criminal activities involving marijuana, DEA does not alter its approach if such persons claim at some point their crimes are "medically" justified. To do so would be to give legal effect to an excuse considered by the text of federal law and the United States Supreme Court to be of no moment. Because nearly all arrests and prosecutions for marijuana possession are handled by state and local law enforcement officers, patients and caregivers in the medical marijuana states can, as a practical matter, possess medical marijuana without fear of arrest and imprisonment. DEA enforcement actions against medical marijuana dispensaries—as occurred in San Francisco shortly after the Raich decision was announced —can, however, make it more difficult for patients to obtain the drug. The situation that Grinspoon and Bakalar described in 1995 in the Journal of the American Medical Association persists a decade later: "At present, the greatest danger in medical use of marihuana is its illegality, which imposes much anxiety and expense on suffering people, forces them to bargain with illicit drug dealers, and exposes them to the threat of criminal prosecution." Doctors, not the federal government, know what ' s best for their patients. If a state decides to allow doctors to recommend proven treatments for their patients, then the federal government has no rightful place in the doctor ' s office . —Attorney Randy Barnett, 2004 Three States—California, Maryland, and Washington—filed an amici curiae brief supporting the right of states to institute medical marijuana programs. Their brief argued, "In our federal system States often serve as democracy's laboratories, trying out new, or innovative solutions to society's ills." The Raich case shows that the federal government has zero tolerance for state medical marijuana programs. The Bush Administration appealed the decision of the Ninth Circuit Court of Appeals to the Supreme Court, which reversed the Ninth Circuit and upheld the federal position against the states. Framed as a Commerce Clause issue, the case became a battle for states' rights against the federal government. The Raich case created unusual political alliances. Three southern states that are strongly opposed to any marijuana use, medical or otherwise—Alabama, Louisiana, and Mississippi—filed an amici curiae brief supporting California's medical marijuana users on the grounds of states' rights. Their brief argued As Justice Brandeis famously remarked, "[i]t is one of the happy incidents of the federal system that a single courageous State may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country." Whether California and the other compassionate-use States are "courageous—or instead profoundly misguided—is not the point. The point is that, as a sovereign member of the federal union, California is entitled to make for itself the tough policy choices that affect its citizens. States' rights advocates argue that authority to define criminal law and the power to make and enforce laws protecting the health, safety, welfare, and morals reside at the state level and that a state has the right to set these policies free of congressional interference. For Justice O'Connor, the Raich case exemplified "the role of States as laboratories." She wrote in her dissenting opinion: If I were a California citizen, I would not have voted for the medical marijuana ballot initiative; if I were a California legislator I would not have supported the Compassionate Use Act. But whatever the wisdom of California's experiment with medical marijuana, the federalism principles that have driven our Commerce Clause cases require that room for experiment be protected in this case. The current efforts to gain legal status of marijuana through ballot initiatives seriously threaten the Food and Drug Administration statutorily authorized process of proving safety and efficacy. —Brief of the Drug Free America Foundation, et al., 2004 Although the individual states regulate the practice of medicine, the federal government has taken primary responsibility for the regulation of medical products, especially those containing controlled substances. Pharmaceutical drugs must be approved for use in the United States by the Food and Drug Administration, an agency of the Department of Health and Human Services. The Federal Food, Drug, and Cosmetics Act gives HHS and FDA the responsibility for determining that drugs are safe and effective, a requirement that all medicines must meet before they can enter interstate commerce and be made available for general medical use. Clinical evaluation is required regardless of whether the drug is synthetically produced or originates from a natural botanical or animal source. Opponents of medical marijuana say that the FDA's drug approval process should not be circumvented. To permit states to decide which medical products can be made available for therapeutic use, they say, would undercut this regulatory system. State medical marijuana initiatives are seen as inconsistent with the federal government's responsibility to protect the public from unsafe, ineffective drugs. The Bush Administration argued in its brief in the Raich case that "excepting drug activity for personal use or free distribution from the sweep of [federal drug laws] would discourage the consumption of lawful controlled substances and would undermine Congress's intent to regulate the drug market comprehensively to protect public health and safety." Three prominent drug abuse experts argued in their amici brief: This action by the state of California did not create a "novel social and economic experiment," but rather chaos in the scientific and medical communities. Furthermore, under Court of Appeals ruling, such informal State systems could be replicated, and even expanded, in a manner that puts at risk the critical protections so carefully crafted under the national food and drug legislation of the 20 th century. The Food and Drug Administration itself has stated that FDA is the sole Federal agency that approves drug products as safe and effective for intended indications.... FDA's drug approval process requires well-controlled clinical trials that provide the necessary scientific data upon which FDA makes its approval and labeling decisions.... Efforts that seek to bypass the FDA drug approval process would not serve the interests of public health because they might expose patients to unsafe and ineffective drug products. FDA has not approved smoked marijuana for any condition or disease indication. The Drug Free America Raich brief elaborates further (pp. 12-13): The ballot initiative-led laws create an atmosphere of medicine by popular vote, rather than the rigorous scientific and medical process that all medicines must undergo. Before the development of modern pharmaceutical science, the field of medicine was fraught with potions and herbal remedies. Many of those were absolutely useless, or conversely were harmful to unsuspecting subjects. Thus evolved our current Food and Drug Administration and drug scheduling processes, which Congress has authorized in order to create a uniform and reliable system of drug approval and regulation. This system is being intentionally undermined by the legalization proponents through use of medical marijuana initiatives. The organizers of the medical marijuana state initiatives deny that it was their intent to undermine the federal drug approval process. Rather, in their view, it became necessary for them to bypass the FDA and go to the states because of the federal government's resistance to marijuana research requests and rescheduling petitions. As for the charge that politics should not play a role in the drug approval and controlled substance scheduling processes, medical marijuana supporters point out that marijuana's original listing as a Schedule I substance in 1970 was itself a political act on the part of Congress. Scientists on both sides of the issue say more research needs to be done, yet some researchers charge that the federal government has all but shut down marijuana clinical trials for reasons based on politics and ideology rather than science. In any case, as the IOM Report pointed out, "although a drug is normally approved for medical use only on proof of its 'safety and efficacy,' patients with life-threatening conditions are sometimes (under protocols for 'compassionate use') allowed access to unapproved drugs whose benefits and risks are uncertain." This was the case with the FDA's IND Compassionate Access Program under which a limited number of patients are provided government-grown medical marijuana to treat their serious medical conditions. Some observers believe the pharmaceutical industry and some politicians oppose medical marijuana to protect pharmaceutical industry profits. Because the whole marijuana plant cannot be patented, research efforts must be focused on the development of synthetic cannabinoids such as Marinol. But even if additional cannabinoid drugs are developed and marketed, some believe that doctors and patients should still not be criminalized for recommending and using the natural substance. The New England Journal of Medicine has editorialized that [A] federal policy that prohibits physicians from alleviating suffering by prescribing marijuana for seriously ill patients is misguided, heavy-handed, and inhumane. Marijuana may have long-term adverse effects and its use may presage serious addictions, but neither long-term side effects nor addiction is a relevant issue in such patients. It is also hypocritical to forbid physicians to prescribe marijuana while permitting them to use morphine and meperidine to relieve extreme dyspnea and pain. With both of these drugs the difference between the dose that relieves symptoms and the dose that hastens death is very narrow; by contrast, there is no risk of death from smoking marijuana. To demand evidence of therapeutic efficacy is equally hypocritical. The noxious sensations that patients experience are extremely difficult to quantify in controlled experiments. What really counts for a therapy with this kind of safety margin is whether a seriously ill patient feels relief as a result of the intervention, not whether a controlled trial "proves" its efficacy. Some observers suggest that until the federal government relents and becomes more hospitable to marijuana research proposals and more willing to consider moving marijuana to a less restrictive schedule, the medical marijuana issue will continue to be fought at state and local levels of governance. As one patient advocate has stated, "As the months tick away, it will become more and more obvious that we need to continue changing state laws until the federal government has no choice but to change its inhumane medicinal marijuana laws." Advocates have tried to legalize marijuana in one form or another for three decades, and the " medical marijuana " concept is a Trojan Horse tactic towards the goal of legalization. —Brief of the Drug Free America Foundation, et al., 2004 Medical marijuana opponents see the movement to promote the use of medical marijuana as a cynical attempt to subvert the Controlled Substances Act and legalize the recreational use of marijuana for all. They see it as a devious tactic in the more than 30-year effort by marijuana proponents to bring an end to marijuana prohibition in the United States and elsewhere. They point out that between 1972 and 1978, the National Organization for the Reform of Marijuana Laws (NORML) successfully lobbied 11 state legislatures to decriminalize the drug, reducing penalties for possession in most cases to that of a traffic ticket. Also, in 1972, NORML began the first of several unsuccessful attempts to petition DEA to reschedule marijuana from Schedule I to Schedule II on the grounds that crude marijuana had use in medicine. Later, beginning with California in 1996, "drug legalizers" pushed successfully for passage of medical marijuana voter initiatives in several states, prompting then-Drug Czar Barry McCaffrey, writing in Newsweek , to warn that "We're on a Perilous Path." "I think it's clear," he wrote, "that a lot of the people arguing for the California proposition and others like it are pushing the legalization of drugs, plain and simple." Is it cynical or smart for NORML and other drug reform organizations to simultaneously pursue the separate goals of marijuana decriminalization for all, on the one hand, and marijuana rescheduling for the seriously ill, on the other? It is not unusual for political activists tactically to press for—and accept—half-measures in pursuit of a larger strategic goal. Pro-life activists work to prohibit partial-birth abortions and to pass parental notification laws. Gay rights activists seek limited domestic partner benefits as a stepping stone to full marriage equality. Thus is the tactic used on both sides of the cultural divide in America, to the alarm of those opposed. It is certainly true that the medical cannabis movement is an offshoot of the marijuana legalization movement. Many individuals and organizations that support medical marijuana also support a broader program of drug law reform. It is also true, however, that many health professionals and other individuals who advocate medical access to marijuana do not support any other changes in U.S. drug control policy. In the same way, not everyone in favor of parental notification laws supports banning abortions for everyone. And not every supporter of domestic partner benefits believes in same-sex marriage. In these hot-button issues, ideology and emotion often rule. Marijuana users in general, and medical marijuana users in particular, are demonized by some elements of American society. The ideology of the "Drug Warriors" intrudes on the science of medical marijuana, as pointed out by Grinspoon and Bakalar in the Journal of the American Medical Association : Advocates of medical use of marihuana are sometimes charged with using medicine as a wedge to open a way for "recreational" use. The accusation is false as applied to its target, but expresses in a distorted form a truth about some opponents of medical marihuana: they will not admit that it can be a safe and effective medicine largely because they are stubbornly committed to exaggerating its dangers when used for nonmedical purposes. The authors of the IOM Report were aware of the possibility that larger ideological positions could influence one's stand on the specific issue of patient access to medical marijuana when they wrote that [I]t is not relevant to scientific validity whether an argument is put forth by someone who believes that all marijuana use should be legal or by someone who believes that any marijuana use is highly damaging to individual users and to society as a whole. (p. 14) In other words, it is widely believed that science should rule when it comes to medical issues. Both sides in the medical marijuana debate claim adherence to this principle. The House Government Reform Committee's April 2004 hearing on medical marijuana was titled "Marijuana and Medicine: The Need for a Science-Based Approach." And medical marijuana advocates plead with the federal government to permit scientific research on medical marijuana to proceed. Rescheduling marijuana and making it available for medical use and research is not necessarily a step toward legalizing its recreational use. Such a move would put it on a par with cocaine, methamphetamine, morphine, and methadone, all of which are Schedule II substances that are not close to becoming legal for recreational use. Proponents of medical marijuana ask why marijuana should be considered differently than these other scheduled substances. It is also arguable that marijuana should indeed be considered differently than cocaine, methamphetamine, morphine, and methadone. Scientists note that marijuana is less harmful and less addictive than these Schedule II substances. Acceptance of medical marijuana could in fact pave the way for its more generalized use. Ethan Nadelmann, head of the Drug Policy Alliance, has observed, "As medical marijuana becomes more regulated and institutionalized in the West, that may provide a model for how we ultimately make marijuana legal for all adults." Medical marijuana opponents have trumpeted his candor as proof of the hypocrisy of those on the other side of the issue. Others note, however, that his comment may be less hypocritical than astute.

The issue before Congress is whether to continue the federal prosecution of medical marijuana patients and their providers, in accordance with the federal Controlled Substances Act (CSA), or whether to relax federal marijuana prohibition enough to permit the medicinal use of botanical cannabis products when recommended by a physician, especially where permitted under state law. Fourteen states, mostly in the West, have enacted laws allowing the use of marijuana for medical purposes, and many thousands of patients are seeking relief from a variety of serious illnesses by smoking marijuana or using other herbal cannabis preparations. Two bills relating to the therapeutic use of cannabis have been introduced in the 111th Congress. The Medical Marijuana Patient Protection Act (H.R. 2835), which would allow the medical use of marijuana in states that permit its use with a doctor's recommendation, was introduced on June 11, 2009, by Representative Barney Frank. The bill would move marijuana from Schedule I to Schedule II of the CSA and exempt from federal prosecution authorized patients and medical marijuana providers who are acting in accordance with state laws. Also, the Truth in Trials Act (H.R. 3939), a bill that would make it possible for defendants in federal court to reveal to juries that their marijuana activity was medically related and legal under state law, was introduced on October 27, 2009, by Representative Sam Farr. For the first time since District of Columbia residents approved a medical marijuana ballot initiative in 1998, a rider blocking implementation of the initiative was not attached to the D.C. appropriations act for FY2010 (P.L. 111-117), clearing the way for the creation of a medical marijuana program for seriously ill patients in the nation's capital. The Obama Administration Department of Justice, in October 2009, announced an end to federal raids by the Drug Enforcement Administration of medical marijuana dispensaries that are operating in "clear and unambiguous compliance with existing state laws." This move fulfills a pledge to end such raids that was made by candidate Obama during the presidential campaign. Claims and counterclaims about medical marijuana—much debated by journalists and academics, policymakers at all levels of government, and interested citizens—include the following: Marijuana is harmful and has no medical value; marijuana effectively treats the symptoms of certain diseases; smoking is an improper route of drug administration; marijuana should be rescheduled to permit medical use; state medical marijuana laws send the wrong message and lead to increased illicit drug use; the medical marijuana movement undermines the war on drugs; patients should not be arrested for using medical marijuana; the federal government should allow the states to experiment and should not interfere with state medical marijuana programs; medical marijuana laws harm the federal drug approval process; the medical cannabis movement is a cynical ploy to legalize marijuana and other drugs. With strong opinions being expressed on all sides of this complex issue, the debate over medical marijuana does not appear to be approaching resolution. This report will be updated as legislative activity and other developments occur.

There is growing momentum among many national security practitioners and scholars, across the political spectrum, broadly in favor of reforming the interagency system to encourage a more effective application of all elements of national power. One subset of these interagency reform discussions has focused on the cultivation of a community of national security professionals (NSPs) from all relevant departments and agencies. According to proponents, NSPs, through some combination of shared education and training, and rotational tours of duty in other agencies, would gain a better understanding of the mandates, capabilities, and cultures of other agencies. Such preparation would enable NSPs to more effectively craft strategy and plan and execute national security missions together. These shared practices, proponents add, would eventually lead to broader organizational cultural change across U.S. government agencies, as NSPs, for whom interagency collaboration would become second nature, reach senior leadership positions. Such recommendations are not new, but they were given a new sense of urgency by operational experiences at home and abroad over the last 10 years—from the wars in Iraq and Afghanistan to the responses to Hurricane Katrina—which suggested insufficiencies in the ability of the U.S. government to integrate and apply the various components of its efforts. In 2007, in response to growing concerns, the Bush Administration launched the National Security Professional Development (NSPD) program, based on an Executive Order (E.O.) and a published national strategy. The program took shape slowly, and then endured a pause in its development at the change of administration, but in 2011, the Obama Administration revised the NSPD program and refined its focus. Meanwhile, over the last several years, Members of Congress have expressed interest in the cultivation of national security professionals by holding hearings, directing the conduct of independent studies, and introducing related legislation. This report focuses on issues that Members of Congress may wish to consider in crafting or providing oversight for NSP initiatives. For context, it also describes key early proposals; the experiences of the NSPD program to date; current U.S. government strategic guidance; and significant congressional initiatives. Calls for the cultivation of national security professionals to help improve interagency integration date back at least to the immediate aftermath of World War II. They were given fresh impetus by lessons learned from recent operational experiences at home and abroad. The largest major contingency of the 20 th century, World War II, prompted some calls to use professional development tools to improve the nation's ability to apply all of its critical instruments of power more effectively. In the war's immediate aftermath, the War Department commissioned a study of military officer education and tasked Army Lieutenant General Leonard Gerow to lead it. In February 1947, the study team issued its findings, including a recommendation for the establishment of a National Security University. The University would bring together and educate practitioners not just from the military but also from all other security-related agencies, broadly defined. The University would include the Industrial College of the Armed Forces (ICAF, which had already been established), as well as four new schools—a National War College, a joint administrative college, a joint intelligence college, and a Department of State college. As it turned out, of the proposed new institutions, only the National War College (NWC) was established, and in 1976, ICAF and the NWC were brought together under the new National Defense University, designed to pool the intellectual resources of the defense community. Fifty years later, in the aftermath of the Cold War and during a time of expanding U.S. government involvement in nation-building missions, the National Defense Panel (NDP) recommended the establishment of an interagency cadre based on long-term, multi-faceted career development. The NDP itself, a "nonpartisan, independent panel," was established by the National Defense Authorization Act (NDAA) for Fiscal Year 1997 to assess and report on the execution by the Department of Defense (DOD) of the 1997 quadrennial defense review process. The NDP recommended creating: an interagency cadre of professionals, including civilian and military officers, whose purpose would be to staff key positions in the national security structures. Such a cadre would be similar in spirit to the "joint" experience envisioned by the 1986 Goldwater-Nichols Act. Attention should be given to their education, development, and career development [sic]. A certain number of "interagency" slots should be identified within the national security community, including domestic agencies that have foreign affairs responsibilities (e.g. Justice, Commerce, Energy) and staffed by the interagency cadre. The panel further recommended that to support the new cadre, a national security curriculum should be established, "combining course work at the National Defense University and the National Foreign Affairs Training Center, with a mix of civilian, military, and foreign students to receive training and education in strategic affairs." In February 2001, as part of a larger package of proposed national security reforms, the United States Commission on National Security/21 st Century (the "Hart-Rudman Commission") proposed the creation of an interagency cadre called the National Security Service Corps (NSSC) and spelled out its recommendations in detail. The goal would be developing leaders "skilled at producing integrative solutions to U.S. national security policy problems." The program would include full-spectrum career development, including rotational assignments and professional education, and these experiences would be prerequisites for "hold[ing] certain positions or to be promoted to certain levels." The scope of "national security" would be broadly defined—participating departments would include "Defense, State, Treasury, Commerce, Justice, Energy, and the new National Homeland Security Agency." The proposals focused only on civil servants—the military, the intelligence community, and the Foreign Service would be excluded. To help integrate the efforts by multiple agencies, the Hart-Rudman Commission recommended the creation of an "interagency advisory group." The group would ensure that promotion rates for the NSSC were at least comparable to those elsewhere in the Civil Service, and would help establish guidelines for rotational assignments and for meeting professional education requirements. Departments would retain control over their own personnel and would continue to make promotion decisions. The Commission believed that specific legislative authority for such an initiative was not necessary. In 2005, the Beyond Goldwater-Nichols project at the Center for Strategic and International Studies (CSIS) made a very similar recommendation, noting its debt to the Hart-Rudman Commission. They proposed and described the creation of a "national security career path that would give career professionals incentives to seek out interagency experience, education, and training." To the Hart-Rudman proposals, the CSIS team added that to make the program workable for civilian agencies, "Congress should approve a 10% float"—additional personnel—to allow participation in training, education, and exchange programs. In recent years, the interagency reform debates received a powerful jumpstart from the convergence of "lessons learned" thinking in the homeland security and traditional national security communities, developed to assess operational experiences, respectively, in response to Hurricane Katrina, and in Iraq and Afghanistan. Members of both communities concluded that fostering an interagency cadre of specialists would help improve coordination in the future. The convergence of national and homeland security thinking gave additional weight to the basic recommendation, but it also introduced a fundamental tension concerning the relative importance of national and homeland security considerations. In February 2006, then-Assistant to the President for Homeland Security and Counterterrorism Frances Fragos Townsend submitted to President Bush the report The F ederal Response to Hurricane Katrina: Lessons Learned , which described the state of national preparedness before Katrina's landfall and assessed the responses in the immediate aftermath. The report highlighted numerous challenges responding organizations faced in trying to coordinate their efforts—for example, communicating with one another effectively, given that some communications systems were mutually incompatible and others were rendered inoperable by natural events. The report made 125 recommendations for change. Among those recommendations, the report called for the creation of a "comprehensive program for the professional development and education of the Nation's homeland security personnel," with the goal of fostering "a 'joint' Federal Interagency, State, local and civilian team." The scope of the proposed program would thus be broad, including federal, state, and local officials as well as emergency management personnel from the private sector, non-governmental organizations, and faith-based and community groups. To implement such a program, the Katrina Lessons Learned report, like the Hart-Rudman Commission report, prescribed a de-centralized division of labor with only limited centralized oversight. While the Office of Personnel Management (OPM) would establish the professional development program, each participating agency would determine which of its offices played homeland security roles, and what preparation they would need in order to execute those responsibilities. Each agency would establish its own professional development program, including "career assignments, education, exercises, and training." The Department of Homeland Security (DHS), in turn, would set up an interagency working group to establish shared goals and standards for measuring individual agency progress—a collaboration among equals. The Katrina Lessons Learned report also called for making both education and rotational tours in other agencies prerequisites for "senior managerial positions." It argued that legislation should be considered to support this provision. Meanwhile, early operational experiences in Iraq and Afghanistan led many participants and observers to conclude that U.S. government interagency coordination in the decision-making, strategy-making, and planning and execution for national security activities left much to be desired. For example, in the case of Operation Iraqi Freedom (OIF), some practitioners and observers suggested that an insufficiently rigorous National Security Council decision-making process failed to appropriately define objectives or to assign roles and missions among agencies ahead of time; that agencies conducted insufficient planning for post-war considerations; and that in the execution of the formal occupation of Iraq, from 2003 to 2004, agencies found it difficult to collaborate smoothly and seamlessly. At the Department of State, these and other operational experiences contributed to the decision to establish, in 2004, the Office of the Coordinator for Reconstruction and Stabilization (S/CRS), with the mandate to help develop policies and procedures to enable more effective integration of effort in planning and execution, in future contingencies. Within the Department of Defense, for many senior military officers, the apparent need for closer integration of effort across U.S. government agencies suggested that the military's experiences integrating the military services under the umbrella of "jointness," based on the Goldwater-Nichols Act of 1986, might be germane. In 2004, then-Vice Chairman of the Joint Chiefs of Staff Marine Corps General Peter Pace, in a series of public speeches and addresses to DOD war college audiences, suggested that the nation might need a "Goldwater-Nichols for the interagency." He emphasized the value that "cross-pollination," trust, and understanding among agencies could have, and he stressed the fact that within DOD, the Services "had to be forced" into jointness by legislation. Goldwater-Nichols is a touchstone for the uniformed military—both a watershed event for today's senior leaders, and a fundamental way of doing business for junior officers—so it is no surprise that it provides a basis of comparison for many, in thinking about possible interagency reform. In common parlance, "Goldwater-Nichols" refers to the Goldwater-Nichols Department of Defense Reorganization Act of 1986 itself ( P.L. 99-433 , October 1, 1986), and to the ongoing process of implementing and adapting the Goldwater-Nichols legislation, including follow-on amendments to Title 10, U.S. Code, and associated updates to DOD practices and policies. The 1986 act ushered in fundamental defense reorganization, aimed at reducing inter-Service rivalries and fostering greater "jointness" among the Services. The act began by defining what the new concept "joint" meant, thereby bounding the substantive scope of the act . It stated, "the term 'joint matters' means matters relating to the integrated employment of land, sea, and air forces, including matters relating to—(1) national military strategy; (2) strategic planning and contingency planning; and (3) command and control of combat operations under unified command." To achieve greater "jointness," the Goldwater-Nichols Act and related later amendments to Title 10, U.S. Code, created and elaborated a professional development system for joint qualified officers, including requirements for both education and joint duty assignments. The John Warner National Defense Authorization Act (NDAA) for Fiscal Year 2007 made an important revision, amending Title 10, U.S. Code, to establish a four-tiered system of joint qualification that emphasized career-long development and introduced more flexible options for meeting the requirements. As the amended Title 10 now states: "The purpose of establishing such qualification levels is to ensure a systematic, progressive, career-long development of officers in joint matters and to ensure that officers serving as general and flag officers have the requisite experience and education to be highly proficient in joint matters." To make the new system work, the Goldwater-Nichols Act and follow-on legislation established links between "jointness" and career progression. In the first place, the legislation took steps to ensure that pursuing "jointness" would have no negative repercussions on individual career advancement, by supporting parity in promotion decisions concerning "joint" officers and their peers. In addition, in order to create a strong incentive for individual participation, the Goldwater-Nichols Act established joint service as a requirement for promotion to the rank of general or flag officer. The N DAA for FY 2002 strengthened the requirements for promotion to general or flag officer, to include serving a "full tour" of duty in a joint duty assignment, as well as achieving joint designation. The concept of a "Goldwater-Nichols for the interagency" was institutionalized in DOD strategic thinking in 2005, during the conduct of the congressionally mandated quadrennial defense review (QDR) process. The QDR Report called specifically for an interagency cadre: "the Department supports the creation of a National Security Officer (NSO) corps—an interagency cadre of senior military and civilian professionals able to effectively integrate and orchestrate the contributions of individual government agencies on behalf of larger national security interests." In putting forward this proposal, the QDR Report also specifically invoked the joint duty assignment provisions of Goldwater-Nichols, noting, "Much as the Goldwater-Nichols requirement that senior officers complete a joint duty assignment has contributed to integrating the different cultures of the Military Departments into a more effective joint force, the QDR recommends creating incentives for senior Department and non-Department personnel to develop skills suited to the integrated interagency environment." The QDR Report was issued in February 2006, the same month that the Katrina Lessons Learned report was released. In recent years, the George W. Bush and then Obama Administrations have supported fostering a community of national security professionals, both by establishing and maintaining an NSP program and by issuing strategic guidance. Simultaneously, some Members of Congress have pursued the cultivation of an NSP community by mandating studies, conducting hearings, and drafting legislation that would establish a permanent NSP requirement. Until recently, these relatively low-key executive and legislative branch efforts took place largely in isolation from one another. In May 2007, as a direct outgrowth of the convergence of national and homeland security "lessons learned," the Bush Administration launched the original National Security Professional Development (NSPD) program. Under the Obama Administration, after an initial period of relative stasis, the program was revived in substantially revised form. Under both Administrations, the most basic aim of the program has been to improve interagency collaboration by cultivating a community of national security professionals (NSPs). Under the Bush Administration, despite apparently broad and long-standing support for the establishment of such an initiative, the NSPD program was launched quietly and without much fanfare, and few senior officials spoke about it publicly. There was no legislative mandate for the creation of the NSPD program. It was established on the basis of Executive Order (E.O.) 13434 issued in May 2007, and further elaborated by the National Strategy for the Development of Security Professionals ( " National Strategy " ) , released in July 2007. The National Strategy recognized both Katrina Lessons Learned and the 2006 QDR as direct inspirations for the creation of the program. According to the E.O., the broad purpose of the NSPD program was "to enhance the national security of the United States, including preventing, protecting against, responding to, and recovering from natural and manmade disasters." The program aimed to achieve such enhancement by providing opportunities in three areas, or "pillars"—education, training, and professional experience—and by linking progress through the program with career opportunities. One of the most fundamental challenges the designers of the NSPD program faced was to define the program's scope in terms of both substance and participation: how far ought the parameters of "national security" extend? And who exactly should be included? From the outset, the program pointedly defined "national security" to include both "traditional national security and homeland security missions." The National Strategy attempted to refine that definition by stating, somewhat circularly, that "national security missions" were those necessary for the implementation of a series of national strategies: among others, the National Defense Strategy , the National Drug Control Strategy , the National Intelligence Strategy , the National Strategy for Combating Terrorism , the National Strategy for Combating Weapons of Mass Destruction , the National Strategy for Homeland Security , the National Strategy for the Physical Protection of Critical Infrastructures and Key Assets , the National Security Strategy , the National Response Plan , the National Cyber Security Strategy , and the War on Terrorism National Implementation Plan . This statement provided practical but not conceptual guidance concerning the bounds of "national security." Without a crisp definition of "national security" itself, the NSPD program struggled to determine which categories of personnel ought to participate. Levels of Government: While the initial intent of the NSPD program, which pointedly included homeland security in its conceptual scope, appeared to be to include all levels of government, the focus subsequently narrowed to the federal level. The NSPD E.O. stated that the NSPD program's "opportunities shall be provided across ... levels of government"; and it directed that the Secretary of Homeland Security "develop a program to provide to Federal, State, local and tribal government officials education in disaster preparedness, response, and recovery plans and authorities, and training in crisis decision-making skills." Yet the language of the National Strategy repeatedly suggested that NSPs are exclusively federal government employees. For example, the Strategy's first paragraphs asserted that success depends on "heightened collaboration and a mutual understanding ... across the Federal Government." The Strategy also noted: "A national security professional development framework must utilize existing and new opportunities to develop Federal Government professionals with the breadth and depth of knowledge, skills, abilities, and experiences necessary for them to carry out their national security responsibilities effectively." Three Special Categories: The NSPD E.O. created special conditions for three categories of federal professionals: the military, the Foreign Service, and the intelligence community. According to NSPD officials, as the E.O. was being drafted, these communities, all of which already maintained their own robust career development programs, expressed concerns that full incorporation into the NSPD program would impose undue additional burdens in terms of time and resources required. The E.O. clearly indicated the intent that these three communities contribute to the implementation of the National Strategy. At the same time, it specifically freed them from oversight by the NSPD program governing hierarchy. Instead, it tasked their respective agency heads to "issue rules or guidance on professional development programs ... to implement the national strategy," and directed that in doing so they "shall coordinate such programs to the maximum extent practicable with the [NSPD] Steering Committee." Within these parameters, the original NSPD program used positions—or billets—to determine individual participation. The E.O. specifically defined national security professionals as "current and future professionals in national security positions." Agencies were tasked to identify NSP billets, and current occupants of those billets were "in" to the program by virtue of the seats they occupied. Missing, according to some officials, was a mechanism for identifying "future" NSPs, in the language of the E.O., as well as a system for tracking and effectively utilizing NSPs once they had completed program requirements and left designated NSP billets. In 2008, the NSPD program provided a rough order of magnitude estimate that the program would eventually include approximately 20,000 federal government employees, of whom about 1,500 would be Senior Executive Service members, and the rest GS-13s through GS-15s (and their rank equivalents). At the time, some officials familiar with the program suggested that these numbers seemed low, and they wondered which positions at the Department of Defense, for example, would not logically fall under the rubric of national security. Others suggested that the relatively low numbers had a practical explanation—the NSPD program tasked individual departments and agencies to produce lists of their respective NSP positions, but provided no additional resources to support NSP education, training, or other programs, so agencies may have had an incentive to lowball the total numbers reported. In general, governance of the original NSPD program was characterized by relatively weak central administration and largely decentralized execution. Specific leadership roles, and the relationships among key NSPD bodies, shifted during the course of implementation. The May 2007 E.O. created an Executive Steering Committee (ESC) to provide senior-level oversight of the NSPD program. The E.O. specified that the ESC would be chaired by the Director of the Office of Personnel Management (OPM). The ESC's relatively extensive membership, reaching beyond the bounds of those agencies traditionally concerned with national security, included the principals or their designees from the Departments of State, Treasury, Defense, Justice, Agriculture, Labor, Health and Human Services, Housing and Urban Development, Transportation, Energy, Education, and Homeland Security; as well as the Office of the Director of National Intelligence, and the Office of Management and Budget (OMB). In practice, according to participants, once the program was established, agency designees tended to be senior human capital professionals. In late 2007, leadership of the ESC shifted—rather abruptly, some observers noted—from OPM to OMB, under the personal direction of then-Deputy Director for Management Clay Johnson. The shift took place after OPM, in accordance with Section 3 of the E.O., had met a major program milestone by submitting the initial plan for the National Strategy . The E.O. provided that the ESC report jointly to the Assistant to the President for Homeland Security and Counterterrorism and the Assistant to the President for National Security Affairs—a dual reporting chain that emphasized the program's combined emphasis on national and homeland security matters. As established by the E.O. the ESC's broad mandate—to "facilitate the implementation of the National Strategy "—was relatively weak, and individual agencies were designed to be the primary engines of the effort. Agencies were tasked to craft career development initiatives under the NSPD umbrella, and it would be the function of the ESC to "coordinate, to the maximum extent practicable, national security professional development programs and guidance issued by the heads of agencies in order to ensure an integrated approach to such programs." The National Strategy elaborated on this theme, arguing that core competencies and requirements differed among agencies, and therefore the goal was not "a single human resource or career development standard," but rather the "integration of national security professional development resources and opportunities." In early 2008, the NSPD Integration Office (IO) was established with the mandate to coordinate NSPD-related activities among agencies on behalf of the ESC. The NSPD IO was led, under the Bush Administration and in the first years of the Obama Administration, by retired Army Major General William Navas, Jr., a former Assistant Secretary of the Navy for Manpower and Reserve Affairs. He was supported initially by a senior executive detailed from the Central Intelligence Agency and a handful of staff provided by the Under Secretary of Defense for Personnel and Readiness. DOD provided the office with a limited operating budget. With its skeleton staff, relatively limited resources, and limited authority, the IO performed a monitoring rather than an enforcement function: conveying ESC guidance to participating agencies, encouraging and tracking agency implementation, coordinating efforts among agencies, and reporting back to the ESC. The structure of the original NSPD program also included the National Security Education and Training Consortium (NSETC), a virtual network of public and private institutions providing relevant national security education and/or training. The NSETC was led by a board of directors, created in late spring 2008 and mandated to establish criteria for admitting new members to the consortium, to facilitate coordination and information-sharing among members, and to address any identified gaps. The board included representatives from NSPD participating agencies, and it enjoyed significant support from the U.S. Institute of Peace. In accordance with the guidance in E.O. 13434, the original NSPD program focused on three "pillars": education, training, and rotational service in other agencies. These pillars broadly echoed the basic planks of the military's Joint Qualification System. In practice, in NSPD's de-centralized construct, the pillars were implemented to varying degrees and in varied ways, from agency to agency, frequently drawing on and modifying their own pre-existing programs in order to meet NSPD intent. For the education pillar, the NSPD National Strategy stated that the federal government would "establish a broad interagency education system." To that end, rather than create new programs from scratch, the ESC was tasked first to inventory existing programs inside and outside government, to synchronize and provide curricula as needed, to enable virtual connectivity among agencies and educational institutions, and to consider a wide array of possible formats including short-term programs and distance learning. The educational pillar of the NSPD program drew on a pre-existing effort at the Department of Defense aimed at pooling educational resources under the broad banner of national security. The 2006 QDR Report , borrowing terminology from a 1947 study by the War Department, had called for the transformation of the National Defense University (NDU), located at Fort McNair in Washington, DC, into a "true National Security University." As the QDR Report described it, the new institution would be "tailored to support the educational needs of the broader U.S. national security profession. Participation from interagency partners will be increased and the curriculum will be reshaped in ways that are consistent with a unified U.S. government approach to national security missions, and greater interagency participation will be encouraged." Some leading proponents of Joint Professional Military Education (JPME) responded to the QDR recommendations with concern. Representative Ike Skelton of the House Armed Services Committee, long a strong proponent of professional military education, wrote a letter to then-Secretary of Defense Donald Rumsfeld, urging him not to take a step that might impinge on JPME. General Pace, by then Chairman of the Joint Chiefs of Staff, reportedly agreed and gave guidance to make sure that any new interagency-focused initiatives at DOD schoolhouses would not interfere with the fulfillment of the military's own existing educational requirements. As a result of such concerns, instead of transforming itself into a "National Security University," including new bricks-and-mortar facilities, NDU began exploring options for creating virtual communities with counterpart institutions affiliated with other U.S. government agencies, including the Foreign Service Institute, and the National Intelligence University. This approach, known for a time as the National Security Education Consortium, also reportedly eased the concerns of some civilian agencies that developing interagency educational programs within a physical, DOD-owned facility might give the program too much of a defense focus. After the NSDP E.O. was signed in May 2007, these ground-up NDU-led educational efforts were subsumed under the NSPD program. While NDU's early efforts to expand interagency education had been guided primarily by educators, under the NSPD umbrella, human capital professionals, responsible in general for establishing competencies to guide educational requirements, assumed the lead role. One early major NSPD educational initiative was a pilot program hosted by NDU, during the 2007-2008 academic year, at three of its schoolhouses—the National War College (NWC) and the Industrial College of the Armed Forces (ICAF) at Fort McNair, and the Joint Forces Staff College (JFSC) in Norfolk, VA. According to its mission statement, the goal of the pilot program was to produce professionals able to "analyze, at the strategic and operational level, the capabilities, organizational cultures, procedures, and roles of U.S. departments and agencies in the planning and conduct of complex operations in peace, crisis, war and post-conflict overseas and in homeland contingencies." A total of 38 students took part—15 at the NWC, 15 at ICAF, and 8 at the JFSC. Of those, 11 were military officers, including some members of the U.S. Coast Guard. Participating civilian agencies included the CIA, and the Departments of Homeland Security, Justice, and Energy, and the Congressional Research Service. At each institution, NSPD students enrolled in all of the regular core curriculum courses, but selected their elective courses from special lists. At the NWC and ICAF, 12 electives were available, including—illustratively—"Intelligence and National Security," "Homeland Security," "Stabilization and Reconstruction," and "Interagency Negotiation." At the JFSC, available electives included "Case Studies in Interagency and International Operations;" "Homeland Security, Transformation and the War against Terrorism;" "Joint Intelligence, Surveillance, and Reconnaissance;" and "Just War to Jihad: Ethics in an Age of Uncertainty." The pilot program participants, who graduated on June 12, 2008, were to receive a designation in their personnel records that they had completed the NSPD education pillar. According to NSPD officials, eligible participants would still be required to complete the training and professional experience pillars, in order to be designated "national security professionals." At the time of graduation, however, the qualification requirements for those pillars had not yet been developed. "Lessons learned" efforts, including a series of focus groups conducted by NDU, and informal feedback volunteered by students, suggested a few concerns with the pilot program's execution. Some observers reportedly commented that it was not obvious how the NSPD educational objectives differed from those of the normal NDU programs. This observation might be considered a vote of confidence in the adaptability of NDU programs, which have been revised and updated in recent years to reflect greater concern with interagency issues. Some pilot program participants advocated greater flexibility in selecting their elective courses, suggesting that the concept of what is relevant to national security professionals might usefully be expanded. Others reportedly suggested that an NSPD educational program should be more robust and intensive—for example, it might include additional seminars or discussions, outside the usual coursework, exclusively for NSPD participants, to delve more deeply into key interagency issues and case studies. The NSPD educational pilot program was not continued in the following academic year. Meanwhile, the Department of State also leveraged existing initiatives to support the education pillar of the NSPD program. In spring 2007, State piloted its new National Security Executive Leadership Seminar (NSELS) at its Foreign Service Institute (FSI). NSELS, initially envisaged as a replacement for an earlier, nine-month residential executive course, was developed in parallel with the NSPD E.O. and refined to meet its intent. Like the DOD courses, the NSELS program focuses on both national security and interagency concerns, utilizing a variety of assigned reading and guest speakers. NSELS is also deeply "interagency"—about half the participants in each NSELS course come from agencies other than the State Department. Unlike the DOD courses—which are nearly a year long and full-time residential—NSELS students participate two days a month for five months. This approach allows students to continue to do their day jobs without a backfill. Some NSPD-affiliated educators and observers have raised questions about what properly constitutes "education," and they have suggested that short-form courses like NSELS might more appropriately be considered "training." Some further point to the very name of the facility that hosts NSELS: the George P. Shultz National Foreign Affairs Training Center (emphasis added). Others, however, argue that the distinction between education and training should depend more on content than on course length. The NSPD National Strategy defines the two terms this way: Education: Opportunities to enhance a person's capacity for critical and innovative thinking, and level of understanding of authorities, risks, responsibilities, and tools to perform a current or future national security mission successfully. Training: Opportunities to enhance, exercise, or refine a person's ability to apply knowledge, skills, and abilities in performing national security missions. State's NSELS program is not unique in adopting a format that allows participants to continue serving in their current billets. For example, DOD's Executive Leadership Development Program (ELDP), established in 1985, provides DOD civilians (GS-12 to GS-14) with deep exposure to DOD joint roles and missions. Over the course of 10 months, students—who remain in their current jobs—convene first for two weeks of classroom education, and then monthly for one-week field visits to various DOD commands around the world. Proponents argue that such formats can make educational opportunities available to those cannot leave their day jobs for a significant consecutive length of time and would thus otherwise be unable to participate; and that, compared to online coursework, they have the advantage of facilitating in-person relationship-building. For the training pillar of NSPD, the National Strategy called for "ample training opportunities to refine skills through instruction, drills, and exercises." According to the Strategy , the first step—as in the education pillar—was to be identifying existing programs, facilities and institutions that could support the NSPD program. The survey was to consider federal programs first, but also state, local, territorial, tribal, academic, non-governmental, and private sector programs. The newly constituted National Security Education and Training Consortium (NSETC) Board of Directors was assigned the responsibility to recommend training as well as educational courses for inclusion in the NSPD program. The National Strategy also tasked the ESC to promote existing federal government training consortia concerned with aspects of national security, "in order to promote a sharing of best practices." In general, the original NSPD program acknowledged great variation among the roles and responsibilities of NSPs across the government. The National Strategy , for example, recognized "the reality that the core competencies needed for each mission area and institution will vary, and therefore professional experience, education, and training programs must be customized in each mission area and institution." What the NSPD program's strategic documents did not directly address is that the variation in requirements might be substantially greater for training than for education. Education in strategic planning, problem-solving, and leadership, for example, might be appropriate for all NSPs. Training requirements, however, are typically much more specific, focused on mastering tasks to be executed during contingencies, including requirements to coordinate with specific colleagues in other agencies, and thus might reasonably vary significantly among NSPs. The earliest NSPD training efforts were focused on creating an appropriate orientation for all participating NSPs. According to NSPD officials, the purpose of introductory training would not be to create instant experts, but rather to introduce participants to the full spectrum of NSPD agencies and concerns. In practice, orientation training was bifurcated between homeland and traditional national security concerns. On February 4, 2008, the Emergency Management Institute of the Federal Emergency Management Agency (FEMA), part of the Department of Homeland Security, unveiled an online, three-hour orientation course entitled, "National Response Framework: An Introduction." The course, like the framework itself, had been developed in response to lessons learned from responses to Hurricane Katrina. The FEMA course outline stated that material covered included the framework's purpose, response doctrine, the roles and responsibilities of participating entities, and multi-agency coordination. The course was intended for "government executives, private-sector and non-governmental organization (NGO) leaders, and emergency management practitioners." The course was adopted pragmatically by the NSPD program to meet at least part of its own training requirements. Meanwhile, in the absence of a pre-existing product, National Security Council staff worked to develop a traditional national security-focused introductory online training module, entitled "National Security Objectives, Structures and Processes: An Introduction." At the time, some officials noted that this pragmatic dual-track approach to orientation missed a key opportunity to underscore and elaborate on a fundamental premise of the NSPD program—that, as the National Strategy stated: "The Nation cannot view the missions of national security and homeland security as separate and distinct." Professional experience—or interagency rotation—was the third pillar of the NSPD program established by the May 2007 E.O. Other than interagency rotation programs that were already in place, this pillar was the least developed of the three under the original NSPD program, arguably because rotations require more refinements to personnel systems and more coordination among agencies than either shared education or shared training. The original NSPD program consistently adopted a highly de-centralized approach toward rotational opportunities. The National Strategy spelled out the tasks to be undertaken to support the interagency experience pillar, including designating certain activities as "interagency duty assignments," developing a "formal mechanism" for rotational and temporary detail assignments, and linking career advancement to participation in such rotational assignments. The Strategy assigned these responsibilities to the "relevant departments and agencies," while the role of the ESC would be simply to "coordinate the completion" of the tasks. In March 2008, the NSPD IO coordinated the compilation of a checklist of proposals to the ESC for decision and action. This "Action List" echoed the Strategy's highly de-centralized division of labor for interagency rotation issues. It recommended tasking individual agencies to develop the "criteria for acceptable mission-related experiences that are appropriate for their NSP positions;" to identify positions available for rotational opportunities; and, "to the extent permitted by law," to draft regulations "designed to create rules stipulating that candidates for Senior Executive Service (SES) positions (or other equivalent senior-level federal executive positions) for identified national security positions across the Federal government must have documented rotational or interagency national security professional experience." In November 2008, OPM, in coordination with the ESC, acted on some of these proposals by issuing guidance to NSPD participating agencies, in which they "encourage[d] agencies to implement a qualification requirement for specific NSP-designated SES positions," based on individuals' "demonstrated ability to lead inter-agency, inter-departmental, inter-governmental activities, or comparative cross-organizational activities;" and recommended "a multi-agency or equivalent experience for selection into NSP SES positions." This OPM guidance cast a broad net in defining the boundaries of "interagency" experience, including "Federal, state, local or foreign government entities, non-profit or non-governmental organizations, private sector organizations, international organizations such as NATO, and/or academic institutions." Like the National Strategy, the OPM guidance gave agencies a great deal of leeway in general, including the flexibility to include internal rotations among their own components, and the discretion more broadly to define the qualification requirements based on their own needs. Since the mandate for the NSPD program is an executive order, the January 2009 change of administration introduced deep uncertainty about the future of the program—would the Obama Administration rescind the E.O., or extend and perhaps expand on it, or simply let it die a quiet death? Coming into office, the Obama Administration did not rescind the NSPD E.O., but neither did anyone at the White House immediately assume the mantle of leadership for the program. Then-NSPD IO Director Navas reportedly posted a sign in the office: "If the boss calls, get his name and number!" Many referred to this period as a "strategic pause." However, that term is something of a misnomer, in two senses: NSPD program activities did continue, albeit at a lower tempo; and specific efforts were launched during that time to refine the program's strategic direction. In 2009 and 2010, some NSPD participating agencies continued to take the initiative in making training and educational opportunities available to their own designated national security professionals (NSPs) as well as to NSPs from other agencies. For example, the State Department continued to conduct its NSELS educational course for full houses of State and non-State "students," and its Foreign Service Institute conducted germane training courses for State and non-State participants, such as the workshop "Interagency Effectiveness: Strategies and Best Practices." In August 2010, the Department of Defense (DOD) hosted a National Security Professional Symposium at the National Defense University. The event was designed not to map out the next phase of NSPD program activities, but rather to continue the NSPD process by "bringing together professionals from a wide variety of agencies to collaborate and learn together." DOD reported that the event drew 266 participants from more than a dozen federal agencies. In November 2010, the Department of Commerce hosted a half-day "NSPD Agency Awareness" event, with participants from at least 10 agencies. The event was designed to give NSPs "the opportunity to network with other NSPs from across the federal government while also learning about the history, functions, and cultures of other departments." The event included "101"-style overviews by three agencies: the Departments of Commerce, Energy, and Transportation. Despite the lack of robust overall program guidance at that time, the level of individual interest in participating in the NDU event was reportedly reasonably strong. Meanwhile, during the so-called pause, the National Security Staff (NSS) sought to reinvigorate and refine the focus of the NSPD program. Ambassador Mary Carlin Yates, then the Special Assistant to the President and Senior Advisor for Strategic Planning, who had led efforts across the Administration to produce the 2010 National Security Strategy , was given policy responsibility for the NSPD program and established an Interagency Policy Committee (IPC) to oversee the effort. Ambassador Yates' staff, working through an interagency sub-IPC, reportedly made substantial progress revising the Bush Administration's National Strategy for the Development of Security Professionals, which had been issued in July 2007, with the intent of using a clear, agreed new NSPD strategy as the basis for developing and issuing an updated NSPD executive order. In addition, Ambassador Yates' NSS team led an effort to craft and gain IPC approval of a revised list of desired "shared capabilities" that would apply to all NSPs. The objective, according to NSS and agency officials, was to provide all NSPD participating agencies with refined, broad intent to serve as a basis for their respective NSPD program planning efforts. The revision effort grew out of discussions that took place during the August 2010 NSPD Symposium hosted by NDU. After the NDU event, the National Security Education and Training Consortium (NSETC) put together a curriculum working group which, under NSS leadership, revised the Bush Administration-era document, "National Security Professionals Shared Competencies for Interagency Operations." The new document, "Shared Capabilities," identified the same basic eight qualities named in the earlier version—strategic thinking; critical and creative thinking; leading interagency teams; collaborating; planning and managing interagency operations; maintaining global and cultural acuity; mediating and negotiating; and communicating—but refined the descriptions of each. Substantively, all of the categories in the revised "Shared Capabilities" paper were broadly applicable to any contingency, rather than being mission-specific. The paper did not describe how much of each capability an individual required. Practically, the shift away from the use of the word "competencies" was deliberate—the revised paper began, "It is important to note that the list does not include specialized competencies." The change was significant from a human resources (HR) perspective—in that community, the term has technical ramifications for hiring and career progression. While the HR community reportedly was eager to shed the term, other NSPD officials apparently lamented the loss of the leverage that might be gained from pinning desired outcomes to mandatory HR procedures. All of the NSPD efforts spearheaded by the NSS in 2010—on strategy and on shared capabilities—reflected a new, narrower substantive emphasis on the "interagency." In 2010, NSPD officials noted that the tighter focus on the interagency—including those individuals who work primarily in an interagency context, and those issues that are clearly and primarily cross-cutting—was an effort to more appropriately scope the NSPD program, improving both its effectiveness and its efficiency. That new emphasis, officials indicated, would be reflected in the revised NSPD National Strategy . The "Shared Capabilities" paper also underscored the new emphasis in its new preambular language, which noted that every response to national security threats and opportunities shares "the need for integrated interagency engagement," and that "recognizing this, the Executive Steering Committee opted to focus on the shared capabilities NSPs need in order to succeed in any interagency environment." In 2011, the Obama Administration launched a significant reorientation of the NSPD program—referred to by some key practitioners as "NSPD 2.0"—including changes to its structure, organization, and focus. After Ambassador Yates transitioned to a new role on the NSS as Special Assistant to the President and Senior Director for African Affairs, her team's mandate to revise the National Strategy and the E.O. was apparently not transferred to her Strategic Planning successor. Instead, in February 2011, the Resilience Policy Directorate of the NSS, led by Richard Reed, Special Assistant to the President for Homeland Security and Senior Director for Resilience Policy, assumed policy leadership of the NSPD program. The Domestic Resilience Group (DRG) IPC, led by the Resilience Directorate, became the senior-level forum for providing strategic direction. In terms of its mandate, NSPD 2.0 continues to rely on the formal mandate provided by the original NSPD E.O. 13434. A new Charter for the program's Executive Steering Committee (ESC) states clearly that the program does not seek any additional authorities. At the same time, the Charter itself has served as a vehicle for refining the program's emphasis. The most fundamental change has been a new focus on preparing to accomplish specific missions, rather than on fostering an ability to collaborate across the spectrum of potential national security concerns. One official called the new focal point "tangible outcomes with smaller scope." In terms of its structure, NSPD 2.0 preserved the ESC, under OPM chairmanship, largely intact. The new Charter echoes the role of list of ESC participants from the original E.O. with only one change, the inclusion of the Department of Commerce. Even that change is minimal—after the original E.O. was issued, Commerce had been invited to participate in the NSPD program. The Charter requests that agencies' chief human capital officers represent them at ESC sessions. The ESC convened for the first time in this slightly modified format and under new policy direction, on July 27, 2011. NSPD 2.0 also preserved the NSPD Integration Office. Since June 2011, the office has been led by Rear Admiral (retired) Gerald Talbot, a senior executive on detail from the National Nuclear Security Administration at the Department of Energy. The NSPD IO, still a small team, maintains its function of integrating the efforts of multiple agencies under the leadership of OPM and the ESC. In terms of program activities, the Charter specified that, to start, NSPD would focus on a single pilot program organized around Emergency Management, "in lieu of developing an NSPD program that addresses the entire scope of national security issues." The Charter named the Department of Homeland Security (DHS) the lead agency for the pilot, and further specified that the pilot would be limited to the National Capital Region, for cost reasons, and to participation by employees—not contractors—in the GS-13 to GS-15 range. To implement the pilot, the Charter tasked agencies to identify both positions and individuals for participation in the revised program; it tasked DHS to develop the core requirements for education, training, and rotational assignments for the pilot; and it tasked OPM to develop an appropriate human capital plan. In completing these assignments and charting a way forward, the refined NSPD program reportedly has been able to leverage implementation of Presidential Policy Directive-8, on "National Preparedness," issued in March 2011. PPD-8 directed the development of a "national preparedness goal that identifies the core capabilities necessary for preparedness," to include threats and vulnerabilities, and measurable, prioritized objectives; and "a national preparedness system to guide activities that will enable the Nation to achieve the goal," including mechanisms for planning, organizing, equipping, training, conducting exercises, carrying out assessments, and engaging in strategic communications. PPD-8 named DHS the lead agency for coordinating with other agencies, other levels of government, and outside stakeholders in order to craft the goal and design the system. Agencies participating in both the NSPD program and the implementation of PPD-8 were able to use PPD-8 working group participation lists to help identify both positions and personnel for the NSPD program. In turn, PPD-8 implementation, officials note, has provided opportunities for budding NSPs to test and further develop the skills and understanding that the NSPD program was designed to foster. The reorientation of the NSPD program has been the focus of some debate, particularly among current and former officials with responsibilities for the program. The field of emergency management, it is generally agreed, had the advantage of existing collaboration mechanisms, and training and educational programs (in particular through FEMA's Emergency Management Institute), that were already quite robust. Most agree that making emergency management the focus of NSPD allows the program to draw on these existing initiatives in order to "demonstrate success"—tangible evidence of collaboration—relatively early. Some have expressed concern that the narrowing of the program's substantive focus might make it difficult to broaden that scope again in the future to include a wider array of national security-related concerns. Program officials have suggested, however, that if the revised NSPD program is perceived to succeed, it is more likely that there will be future opportunities to consider expanding NSPD to include additional communities of interest. The Obama Administration has issued considerable strategic guidance, at the national and individual agency levels, reinforcing support in general for stronger interagency collaboration and in particular for the NSPD program. The congressionally mandated May 2010 National Security Strategy devoted three pages to a discussion of "strengthening national capacity—a whole of government approach." The Strategy stressed progress to date in "improving the integration of skills and capabilities within our military and civilian institutions, so they complement each other and operate seamlessly." It acknowledged that "work remains to foster coordination across departments and agencies." To that end, it called for "adapting the education and training of national security professionals to equip them to meet modern challenges." The State Department's 2010 Quadrennial Diplomacy and Development Review (QDDR), the first such review conducted, echoed the emphasis of the National Security Strategy on the need for more effective interagency integration—stressing the need "to create whole-of-government solutions through better engagement and coordination with other U.S. government agencies." The QDDR pledged that the State Department would undertake specific initiatives to that end. It called for expanded training opportunities for State Department employees, and encouraged both the application of additional resources and the exercise of "high-level commitment" in order to make sure that employees have the time and incentives to undertake training. It pledged that the State Department would work closely on training opportunities with DOD and other agencies to leverage their capabilities and expertise. It also called for increased opportunities for interagency rotational assignments both to and from other U.S. government agencies. To support such efforts, it called for tying training and rotational service to promotion decisions. The QDDR also specifically noted that the President had directed the National Security Staff to reinvigorate the NSPD program, starting with an interagency effort to refine a strategy for the program. The Department of Defense's congressionally mandated February 2010 Quadrennial Defense Review (QDR) Report stressed the same fundamental theme from a DOD lens: "the need to continue improving the Department of Defense's cooperation with other U.S. departments and agencies." To that end, it underscored that DOD would continue "to advocate for an improved interagency strategic planning process." It stressed the need for the U.S. government as a whole to "significantly improve interagency comprehensive assessments, analysis, planning, and execution for whole-of-government operations." Like the QDDR, the QDR specifically mentioned the NSPD program. The QDR urged fully implementing the program by "improv[ing] cross-agency training, education, and professional experience opportunities," which would in turn "foster a common approach to strategic and operational planning and implementation," and "improv[e] prospects for success in future contingencies." In February 2010, the Department of Homeland Security (DHS) submitted to Congress the first Quadrennial Homeland Security Review (QHSR) R eport . Like its sister strategic guidance documents, the QHSR called for unity of effort. It emphasized the need for a strong national security community supported by "a professional development program that fosters a stable and diverse community of professionals with the proper balance of relevant skills, attributes, experiences, and comprehensive knowledge." It particularly lauded the launch of the NSPD program and underscored the need for DHS to "work together with our national security partners in bringing that important idea to fruition." As an additional step, the QHSR called for fostering a "homeland security community of interest" within the broader NSPD framework. The community would include representatives of "State, local, tribal, and territorial governments, DHS and other Federal agencies," with support from academic institutions. This bounding of a sub-category under the larger national security professional umbrella presaged the new direction the NSPD program would take in 2011. Like the State Department, DHS introduced resource considerations into the discussion. While State stressed the challenges that all agencies other than DOD face in backfilling positions while personnel pursue "national security professional" opportunities, DHS specifically emphasized the hurdles to participation faced by those agencies with limited but still critical national or homeland security responsibilities. It called for adequately resourcing such agencies. Against the backdrop of Administration initiatives and growing policy community interest, Congress has taken a number of discrete NSP-related actions. Congress has directed the conduct of several major studies that, in part or in whole, have focused on NSPs. In the National Defense Authorization Act (NDAA) for Fiscal Year 2008, Congress tasked the Secretary of Defense to contract with an "independent, nonpartisan, nonprofit organization" to conduct a study of the national security interagency system. The contract was awarded to the Project on National Security Reform (PNSR), led by Jim Locher, which published its findings as the landmark study Forging a New Shield in 2008. As part of this sweeping call for fundamental interagency reform, PNSR argued in favor of fostering a cadre of national security professionals who would serve in what Locher has frequently termed "interagency space." The proposed National Security Professional Corps would "complement department personnel with professionals able to move easily among agencies and into positions requiring interagency experience." Tellingly, since the Corps would focus on "identifying and assigning people for interagency work," it would ease agencies' "reluctance to give up personnel for interagency positions." In the NDAA for FY 2010 , Congress required the commissioning of a study to be conducted by "an appropriate independent, nonprofit organization" of "a system for career development and management of interagency national security professionals." This contract was also awarded to PNSR, which produced its findings, The Power of People, in November 2010. In this report, PNSR called for building an Integrated National Security Professional System, a revised and also more detailed version of its 2008 National Security Professional Corps concept. Much like the existing NSPD program, the proposed system would include training, educational, and rotational opportunities that would help foster program participants' abilities to collaborate across agency boundaries. Participants would progress over time through a series of levels of proficiency. Centralized management would help provide oversight for standards, qualifications, and appointments. The program would be open to practitioners across the federal government, including the military, as well as state, tribal and local officials. In P ower of People , as in its previous study, Forging a New Shield, PNSR envisaged the national security professional initiative as part of a much broader program of interagency reform. But in a shift from its approach in Forging, in Power of People, PNSR called for a more deliberate, four-stage approach to developing the NSP community. In the early stages, NSPs would still belong primarily to their home organizations. As the initiative developed, PNSR argued, the interagency system as a whole would move toward closer, broader integration of effort. Against that backdrop, by stage four of the process, a robust cadre of NSPs would be serving primarily at the "interagency" level. At that stage: Significant responsibilities and accountabilities for performance would transition to integrated teams and task forces, with departments and agencies in many instances becoming providers of capabilities rather than mission managers, especially where missions inherently require collaboration. In December 2010, the Government Accountability Office (GAO), one of Congress's own research organizations, released a study of current professional development activities designed to improve interagency collaboration on national security matters, based on a request by a congressional client. The study catalogued a broad array of programs, including most if not all NSPD efforts to date as well as many other initiatives that fell outside the formal scope of NSPD. The study made a valuable contribution in part because, according to many officials, most agencies had previously had only limited visibility on the full spectrum of collaboration initiatives underway. GAO subsequently launched a follow-up project aimed at evaluating several of the interagency rotation programs identified in the December 2010 report. The National Defense Authorization Act for Fiscal Year 2011 required the Department of Defense to select an "appropriate independent, nonprofit organization" with "relevant expertise in the fields of national security and human capital development, to conduct a study to assess the current state of interagency national security knowledge and skills in DOD civilian and military personnel," and then to make recommendations for strengthening that knowledge and those skills. The NDAA required the Secretary of Defense to submit the findings to congressional defense committees by December 1, 2011. The NDAA required that the study consider, among other topics, the availability of training, education and rotational assignment opportunities; incentives and disincentives for individuals to undertake these opportunities; the integration of such educational opportunities with the joint professional military education (JPME) system; and the existing level of interagency knowledge and skills of senior civilian and military officials. While the requirement was focused only on DOD, rotational assignments, by definition, involve other agencies, so completion of the study could cast light on broader interagency NSP practices. A notable feature of the legislative requirement was the specific mandate to consider the relationship between NSP initiatives and JPME, given concerns long expressed by some military officials regarding the potential for NSP programs to "impinge" on smooth execution of JPME. The past several years have witnessed several discrete, major, congressional initiatives, each designed to create a permanent requirement for the executive branch to foster a community of national security professionals. The Interagency National Security Professional Education, Administration, and Development System Act of 2010, ("INSPEAD"), H.R. 6249 , introduced in the House during the 111 th Congress but not enacted, drew explicitly on the Goldwater-Nichols Act of 1986 and the military's joint qualification system to create a multi-faceted system for "interagency qualification" based on education, training, and interagency exchange service. The bill was sponsored by Representative Ike Skelton, and co-sponsored by Representatives Geoff Davis, Vic Snyder, and John Tierney. In the previous Congress, the 110 th , Representative Davis had introduced a related bill, H.R. 7138 , The National Security Professionals Act of 2008 . The INSPEAD bill envisaged a system based—analogously with the Joint Qualification System—on levels of interagency qualification, which individuals would achieve by completing specified educational, training, and rotational assignment requirements. As the bill explained, The purpose of establishing such qualification levels shall be to ensure systematic, progressive, career-long development of national security professionals in the knowledge, skills, experience, and abilities that enable them to be highly effective participants in interagency activities related to national security matters. In turn, in the INSPEAD system, designated "interagency national security professional" positions would be mapped to specified levels of qualification, helping to ensure that critical national security posts were filled by individuals with sufficient "interagency" backgrounds. Achieving the highest level of interagency qualification would be a prerequisite for filling a senior-level INSP billet. To scope the program, the INSPEAD bill defined participation in the system primarily by position. It focused on those positions that deal substantively with national security matters and also require substantial interagency engagement. That focus echoed the shift of emphasis in the NSPD program early in the Obama Administration from all those engaged in national security activities toward those actively involved in interagency collaboration. The INSPEAD bill excluded participation by political appointees, but made the requirements of the system applicable to the military's commissioned officer corps. In terms of organization, the INSPEAD bill maintained the basic Executive Steering Committee format utilized by the NSPD program, but re-located the Integration Office from DOD sponsorship to the Executive Office of the President. Compared to the NSPD program, the INSPEAD bill advocated stronger centralized management, giving the center greater responsibilities for establishing shared standards and providing long-term career management oversight for NSPs. The Interagency Personnel Rotation Act of 2011, introduced simultaneously in the Senate and the House during the 112 th Congress, aims broadly at the same goal shared by the INSPEAD bill and the PNSR proposals—that is, more effective and more efficient interagency collaboration. While the INSPEAD bill would have established, to that end, a robust career development system including education, training, and exchange service, the Rotation Act would create a more streamlined mechanism based on a program for interagency rotations. The Senate bill, S. 1268 , is sponsored by Senator Lieberman, and co-sponsored by Senators Akaka and Collins. The House bill, H.R. 2314 , is sponsored by Representative Geoff Davis and co-sponsored by Representative Tierney. In terms of participation, the Rotation Act would cast a broad net including national and homeland security practitioners, from the GS-11 through GS-15 levels, and would leave the participation by military officers to the discretion of the Secretary of Defense. In terms of organization, the Rotation Act would preserve the both the de-centralized premise and the rough organizational structure of the NSPD program, creating a Committee on National Security Personnel within the Executive Office of the President, under the chairmanship of the Director of OMB, including the National Security Advisor and the Director of OPM, and supported by a board including senior-level officials from participating agencies. Unlike most past initiatives, the Rotation Act would create a framework of "interagency communities of interest" (ICIs) under the broader NSP umbrella. The committee would designate the substantive ICI categories—functional or regional—while individual agencies would determine which of their positions belong to each ICI. The bill itself specifies the first two ICIs: emergency management and post-conflict reconstruction. The use of communities as distinct subsets of a broader program echoes a QHSR recommendation and would mirror the approach of "NSPD 2.0," which began by focusing on a single pilot, Emergency Management. Like NSPD 2.0, the Rotation Act explicitly aims to limit costs. As a rule, it aims to achieve one-for-one matching between rotating personnel and host agency positions, in order to avoid gaps and obviate the requirement for personnel "floats." The act envisages an initially very modest scope of participation including, during the first five years of the program, between 20 and 25 persons serving in rotational assignments per year. To help bolster both individual incentives for participation, and long-term agency commitment to the process, the Rotation Act mandates that agencies, in selecting individuals to serve in senior-level positions in a given ICI, give "strong preference" to personnel who have completed interagency rotations in that ICI. That provision echoes, though more faintly, the INSPEAD provision that would have made the highest level of interagency qualification—including rotational service—a prerequisite for service in senior-level NSP positions. In weighing the merits of draft legislation and outside proposals aimed at fostering an interagency community of national security professionals, Members of Congress may wish to consider the following issues. One of the most fundamental questions concerning any existing or proposed NSP initiative is the basic purpose of the effort. One approach is to focus on changing individual practices, to help ensure that designated professionals are better prepared to participate in specific, near-term interagency national security activities. An alternative approach is to focus on changing institutional cultures such that, over the long term, interagency collaboration becomes the natural default for all those engaged in national security matters. The original NSPD program took a longer-term view, aiming to foster a cadre of interagency-qualified professionals able to work effectively in interagency contexts and then to bring those interagency perspectives back to their home agencies. The 2011 revised version of the NSPD program aims far more explicitly at meeting current requirements—using educational, training, and rotation opportunities to foster the ability of NSPs to more effectively execute missions "now." Yet most practitioners and observers would agree that there need be no hard and fast choice between fostering individual mission-oriented skills and changing institutional cultures—indeed, changing individual practices, many sociologists would argue, is the most effective way to change shared culture over time. As an analogy, the military's joint qualification system aims explicitly to achieve both goals. To meet immediate mission requirements, the Goldwater-Nichols process designates some joint billets as critical for mission success, and requires that those billets be filled by individuals who already have a specified level of joint qualification. At the same time, the system fosters joint-qualified senior leaders, who bring joint mindsets and approaches back to their home services, thus augmenting—though not replacing—service cultures with joint culture. It is common for interagency reform proponents to call for closer integration among departments and agencies, but "integration" can mean a range of different things in practice. At one end of the spectrum, members of different agencies view may themselves primarily or exclusively as representatives of their home agencies, but they are familiar with the work of other agencies and able to work with counterparts in them—this may facilitate a well-coordinated application of their respective capabilities. At the other end of the spectrum, members of different agencies may view themselves primarily as part of a common, completely integrated enterprise at the systemic level, though they may still be able to reach back into their home agencies for resources and support. Among commentators, PNSR has made the most comprehensive case to date for fostering a genuinely "interagency cadre." Some argue that a systemic-level cadre might be best able to articulate and execute national-level priorities and missions. Others suggest that members of such a cadre might lose the ability to understand and represent their agencies of origin, and their exclusive work in interagency circles might leave them little time to help infuse their home agencies with interagency perspective. As a point of comparison, the U.S. military's emphasis on jointness, based on the 1986 Goldwater-Nichols Act as amended, more nearly mirrors the agency-based concept of integration. Officers at various levels of joint qualification complete joint duty assignments, usually outside their home military service, but they serve most of their careers within their respective services. An officer's service decides whether he or she is sent to a joint duty assignment, and whether or not he or she is promoted. The overall intent may best be described less as the creation of a cadre of joint-qualified officers who serve together and work on joint matters, and more as the fostering of an increasingly "joint-minded" total force that benefits from—and relies on—the infusion of joint perspectives using the mechanism of joint duty assignments. One critical issue, both in practice to date and in the broader policy debates, has been the appropriate scope of inclusion for a national security professional program—which individuals, and which categories of personnel, should be considered NSPs or have the opportunity to become NSPs? At stake are two very different considerations, which might drive very different solutions. The substantive consideration is how best to make sure that the program includes all the right categories of personnel, at the right scale, to ensure that the program meets its strategic goals and generates desired effects. The practical consideration is how best to protect resources at both the systemic and agency levels, by strictly limiting participation to the minimum essential categories of personnel and numbers while still achieving program goals. One key facet of the "scope" issue is the substantive focus of the program—in particular, the balance between homeland and traditional national security concerns. There is a broad consensus in the Washington policy community that the two categories are related, and this position has been echoed clearly by the Obama Administration. As many observers have noted, it is difficult to draw a clear line between them, because providing security for the homeland may require addressing challenges that arise abroad. But there is also recognition in practitioner communities that not all aspects of "national security" broadly defined are related to all others. Too broad a substantive reach—or too broad a reach with too-uniform policies and procedures—runs the risk of imposing unneeded professional development activities with an attendant waste in time and resources. In practice—and deriving in part from the desired substantive focus—one key decision for any NSP program concerns which agencies of the federal government should be included. The initial NSPD Executive Order and the 2011 revised Charter for the NSPD Executive Steering Committee each cast a wide net in terms of participation, including not only stalwarts such as DOD, State, and DHS, but also less traditional national security agencies such as Health and Human Services, and Housing and Urban Development. On one hand, broadening the scope of participation to include additional, non-traditional national security agencies is appealing because it might offer a relatively low-cost way to incorporate entities with singular expertise, and to catalyze interagency relationships that could improve coordination, and save time and money, in future contingencies. On the other hand, the inclusion of agencies that would have only a handful of participants might create disproportionate administrative burdens for both the agencies themselves and for those responsible for program oversight. Some of the "undue burden" risk might be ameliorated, in practice, by relying on the major participants such as DOD, State, and DHS to host program activities open to all participating agencies. Both practitioners and outside experts have grappled with the question of participation by three major sub-categories of professionals within agencies: the uniformed military, the Foreign Service, and the intelligence community. At the outset, all three communities reportedly opposed full, formal inclusion in the NSPD program, on the grounds that each community already had a well-established career development program, and that additional requirements would be too burdensome. The NSDP E.O. gave the Secretary of Defense, the Secretary of State, and the Director of National Intelligence the responsibility to issue separate sets of guidance for each of these communities, and then "to coordinate such programs to the maximum extent practicable with the [NSPD] Steering Committee." In practice, this language was widely interpreted to mean that the three communities were welcome, but not obliged, to participate in NSPD activities. The argument for avoiding a formal mandate for these three communities to participate is the possible time conflict it might create with their respective, existing career development programs, which already include various forms of training, education, and rotational service. For the military, for example, the requirements for Joint Professional Military Education (JPME) are robust, leaving little time in a career for additional education or rotational tours. Moreover, JPME is governed in part by law, so some changes to JPME might require legislative action. On the other hand, some observers have suggested that, in theory, some of the requirements of JPME and the other communities' career development programs might be fully compatible with those of interagency NSP programs. For example, one can imagine possible duty assignments for a military officer that might provide both "joint" and "interagency" experience. The NSPD program was designed to include career professionals, not political appointees. Over the course of NSPD program implementation to date, some practitioners and outside experts have pointed out that political appointees with similar responsibilities to coordinate national security matters in an interagency environment might also benefit from NSPD-program-like training and education, and other forms of relationship-building. In fact, many have noted, appointees who come from sectors outside government may need familiarization with interagency work much more than government career professionals do. Most observers agree that formal inclusion of political appointees in any NSP program, including making them subject to the same rules that apply to career professionals, would be a bridge too far because it would constrain the President's authority. Moreover, some argue, given the short average tenure of political appointees in government, it might be hard to justify any significant allocation of their limited time for training and education. As a compromise, some have suggested making NSP program activities available to political appointees at their discretion—a flexible approach that might not, however, encourage appointees to consider those activities a priority. Others have suggested that in the selection of political appointees to fill designated national security positions, criteria similar to those that would be applied to career personnel ought to be considered. Practitioners and outside experts have debated the extent, if any, to which NSPD or a possible successor program should include state, local, and tribal officials, as well as federal-level employees. The initial NSPD E.O., without requiring formal participation from non-federal levels of government in the NSPD program, did open the door to their participation in program activities. Section 2 of the E.O. noted that NSPD's "education, training and professional experience opportunities" should be "provided across organizations, levels of government, and incident management disciplines as appropriate." Section 5 noted that the Secretary of Homeland Security should develop a program to provide to federal, state, local, and tribal government officials education in disaster preparedness, response, and recovery plans and authorities, and training in crisis decision-making skills, consistent with applicable presidential guidance. The NSPD Strategy , however, pointedly narrowed the focus of the program to the national level, stating at the outset that the goal was "integrated effort with common purpose across the Federal Government." It underscored the narrower scope by arguing that NSPs would "work in coordination with" many others including "state, local, territorial, and tribal governments" as well as the private sector, NGOs, and foreign governments—by implication, none of those others would themselves be considered NSPs. The main practical argument for narrowing the scope to the federal level of government is that the inclusion of other levels of government would impose on the program significant resource demands and logistics challenges. The main substantive argument for exclusion is that the overlap among the portfolios of interest and responsibility of various levels of government is relatively limited—after all, firefighters in Des Moines, Iowa, do not need to know how to foster inclusive community councils in Paktika Province, Afghanistan. On the other hand, some observers, including PNSR, have argued that the more closely the U.S. government approaches a truly "whole of nation" approach to national security, including all levels of government and all relevant non-governmental actors, the more effective the practice of national security will be. For those considering the merits of, and possible options for, fostering a community of national security professionals, a key practical issue is how best to structure such an initiative in order to achieve the desired objectives. Different objectives—meeting short-term mission requirements or fostering long-term cultural change, building a cadre of "interagency professionals" at the systemic level or fostering "interagency-savvy" professionals in individual agencies—would likely be best met by different practical mechanisms. In any case, as the military has discovered in more than 25 years of refining its implementation of the Goldwater-Nichols Act, crafting the detailed mechanics to meet a program's policy goals, once defined, tends to be complicated and to require substantial human resources expertise. One of the most important practical questions concerns the selection of individuals for participation in any NSP program—a distinct question from the selection of billets. At stake in the choices at this "micro" level are two key considerations that also apply to the choice of "categories" of personnel for inclusion: ensuring that participation is broad enough to meet substantive national security requirements, while avoiding too-strenuous resource demands. "Individuals" are not static—people enter and exit government employment altogether; government employees enter and exit national security-focused jobs; and government employees progress through different career stages. Further, in many proposed formats for fostering national security professionals, participating individuals would be expected to progress from "seeking qualification" to "qualified"—and in some proposals, through multiple stages. To address this dynamism, some suggest that it might be useful for an NSP program to (1) identify the broader "pool" of those entitled to seek qualification; and (2) specify the rules that govern individual progress over time through the system. "Billets" are a potential source of confusion because they can serve two distinct purposes in a professional development program that also has real-world goals. One purpose can be to meet real-world requirements—for example, a program might specify that designated national security billets must be filled by persons with some identified interagency capabilities, in order for the U.S. government to best execute national security activities. Another purpose billets can answer is instrumental—serving in them helps an individual gain program qualification. To address this potential room for confusion, an NSP program might clearly articulate whether the function of billets is to meet real-world needs, help grow qualified NSPs, or both. The military's joint qualification system, while not an exact model, provides a useful point of comparison for any proposed or existing NSP programs. In the military, the scope for individual participation is broad—all officers, active and reserve, can seek joint qualification. In practice, achieving various levels of joint qualification depends not only on individual choice, but also on decisions by the appropriate approval authorities who may offer an individual the needed assignments and educational opportunities. The military's nomenclature has undergone revision several times, and arguably it remains incomplete. The John Warner NDAA for FY 2007 introduced a four-level qualification system, in which approval for each level requires the completion of some combination of education and joint service. On being approved for Level III, an individual is considered a Joint Qualified Officer (JQO), the only level that has a specific associated term. There is no separate term for "JQOs-in-training," since that category encompasses the entire officer corps. In the military's system, the designation of joint billets, published in a Joint Duty Assignment List (JDAL), serves the dual purpose of meeting real-world goals and helping individuals achieve joint qualification. So-called critical billets have significant prerequisites: they "require the incumbent to be previously trained, educated and experienced in joint matters," and incumbents must be JQOs. Filling these billets with appropriately prepared personnel directly supports the conduct of joint business. "Standard" billets, in turn, are generally used to help the incumbents further improve their ability to work in a joint environment; these billets may carry some prerequisites below the level of full joint qualification. Since its inception, the NSPD program has wrestled with the respective roles of individuals and billets in making the system work. In its original incarnation, the NSPD program used the designation of national security professional billets to define the program's scope—occupying a designated billet made the occupant a program participant. The NSPD E.O. established the NSPD program for "professionals in national security positions." In 2010, during the aborted revision of the NSPD Strategy and E.O., program officials signaled their intention to narrow the substantive focus of the program from all national security matters to interagency collaboration on national security matters. The new rules would require, officials noted, that designated "interagency" NSP positions involve not only a substantive focus on national security-related issues, but also regular, practical collaboration with partners from other agencies. While that thinking would have changed the program's substantive focus, it would have left intact the premise of using designated billets to define participation in the program. Some stakeholders reportedly found this billet-based approach attractive because, in its apparent simplicity, it might require fewer resources for personnel management, and it might require less of participants, who are "in" by virtue of the seats they occupy. Others argued, however, that the original NSPD program's use of billets to identify individual participants made the program extremely static and self-contained: other than occupying a designated billet, the program established no accession mechanism. It did not make use of any broader "pool" of potential participants. And it included no mechanism to leverage service in its designated billets to bring greater interagency awareness to broader communities in home agencies. The early experience of the original NSPD program with billet designation illustrates another potential source of confusion—the use of billets for two different purposes, identifying program participants and providing interagency rotational opportunities. Echoing the military's joint system, rotational assignments in the original NSPD program were intended to take place outside an individual's home agency, or alternatively, on a dedicated interagency task force. The NSPD Strategy called on the program's oversight body, the Executive Steering Committee, "where appropriate," to "develop a formal mechanism ... for national security professionals to participate in rotational or temporary detail assignments." In turn, the NSPD Implementation Plan, based on the Strategy and approved in September 2008, tasked each participating agency to identify the rotational opportunities—primarily in other agencies—that would be available to its own personnel. In theory, it made intuitive sense that the "NSP billets" in Agency X might be available as "rotational assignment billets" for personnel from Agency Y, since by definition those billets should require a national security focus in an interagency working environment. In practice, one agency's NSP billets, and the rotational billets designated in that agency by other agencies, might conceivably have had little to no overlap, since the two sets of decisions were to be reserved to different agencies, rather than to an oversight body. The approach of the original NSPD program toward the use of billets for rotational assignments was quite different from the military's much more centralized joint system. In that system, a single, integrated list of billets is recommended by the Chairman of the Joint Chiefs of Staff and approved by the Under Secretary of Defense for Personnel and Readiness. Practitioners with experience in the military's joint system suggest that interagency rotational systems might also require strong centralized oversight to ensure that the equities and requirements of all stake-holding agencies and individuals are met. The 2011 revision of the NSPD program drew a distinction from the outset between individuals and billets, by asking participating agencies to identify both individuals and positions for participation in its Emergency Management pilot effort. Still to be determined are the modalities for future accession into the revised NSPD program, and the ways in which billets will be used to determine participation, help provide qualification, or both. Any interagency national security professional program, whether limited or quite ambitious in scope, includes multiple agencies by definition, and therefore requires some mechanism to coordinate their efforts. At issue is how centralized—or de-centralized—this integration function ought to be. The original NSPD program was quite de-centralized. The NSPD Executive Order gave the Executive Steering Committee a weak mandate: "to coordinate, to the maximum extent practicable," the NSPD "programs and guidance issued by the heads of agencies, in order to ensure an integrated approach to such programs." The original ESC and its supporting Integration Office did not enjoy formal tasking authority, and they did not control any resources. Instead, they served primarily to coordinate agency programs, activities, and promotion policies. According to some officials, in practice, the original ESC rarely enjoyed a veto over agency initiatives that appeared out of synch with NSPD intent. In the absence of dedicated funding for the program's central oversight apparatus, DOD established and funded the NSPD Integration Office to coordinate agency efforts to implement ESC guidance. But one challenge was that since DOD had no formal "lead agency" role, practitioners in some other agencies interpreted DOD's support for the NSPD IO as a thinly veiled attempt to steer the overall program. The 2011 revitalized NSPD program also appears to be based on a de-centralized premise. The updated ESC Charter confirms the ESC's weak mandate to "coordinate ... to the maximum extent possible." For the sake of comparison, DOD's joint officer management program features much stronger oversight from the systemic level. The Secretary of Defense, with the advice of the Chairman of the Joint Chiefs of Staff, is tasked to establish different levels of joint qualification, including education and joint experience criteria, to determine the number of officers who are joint qualified, and to establish career guidelines for officers to achieve joint qualification and for officers who have been so designated, including guidelines for selection, education, training, and types of duty assignments. Furthermore, the requirement of joint duty service and joint qualification as prerequisites for promotion to general or flag officer are stipulated by law, not left to the discretion of service rules or regulations. On one hand, a strongly centralized system might have advantages in terms of forcing the system to work, and ensuring that all relevant policies and resource expenditures support the overall intent of the effort. On the other hand, a more de-centralized approach might have the advantage of better preserving "wiggle room" for agencies with very different missions, roles in national security, and established career paths. Some observers have pointed out that, in any case, effective integration is typically a product of leadership as well as formal authorities. Creating a program and giving it a name does not necessarily ensure that it will function according to plan, let alone that it will achieve its stated objectives. Many observers suggest that in order for a complex, multi-agency program or system to be effective, it needs an incentive structure—for both agencies and individuals—that makes active participation more advantageous than benign neglect. Agency incentives are likely to be shaped significantly by the resources available to implement the initiative. In theory, in a program designed to foster interagency communities, resources might be required to support new or expanded education and training programs, including faculty and staff, facilities, curriculum-development, and/or tuition at non-government institutions. Resources might also be required to support a centralized secretariat that coordinates and integrates program efforts. The single greatest cost might be funding required to create and maintain a personnel "float" in civilian agencies, to backfill positions while personnel participate in education programs, training, or rotational tours in other agencies. While the military builds sufficient numbers into its personnel systems to provide such backfills, to support the pursuit of joint qualification, most non-DOD agencies do not have that luxury, so participation often means a zero-sum contest with "day job" requirements. In the original NSPD program, in the absence of dedicated funding to support agency participation, agencies were asked to take resources "out of hide"—that is, to reallocate resources to NSPD from other programs. Many practitioners agreed that this construct created a strong incentive for agencies to limit the extent of their participation, including designating relatively low numbers of national security positions, and creatively reframing existing training, education and exchange opportunities as compliant with NSPD intent, rather than crafting new, more optimal programs. Both the reinvigorated NSPD 2.0, and the related bill introduced in the 112 th Congress, the Interagency Personnel Rotation Act of 2011, clearly aim to strictly limit program costs. Clear advantages of relatively more robust resourcing might include ensuring the available of personnel "floats" to facilitate participation in program activities, and easing agency concerns about internal zero-sum competitions for resources and staff time. The clear disadvantage of greater resourcing, in a sharply constrained fiscal environment, is the set of likely opportunity costs in the form of other activities that would go unfunded. Various observers and practitioners have proposed several ways in which the costs of an interagency community-building initiative might be minimized, for example: Structuring educational opportunities in limited, recurrent blocks of time that allow participants to continue to do their day jobs—for example, several days per month, on the model of the State Department's National Security Executive Leadership Seminar—rather than as year-long, full-time residential programs Carefully engineering interagency rotational opportunities such that program participants simultaneously complete the program's requirement for rotational service and fully meet the needs of the position they temporarily occupy. Leveraging the many existing training opportunities currently provided by State, DOD, and DHS, by making them available to NSP participants from other agencies. Regardless of the resources made available, agencies are likely to assign a higher priority to an initiative if it apparent that the effort enjoys strong support from senior leadership, first of all from the President. Such support might be indicated in publicly delivered remarks, or in the course of private consultations, or in other fora. Some practitioners note that the absence of any such attention, too, is likely to be noted by agencies, and suggest that this was the fate of the original NSPD program after the President signed the initial Executive Order. Individuals might be motivated to participate in an interagency community development program by any number of different incentives, such as: enhanced promotion potential; improved prospects for choice assignments; a reasonable degree of confidence that the program rules, on which they may base some career decisions, will not change too dramatically over time; or direct guidance from leadership to participate, regardless of specific perceived benefits. Based in part on the readily available analogue of the military's joint qualification system, interagency community advocates have focused on the linkage between the completion of program requirements and opportunities for senior-level service. In the joint system, military services maintain jurisdiction for individual promotion decisions, but legislation ensures that there are jointness prerequisites for individual promotion to flag officer. In addition, also based on congressional mandate, the Secretary of Defense, with advice from CJCS, plays an oversight role, helping ensure that overall promotion rates support the goal of jointness. In a public address in 2004, then-Vice Chairman General Pace suggested that the officer corps did get the message: "Congress said, 'If you want to get promoted, you've got to be joint.' I was a Lieutenant Colonel in 1986. I said, 'I want to get promoted! What is joint, and how do I get some?'" In contrast, in the original NSPD program, departments and agencies retained full jurisdiction over individual promotion decisions, with neither legislation nor a systemic-level mechanism to help ensure that "interagency qualification" would be given due consideration in the agencies' promotion decision-making processes. At the same time, NSPD officials have indicated that individual interest in participation in interagency-related activities—such as longer-term education, short-term training courses, one-day seminars—has remained consistently strong over the past several years, despite fluctuations in the perceived "operational tempo" of the NSPD program itself. Some observers suggest that the key empirical events of the last 10 years—Hurricane Katrina, the wars in Iraq and Afghanistan—which led to the policy conclusion that more effective interagency integration was be necessary, have also directly spurred many individual practitioners to seek the interagency tools they believe they need in order to perform more effectively. Some observers have argued that a program designed to foster national security professionals might benefit from an array of flexible recruitment tools. The NSPD National Strategy tasked departments and agencies to "reform employment practices to encourage the hiring of personnel with a variety of experiences from within and outside the Federal Government," but the original NSPD program apparently took little action on that front. One proposed approach would be further developing programs at the college-level, including providing support for national security studies programs, and creating opportunities for student internships in national security fields. Other tools might include allowing greater flexibility for mid-career recruitment of specialists from outside the U.S. government, and facilitating transfers in and out of government jobs including providing incentives for valuable experience gained. The opportunity to bring NSPs into government at all career stages, it is argued, might improve effectiveness by introducing needed expertise, and might also improve efficiency by taking advantage of education, training, and experience achieved outside government (and not at government expense). Potential drawbacks of utilizing flexible recruiting tools could include higher costs required to manage a more complex human capital system; and potential reduced incentives for agencies to make NSP opportunities available to their "permanent" personnel—and to pay for those opportunities—if they can, instead, hire personnel who already have equivalent qualifications. Whether or not legislation is enacted, Congress has the option of exercising oversight over both existing and possible future initiatives aimed at fostering a community of interagency national security professionals in the executive branch. Some observers have wondered how Congress might best exercise such oversight, given that, by definition, such programs involve multiple agencies with multiple corresponding committees of jurisdiction on the Hill. One option might be oversight of program implementation in individual agencies by their respective committees of jurisdiction. This approach might help ensure such agencies' individual compliance, but it would not provide an assessment of a program's overall impact or of the consistency of its application. Another option might be oversight by the Senate Committee on Homeland Security and Governmental Affairs, and the House Committee on Government Oversight and Reform. These committees have oversight responsibility for executive branch organization and the federal civil service, although they neither authorize nor appropriate. In the broader debates concerning national security reform for the interagency, some participants have suggested yet another option—the creation of House and Senate Select Committees on National Security, which would have oversight responsibility for holistic issues and initiatives that cross agency boundaries. One expected challenge might be institutional resistance to any diminution of the prerogatives of existing committees. In addition, determining the appropriate boundaries for "national security" might prove as challenging on the Hill as it has proven to be within the executive branch and in broader policy community debates.

There is a growing consensus among many practitioners and scholars, across the political spectrum, broadly in favor of reforming the U.S. government interagency system to encourage a more effective application of all elements of national power. The reform debates have included proposals and initiatives to establish and foster an interagency community of national security professionals (NSPs) from all relevant departments and agencies. According to proponents, NSPs, through participating in activities that might include shared educational and training opportunities, and rotational tours in other agencies, would gain a better understanding of the mandates, capabilities, and cultures of other agencies. They would become better prepared to plan national security missions with counterparts from other agencies and to execute those missions at home and abroad, and eventually become better able to oversee their own agencies' efforts from leadership positions. Such recommendations are not new, but real-world events over the past decade— the wars in Iraq and Afghanistan and U.S. government responses to natural disasters at home, including Hurricane Katrina—gave the debates a greater sense of urgency by underscoring room for improvement in the ability of the U.S. government to integrate the various components of its efforts. Congressional interest has emerged in both houses, on both sides of the aisle, and from multiple committees. That interest was manifested in part by the introduction of NSP-related legislation in the 110th, 111th, and 112th Congresses. In the executive branch, in 2007, the Bush Administration launched the National Security Professional Development (NSPD) program, based on the three pillars of education, training, and rotational service. The program included an oversight structure and participation by multiple agencies, including many not traditionally focused on national security. In 2011, the Obama Administration reinvigorated the NSPD program, giving it a streamlined new emphasis on accomplishing missions, and adopting Emergency Management as the initial focus area. This report focuses primarily on analyzing key issues that Members of Congress may wish to consider in evaluating existing or proposed NSP initiatives, including the fundamental purpose; the concept of integration; the scope of participation; practical modalities for making the program work; the role of centralized oversight; incentive structures for individuals and agencies; recruiting; and congressional oversight. For context, the report also describes early NSP proposals; U.S. government strategic guidance; the experiences of the NSPD program to date; and significant congressional initiatives. It makes illustrative use of the military's Joint Qualification System, perhaps the closest U.S. government analogue.

In November 2000, the nation faced the unusual circumstance of not knowing the winner of the election for President for several weeks. The results in Florida were contested, and the contest did not end until a decision by the U.S. Supreme Court. The public scrutiny resulting from that experience exposed a wide range of weaknesses with the American system of elections. Among them were poorly designed and outdated voting technology; inefficient and poorly administered registration systems; insufficient professionalism in the election workforce, especially pollworkers; problems with absentee voting; a confusing array of administrative procedures across jurisdictions; inadequate funding; problems with the processes for conducting election audits and recounts; and suspicions among many of alarming levels of voter fraud and intimidation. Although many jurisdictions suffered from few, if any, of these problems, they were sufficiently prevalent to cause widespread concern after the realization that they could, at least in some circumstances, have a significant impact on major elections. Many of the weaknesses had been known for years by election administrators, but they had been unsuccessful at drawing sufficient attention to them to effect the needed improvements. The situation began changing when several commissions and studies examined what had happened in Florida and made recommendations. Both the House and the Senate held several hearings during the first session of the 107 th Congress. Some states made plans or began to replace voting equipment and adopt other improvements. In December 2001, the House passed H.R. 3295 , the Help America Vote Act. In early 2002, the Senate debated and passed S. 565 , the Martin Luther King, Jr. Equal Protection of Voting Rights Act, after adopting 40 amendments. After conference negotiations, a compromise bill, the Help America Vote Act of 2002 (HAVA, P.L. 107 - 252 ) was enacted in October. The act created a new federal agency with election administration responsibilities, set requirements for voting and voter-registration systems and certain other aspects of election administration, and provided federal funding; but it did not supplant state and local control over election administration. Issues for the 108 th Congress included funding, establishment of the new agency, and implementation by and impacts on the states. Issues for the 109 th Congress included problems identified pursuant to the November 2004 Presidential election, as well as implementation by states of HAVA requirements, response to Hurricanes Katrina and Rita, and the security of voting systems. In addition to funding, issues for the 110 th Congress have included those that arose in the 2006 election, as well as voter-verified paper audit trail requirements for electronic voting machines, photo identification, poll worker training, and prohibiting deceptive practices. Despite considerable effort by Congress to alleviate difficulties for military and overseas voters, there remain a number of hurdles to participation. Congress may consider several options for easing them. Other issues that might be considered in the 110 th or 111 th Congress are associated with voting systems standards, remote voting (absentee, early, and Internet), election personnel, polling places, election security, and the electoral college. This report discusses how HAVA addresses those and other issues, and their potential legislative implications. HAVA established a new federal agency, the Election Assistance Commission (EAC, http://www.eac.gov ), to replace the Office of Election Administration (OEA) of the Federal Election Commission (FEC) and also to perform new functions. The EAC is an independent, bipartisan federal agency. HAVA authorized funding for it only through FY2005, but the agency has continued to be funded at or above authorized levels. Members are appointed to four-year terms and may be reappointed once. The act also established two boards, with broad-based state and local membership, and a technical committee, to address aspects of voting system standards and certification. The main duties of the EAC include carrying out grant programs, providing for testing and certification of voting systems, studying election issues, and issuing voluntary guidelines for voting systems and the requirements in the act. The commission does not have any new rule-making authority and does not enforce HAVA requirements. The law provides for technical support and participation by the National Institute of Standards and Technology (NIST, see http://vote.nist.gov ) in relevant commission activities, including the technical committee. The initial establishment of the EAC was delayed for more than nine months beyond the statutory deadline of February 25, 2003, and funding for the commission for FY2004 was less than one-fifth the authorized level of $10 million. As a result, the commissioners did not hold their first public meeting until March 2004 and the EAC was significantly limited in its ability to provide assistance to states in preparation for the November 2004 election. It also had to delay beginning many of the tasks assigned to it by HAVA. It has subsequently, however, been staffed more fully and has engaged in major activities under its HAVA mandate. Among them are a recommended set of best practices for local election administrators released in August 2004, release of the federal Voluntary Voting System Guidelines in December 2005 with a revision in review in 2008, and completion of the distribution of payments to states (see below). HAVA established several grant programs for various purposes. Payments to states authorized by HAVA included $650 million under Title I to improve election administration and to replace punchcard and lever-machine voting systems and $3 billion over three years under Title II to meet requirements established by the act (see below). The first program was fully funded and all payments have been made. The second was funded at close to the $2.4 billion authorized through FY2004, but no additional funding was appropriated since then until FY2008, when Congress provided an additional $115 million. Other programs provide funding through the Department of Health and Human Services to make polling places accessible to persons with disabilities, and for state protection and advocacy systems to ensure electoral participation by persons with disabilities. HAVA also provided $20 million in grants for research and $10 million for pilot programs to improve voting technology, although neither of those programs have been specifically funded. Three small programs to encourage student participation in the voting and election process were established by the act, and they have received some funding. The remaining authorization for payments to help states meet the HAVA requirements may continue to be an issue, especially given the concerns of election officials about HAVA's impact on the costs of elections. Whether the levels of payments provided to states are sufficient to fund HAVA requirements is uncertain. Also contributing to this funding uncertainty is the continuing controversy over the security and reliability of the electronic voting systems promoted by HAVA's accessibility requirements (see below). Funding for all major programs was authorized by HAVA only through FY2005; however, Congress has continued to provide funding in subsequent fiscal years. One of the innovations in HAVA is the establishment, for the first time, of federal requirements for several aspects of election administration: voting systems, provisional ballots, voter information, voter registration, and identification for certain voters. Most of those requirements went into effect in January 2006. However, four went into effect earlier: (1) Any voter not listed as registered must be offered and permitted to cast a provisional ballot. This is a separate ballot that is set aside along with relevant information about the voter so that election officials can determine whether the person is entitled to vote. (2) Any ballots cast during a court-ordered extension of polling hours must be provisional. (3) A sample ballot and other voter information must be posted at the polling place on election day. (4) First-time voters who register by mail must provide specified identification either when submitting their registration or when voting. Also, the seven states that received title I payments to replace lever machines or punchcard voting systems and did not request a waiver were required to replace all those systems statewide in time for the November 2004 federal election. The provisional ballot requirement has been somewhat controversial, although broader use of such ballots was called for by all the major reports stemming from the 2000 election controversy (see above) and was included in both the original House- and Senate-passed versions of HAVA. States vary in how this requirement is implemented, and some of those interpretations have been subject to litigation. In some states a ballot is counted at least for some contests even if cast outside the voter's home precinct. In other states, provisional ballots are counted only if they are cast in the home precinct. If the policy governing provisional ballots is unclear to voters or pollworkers in a jurisdiction, a voter might be unintentionally disenfranchised, for example by inadvertently voting in the wrong precinct. Provisional ballots may be especially at issue in some close contests, where the outcome may not be known until provisional ballots are processed, which can take several days and may be subject to litigation. Congress could consider modifying this requirement to clarify its applicability to federal contests for ballots that are cast outside the home precinct. Also, provisional balloting may become less important as states continue to implement and gain experience with the statewide computerized registration lists that HAVA requires (see below). The voter-identification requirement was the subject of some controversy in the 2002 Senate debate on HAVA, causing a delay of several weeks in floor action. It does not, however, appear to have been particularly controversial in implementation so far. However, many states have broader identification requirements, and some of those have been controversial. Some questions have been raised about photographic identification requirements in particular. However, the U.S. Supreme Court has ruled that such voter-identification requirements are permissible. Beginning January 1, 2006, voting systems used in federal elections were required to provide for error correction by voters (either directly or via voter education and instruction), manual auditing for the voting system, accessibility to disabled persons (at least one fully accessible machine per polling place) and alternative languages, and needed to meet federal machine error-rate standards. Systems were also required to maintain voter privacy and ballot confidentiality, and states were required to adopt uniform standards for what constitutes a vote on each system. While HAVA does require a paper record that can be used for manual audit of a voting system, it does not require paper ballots. Also, states using voter registration needed to employ computerized, statewide voter registration systems that are accurately maintained. The 23 states that received title I payments to replace lever machines and punchcard systems and that requested a waiver of the 2004 deadline were required to replace those systems statewide before the first election for federal office in 2006. Finally, beginning in 2007, all new voting systems purchased with Title II requirements payments were required to be fully accessible for persons with disabilities. Many states began changing voting systems well before the HAVA requirements went into effect. For example, both Maryland and Georgia adopted statewide direct-recording electronic (DRE) voting systems, which meet the error-correction and accessibility requirements of HAVA and facilitate meeting the standard for what constitutes a vote. However, a separate controversy has arisen over the reliability and security of DREs, resulting in the adoption of a requirement for paper ballots in many states. In the case of DREs, paper ballots can be produced parallel to the electronic ballot and are available for inspection by the voter before the ballot is cast. This approach is called a voter-verified paper audit trail, or VVPAT. Alternatively, states may adopt a paper-based optical-scan voting system. Starting in the 108 th Congress, bills have been introduced that would require the use of paper ballots in federal elections. Whether Congress will enact such a requirement remains uncertain. Meanwhile, The EAC's technical committee, in the 2007 draft of the Voluntary Voting System Guidelines, or VVSG, (discussed below) has proposed that certified voting systems be required to provide a means of auditing the vote that is independent of the software used by the voting system. The proposal is consistent with HAVA's use of performance rather than design standards in its voting system provisions (§301(a)). While paper ballots would meet this proposed requirement, it also permits the development of new systems that could provide levels of verifiability, security, and accessibility that are not possible with paper ballots. A specific design standard such as that contained in most of the introduced bills would preclude the use of such new systems and therefore most likely impede their development. However, such a specific design standard is arguably easier to implement and enforce than a performance standard. Some states have had difficulty replacing voting equipment to meet HAVA requirements or to meet the conditions of title I HAVA payments they received to replace equipment. Problems may also arise in other states that are changing voting systems, given the logistical complexities of the changeover in some cases. Most states waived the 2004 HAVA deadline for developing computerized statewide voter-registration lists and were therefore required to implement the new systems by January 2006. At least 11 states missed that deadline, although most claimed that they would be compliant before the first election of 2006. In addition, the absence of a clear national standard for the lists has led to uncertainties about implementation. Given the increase in new-voter registration in recent elections and recent closely contested presidential elections, some other issues have also arisen. Among them are questions about the validity of new registrations, concerns about various kinds of fraud and abuse, and the impacts of attempts to challenge the validity of voters' registrations at polling places. Making informed decisions about the above and other issues depends in part on the availability of accurate and comparable information from jurisdictions. However, state and local jurisdictions vary in what data they collect and make publicly available. While the EAC is responsible under HAVA for performing research on various aspects of election administration, it has no authority to ensure that the necessary data are provided by jurisdictions. If those data prove difficult for the EAC to obtain, Congress might wish to consider providing the agency with the authority needed to acquire them. For FY2008, Congress provided the EAC with $10 million for grants to states to improve data collection. After the 2000 election, both the Defense Authorization Act of 2002 and HAVA amended the Uniformed and Overseas Citizens Absentee Voting Act of 1986 (UOCAVA) to improve the voting process for members of the military, their family members, and Americans living overseas. Just before the November 2004 election, the President signed the Ronald W. Reagan National Defense Authorization Act for Fiscal Year 2005 ( P.L. 108 - 375 ), which included provisions to ease the use of the federal write-in ballot, a substitute under certain conditions for the states' regular absentee ballots. Despite considerable effort by Congress to alleviate difficulties for military and overseas voters, there remain a number of hurdles to participation. The most prominent are timing and the reliance on military and overseas mail to receive and return registration and ballot applications and the ballots themselves. Some states permit returning voting materials by fax, but privacy concerns have been raised about this option. The Defense Authorization Act for 2005 expanded the use of the federal write-in ballot to those in the military who were not deployed abroad but were away from their voting jurisdiction because they are on active duty. Nonetheless, delays in printing absentee ballots because of late-occurring primaries, delays in sending out ballots from the states, and delays with the mail reportedly continued with primary and general elections in 2004. Problems continued in the 2006 elections as the EAC reported that only 33% of ballots requested by military and overseas voters were counted in the election, with 70% having been returned to election officials as undeliverable. There are few options to fix timing problems, but Congress could consider requiring an information campaign well in advance of the election to alleviate the glut of registration and ballot applications that typically arrive within two months of election day. Improvement in this area might be expected following the October 2007 launch of the Overseas Vote Foundation's website to assist UOCAVA voters with registration and ballot requests. And while each state was required to designate a single office to administer the law, an additional requirement for a hotline telephone number in each state could ease difficulties for individual voters. The Federal Voting Assistance Program provides both domestic and overseas toll-free numbers. Expanded use of the federal blank ballot without restrictions could eliminate the problem of waiting for the state absentee ballot, but would limit voting to federal offices only unless a state decided otherwise. In addition to voting system requirements, HAVA required the EAC to develop the Voluntary Voting System Guidelines (VVSG) to replace the Voluntary Voting Systems Standards (VSS) developed under the auspices of the FEC and first issued in 1990. They apply to both computer hardware and software and have been adopted in whole or in part by most states. An updated version of the VSS was released in 2002. The EAC released the first version of the VVSG in December 2005. Developed in cooperation with NIST, those guidelines are only a partial revision of the VSS, with new or revised sections on security, human factors, conformance, and certain testing procedures. They went into effect in December 2007. A more thorough revision is in progress. A voluntary certification program for voting systems was also developed by the National Association of State Election Directors (NASED) to verify conformance with the VSS . HAVA gives responsibility for establishing testing and certification procedures to the EAC, with NIST playing an advisory role and developing a laboratory accreditation program. The EAC has accredited some laboratories for testing and certification of voting systems under the VVSG. HAVA does not authorize specific funding for NIST support activities, but Congress has provided appropriations for those activities as part of the EAC funding. The delays and funding uncertainties experienced by the EAC were apparently a factor in the decision to revise only parts of the VSS for the first version of the VVSG . While HAVA stipulated that the most recent version of the VSS , last revised in 2002, would serve as the guidelines until the VVSG went into effect, the VSS have been widely criticized with respect to their scope, approach, and effectiveness. For example, the DREs for which significant security weaknesses have been identified had been certified as conforming to the VSS. The VVSG have been criticized on the one hand as placing an undue burden on manufacturers to comply with the two-year implementation window, and on the other as being insufficiently comprehensive, revising only part of the VSS . The provisions in the 2007 revision of the VVSG relating to security concerns about DREs, and its extensive revision to conform more closely to international standards and address other concerns with the earlier version, have also generated some controversy. In addition, there have been calls for increased openness and other changes to the certification process. No federal standards exist with respect to absentee ballots, although the EAC is required to conduct a study of absentee voting under HAVA. Voters in many states can request an absentee ballot only for specific reasons that would prevent the voter from casting a ballot in person. But according to the National Conference of State Legislatures (NCSL), 26 states in 2004 allowed any voter to request such a ballot, sometimes called "no fault" absentee voting. Oregon conducts its elections entirely by mail—all registered voters receive their ballots through the Postal Service. While the percentage of votes cast by absentee or mail ballot has been increasing in recent elections, some observers have expressed concerns that the method is more vulnerable to certain kinds of fraud and coercion of voters than is balloting at the polling place. Absentee ballots are perhaps the classic example of the legacy of state-by-state election administration. Eligibility, types of ballots used, deadlines for submission, and counting procedures and deadlines vary widely by state, and no uniform approach exists with any single element of absentee voting. Absentee voting is on the increase and some voters reportedly cast absentee ballots in 2004 to avoid using a DRE at the polling place to cast a ballot. It is not clear whether Congress will take any action with respect to absentee ballots, although the House Administration Committee reported H.R. 281 , the Universal Right to Vote by Mail Act of 2007 on April 14, 2008. The bill establish universal absentee voting by mail in all states and prohibit a state from counting an absentee ballot unless it matched the ballot envelope signature with the voter's signature on file. Other legislative remedies that could be introduced include establishing uniform procedures for sending out absentee ballots, counting methods, and deadlines. In some states, voters may cast a ballot in person before election day through an early voting program. There are many approaches, and the number of states using early voting is growing. According to the NCSL, 23 states had some form of it in 2004, whereas 13 states offered early voting in 2000. In some states, a voter can cast a ballot at multiple locations in the jurisdiction before election day, while in other states, the voter must visit the election official's office to do so. The days and hours for voting vary as well. Some observers have criticized early voting as distorting to the electoral process and being open to certain kinds of fraud and abuse. One disadvantage concerns late-occurring developments or issues in a campaign about which an early voter might have no knowledge. Also, because early voting is a form of remote voting, as opposed to casting a ballot at an assigned precinct, a greater possibility of committing fraud arguably exists. Proponents argue that early voting can increase turnout and lessen the risk of certain kinds of distortions. The increase in the number of states offering early voting suggests that the trend will continue. If the 110 th Congress takes up the issue, it may consider legislation to require all states to establish early voting programs or to require that voter rolls at polling places indicate which voters have cast ballots before election day. A Defense Department program to allow those in the military and their family members abroad to vote over the Internet was cancelled for 2004 after a report that noted it could be prone to tampering that might affect the election outcome. The 2004 program was to be an expanded version of a pilot program in 2000 in which 84 voters cast ballots over the Internet. As many as 100,000 voters might have cast ballots under the program in 2004. Arizona's Democratic party conducted a primary in 2000 in which approximately 40% of voters cast ballots over the Internet, although computer problems and access issues emerged after the voting. While little progress has been made in the development of Internet voting for public elections in the United States, other countries have begun implementing this method. The most prominent example is Switzerland, which has used Internet voting experimentally for several years. Different cantons use different approaches, with Neuchâtel using an "end-to-end" system that provides true voter verifiability, which is not possible with paper ballot systems. Internet voting may continue on a limited basis for certain types of elections in the United States, such as Arizona's Democratic primary in 2000, or on an experimental basis, but security concerns are paramount. Given the emergence of security issues in voting in recent years, particularly those raised with respect to the use of DREs, enthusiasm for Internet voting has consequently declined in the United States. Efforts in the Defense Department to facilitate Internet voting are the most likely prospect for the immediate future. There are roughly 10,000 election jurisdictions in the United States, ranging in size from small rural jurisdictions with fewer than a thousand voters to large metropolitan jurisdictions with several million. For many jurisdictions, the administration of periodic elections is unlikely to be considered as high a priority as more regular needs such as schools and roads. Funding and personnel vary, with some jurisdictions having large, well-funded operations and others very small efforts with part-time staffing. The demographic profile of local election officials is unusual, especially for a professional group of government employees. According to the EAC, a federal election requires a total of about 2 million pollworkers nationwide. Most pollworkers are older citizens, many retired and elderly, although no reliable demographic information is available on them nationwide. They are usually required to work on election day from before polls open to well after they close, often a span of 14 hours or more. They are usually either unpaid or they receive only a small stipend. HAVA established two small programs to recruit college and high school students to work at the polls but has no other specific provisions regarding pollworkers. The level of training and expertise varies substantially among election administrators, and some observers believe that election administration needs to be more strongly developed as a profession, with concomitant expectations about expertise, certification, and adherence to professional codes of conduct. The reported age and number of pollworkers is also of concern to many, especially in elections with high turnout, and given the increased complexity of and role of technology in elections in the wake of HAVA. Many jurisdictions have apparently expressed concerns that recruiting enough pollworkers has become more difficult. An insufficient workforce at the polling place, or pollworkers who are insufficiently or improperly trained, especially if they are using new equipment, may lead to errors that can create problems for voters or even impact the outcome of an election. HAVA requires states receiving Title II requirements payments to submit plans to the EAC that describe, among other things, their plans for education and training of election officials and pollworkers with respect to meeting HAVA requirements. It does not specify expectations or require EAC guidance for that education and training. Should Congress decide to address issues relating to election personnel, it could establish a specific program to fund training of election officials and pollworkers, or it might require the EAC to establish a program to accredit organizations that create and administer certification programs for election administrators, as it is required to do for testing laboratories (Sec. 231(b)). The Help America Vote Act requires posting voting information at each polling place, mandates disability access to voting in all polling places through the use of at least one voting device that provides the same privacy and independence as for other voters, and requires voters who have registered by mail and have not voted in the jurisdiction to provide one of a number of acceptable forms of identification (see the discussion of these requirements in HAVA 2004 Requirements and HAVA 2006 Requirements above). Jurisdictions vary in the number and kinds of polling places used for an election. Some jurisdictions are experimenting with the use of vote centers, where any registered voter in the county can vote, instead of traditional precinct polling places. HAVA provides grants to improve the accessibility of polling places but does not establish new requirements. Provisional voting and voter-identification requirements have generated some controversy and could continue to do so as state legislatures revisit these topics, insofar as HAVA left the specific details of implementation to the states. With respect to both topics, states could modify voter identification requirements generally and the procedures for the use of provisional ballots, as some have. Challenging a voter's eligibility at the polling place emerged as an issue in the 2004 election, although HAVA is silent on this issue and state laws vary considerably with respect to who may challenge and under what circumstances. In some states, no challenges may be made except by a poll worker, while in others, partisan workers may be admitted to the polling place to observe the voting and may challenge a voter's eligibility. A related issue concerns proof of citizenship as a condition for registration. A number of bills have been introduced, but the issue first emerged at the state level when Arizona voters approved a 2004 referendum that required citizenship proof for voting. A number of Latino advocacy groups mounted a legal challenge to the law on the grounds that it is discriminatory, but a federal judge rejected the request for a temporary restraining order in June 2006. The number, distribution, and condition of polling places has also sometimes been an issue. It could potentially be addressed by establishing requirements such as a maximum number of registered voters or a maximum geographic area covered by a polling place. The security environment following the terrorist attacks of 2001 raised concerns before the 2004 elections that further attacks or other events might disrupt an election and even affect the outcome. Questions were raised about both postponement of elections and enhancement of security. The executive branch does not currently have authority to set or change the times of elections, a power reserved for Congress under the Constitution, although Congress may be able to delegate such authority. Either Congress or the states might also pass legislation in response to a terrorist attack that would change the timing of any elections that were affected. Some states have enacted statutes providing for the temporary postponement of elections. Many state statutes also grant the Governor the power to suspend certain state laws during an emergency. Those statutes might also be able to be used to postpone the general presidential election in the state during an emergency. However, actual postponement of elections has occurred in relatively few cases over the last 150 years. It is generally the responsibility of state and local governments to provide security at polling places. A guide for state election-security planning recommends establishment of planning teams and preparation for a range of possible scenarios. Reactions of state and local officials varied for the November 2004 election, with some making as few visible changes as possible and others increasing police presence or even moving polling places. Polling-place security issues were less prominent during the 2006 elections. Whether Congress considers actions to safeguard future elections may depend on events associated with them or with elections in other countries. Among the options are to take no legislative action, to explicitly delegate authority to the executive branch to the extent permitted by the Constitution, to provide mechanisms for improved coordination, and to encourage early and absentee voting. All these options have some potential benefits but also significant potential disadvantages. The President and the Vice President are elected indirectly by the electoral college, according to a compromise design that balanced equal representation from each of the states against population differences. The U.S. Constitution, in Article II, Section 1, Clause 2, as amended by the 12 th Amendment, together with a series of implementing federal statutes, provides the broad framework through which electors are appointed and by which they cast votes for President and Vice President. Nearly since its inception, the electoral college has engendered calls for reform. Among the criticisms are the possibility that no candidate achieves a majority of electoral college votes, resulting in election by the House of Representatives (as occurred in 1824); the election of a President and Vice President who win a majority in the electoral college, but do not win the popular vote (as happened in 1824, 1876, 1888, and 2000); the assignment of electoral votes, said to give less populous states an advantage because a state's vote equals the number of members of the House of Representatives (based on population) and the Senate (not based on population); and a perceived advantage for ethnic voters, whereby the concentrations of such voters in large states are said to benefit because of a tendency to vote as a group for a single candidate, thus increasing their comparative influence. In recent years, heightened interest in reforming the electoral college tends to coincide with closely contested presidential elections wherein the possibility exists that the electoral college winner does not win the popular vote. Despite the circumstances of the 2000 election, which focused national attention on the electoral college vote, subsequent reform efforts addressed election administration and voting issues, rather than reform of the electoral college. Reform proposals are routinely introduced in nearly every Congress, but the results from the 2004 election suggest that a public mandate for changing or abolishing the electoral college has yet to emerge.

In November 2000, the nation faced the unusual circumstance of not knowing the winner of the election for President for several weeks. The public scrutiny resulting from that experience exposed a wide range of weaknesses with the American system of elections. Many of the weaknesses had been known for years by election administrators, but they had been unsuccessful at drawing sufficient attention to them to effect the needed changes. In October 2002, Congress enacted the Help America Vote Act (HAVA, P.L. 107-252), which addressed many of those weaknesses. It created a new federal agency, the Election Assistance Commission (EAC), with election administration responsibilities. It set requirements for voting and voter-registration systems and certain other aspects of election administration, and it provided federal funding; but it did not supplant state and local control over election administration. The establishment of the EAC was delayed for several months beyond the statutory deadline, and it was initially funded at a fraction of the authorized level. As a result, many of the tasks assigned to it by HAVA were also delayed, although the agency has since been more successful at fulfilling its statutory tasks. HAVA established several grant and payment programs for various purposes, and Congress has appropriated more than $3 billion altogether for them. It is uncertain if current levels of funding are sufficient to meet HAVA goals and requirements. One of the innovations in HAVA is the establishment, for the first time, of federal requirements for several aspects of election administration: voting systems, provisional ballots, voter information, voter registration, and identification for certain voters. Those requirements are now in effect. Many states have changed voting systems to meet them. Controversy has arisen over the reliability and security of electronic voting, leading many states to adopt requirements for paper ballots. The provisional ballot requirement was one of four that went into effect in 2004, and it was also somewhat controversial. There is also still some question about implementation of computerized statewide voter-registration lists in some states. In addition to funding, issues for the 110th Congress include voter-verifiable paper audit trails and possibly photo identification, poll worker training, and prohibiting deceptive practices. Despite considerable effort by Congress to alleviate difficulties for military and overseas voters, there remain a number of hurdles to participation. Congress may consider several options for easing them. Other issues that might be considered are associated with voting systems standards, remote voting (absentee, early, and Internet), election personnel, polling places, election security, and the electoral college.

Lending is inherently risky. Banks face default risk because their assets consist primarily of loans made to borrowers who may not always repay all of the principal and interest owed. In addition, banks face funding risk because they must continuously borrow short-term to fund their assets (customer loans). In other words, banks typically provide longer-term (illiquid) customer loans by borrowing the funds via sequences of shorter-term (liquid) loans at relatively lower rates. Profits are generated from the spread between the long-term rates lenders charge their customers and the successive sequences of shorter-term rates they pay for liquidity until the longer-term loans are repaid in full. Hence, if borrowers default on their loans, then lenders might be unable to repay their shorter-term loan obligations (liabilities) to depositors and other creditors (e.g., financial institutions). Lenders also face systemic risk . Although economists have not arrived at a consensus definition, systemic risk may be viewed as an increase in correlation among individual default and funding risks, largely due to a sudden loss of confidence (panic) of financial market participants following a liquidity disruption or decline in asset prices. In other words, systemic risk can be thought of as contagion, meaning that liquidity and payment problems affecting one or a few entities may spread and create disruptions in the rest of the market. For example, suppose an isolated default event prompts other financial market participants to re-evaluate their estimates of default risk for similar or related financial activities. If market participants suspect that an observed default event is relevant beyond the directly involved entities, then growing pessimism of creditors of investors can suddenly manifest itself in the form of a market retrenchment. Consequently, financial panics have historically been rooted in the uncertainty about future asset prices (e.g., real estate, stocks, financial securities) while such assets were serving as collateral for an innumerable amount of loans. Furthermore, the severity of a national recession depends upon the amount of lending activity prior to the bursting of an asset bubble, particularly if many of the outstanding loans suddenly became "underwater," such that the balances owed were to exceed the current value of the underlying collateral. U.S. lending institutions that accept federally insured deposits are collectively referred to as insured depository institutions, and they must comply with safety and soundness regulatory requirements. As part of safety and soundness regulation, banks are required to maintain sufficient capital reserves to buffer against losses associated with default (credit), funding (liquidity), and systemic risk events. A bank's capital is defined as the difference between its assets and liabilities. If a bank maintains sufficient capital, then defaults of a few assets (longer-term loans) are less likely to translate into a subsequent failure to repay its shorter-term obligations. A capital buffer, therefore, protects bank creditors from loan defaults by bank customers as well as other sudden unfavorable macroeconomic events. A bank is considered solvent as long as it maintains capital above a minimum threshold level, and it is considered undercapitalized and faces the prospect of being shut down by its regulator should its capitalization fall below the threshold. Hence, a bank's asset or lending portfolio normally grows proportionately with its capital reserves. The work by the Basel Committee on Banking Supervision (BCBS) on the first Basel Capital Accord, Basel I, provided an international consensus framework for bank safety and soundness regulation. The objective of the first Basel Capital Accord was to promote consistent safety and soundness standards while providing an equitable basis of competition for banking institutions in participating countries. In other words, international regulators were concerned that banks might prefer to domicile in countries with the most relaxed safety and soundness requirements. Unless capital reserve requirements are internationally harmonized, variation in standards may also lead to competitive disadvantages for some banks with competitors in other countries. Basel I established the amount of capital (relative to assets) that financial institutions needed to maintain. Although the BCBS has no authority to compel member governments to adopt any specific standards, the U.S. federal banking regulators generally adopt rules consistent with the Basel Accords. The first Basel Capital Accord was published in July 1988 and fully implemented in the United States by the end of 1992. The safety and soundness regulatory framework for banking institutions that stems from the Basel Capital Accords includes a Tier 1 capital component made up of mainly common shareholders' equity (issued and fully paid), disclosed reserves, most retained earnings, and perpetual non-cumulative preferred stock. Tier 1 capital risk-weighted asset ratios are generally defined as Tier 1 capital (e.g., common shareholder equity) in the numerator and bank assets (typically weighted according to their likelihood of default) in the denominator. Banks must hold enough capital reserves to maintain the minimum required capital-asset ratios, which would reduce banks' vulnerability to un anticipated loan defaults. a Tier 2 capital component, which includes allowances for loan and lease losses (ALLL), set aside for anticipated (or estimated) loan losses. Loan loss provisioning refers to increasing the amount of ALLL when loan default risks increase; decreases are referred to as "charge-offs" that occur when it becomes apparent that loan(s) will not be repaid. ALLL is adjusted quarterly, and these loan loss reserve proceeds must come from current income earnings (as opposed to total assets). When the ALLL of a bank exceeds 1.25% of its (risk weighted) assets, the excess is not counted as part of its Tier 2 capital. stress testing , which is conducted to determine whether a bank can withstand losses arising from a severe recession or systemic risk event and still remain adequately capitalized. Stress testing requirements vary by bank size and type of lending activities, but federal regulators require all U.S. banking institutions to analyze the potential impact of adverse economic conditions on their financial conditions or viability. The second Basel Accord, Basel II, was developed in response to perceived shortcomings, in particular with the asset risk weighting system, discussed in more detail in Appendix A . In the United States, Basel II was initially applied to only the 19 largest banking institutions. On December 7, 2007, the federal banking regulators published the final rule to implement Basel II, which became effective on April 1, 2008. The date of expected compliance with some Basel II rules, however, was delayed or waived after the financial turmoil that began in 2007. In response to the 2007-2009 global financial crisis, the BCBS issued what is referred to as Basel II.5 as an amendment to Basel II. Basel II.5 is designed to better capture credit risk in the "trading book" of a bank. The trading book refers to securities that a bank would not hold to maturity and would also be accounted for at current market value. A security held to maturity is accounted for in the "banking book" at its original book value, unless the bank decides to sell it; if so, it then moves over to the trading book where it is given fair market value accounting treatment. Distinguishing between assets that should be held in the trading and banking books is not always easy, thus making it difficult to determine the proper accounting and risk weighting treatment. Nonetheless, Basel II.5 is intended to prevent strategic but inappropriate placement of securities in the book that would provide the most favorable accounting treatment at a particular point in time, potentially resulting in a bank having an insufficient capital buffer to mitigate lending risks. The U.S. federal banking regulators issued proposed rules on the adoption of Basel II.5 revisions in the United States on January 11, 2011; these were amended and re-proposed on December 7, 2011. The final rule on the adoption of Basel II.5, also known as the market capital risk rule, was issued by the U.S. federal banking regulators on June 7, 2012. In a further response to the financial crisis, the Basel III regulatory framework reforms Basel II by revising the definition of regulatory capital and increasing the amounts banks must hold, among other requirements. The requirements and phase-in schedules for Basel III were approved by the 27 member jurisdictions and 44 central banks and supervisory authorities on September 12, 2010. Basel III compliance requires banks to satisfy the enhanced requirements by 2019. The federal banking regulators issued a proposed rule on June 7, 2012; the final rule to implement most of the Basel III recommendations in the United States was approved by July 9, 2013. The Basel III final rule adopted by the U.S. federal banking regulators also implements some provisions from the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act; P.L. 111-203 ), which also addressed capital reserve requirements for banks. Some of the key statutory requirements are summarized below. Section 939 of Dodd-Frank requires the removal of any regulatory references to credit ratings in light of the viewpoint that flawed credit ratings may have contributed to the housing bubble. Section 939A required each federal agency to review regulations that would require the use of an assessment of the creditworthiness of a security or money market instrument, and any references to, or requirements in, those regulations regarding credit ratings. Afterwards, the agencies had to modify all regulations such that any reference to or requirement for reliance on credit ratings had to be removed. Regulators were required to find other appropriate standards by which to determine the financial risks of bank portfolio holdings while enforcing the mandatory capital requirements, and they must also transmit reports to Congress that contain descriptions of all regulatory modifications made pursuant to the section. The Collins Amendment of Dodd-Frank provides for the development of consistent capital requirements for all insured depository institutions, depository institution holding companies, and systemically important non-bank financial companies. Small bank holding companies with less that $500 million in assets are exempt from the Collins Amendment. In addition, the amendment would not apply to foreign parents of bank and thrift holding companies; Federal Home Loan Banks would also be exempt from these requirements. Section 171(b) of the Collins Amendment requires federal banking regulators to apply to U.S. bank holding companies and other systemically significant nonbank financial companies the same capital requirements that apply to federally insured depository institutions. Specifically, Section 171(b)(2) says, The appropriate Federal banking agencies shall establish minimum risk-based capital requirements on a consolidated basis for insured depository institutions, depository institution holding companies, and nonbank financial companies supervised by the Board of Governors. The minimum risk-based capital requirements established under this paragraph shall not be less than the generally applicable risk-based capital requirements, which shall serve as a floor for any capital requirements that the agency may require, nor quantitatively lower than the generally applicable risk-based capital requirements that were in effect for insured depository institutions as of the date of enactment of this Act. In other words, the capital requirements of a bank holding company can be no less stringent than the requirements applied to its depository subsidiary. In addition, the minimum requirements cannot be quantitatively lower than the capital requirements that were in effect when Dodd-Frank was enacted (July 2010). Hence, only the features of Basel I and Basel II that were implemented in the United States at that time, along with other requirements consistent with Section 38 of the Federal Depository Insurance Act, became a floor for future regulatory ratios. Regulators may set higher (but never lower) ratio requirements than those established for insured depositories that were in effect at that time. The U.S. federal banking regulators announced the final rule implementing this requirement on July 28, 2011. The Collins Amendment also had the effect of excluding a class of securities from the definition of eligible Tier 1 capital for large bank holding companies and systemically important nonbanks. Trust preferred securities are hybrid instruments possessing characteristics typically associated with debt obligations; issuers, however, may have an incentive to redeem at some future date. Given that trust preferred securities were excluded from Tier 1 capital for insured depositories at the time of passage, the Collins Amendment effectively made this a requirement for bank holding companies, specifically those with $15 billion or more in total consolidated assets as of December 31, 2009. Bank holding companies with $15 billion or more in consolidated assets have a three-year phase-out period that began on January 1, 2013; institutions with less than $15 billion in assets have a 10-year phase-out period that began on January 1, 2013. The capital requirements adopted in the Basel III final rule include most but not all of the BCBS recommendations; they also include many, but not all, of the related safety and soundness provisions required by Dodd-Frank. For example, Title 1 of Dodd-Frank created enhanced safety and soundness requirements for banks with $50 billion or more in assets as well as systemically important financial institutions (SIFIs) that the Financial Stability Oversight Council (FSOC) determines could pose a threat to financial stability. In addition, additional capital requirements not implemented in the Basel III final rule may still be implemented at some future date. The Basel III final rule provides guidance on the required risk-weighting methodology and capital ratio levels, and it also incorporates the enhanced capital and liquidity requirements mandated by Dodd-Frank. The Basel III final rule applies to all banks and bank holding companies domiciled in the United States, with some exceptions. Banking institutions with less than $500 million in total consolidated assets will not have to comply with the same prompt corrective action ratio requirements (discussed below), but they will have to comply with the revised system of risk weights. The Basel III final rule does not apply to all top-tier savings and loan holding companies domiciled in the United States, particularly those substantially engaged in insurance underwriting or non-financial activities. Some banking institutions covered by the Basel III final rule will face even more stringent requirements. For example, a dvanced approaches banks, defined as institutions with at least $250 billion in consolidated assets or on-balance sheet foreign exposures of at least $10 billion, must comply with additional safety and soundness requirements, particularly in the form of a countercyclical capital buffer and a supplementary leverage ratio discussed below. Furthermore, advanced approaches banks that get designated as SIFIs can expect to see additional requirements in the future. This section discusses changes to the definition of eligible capital and highlights some of the new risk-weighting and prompt corrective action ratio requirements stemming from the Basel III final rule. Appendix C discusses the increase in stress testing requirements for all U.S. banks, which are likely to result in banks holding levels of required capital that exceed the minimum ratio compliance thresholds. The U.S. federal banking regulators closely followed the definition of Tier 1 capital established by the BCBS, which now will be defined more narrowly. To raise the quality, consistency, and transparency of regulatory capital, the committee determined that Tier 1 capital must consist predominantly of common equity and retained earnings. The financial crisis demonstrated that the resources to cushion against credit losses and write-downs came out of retained earnings, which is a part of a bank's tangible equity base. Hence, the definitions of Tier 1 capital ratio and tangible common equity ratio are now more closely defined. Mortgage servicing rights, deferred tax assets, and holdings in other financial institutions may also be included in Tier 1 because they are considered very liquid and can be sold to offset unexpected losses; but these assets may not collectively exceed more than 15% of a bank's Tier 1 capital. This requirement limits dilution of the amount of common tangible equity in Tier 1 capital. The final rule requires most elements of accumulated other comprehensive income (AOCI) to be included in Tier 1 regulatory capital. AOCI refers to gains or losses not yet realized (on assets available for sale), but the rationale to include these elements in Tier 1 capital is to capture a more accurate assessment of a bank's loss absorption capacity if its assets had to be sold. For example, temporary movements in interest rates may cause the market value of securities to fluctuate. When interest rates fall, loans become more valuable especially if borrowers choose not to refinance into ones with lower interest rates; conversely, the market values of existing loans fall when interest rates increase. Given that interest rate fluctuations translate into fluctuations of bank assets (securities) values, inclusion of unrealized gains and losses in Tier 1 capital would likely add volatility to bank capital ratios, arguably reflecting more frequent movements in market interest rates rather than changes in borrowers' default risks. Such volatility could increase the difficulty to gauge how much to lend and remain in compliance during periods of interest rate uncertainty, which may be particularly problematic for small banks with limited ability to use derivative instruments to hedge interest rate risks. Consequently, the U.S. federal banking regulators will allow banks that are not subject to the advanced approaches rules a one-time opportunity to opt out of the AOCI requirement. Banks may opt out of this requirement by the first quarterly financial report filed and submitted after January 1, 2015. Before discussing some of the ratio requirements, it may be useful to review the two-step process for determining the proper capitalization levels. First, the asset (loan) is multiplied by a risk weight that is designed to capture the riskiness of the borrower. Next, the risk-weighted asset (or the product of the original asset multiplied by the risk weight) is multiplied by the prompt corrective action ratio or required capital ratio charge, which is designed to ensure that lending institutions have a capital reserve to buffer against the credit risk of the borrower. For example, suppose a borrower receives a $100,000 mortgage loan. According to the Basel III final rule, if the mortgage meets certain requirements, then it would be assigned a 50% risk weight, and the value of the risk-weighted asset would be $50,000. For the bank to be adequately capitalized , it would need to hold total risk-based capital in the amount of $4,000 (8% prompt corrective action capital charge *$50,000) on this loan; to be well-capitalized , it would need to hold total risk-based capital in the amount of $5,000 (10% prompt corrective action capital charge *$50,000). This example has only one loan, but the entire asset side of a bank's balance sheet is typically risk weighted and then summed prior to applying the prompt corrective capital charges. All banks regardless of size are required to follow the same risk-weighting guidelines. Federal regulators have implemented a system that assigns risk weights, some that appear below, to all types of asset holdings (or exposures) based upon various categories of loans, issuers (of financial securities), and borrower underwriting requirements. All bank assets (loans) would be multiplied by the assigned risk weight, and the sum of the risk-weighted assets would then be multiplied by a minimum capital percentage to determine how much capital a bank must hold. After the assets are risk weighted, banks must apply prompt corrective action capital ratio charges to determine how much capital to hold. Generally speaking, a bank in compliance with the capital charges (see Appendix B , Table B -1 ) would be considered adequately capitalize d or has satisfied the minimum levels of capitalization. A bank must exceed those capitalization standards to be considered well-capitalized , and the U.S. federal banking regulators have defined the criteria necessary to achieve that designation. A bank failing to satisfy the minimum capitalization requirements would receive a prompt corrective action notice from its primary regulator that may include penalties and other restrictions. An overview of the ratios as applied to banks of difference sizes is presented below; a more detailed discussion appears in Appendix B . The total risk-weighted capital requirements, which is defined as total (Tier 1 and Tier 2) capital divided by total risk-weighted assets, must now use the following new risk weights below. In the earlier risk weighting example, a $100,000 mortgage loan was assigned a 50% risk weight, and the risk-weighted asset was equal to $50,000. Thus, the minimum prompt corrective action total risk-weighted capital charges under the final rule are as follows: banks with assets under $500 million would hold a capital buffer of $4,000; banks with more than $500 million in assets would hold $5,250; and advanced approaches banks would hold $5,250 if the countercyclical buffer is set at 0% or $6,500 if the countercyclical buffer is set at 2.5% during times of rapid credit growth. In contrast to the risk-weighted capital ratio requirements, the leverage ratio is defined as Tier 1 capital divided by the average total on-balance sheet assets. An unweighted ratio requirement may be important at times when financial risks suddenly rise above what the assigned risk weight can feasibly capture. The leverage ratio requirements for U.S. banks appear below. On April 8, 2014, the U.S. federal banking regulators issued a final rule that would add an additional capital buffer of at least 2% to the current supplementary leverage ratio of 3% for banks with more than $700 billion in total consolidated assets or $10 trillion in total assets, thus raising the total supplementary leverage ratio requirement to a 5% minimum. The enhanced supplementary leverage ratio would function similar to the capital conservation buffer such that the eight largest SIFIs must maintain a 6% ratio (which would exceed the 5% minimum) to avoid restrictions on bonuses. The proposal would take effect on January 1, 2018. One definition of liquidity is the ability to sell an asset immediately for its original face or book value without incurring losses or significant transaction fees. Bank portfolios generally consist of illiquid assets (longer-term loans) that are funded by liabilities (shorter-term borrowings) that must be renewed continuously until the longer-term customer loans are fully repaid. Episodes of uncertainty, however, can cause increases in short-term rates relative to long-term rates, which can translate into distress for financial institutions. For example, institutions holding large amounts of illiquid assets may suddenly find themselves competing with other financial institutions to borrow shorter-term liquid assets, which drives up short-term rates and increases funding risks. During a period of uncertainty, another option for a bank might be to liquidate some of its asset security holdings; but if other banks simultaneously make similar financial decisions, the market for such securities may consist of many sellers and few willing buyers. In both cases, even if banks have sufficient capital reserves to still be considered solvent, the scarcity of liquid funds would result in problems repaying short-term funding obligations. Hence, in addition to having sufficient capital to absorb some loan defaults (credit risk), banks need sufficient amounts of liquidity to buffer against unanticipated reversals in cash flow that could result in asset "fire sales," a phenomenon that occurred in 2007 and into 2008. The BCBS, therefore, introduced two new liquidity risk ratio requirements (discussed in Appendix B ) to improve resilience to liquidity stress. The liquidity risk ratio requirements proposed by the BCBS were not implemented in the Basel III final rule. On October 24, 2013, however, the federal banking agencies announced a proposed rule to strengthen liquidity requirements (or implement the BCBS's liquidity coverage ratio ), which would be applied to depository institutions with $10 billion or more in total consolidated assets. The liquidity risk ratio requirements have come under scrutiny, particularly because banks would have to substitute away from higher-yielding, illiquid loans and hold more lower-yielding, liquid assets. If banks are required to hold more liquid assets, then they may not be taking on a sufficient amount of risk (i.e., providing credit in the form of illiquid loans) necessary to spur economic growth. In addition, the banking system may not need to hold large amounts of liquid assets given that the Federal Reserve was established to function as the lender of last resort when liquidity shortages arise. Furthermore, if the banking system held enough highly liquid U.S. Treasury securities to satisfy the liquidity risk ratio requirements, other financial and non-financial entities may experience a shortage of liquid securities. Consequently, the entire banking system could become more susceptible to a systemic risk crisis should its large concentration of liquid (U.S. Treasury) securities suddenly experience an increase in credit risk. Hence, while the U.S. federal banking regulators recognize that liquidity risk management is a practical tool for banking system stability, a substantial increase in risk-free asset holdings by the banking system could introduce new challenges to financial stability. In theory, increasing safety and soundness requirements in the form of holding more capital should increase the capacity of the banking system to absorb losses associated with its various financial risks. Higher capital requirements can reduce vulnerability of banking institutions to insolvency (failure). Furthermore, under circumstances when a bank failure is unavoidable, higher capital may reduce the size of claims or perhaps the need to draw from the deposit insurance fund that is maintained by the Federal Deposit Insurance Corporation, thus avoiding possible taxpayer losses. Banks, however, are reluctant to hold larger amounts of capital than necessary given that funding loans via the short-term interbank loan markets is typically cheaper than funding them with shareholder equity. A bank typically must pay its shareholders a greater return than it would to short-term creditors because (1) its return on equity must be competitive with that of other publicly-traded firms; and (2) shareholders require greater compensation for their willingness to shoulder greater default risk. During periods of economic uncertainty, investors could possibly interpret a bank's decision to raise capital as a sign that its default or funding risks may be increasing. If investors subsequently react negatively to a bank's efforts to raise capital (by seeking higher investment returns elsewhere), then the bank's share price might fall and the risk of bank failure, ironically, could increase. A bank may attempt to meet increased capital requirements by placing the higher cost burdens on its customers (borrowers) rather than on existing shareholders. For example, to avoid raising new capital and diluting shareholder equity by reducing portfolio assets (loans), a bank may decide to sell some existing assets or reduce future lending. A bank could also pass its higher funding costs on to borrowers by increasing lending rates. Hence, a bank must decide how to distribute the costs of higher capital requirements between its shareholders and customers. The distribution of those costs may dampen credit expansion and slow the pace of economic recovery. Although higher capital and stress testing (discussed in Appendix C ) requirements may result in a larger cushion to absorb unexpected losses, the extent to which a systemic risk event can be mitigated is unclear. Prior to the recent financial crisis, many banks held more than enough capital to be considered well capitalized by regulatory standards; yet holding precautionary capital did not necessarily restrain lending by the covered institutions. According to the "paradox of financial instability," the financial system appears at its most robust when it is actually most at risk. The evidence for the paradox is linked to the observation that bank capital is procyclical , meaning that it rises during healthy economic periods, when there are fewer defaults, and declines during financial downturns when defaults increase. Procyclical implies that bank capital levels may be a lagging indicator of distress rather than a predictor of a systemic event. Ironically, excessive lending activity may arise when banking institutions grow overconfident (1) as a result of being well-capitalized and (2) as optimism grows with the exceptional performance of an asset used as collateral for loans. Given that many banking crises arguably may be attributed to the bursting of asset bubbles, which have proven difficult for the Federal Reserve to identify and counteract, a rise in the pace of aggregate lending activity (especially as lenders' credit risk exposures grow more correlated with the performance of a particular financial market) may arguably serve as a better indicator of vulnerability to a systemic risk event than higher capital requirements. Bank capital levels may also become more misleading or less effective at mitigating financial risks when a significant amount of lending occurs outside the regulated banking system. Prior to the recent financial crisis, many loans were originated by nonbank (nondepository) institutions and nonbank subsidiaries of bank holding companies; some nonbanks and securitizers that held mortgage loans were not subject to safety and soundness capital requirements. Furthermore, large complex financial institutions sponsored financial conduits that allowed mortgages to be financed off the balance sheets of supervised banks. When large amounts of lending activity occur in parts of the financial system that are not regulated for safety and soundness, raising capital requirements for depository institutions would not necessarily address the rise in the various types of financial risks in the economy. Conversely, if non-bank lending activities substantially decline, then the influence of higher bank capital requirements on overall lending activity may increase, causing credit availability in the economy to become more contingent on (or sensitive to) changes in bank capitalization levels. Appendix A. Asset Risk Weighting Capital adequacy regulation requires banks to hold enough reserves to maintain minimum capital-asset ratios, which are generally defined as bank capital (e.g., common shareholder equity) in the numerator and bank assets in the denominator. Basel I introduced a risk weighting system that weights (multiplies) the assets in the denominator of the capital-asset ratio by a factor that attempts to capture the relative credit or default risk of bank assets. The risk weighting system arguably correlates lower credit risk with liquidity, as it typically assigns lower weights to more liquid assets and higher weights to less liquid assets. For example, cash and U.S. Treasury securities, which are liquid and considered to have zero default risk, receive a risk weight of 0%. These asset holdings would have no effect on a bank's portfolio capital-asset ratio. On the other hand, loans with higher risk weights reduce the overall portfolio capital-asset ratio by increasing the size of the denominator. A bank holding a loan that is assigned 100% risk weight would be required to hold 8% of the value of that asset as capital. Should a bank decide to hold less cash and increase its holdings of higher yielding, less liquid loans, then its capital reserves must also increase for its capital-asset ratio to remain intact. Conversely, when capital-asset ratios are low, academic research has found that some banks will substitute toward low risk-weighted asset categories to restore the ratio. The composition of a bank's asset portfolio, therefore, may be influenced by the fixed risk weights assigned to the various assets. The Basel I weighting system arguably did not sufficiently differentiate among the degrees of risk. To illustrate, Basel I places the same capital charge on all commercial loans regardless of the differences in credit (default) risk. In other words, a bank would be required to hold the same percentage of capital against two commercial loans regardless if one were of relatively higher credit quality. Furthermore, the weighting system is unable to capture offsetting risk exposures. The capital surcharge is the same even though holding the loan with lower default risk may compensate for holding the higher risk loan. Hence, banks arguably have an incentive to make higher risk loans with potentially higher yields as opposed to lower risk loans with lower yields. Another concern regarding the Basel I weighting system is that banks would be incentivized to hold government securities (e.g., U.S. Treasuries) rather than extend loans where credit shortages may exist, particularly during economic downturns. The government securities of nations that are members of the Organization for Economic Co-operation and Development (OECD) receive a risk weight of 0%. Suppose capital-asset ratios fall below regulatory threshold levels during recessions after an increase in borrower loan defaults. If banks, as discussed earlier, previously had the incentive to hold lower quality loans during an expansionary economic period, they may decide to hold more OECD country sovereign debt rather than make new loans during recessionary periods to keep capital-asset ratios in compliance. These actions may further curtail lending to segments where more severe credit shortages may exist, such as in non-OECD emerging market economies or in the private sector when entering the recovery phase of a business cycle. Hence, the Basel I weighting system that relies on fixed weights results in "procyclical" capital requirements, which means they may incentivize excessive risk taking during expansions and discourage credit availability during economic downturns. A bank's risk exposure may also be understated should the default risk of OECD country sovereign (debt) securities increase. Basel II revised the weighting system to allow for more risk differentiation, specifically by adding more risk weight categories. Given that fixed weights do not vary when financial risks change, Basel II also proposed the use of external credit assessments or ratings to support the determination of the appropriate risk weight assignment. For example, suppose a Nationally Recognized Statistical Rating Organization (NRSRO) gave its highest investment grade rating to a security that still receives a 100% risk weight under Basel I. The highly rated security could receive a 20% risk weight under Basel II, which arguably better reflects the high credit quality. Given that Dodd-Frank removes the use of NRSRO credit ratings, the Basel III final rule incorporated a more extensive risk weighting system that allows for more risk differentiation than Basel I. Despite the greater array of risk weights to differentiate among the degrees of risk, the risk weighting system would still provide procyclical lending incentives for the banking system (in terms of the types of assets to hold in portfolio during different phases of the business cycle as previously discussed). Appendix B. Capital Charges and Regulatory Ratios The purpose of this appendix is to show the capital requirements arising from the Basel III Capital Accord (as opposed to the Basel III final rule) before the federal regulators included additional elements, such as some of the required Dodd-Frank provisions. Basel III, Pillar 1 modifies the regulatory capital and liquidity requirements established in Basel I and Basel II, requiring more and higher quality capital. As previously discussed, Basel III, Pillar I revises the definition of Tier 1 capital to increase the amount of common tangible equity that must be held as minimum regulatory capital. In addition, the minimum common equity capital requirement increases to 4.5% by January 1, 2015, up from the Basel II level of 2%. By January 1, 2019, the total minimum total capital requirement (Tier 1 and Tier 2) increases from 8.0% to 10.5%, which reflects the 2.5% capital conservation buffer (discussed below). Basel III also establishes a countercyclical capital buffer, a leverage ratio, and two new liquidity ratios. These regulatory ratios, sometimes referred to as capital charges, are discussed in more detail in this appendix. Table B -1 summarizes the Basel III minimum capital requirements and phase-in arrangements. Capital Conservation Buffer The BCBS established a capital conservation buffer to encourage banks to build capital buffers outside periods of financial stress that can be drawn down should their assets deteriorate, thus improving their resiliency to unanticipated losses. On September 12, 2010, the BCBS agreed to set the capital conservation buffer at 2.5% of risk-weighted assets. This buffer must consist mostly of common tangible equity. According to Basel III, regulators should forbid banks from distributing earnings, dividend payments, and salary bonus payments when banks have depleted their capital buffers. The conservation buffer would increase in increments of 0.625% annually. On January 1, 2016, the conservation buffer must be 0.625, rising to 2.5% by January 1, 2019. Countercyclical Capital Buffer Lending can grow disproportionately when economic activity is expanding and contract when economic activity is contracting, thus feeding and exacerbating the business cycle. On September 12, 2010, the BCBS established a countercyclical buffer that would equal between 0 and 2.5% of a bank's total risk-weighted assets and consist of common equity or other fully loss absorbing capital. The buffer would grow during economic expansions and decrease during contractions. National regulatory authorities will be allowed to determine when lending growth poses a risk to the stability of the financial system and when a countercyclical capital buffer requirement would be necessary. Leverage Ratio The leverage ratio is defined as gross capital divided by the average total consolidated on-balance sheet assets. Unlike the Tier 1 and Tier 2 capital ratios, the leverage ratio does not depend upon risk weights. The logic behind this ratio is to illuminate financial risks that could be assigned lower weights and still translate into substantial losses. Hence, the leverage ratio assigns the same level of credit risk to all assets (e.g., loans held in portfolio, asset-backed securities, credit-risk guarantees) and serves as a capital backstop to ensure that a bank's capital buffer does not fall below a minimum threshold. The BCBS is currently testing a minimum requirement of 3% for the leverage ratio, which it plans to implement as a requirement by January 1, 2018. Liquidity Risk Measures: Liquidity Coverage Ratio, Net Stable Funding Ratio On September 12, 2010, the BCBS established the 30-day liquidity coverage ratio requirement to promote resilience to sudden temporary disruptions in liquidity. The numerator of the liquidity coverage ratio consists of the total amount of a bank's stock of high-quality (generally government securities and cash) liquid assets, and the denominator measures net cash outflows over a 30-day time period. By 2019, a bank must hold an equal (or greater) amount of high-quality liquid assets relative to its amount of net cash outflow over a 30-day period. The BCBS also established the net stable funding ratio (NSFR) to encourage banks to rely upon medium- and longer-term funding of its longer-term loans as opposed to relying primarily upon short-term funding. The NSFR will not be introduced as a minimum requirement in Basel III until 2018. Additional Capital Requirements for G-SIBs Globally systemically important banks (G-SIBs) will have additional loss absorbency or capital requirements. G-SIBs are financial institutions, typically with significantly large amounts of assets that engage in financial activities such that their distress or failure would cause significant disruption to global financial activity. The BCBS recommends that an institution determined to be systemically important would be required to hold an additional 1% to 2.5% of capital in the form of common equity against their risk-weighted assets. These loss requirements would also be phased in and become fully effective by 2019. Appendix C. Stress Testing and Systemic Risk A bank stress test is a diagnostic tool used to judge the ability of banks and financial institutions to weather adverse macroeconomic and financial conditions. Stress tests are conducted to determine whether banks and financial institutions remain adequately capitalized and solvent under specific adverse economic scenarios. A stress test may include events such as heightened rates of unemployment, an economic slowdown or a recession, or failure of a large complex banking organization. Such events could result in widespread borrower defaults, the inability to obtain short-term funding, and ultimately, depletion of a bank's Tier 1 capital. Thus, stress tests may alert a bank's management and regulators to potential balance sheet weaknesses during an unfavorable economic or financial scenario. In addition, passing a stress test often requires banking institutions to hold capital levels that would exceed the capital ratios discussed earlier in this report. Dodd-Frank requires bank holding companies and non-bank financial corporations with consolidated assets of more than $10 billion to conduct and report on self-imposed semi-annual stress tests. On October 9, 2012, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation separately announced final rules requiring national banks and federal savings associations with total consolidated assets of $10 billion or more to conduct annual stress tests; the Federal Reserve released its final rule on October 12, 2012. The final rules were issued directly to banking institutions from their primary federal banking regulator. Federal banking regulators, however, currently require all banking institutions to analyze the potential impact of adverse economic conditions on their financial conditions or viability. Federal regulators do allow stress tests to be customized for banks of different sizes. A Stress Testing Example for Small Institutions Although community banks are less likely to face the same stress testing requirements as banks with $10 billion or more in assets, they are required to assess their ability to withstand an adverse macroeconomic scenario. For example, U.S. federal banking regulators, concerned about relaxed underwriting standards in commercial real estate (CRE), increased supervisory guidance for banks with significant concentrations in CRE. Community banks, which typically engage in CRE lending, are generally considered vulnerable to loan defaults and possible failure if CRE prices suddenly collapse. Given that CRE losses can be substantial and federal regulators may not be familiar with the default and funding risks unique to a particular geographic area, the guidance required a bank to submit a plan to its regulator regarding its risk management practices if any of the following conditions hold: total construction and land development loans was equal to or more than 100% of its total capital reserve; total construction, land development, other land and loans secured by multifamily and nonfarm nonresidential property was equal to or greater than 300% of its total capital; or the CRE loan portfolio had increased by 50% or more in the span of 36 months. The risk management plan must outline the bank's plan to reduce or manage its high level of commercial real estate concentrations. The guidance states its intent to encourage institutions to develop risk management practices and levels of capital levels "commensurate with the level and nature of their commercial real estate concentrations" rather than limit CRE lending by banks. Nevertheless, the U.S. federal banking regulators are likely to require banks with unacceptable risk management plans to raise additional capital. Stress Testing of Midsize Banking Organizations On March 5, 2014, the federal banking regulators issued final guidance on stress testing for firms with assets between $10 billion and $50 billion. Generally speaking, the final rules include, for institutions with $10 billion to $50 billion in consolidated assets, stress testing requirements (e.g., economic scenarios) as well as deadlines for reporting (to the primary regulator) and making financial disclosures (to the public). Stress Testing of Large and Large Complex Banking Organizations Sections 165 and 166 of Dodd-Frank require enhanced prudential standards on bank holding companies with total consolidated assets of $50 billion or more and non-bank financial companies determined by the Financial Stability Oversight Council to be systemically important. In February 2009, the Federal Reserve announced the Supervisory Capital Allocation Program (SCAP) for bank holding companies with assets exceeding $100 billion. Under the SCAP, the Federal Reserve conducted a stress test for the 19 largest U.S. bank holding companies, which included an estimation of their revenues, losses, and reserve requirements under two adverse economic scenarios. The SCAP program conducted stress tests for 2009 and 2010. In November 2011, the Federal Reserve introduced the Comprehensive Capital Assessment Review (CCAR) program that annually evaluates the capital planning process of institutions with over $500 billion in assets. The SCAP stress testing now continues under the CCAR program.

The Basel III international regulatory framework, which was produced in 2010 by the Basel Committee on Banking Supervision at the Bank for International Settlements, is the latest in a series of evolving agreements among central banks and bank supervisory authorities to standardize bank capital requirements, among other measures. Capital serves as a cushion against unanticipated financial shocks (such as a sudden, unusually high occurrence of loan defaults), which can otherwise lead to insolvency. The Basel III regulatory reform package revises the definition of regulatory capital and increases capital holding requirements for banking organizations. The quantitative requirements and phase-in schedules for Basel III were approved by the 27 member jurisdictions and 44 central banks and supervisory authorities on September 12, 2010, and endorsed by the G20 leaders on November 12, 2010. Basel III recommends that banks fully satisfy these enhanced requirements by 2019. The Basel agreements are not treaties; individual countries can make modifications to suit their specific needs and priorities when implementing national bank capital requirements. In the United States, Congress mandated enhanced bank capital requirements as part of financial-sector reform in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act; P.L. 111-203, 124 Stat.1376). Specifically, the Collins Amendment to Dodd-Frank amends the definition of capital and establishes minimum capital and leverage requirements for banking subsidiaries, bank holding companies, and systemically important non-bank financial companies. In addition, Dodd-Frank removes a requirement that credit ratings be referenced when evaluating the creditworthiness of financial securities. Instead, the U.S. federal banking regulators (i.e., the Federal Reserve, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation) are required to find other appropriate standards by which to determine the financial risks of bank portfolio holdings when enforcing the mandatory capital requirements. This report summarizes the higher capital requirements for U.S. banks regulated for safety and soundness. The U.S. federal banking regulators announced the final rules for implementation of Basel II.5 on June 7, 2012, and for the implementation of Basel III on July 9, 2013. On April 8, 2014, the federal banking regulators adopted the enhanced supplementary leverage ratio for bank holding companies with more than $700 billion of consolidated assets or $10 trillion in assets under custody as a covered bank holding company. Although higher capital requirements for most U.S. banking firms may reduce the insolvency risk of the deposit insurance fund, which is maintained by the Federal Deposit Insurance Corporation, they arguably could translate into more expensive or less available bank credit for borrowers. Whether higher capital requirements would result in a reduction of overall lending or systemic risk remains unclear. Prior to the financial crisis, banks maintained capital levels that exceeded the minimum regulatory requirements, yet the economy still saw widespread lending. Bank capital reserves also may have limited effectiveness as a systemic risk mitigation tool if a significant amount of lending occurs outside of the regulated banking system. For an introduction to some of the topics covered in this report, see CRS Report R43002, Financial Condition of Depository Banks, by [author name scrubbed].

The size and scope of the federal workforce, along with the rights and responsibilities of federal agencies and their employees, has been the subject of various legislative proposals from Congress in recent years, and has also been an issue of focus for the Trump Administration. A major topic of interest concerns statutory limits on when federal employees can be removed or demoted for cause or performance-related issues. The current legal framework governing removal or demotion of federal employees originates from efforts to reform the nation's earlier "patronage" system for filling positions in the federal government. Under the "spoils system" that existed in the first century of the Republic, many federal government jobs were filled based upon "political contributions rather than capabilities or competence." Eventually, "strong discontent with the corruption and inefficiency of the patronage system of public employment" resulted in the passage of the Pendleton Act in 1883, which served as the "foundation of [the] modern civil service" and required that federal employees within the civil service be hired based on merit. A number of subsequent laws have further reformed the civil service system, although the modern framework governing the rights of most federal workers is the Civil Service Reform Act of 1978 (CSRA or Act), as amended. The CSRA "was designed to replace an 'outdated patchwork of statutes and rules' that afforded employees the right to challenge employing agency actions in district courts across the country." This patchwork had resulted in "wide variations" within different federal courts regarding the rights of federal employees. Against this backdrop, the CSRA created "a comprehensive system for reviewing personnel action taken against federal employees." It established "an integrated scheme of administrative and judicial review, designed to balance the legitimate interests of the various categories of federal employees with the needs of sound and efficient administration." The Act provides a variety of legal protections for federal employees, authorizes challenges to agency decisions, and funnels review of those challenges to the Merit Systems Protection Board (MSPB or Board), whose decisions are exclusively subject to review by the United States Court of Appeals for the Federal Circuit (Federal Circuit). Among other things, the CSRA establishes a statutory framework, codified in Title 5 of the U.S. Code , regulating specific actions taken by agencies against certain federal employees, including removal, demotion, and suspension. This report focuses on certain legal issues arising under a prominent type of action taken against federal employees—major adverse actions based on employee misconduct under Chapter 75 of Title 5's provisions. However, another important type of action taken by agencies against employees—performance-based actions under Chapters 75 and 43—is beyond the scope of this report. Moreover, this report primarily focuses on the CRSA's applicability to the competitive service. The requirements pertaining to Senior Executive Service (SES) members are thus only discussed briefly. Likewise, certain categories of employees at particular agencies that are exempt from the CSRA's requirements are largely excluded from discussion in the report. The report begins with a brief examination of an important principle that informs and supplements protections for federal workers—the constitutional protections afforded civil service employees by the Due Process Clause. These constitutional considerations not only inform the interpretation and application of the existing statutory rules governing adverse actions against federal employees, but may also establish baseline parameters for policymakers' consideration of proposals to modify the removal and demotion processes authorized under current law. The Due Process Clause of the Fifth Amendment requires the federal government to observe certain procedures when depriving individuals of life, liberty, or property. In addition to protecting against the deprivation of an individual's physical property, the Constitution also guards against the deprivation of certain "property interests" without due process. The property interests protected by the Due Process Clause are not themselves created by the Constitution; instead, those interests arise from an independent source, such as state or federal law. One important type of property interest that can be created by federal law is public employment. The Supreme Court has held that certain public employees have a constitutional property interest in their continued employment. In order for a public employee to have a property interest in continued employment, an employee must have a "legitimate claim of entitlement to it." Such an entitlement can arise when the government gives a public employee "assurances of continued employment or conditions dismissal only for specific reasons." The CSRA's requirement that covered employees may not be removed from federal service except for cause or unacceptable performance creates such an entitlement, bestowing a property interest in continued employment. The government thus cannot deprive covered employees of this property interest without due process. Of course, Congress is not required to give a property interest to federal employees in the first place; but once it does so, that property interest cannot be deprived without constitutionally adequate procedures. In other words, the CSRA gives covered employees a constitutionally protected property interest in continued employment, but that interest is protected both by the statute's procedural provisions and the requirements of due process. Precisely what procedures are constitutionally required before depriving individuals of a protected interest can vary. When deciding what process is due, courts balance three factors enunciated by the Supreme Court in Ma thews v. Eldridge : (1) "the private interest that will be affected by the official action"; (2) the risk of an erroneous deprivation and the probable value of additional procedures; and (3) the interest of the government. In general, the Court has made clear that individuals with a property interest in continued employment are entitled to notice of the proposed agency action and a "meaningful opportunity to be heard" before the government may deprive them of that interest. Prior to termination, an employee is thus "entitled to oral or written notice of the charges against him, an explanation of the employer's evidence, and an opportunity to present his side of the story." Importantly, the contours of this pre-deprivation hearing are dependent on the totality of the proceedings. In determining the type of procedures due process requires, courts will examine the entirety of the relevant procedures, including the available post-deprivation proceedings. Particularly when employees are entitled to a subsequent full hearing and judicial review, a less formal pre-deprivation proceeding is permitted. In conducting the balancing of factors pursuant to Mathews v. Eldridge , the severity of the deprivation is a key factor in determining what procedures due process requires. For example, the Supreme Court in Gilbert v. Homar upheld the immediate suspension —as opposed to removal—of a public employee, arrested and charged with a felony, because the Court concluded that when the government must act quickly, or it is impractical to deliver pre-deprivation procedures, post-deprivation procedures can satisfy due process. In the circumstance at issue in Homar , where an independent third party had made a probable cause determination that the employee committed a felony, a post-suspension opportunity to be heard could satisfy due process. Further, the scope of the right to be heard is not unlimited. The Supreme Court has held that it does not violate the Due Process Clause for an agency to take an adverse action against an employee for making "false statements in response to an underlying charge of misconduct." Employees are of course entitled to exercise a Fifth Amendment right not to incriminate themselves, but agencies may take this silence into consideration in determining the truth or falsity of a charge. While the CSRA's provisions provide statutory requirements of agency actions that effectively overlap with many constitutional requirements, due process sometimes requires protections beyond what the statute obviously requires. For instance, in the adverse action reviewed by the Federal Circuit in Stone v. Federal Deposit Insurance Corporation , an employee was removed by an agency official who had received ex parte communications regarding the employee, and these communications were not disclosed to the employee until after the removal decision was made. The Federal Circuit ruled that ex parte communications made to the decision maker containing "new and material information" violate due process because they prevent the employee from receiving notice of the reasons and evidence for the agency's decision. Similarly, in Ward v. United States Postal Service , the Federal Circuit ruled that this principle is not limited to consideration of conduct serving as the basis for the adverse action itself, but applies to an agency's determination of an employee's penalty as well. In Ward , the agency official responsible for determining the appropriate penalty to be imposed on the employee had received ex parte communications concerning the employee's conduct that were not disclosed to the employee. The Federal Circuit rejected a distinction between communications regarding the basis for the adverse action and those regarding the determination of the appropriate penalty that followed. The court ruled that, just as in Stone , a deciding official's receipt of new and material information via ex parte communications regarding an employee's penalty determination runs afoul of due process. Likewise, as explained in more detail below, in adverse actions where an agency seeks to show that removal of an employee promotes the efficiency of the service, certain "egregious" behavior establishes a rebuttable presumption that this standard is met. When established, this presumption "places an extraordinary burden on an employee, for it forces him to prove the negative proposition that his retention would not adversely affect the efficiency of the service." Consequently, the Federal Circuit made its view clear in Allred v. Department of Health and Human Services that due process requires the presumption actually be rebuttable by an employee's countervailing evidence. The CSRA contains an initial categorization of who counts as a federal employee and which particular employees are covered under its various procedural protections. These classifications are important because, among other things, the CSRA functions as the "comprehensive" legal framework governing certain type of actions taken by agencies against employees. As such, potential claims of certain federal workers not covered by particular provisions of the CSRA may be precluded because of the comprehensive scope of the CSRA. The statute defines the civil service generally as "all appointive positions in the executive, judicial, and legislative branches of the Government of the United States" except for the armed forces and the uniformed forces. It further categorizes civil service federal government employees into three groups: SES employees, competitive service employees, and excepted service employees. SES employees are high-level positions in the federal government above the grade of General Schedule 15. Career SES members are selected according to a merit-based system, and they operate functionally as a link, through successive presidential administrations, between career staff and the political appointees who head federal executive agencies. The CSRA's requirements for SES employees, including hiring and performance reviews, are distinct from those of competitive service and excepted service employees and are beyond the scope of this report. In general, federal civil service employees are in the competitive service. The competitive service generally covers all civil service positions within the executive branch except those that are (1) SES positions; (2) filled via appointment by the President following Senate confirmation; or (3) excepted from the competitive service via statute. By statute, certain positions not in the executive branch and positions in the government of the District of Columbia may be specifically included in the competitive service. Finally, excepted service employees are civil service employees who are not in the SES or the competitive service categories. The primary procedural protections under the CSRA for agency actions taken against employees for misconduct are contained in Chapter 75 of Title 5. Subchapter II of Chapter 75 provides various procedural protections for certain government employees subjected to "major adverse actions." Those adverse actions include removals, suspensions for more than 14 days, reductions in grade or pay, and furloughs of 30 days or less. Agencies may only take a major adverse action against an employee "for such cause as will promote the efficiency of the service." The Federal Circuit has interpreted "efficiency of the service" to involve consideration of "the work of the agency," "the agency's performance of its functions," and "the employee's job responsibilities." These protections of Chapter 75 apply only to covered employees. These include individuals in the competitive service who are not serving in a probationary period or have generally completed one year of continuous service; preference eligibles in the excepted service who have completed one year of continuous service in an executive agency, the Postal Service, or the Postal Regulatory Commission; and other select individuals in the excepted service who are not preference eligible. When taking an adverse action against covered employees, the agency must give 30 days' advance written notice before taking action. Employees also are entitled to an attorney or representative, a reasonable time to respond orally and in writing, and a written decision from the agency describing its reasons for taking action. After the agency has reached its decision, covered employees may appeal to the MSPB, which is empowered to review the case. If the employee is the prevailing party on appeal, the Board may potentially order remedies including reinstatement, backpay, and attorney's fees. When reviewing an employee's appeal of a major adverse action, the MSPB will uphold the agency's decision "only if [it] is supported by a preponderance of the evidence." The "agency must establish three things to withstand challenge" to its decision: (1) it must show by a preponderance of the evidence "that the charged conduct occurred"; (2) it must "establish a nexus between that conduct and the efficiency of the service"; and (3) it must show "that the penalty imposed is reasonable." Following the MSPB's decision, employees may appeal the Board's decision to the Federal Circuit, which has "exclusive jurisdiction" over the MSPB's final decisions. On appeal from the MSPB's decision, the Federal Circuit will uphold the Board's decision unless it is "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law"; "obtained without procedures required by law, rule, or regulation having been followed"; or "unsupported by substantial evidence." As mentioned above, to sustain an adverse action against a covered employee under Chapter 75, the agency must show that its decision was made "for such cause as will promote the efficiency of the service." This means that, in addition to showing that the charged conduct actually occurred, the agency must also establish by a preponderance of the evidence that there is a "nexus" between the employee's misconduct and either "the work of the agency" or "the agency's performance of its functions." Certain on-duty offenses, such as an unauthorized absence without leave, are "inherently connected to the efficiency of the service." And other on-duty behavior may easily satisfy this standard as well, such as when misconduct occurs on agency property and involves agency personnel, or in circumstances where an employee refuses to follow legitimate instructions. However, agencies sometimes bring adverse actions against covered employees for off-duty misconduct as well. As explored in detail in the following sections, the MSPB has noted three circumstances in which an agency may establish a nexus between off-duty misconduct and the efficiency of the service. First, in certain egregious circumstances, the type of misconduct committed by the employee creates a rebuttable presumption of a nexus. Second, an agency may show by a preponderance of the evidence that the misconduct "adversely affects the appellant's or co-workers' job performance or the agency's trust and confidence in the appellant's job performance." Finally, the agency may demonstrate by a preponderance of the evidence that the employee's misconduct interfered with or adversely affected the agency's mission. The Federal Circuit has determined that certain egregious conduct presumptively satisfies the nexus requirement when that behavior "speaks for itself." When such behavior is shown, the agency establishes a rebuttable presumption that there exists a nexus between the misconduct and the efficiency of the service. For example, that court has affirmed the Board's ruling on various occasions that off-duty criminal misconduct involving sexual abuse of a minor is sufficiently egregious to establish a rebuttable presumption of a nexus. Similarly, the Federal Circuit "has consistently held that involvement in drug trafficking, even when limited to off-duty conduct, is sufficiently 'egregious' conduct to warrant a presumption of nexus." As mentioned above, however, due process requires this presumption to actually be rebuttable by the employee, so a finding of a nexus is not automatic. However, the Federal Circuit has required the MSPB to articulate clear and principled standards when determining that off-duty non-criminal misconduct establishes such presumption. In Doe v. Department of Justice , for instance, the MSPB sustained the agency's removal decision for an employee who had videotaped sexual encounters with women without their consent. Though that behavior did not appear to violate any laws in the employee's jurisdiction, the Board upheld the removal decision because that behavior was "clearly dishonest." The Federal Circuit vacated this decision, in part because "[t]o allow the Board decision to stand would be to recognize a presumed or per se nexus between the conduct and the efficiency of the service." The court ruled that the Board "failed to articulate a meaningful standard as to when private dishonesty rises to the level of misconduct that adversely affects the 'efficiency of the service.'" The use of "clearly dishonest" behavior as the basis to sustain a removal action, for the court, "inevitably risks arbitrary results, as the question of removal would turn on the Board's subjective moral compass." Without a clear guiding rule, employees would not know precisely what behavior was barred and agency officials might be able to "legitimize removals made for personal or political reasons." The court thus remanded the case to the Board to "articulate a meaningful standard as to when private misconduct that is not criminal rises to the level of misconduct that affects the efficiency of the service." Aside from situations where misconduct is so egregious that a nexus is presumed, the agency may also establish by a preponderance of the evidence that misconduct adversely affected the employee's or co-worker's job performance or the agency's trust and confidence in the employee's job performance. For example, the MSPB has upheld a removal in circumstances where an employee was convicted of aggravated assault and petty larceny, and agency officials had testified that they were concerned about the safety of fellow employees and the security of government property. The Board ruled in that case that the agency established that the employee's conduct adversely affected the agency's confidence and trust in her job performance. Likewise, the Board has upheld an agency's removal decision where the employee engaged in criminal behavior involving pointing a laser at a police helicopter and disrupting its flight. In this instance, the employee's duties involved regular interaction with the public as a representative of the agency. The MSPB found that the behavior "undermined [the employee's] effectiveness as a public spokesman for the agency." Finally, an agency can establish a nexus by showing that an employee's off-duty misconduct interferes with the agency's mission. This can apply to the agency's mission as a whole or the employee's specific job duties. For example, the MSPB has upheld an adverse action against federal correctional officers for smoking marijuana while off-duty because that behavior was "antithetical to the agency's law enforcement and rehabilitative programs that [the employees] are responsible for monitoring." Even though the misconduct might not have affected the employees' job performance, public awareness of the behavior would undermine confidence in the agency, "thereby making it harder for the agency's other workers to perform their jobs effectively." The Federal Circuit has also upheld an adverse action where a civilian employee of the Marine Corps for the Morale, Welfare, and Recreation Department (MWR) engaged in an adulterous affair with the wife of a deployed Marine who was part of a unit that the employee was directly responsible for supporting. The court noted that although such behavior was not sufficient to support an adverse action against an employee in every civil service position, the employee's position here was unique because it required him to support Marine families, including the families of Marines deployed overseas. The trust and confidence of Marine families was essential to the MWR's mission and the employee's particular job responsibilities; trust that was undermined by the employee's actions. As mentioned above, in order to sustain a major adverse action under Chapter 75, an agency must establish that the charged conduct occurred and that there exists a nexus between that conduct and the efficiency of the service. In addition, an agency must show that the imposed penalty is reasonable. The Board has authority to review, and mitigate when warranted, the agency's penalty determination according to the factors outlined in Douglas v. Veterans Administration . Those factors are (1) The nature and seriousness of the offense, and its relation to the employee's duties, position, and responsibilities, including whether the offense was intentional or technical or inadvertent, or was committed maliciously or for gain, or was frequently repeated; (2) the employee's job level and type of employment, including supervisory or fiduciary role, contacts with the public, and prominence of the position; (3) the employee's past disciplinary record; (4) the employee's past work record, including length of service, performance on the job, ability to get along with fellow workers, and dependability; (5) the effect of the offense upon the employee's ability to perform at a satisfactory level and its effect upon supervisors' confidence in the employee's ability to perform assigned duties; (6) consistency of the penalty with those imposed upon other employees for the same or similar offenses; (7) consistency of the penalty with any applicable agency table of penalties; (8) the notoriety of the offense or its impact upon the reputation of the agency; (9) the clarity with which the employee was on notice of any rules that were violated in committing the offense, or had been warned about the conduct in question; (10) potential for the employee's rehabilitation; (11) mitigating circumstances surrounding the offense such as unusual job tensions, personality problems, mental impairment, harassment, or bad faith, malice or provocation on the part of others involved in the matter; and (12) the adequacy and effectiveness of alternative sanctions to deter such conduct in the future by the employee or others. The MSPB is not permitted to independently determine the appropriate penalty. Instead, the choice of penalty is given to the employing agency and will only be overturned if unreasonable in light of the relevant Douglas factors. The MSPB will thus "modify a penalty only when it finds that the agency failed to weigh the relevant factors or that the penalty the agency imposed clearly exceeded the bounds of reasonableness." An important consideration in weighing these factors is whether similar offenses are treated in a comparable manner. In certain circumstances, the Board's finding that an agency treated analogous employee situations disparately can result in mitigation of the agency's penalty. In order to make a claim that an agency treated an employee unfairly compared to similarly situated employees, the "charges and the circumstances surrounding the charged behavior must be substantially similar." The employee must show that there is "enough similarity between both the nature of the misconduct and the other factors to lead a reasonable person to conclude that the agency treated similarly-situated employees differently, but the Board will not have hard and fast rules regarding the 'outcome determinative' nature of these factors." If an employee establishes this, the agency must then show that it had a legitimate reason for the different treatment by a preponderance of the evidence in order to sustain the penalty. Nevertheless, this is not to imply that agencies are barred from changing their policies. If an agency has applied a lenient policy in the past but wishes to apply a more stringent one in the future, it may do so as long as it effectively notifies its employees of the change. As mentioned above, the procedural protections for major adverse actions in Chapter 75 include removals, demotions, furloughs for less than 30 days, and suspensions for more than 14 days. A suspension "means the placing of an employee, for disciplinary reasons, in a temporary status without duties and pay." However, the CSRA does not reference "indefinite suspensions," although agencies have routinely indefinitely suspended employees for certain behavior. Nevertheless, the Federal Circuit and the MSPB have ruled that indefinite suspensions for disciplinary reasons that last more than 14 days qualify as major adverse actions under subchapter II of Chapter 75. In addition, Office of Personnel Management (OPM) regulations that implement the statute expressly provide that indefinite suspensions are adverse actions. In order to sustain an indefinite suspension against a covered employee, therefore, an agency must satisfy the procedural requirements of Chapter 75 for major adverse actions. Consequently, just as in other major adverse actions, an agency may indefinitely suspend an eligible employee for more than 14 days only "for such cause as will promote the efficiency of the service." In practice, this means that the agency must show that the suspension was based on an authorized reason and that the suspension "bears a nexus to the efficiency of the service." The MSPB has also made clear its view that based on the statutory definition of "suspension" as a temporary status, indefinite suspensions "must have an ascertainable end." Although "the exact duration of an indefinite suspension may not be ascertainable, such an action must have a condition subsequent ... which will terminate the suspension." Finally, as in all adverse actions taken against an employee, including indefinite suspensions, the ultimate penalty imposed by the agency must be reasonable. The MSPB has noted that indefinite suspensions have satisfied 5 U.S.C. § 7513(a)'s efficiency of the service standard in only three situations: (1) when there is reasonable cause to believe the employee has committed a crime carrying a sentence of imprisonment; (2) for certain medical reasons; and (3) when the employee's position requires access to classified information, but that access has been suspended. Pursuant to this authority, a prominent recurring issue regarding the federal civil service is the circumstances in which an agency can indefinitely suspend an employee for alleged criminal behavior. In such situations, while an agency normally must provide 30 days' advance notice of an adverse action, Chapter 75 provides that an agency may suspend an employee immediately if "there is reasonable cause to believe the employee has committed a crime for which a sentence of imprisonment may be imposed." As a threshold matter, events subsequent to the agency's decision cannot be mustered to support an indefinite suspension. The Federal Circuit has made clear that the "inquiry into the propriety of an agency's imposition of an indefinite suspension looks only to facts relating to events prior to suspension that are proffered to support such an imposition." Importantly, the relevant issue is whether the agency established reasonable cause, not whether the employee should be convicted for a crime. In other words, substantive defenses to criminal prosecution—such as, for example, that an employee's behavior does not truly constitute a crime—should be brought in a criminal trial, rather than as a challenge to the agency's decision. Further, the Board may not substitute its own reasoning for that of the agency; it must examine the agency's decision exclusively based on the grounds that the agency invoked. An agency may establish "reasonable cause to believe the employee committed a crime for which a term of imprisonment may be imposed" in several ways. In some cases, the agency may conduct its own investigation of the underlying facts and rely on those findings to support its decision. Often however, the agency cannot do so for various reasons. For example, an agency investigation into matters in a pending criminal investigation might unfairly force the employee to prematurely voice his or her defense. Consequently, an agency must sometimes rely on the accounts of third parties such as the police or courts to determine if the reasonable cause threshold has been met. In these circumstances, whether an agency has met that threshold appears to turn somewhat on the formality of the procedures used by the third-party entity. For example, the Federal Circuit has explained that "a formal judicial determination made following a preliminary hearing, or an indictment following an investigation and grand jury proceedings" is more than sufficient to satisfy the reasonable cause standard; in contrast, the mere arrest by a police officer without a probable cause finding is not. But in cases that fall in between these examples, the agency itself may need to delve into the record. For instance, if an arrest warrant based on probable cause was issued by a magistrate in an ex parte proceeding, the agency must "assure itself that the surrounding facts are sufficient to justify summary action by the agency," such as by examining the criminal complaints and supporting statements. In turn, the MSPB has ruled that because "reasonable cause" is "virtually synonymous with [the] 'probable cause' that is necessary to support a grand jury indictment," an indictment by a grand jury satisfies the "reasonable cause" standard. In such circumstances, the agency is under no obligation to conduct an independent investigation. However, in line with the Federal Circuit's jurisprudence, a grand jury determination is not necessarily required. For example, a probable cause determination by a judge at a preliminary hearing is sufficient. The MSPB has also upheld an agency's imposition of an indefinite suspension based on an employee's arrest and arraignment for a probation violation when the agency had information that the employee had previously been charged with a felony, had "entered into a deferred prosecution agreement," and could be imprisoned for the violation. In addition, the Board has ruled that a guilty plea to a felony offense is sufficient, as is a guilty plea to a criminal charge resulting in "Probation before Judgment," where violation of probation can trigger a final judgment imposing prison time. Under certain circumstances, less formal findings can establish reasonable cause. The Board has upheld an indefinite suspension where the employee was charged with a misdemeanor and, although there was no formal probable cause determination because the employee was not in police custody at the time of arraignment, "the case against the appellant had proceeded to the point where the appellant had been ordered to appear for a jury trial." Employing a somewhat functional analysis to the issue, the Board in that case interpreted the misdemeanor complaint to be "comparable to an indictment" under state law. In addition, the Board has upheld a reasonable cause finding based on a criminal complaint, where the agency also examined documents offered in support of an arrest warrant and a police report. Similarly, the Federal Circuit has affirmed an agency's reasonable cause finding when the agency relied simply on a criminal complaint and a sworn statement explaining the applicable charges against an employee. The combination of third-party findings and the agency's own investigation may also support a reasonable cause finding, even if one alone were insufficient to do so. For example, when criminal proceedings alone do not justify a reasonable cause finding, such as before a pending judicial probable cause hearing, an employee's implicit admission to the investigating agency of his or her guilt can satisfy the threshold requirement. In contrast, the Board has held that an agency may not indefinitely suspend an employee based simply on the agency's investigation into allegations that criminal conduct might warrant an adverse action. In other words, the mere fact of an agency investigation, in itself, is not sufficient "cause" to take adverse action against an employee; an agency must instead show that it already has reasonable cause to believe the employee has committed a crime which carries a potential prison sentence. Likewise, the Board has generally required the agency to establish evidence "sufficient to support a grand jury indictment." If the agency has only shown "mere suspicion" of criminal conduct, the Board will reverse the agency's decision. For example, the MSPB has ruled that an agency's reliance on the written statements of three government contractors, without more, "fall[s] drastically short of the level of proof required to prove reasonable cause." The simple fact of an employee's arrest or issuance of an arrest warrant will generally not meet this standard. Instead, the Board has required agencies to conduct further investigation to establish reasonable cause. For example, in one instance, the agency's reasonable cause finding was based on the employee's arrest (which had not been effectuated pursuant to a formal probable cause determination), a newspaper report describing the crime, and a conversation with the employee. The Board ruled that reasonable cause had not been established. In reaching this conclusion, the MSPB observed that the newspaper report was brief; the conversation with the employee was ambiguous as to what the employee admitted; and the agency failed to investigate the official police reports, criminal complaint, or witness statements. Similarly, the MSPB rejected an indefinite suspension where the agency relied on the fact of an arrest and a conversation with the employee where he admitted that he had been arrested and incarcerated. The Board in that case noted that because the arrest constituted the primary justification for the employee's indefinite suspension, consistent with Federal Circuit case law, "the agency was required to satisfy itself that the surrounding facts were sufficient to justify the indefinite suspension action." However, the discussion with the employee, without more, did not satisfy this requirement. Likewise, the filing of a criminal information or complaint without a formal probable cause determination by a neutral magistrate generally will be "insufficient to establish reasonable cause." In order to sustain an indefinite suspension in such a case, the agency is required to take affirmative action to assess whether reasonable cause exists, such as by examining police reports or witness statements. Similarly, depending on the circumstances, an arrest and arraignment alone may not be sufficient to sustain an indefinite suspension. The Board has rejected an indefinite suspension where the agency relied only on the fact of an arrest and arraignment, along with news reports that the agency did not verify. In that case, in a footnote, the Board argued that an arraignment was irrelevant because it consisted simply of "the defendant appearing in court, the reading of the charges, and the defendant entering a plea." Because the agency relied on the arrest and did not take any affirmative action to investigate the matter beyond "read[ing] a newspaper," reasonable cause was not established. The circumstances in which federal employees may be removed from service are thus determined by a variety of legal considerations. The rights of federal employees are protected by both statutory and constitutional requirements. Through the CSRA, Congress has provided certain procedural protections to a number of civil servants, delineating the conditions under which agencies may take adverse actions against federal employees. In the context of adverse actions for misconduct, for example, agencies may only take actions "for such cause as will promote the efficiency of the service" and must abide by various procedural provisions that ensure employees have a sufficient opportunity to defend themselves. Because Congress has bestowed these statutory protections on the federal workforce, certain employees have a property interest in continued employment that cannot be taken away without due process. Those constitutional protections thus inform the interpretation of statutory rules regarding adverse actions against federal employees, as well as establish a baseline of protections that may inform consideration of proposals to modify the process of removing federal employees. Attention to all of these issues may occur if and when lawmakers consider amending the civil service laws.

Federal employees receive statutory protections that differ from those of the private sector, including more robust limits on when they can be removed or demoted. Although a number of laws apply to various aspects of the federal civil service system, the primary governing framework is the Civil Service Reform Act of 1978 (CSRA), as amended. The CSRA created a comprehensive system for reviewing actions taken by most federal agencies against their employees, and the act provides a variety of legal protections and remedies for federal employees. It also funnels review of agency decisions to the Merit Systems Protection Board (MSPB), subject to review by the United States Court of Appeals for the Federal Circuit (Federal Circuit). In addition to these statutory protections, the Due Process Clause of the Fifth Amendment requires the federal government to observe certain procedures when depriving individuals of life, liberty, or property. The CSRA's requirement that covered employees may not be removed from federal service, except for cause or unacceptable performance, creates a constitutional property interest in continued employment. The government cannot deprive covered employees of this property interest without adhering to due process requirements. Chapter 75 of Title 5 of the U.S. Code provides various procedural protections for certain government employees subjected to major adverse actions. Those adverse actions include removal, suspensions for more than 14 days, reductions in grade or pay, and furloughs of 30 days or less. Agencies may only take a major adverse action against an employee "for such cause as will promote the efficiency of the service." In order to sustain an agency's decision on appeal to the MSPB, an agency must show (1) by a preponderance of the evidence that the charged conduct occurred; (2) a nexus between that conduct and the efficiency of the service; and (3) that the penalty imposed by the agency is reasonable. The MSPB has noted three circumstances in which an agency may establish a nexus between off-duty misconduct (e.g., criminal activity) and the efficiency of the service. First, in certain egregious circumstances, the type of misconduct committed by the employee creates a rebuttable presumption of a nexus. Second, an agency may show by a preponderance of the evidence that the misconduct "adversely affects the appellant's or co-workers' job performance or the agency's trust and confidence in the appellant's job performance." Finally, the agency may demonstrate by a preponderance of the evidence that the employee's misconduct interfered with or adversely affected the agency's mission. The CRSA does not expressly reference "indefinite suspensions," but agencies have routinely indefinitely suspended employees for certain behavior. The Federal Circuit and the MSPB have ruled that indefinite suspensions for disciplinary reasons that last more than 14 days qualify as major adverse actions under Chapter 75. The MSPB has recognized that an agency may indefinitely suspend an employee to further the efficiency of the service in three situations: (1) when there is reasonable cause to believe the employee has committed a crime carrying a sentence of imprisonment; (2) for certain medical reasons; and (3) when the employee's position requires access to classified information, but that access has been suspended. A prominent recurring issue is when an agency may indefinitely suspend an employee for alleged criminal behavior occurring outside the workplace. Whether and when indefinite suspensions may be imposed on account of alleged criminal behavior may turn upon the facts relied upon by the agency when in assessing whether there is reasonable cause to believe the employee committed a crime carrying a sentence of imprisonment.

Federal forestry has historically been associated with agriculture, and with agriculture legislation. Forestry programs have been addressed in past farm bills and other agriculture legislation. This report provides brief background on the House and Senate Agriculture Committees' jurisdiction over forestry, with examples of bills addressed by the committees. It then presents information on the forestry provisions in the 2008 farm bill, the Food, Conservation, and Energy Act of 2008 ( P.L. 110-246 ), organized by provisions in the forestry title and other provisions. It concludes with some forestry issues that were debated and that might be discussed in the next farm bill. The Appendix includes a side-by-side description of the House, Senate, and enacted provisions. Both the House and Senate Committees on Agriculture have jurisdiction over "forestry in general" and acquired national forests. Thus, the committees have been able to exert considerable influence over federal forestry activities over the years. For example, the Forest and Rangelands Renewable Resources Planning Act of 1974 (RPA, P.L. 93-378 ; 16 U.S.C. §§ 1600-1614) and the National Forest Management Act of 1976 (NFMA; P.L. 94-588 ), which guide Forest Service (USFS) planning and management, were both initially referred to the Agriculture Committees. More recently, the Healthy Forests Restoration Act of 2003 ( P.L. 108-148 ; 16 U.S.C. §§ 6501-6591) was referred to and reported by the Agriculture Committees. In addition to forestry on federal lands, the Agriculture Committees have jurisdiction over forestry research and forestry assistance to states and to private landowners. Forestry research is governed largely by the Forest and Rangeland Renewable Resources Research Act of 1978 ( P.L. 95-307 ; 16 U.S.C. §§ 1641-1647), which revised and updated the McSweeney-McNary Act of 1928. Forestry assistance is governed largely by the Cooperative Forestry Assistance Act of 1978 (CFAA; P.L. 95-313 ; 16 U.S.C. §§ 2101-2111), which revised and updated the Clarke-McNary Act of 1924. Both laws were referred to and reported by the Agriculture Committees. Recent farm bills have also included forestry provisions, primarily addressing the forestry assistance programs. The 1990 farm bill (the Food, Agriculture, Conservation, and Trade Act of 1990, P.L. 101-624 ) contained a separate forestry title that: created four new forestry assistance programs; revised two existing forestry assistance programs; amended two forestry assistance programs; revised the administrative provisions for forestry assistance; created five special forestry research programs; amended three existing forestry research programs; authorized a private, non-profit tree planting foundation; and created a new USFS branch: international forestry. The 1996 farm bill (the Federal Agriculture Improvement and Reform Act of 1996, P.L. 104-127 ) included only a few forestry provisions, extending the authorization for the one expiring assistance program and adding a new funding option within an existing program. The 2002 farm bill (the Farm Security and Rural Investment Act of 2002, P.L. 107-171 ) contained a separate forestry title. The conference could not resolve many of the differences between the House and Senate forestry provisions, and thus the conference report contained fewer provisions than either. (Some of the disputed provisions were enacted subsequently in the Healthy Forests Restoration Act.) Numerous programs were created, modified, and/or extended in the forestry title of the 2008 farm bill (Title VIII). The various provisions can be sorted into two groups: provisions amending the Cooperative Forestry Assistance Act (CFAA), and other provisions. The CFAA provides various types of forestry assistance to states and private landowners. The 2008 farm bill modified several of the provisions, adding new requirements, authorizing new programs and spending, and otherwise modifying forestry assistance programs. One significant aspect of the 2008 farm bill was the lack of a private forest landowner assistance program, which the Administration had proposed to terminate. The Forest Land Enhancement Program (FLEP) was created in the 2002 farm bill. It was not reauthorized, and thus has expired. FLEP funding ended earlier; funds were borrowed for wildfire suppression, a small portion was repaid, and other funds cancelled. In the end, only about half of the $100 million of mandatory spending enacted in 2002 was actually spent on the program. This marks the first time since the CFAA was enacted in 1978 that no such forest landowner financial aid program is authorized. The 2008 farm bill (§ 8001) established a new set of national priorities for federal assistance for private forest conservation. It added a new subsection to § 2 of the CFAA: (c) Priorities.—In allocating funds appropriated or otherwise made available under this Act, the Secretary shall focus on the following national private forest conservation priorities, notwithstanding other priorities specified elsewhere in this Act: (1) Conserving and managing working forest landscapes for multiple values and uses. (2) Protecting forests from threats, including catastrophic wildfires, hurricanes, tornados, windstorms, snow or ice storms, flooding, drought, invasive species, insect or disease outbreak, or development, and restoring appropriate forest types in response to such threats. (3) Enhancing public benefits from private forests, including air and water quality, soil conservation, biological diversity, carbon storage, forest products, forestry-related jobs, production of renewable energy, wildlife, wildlife corridors and wildlife habitat, and recreation. Thus, the 2008 farm bill requires that forestry assistance aim to conserve working forests, protect and restore forests, and enhance public benefits from private forests. The 2008 farm bill (§ 8002) requires each state to conduct a statewide assessment of forest resource conditions, trends, threats, and priorities to receive federal forestry assistance funds. Each state also must prepare a strategy for addressing the identified threats, and describe the resources needed to address those threats. The states were to prepare the initial assessment and strategy, with updates as needed, and to coordinate with specified agencies and groups. The Secretary may use up to $10 million annually for FY2008-FY2012 of appropriated forestry assistance planning funds to assist states with their assessments and strategies. The farm bill (§ 8003) amended the CFAA to establish a Community Forest and Open Space Conservation Program. The program provides grants to local governments, Indian tribes, or nonprofit organizations to acquire lands threatened by conversion to non-forest uses and that provide economic, environmental, educational, and recreational benefits and serve as models of sustainable forest stewardship for other landowners. The grants may be up to 50% of the acquisition cost, with the authorization for "such sums as are necessary." This program is similar to the Forest Legacy Program, which authorizes the federal acquisition, or grants to states for their acquisition, of lands or easements on lands threatened by conversion to non-forest uses. The bill (§ 8005) replaced the existing USDA Coordinating Committee with a new Forest Resource Coordinating Committee, composed of the heads of four USDA agencies (and chaired by the Chief of the Forest Service) and representatives of state agencies, academia, and interest groups. The Committee is to provide coordination and direction to the USDA agencies and to coordinate with state agencies, focused on achieving the national priorities identified above. The 2008 farm bill (§ 8007) requires the Secretary to allocate a portion of funds available under the CFAA on a competitive basis. The portion to be competitively allocated was "to be determined by the Secretary," in consultation with the Forest Resource Coordinating Committee. The bill (§ 8008) also allows the Secretary to competitively allocate up to 5% of cooperative assistance funding for "innovative national, regional, or local education, outreach, or technology transfer projects" that contribute substantially to achieving the national priorities. These projects require a 50% matching contribution. The farm bill (§ 8203) added an Emergency Forest Restoration Program to the existing Emergency Conservation Program under Title IV of the Agricultural Credit Act of 1978 ( P.L. 95-334 ; 16 U.S.C. §§ 2201-2205). The original program focused on emergency protection and rehabilitation of wind- or water-eroded agricultural lands. The expanded program provides up to 75% of the costs (up to $50,000 annually) for landowners to rehabilitate or restore forest lands damaged by storms, fires, drought, invasive species, or insects or diseases. Subtitle B (§§ 8101-8107) addressed authorities for cultural and heritage cooperation. One section authorizes the use of national forest lands, with federal assistance for reburial of human remains and cultural items. Another section authorizes temporary closures of national forest lands historically used by Indians to assure access for traditional and cultural uses. A third section authorizes free use of trees and forest products for traditional and cultural (but not commercial) purposes. The final substantive section generally prohibits disclosure of information on reburials as well as information on tribal resources, cultural items, uses, or activities. The 2008 farm bill reauthorized and/or extended several programs through 2012: § 8201, the Rural Revitalization Technologies Program, under § 2371(d)(2) of the Food, Agriculture, Conservation, and Trade Act of 1990 (the 1990 farm bill; 7 U.S.C. § 6601(d)(2)); § 8202, the Office of International Forestry, under § 2405(d) of the Global Climate Change Prevention Act of 1990 (Title XXIV of the 1990 farm bill; 7 U.S.C. § 6704(d)); and § 7413, the Renewable Resources Extension Act of 1978 ( P.L. 95-306 ; 16 U.S.C. §§ 1671-1676). The bill (§ 8205) also extended and modified funding for the Healthy Forest Reserves. These reserves had been authorized through 2008 in the Healthy Forests Restoration Act of 2003 ( P.L. 108-148 ; 16 U.S.C. §§ 6571-6578). The extension requires the Secretary to provide $10 million annually for the program from the Commodity Credit Corporation for FY2008-FY2012. The farm bill (§ 8204) amended the Lacey Act Amendments of 1981 ( P.L. 97-79 ; 16 U.S.C. §§ 3371-3378) to expand the restrictions on and penalties for importing wild plants or plant parts (e.g., logs and lumber) removed in violation of domestic or foreign laws. It excluded crops, cultivars, and plants and plant parts (e.g., seeds, roots, and cuttings) intended for planting in the United States. It also expanded and clarified for plants the definition of taken or possessed illegally, and establishes a process for legal plant imports. The bill included provisions affecting national forest lands: §§ 8301 and 8303, modifying the boundary of the Green Mountain National Forest (VT), and authorizing the sale or exchange of specific lands to the Bromley Mountain Ski Resort, with specific directions on using any proceeds generated by the sale or exchange; § 8302(a)-(e), directing the conveyance, without consideration, of certain USDA lands in New Mexico to the Chihuahuan Desert Nature Park; and § 8302(f), directing the conveyance, without consideration, of certain lands in the George Washington National Forest (VA) to the Central Advent Christian Church of Alleghany County. The farm bill (§ 8401) allowed purchasers of non-salvage USFS timber sale contracts awarded between July 1, 2004, and December 31, 2006, to request a modification to their contracts. The options available were to cancel a portion of the contract, to have the payment rate recalculated (called a rate redetermination ), or to substitute an approved Producer Price Index for the index specified in the contract. The Secretary may agree to the contract modification if the several specified terms and limitations are met. The 2008 farm bill (§ 8402) authorized a program of competitive grants for undergraduate scholarships to recruit, retain, and train Hispanics and other under-represented groups in forestry and related fields. The program was authorized through 2012 at "such sums as may be necessary." Forestry practices and woody biomass were addressed elsewhere in the 2008 farm bill, as well. Many conservation programs include forestry practices that qualify as conservation activities for cost-share assistance purposes. Also, many of the existing and proposed bioenergy programs include woody biomass as a possible feedstock. Programs that include forest-related activities, but are not focused primarily on these activities, are not included in this report; two specific woody fuel energy programs in the 2008 farm bill are described below. The provisions addressing softwood lumber imports from Canada and taxation of forests and forestland owners are also discussed briefly. The conservation title of the 2008 farm bill (Title II) modified numerous agricultural conservation programs to include forestry practices on nonindustrial private forest lands as approved activities for the program. Forestry practices and nonindustrial private forest lands are now accepted for the Conservation Stewardship Program (Subtitle D), Farmland Protection and Grassland Reserve (Subtitle E), Environmental Quality Incentives Program (Subtitle F), and other conservation programs (Subtitle G). In addition, § 2709 added a new § 1245 to the 1985 farm bill (the Food Security Act of 1985, P.L. 99-198 ) addressing environmental services markets. The section required technical guidelines to facilitate the development of environmental services markets, with priority on carbon markets. It specified that the guidelines establish procedures to measure benefits, protocols to report benefits, and a registry to track benefits. It also specified that the guidelines provide for verification of the benefits, including possibly by independent third parties. While not establishing markets for environmental or ecosystem services (discussed below), the guidelines would likely create the infrastructure to allow such markets to develop. Imports of softwood lumber from Canada have been of concern to U.S. lumber producers for many years. A 2006 Softwood Lumber Agreement provided a temporary respite from the dispute, but some U.S. producers have asserted that the Canadian producers are not paying the export fees required by the agreement. A provision (§ 3301) in the agricultural trade and aid title of the 2008 farm bill (Title III) added a new Title VIII (Softwood Lumber) to the Tariff Act of 1930 (19 U.S.C. §§ 1202 et seq.). The provision requires softwood lumber importers to declare imports and fees paid, allowing the federal government to verify and reconcile data on softwood lumber imports and to assure implementation of the Agreement. The energy title of the 2008 farm bill (Title IX) included two provisions to expand the use of woody biomass in energy production. Both provisions are in § 9001, which revises the energy title of the 2002 farm bill (also Title IX). The first provision (§ 9012) created a competitive research-and-development grant program for using woody biomass, with priorities for low-value biomass, processes integrated with biorefineries, wood-derived transportation fuels, and improved yield from energy plantations. Funding was authorized at $5 million annually for FY2008-FY2012. The other provision (§ 9013) created a new Community Wood Energy Program. This is a grant program for state and local governments to develop a community wood energy plan and acquire wood energy systems for public buildings. Project priorities are to be determined considering energy efficiency and appropriate conservation and environmental criteria. The state or local government monies are required to match the federal grant. Funding was authorized at $5 million annually for FY2008-FY2012. The tax and trade provisions of the 2008 farm bill (Title XV) included provisions affecting forests and forest landowners. The first (§15316) authorized, in limited amounts, tax-exempt private activity bonds whose proceeds are to be used to finance private forest conservation efforts. This would allow, for example, a non-profit organization to use tax-exempt bonds to acquire private timberlands that were threatened with conversion to non-forest uses, such as residential developments. Another provision (§ 15311) added a new § 1203 to the Internal Revenue Code to permit taxpayers to elect to deduct up to 60% of any timber gains from taxable income. The remaining 40% would be taxed at ordinary-income rates. Finally, several provisions (§§ 15312-15315) altered and clarified the tax treatment of timber real estate investment trusts (REITs). In recent years, most wood products companies that own timberlands have separated the timberlands from wood processing (and other) operations, with the timberlands administered under a REIT because of more favorable tax treatment for REIT timber income than for wood processing company timber income. The provisions in the 2008 farm bill were to clarify, update, and make minor modifications to timber REIT taxation. Reauthorization of the many agriculture programs is a prime reason for the periodic farm bills, but most forestry programs are permanently authorized. This may reduce the pressure to include a forestry title in upcoming farm bills. Nonetheless, interest groups have raised various forestry issues other than the authorization levels for possible discussion within a future farm bill, such as forestry assistance funding, wildfire protection, invasive species, economic diversity, and markets for ecosystem services that have not traditionally been marketed. Federal funding for forestry assistance programs has generally been rising, but the increase has not been spread equally among the various programs. Since the severe 2000 fire season and the development of the National Fire Plan, funding for cooperative fire programs (assistance to states and volunteer fire departments) has risen substantially (more than triple pre-2000 funding), and has remained at very high levels. Funding for Forest Legacy (acquisition of lands or easements on lands threatened with conversion to non-forest uses) has also risen substantially, from less than $4 million in FY1998 to $50 million or more annually since FY2001 (and a request of $100 million for FY2005). In contrast, the Administration has proposed terminating funding for the Economic Action Program (economic assistance to rural, forest-dependent communities), and funding has fallen from a peak of $54 million in FY2001 to less than $5 million in FY2008 (with no funds in FY2007). The adequacy of funding for private landowner assistance programs has been a concern for many. These programs have provided cost-shares to qualified landowners for various forestry practices that increase tree growth, improve wildlife habitat, protect watersheds (thus improving water quality), and more. One of the changes enacted in the 2002 farm bill was to replace two programs—the Forestry Incentives Program (FIP) and the Stewardship Incentives Program (SIP)—with the Forest Land Enhancement Program (FLEP). Because funding for FIP and SIP had been discretionary and either stagnant (FIP) or absent (SIP), FLEP was given mandatory funding through the Commodity Credit Corporation of $100 million total through the end of FY2007. However, some FLEP funds were borrowed to pay for firefighting and other funding was cancelled; in total, about half of the $100 million "guaranteed" for FLEP was actually spent on landowner assistance. Even the existence of landowner cost-share assistance is in doubt. Forestry is included in many conservation programs that provide financial assistance to private landowners, but FLEP was not reauthorized in the 2008 farm bill. For the first time since 1978, no forestry-specific landowner assistance program is authorized. Some question whether a modest forestry-specific assistance program is needed, since a small share of the much larger conservation programs might provide more forestry assistance funding. Nonetheless, Congress may revisit the issue of separate funding for forest landowner assistance programs. The threat of wildfire damages to resources and property seems to have increased in recent years. Attention has focused on high biomass fuel levels (particularly in federal forests) and on homes in or near at-risk forests, an area known as the wildland-urban interface (WUI). The 2002 farm bill (§ 8003) created a new Community and Private Land Fire Assistance Program to assist communities and private landowners in planning and other activities to protect themselves from wildfires. The program was authorized at $35 million annually through FY2007 and "such sums as are necessary ... thereafter." The USFS has included such expenditures as authorized activities in its State Fire Assistance Program. However, Congress has not appropriated funds explicitly for this program. Protecting private lands and structures from wildfires continues to garner congressional attention, as the threat of wildfire persists. How to assist private landowners and communities, how to combine this assistance with other assistance and incentive programs, and how to fund such assistance could be debated in the farm bill context. Invasive species—non-native plants and animals that are displacing native ones—are becoming recognized as a substantial problem. In a speech to the Idaho Environmental Forum on January 16, 2004, then-USFS Chief Dale Bosworth identified invasive species as one of the four major threats to the nation's forests and rangelands. The USFS's Forest Health Management Program has evolved from a mechanism to survey and control insects and diseases, to a program to address all forest pests, including invasive species. Several times, the Bush Administration proposed an Emerging Pests and Pathogens Fund to address rapidly developing problems of invasive species, but the Appropriations Committees rejected the request both years. In its deliberations over a future farm bill, Congress could address the structure and financing of programs to prevent and control invasive species on federal, state, and private forests. The economies of many rural communities have evolved around the use—finding, extracting, processing, and selling—of natural resources. In some of these areas, one resource (e.g., timber, minerals, livestock) has traditionally dominated the local economy, but the economies of such areas can be devastated when that resource is depleted or when its markets are depressed (permanently or even temporarily). Many communities have sought approaches to diversifying their economies, to mitigate the economic and social disruption that can occur when a dominant economic sector is depressed. The National Forest-Dependent Rural Communities Economic Diversification Act of 1990 was enacted in §§ 2372-2379 of the 1990 farm bill to authorize forestry and economic diversification technical assistance to "economically disadvantaged" rural communities. Under the title Economic Action Program , funding rose from $14 million in FY1996 to $54 million in FY2001, but has declined since, and President Bush has proposed terminating the program in several budget requests. In its future farm bill deliberations, Congress might consider ways to perpetuate economic assistance programs for traditional wood products-dependent communities, either as a continued USFS program or as part of other USDA rural assistance programs. Forests provide a broad array of environmental services—clean air and water, wildlife habitats, pleasant scenery, and more—for which private landowners are generally not compensated, because these services are typically not bought and sold in a marketplace. A variety of interests have examined the possibilities of finding ways to compensate landowners for continuing to provide ecosystem services. One means would be to develop such markets, and the 2008 farm bill included a provision (§ 2709, discussed above) that could facilitate such a development. Alternatively, some proposals are for federal "green payments" to directly reward farmers and other landowners who provide environmental benefits through their land management practices. Green payments for forest and other landowners' ecosystem services might be discussed in Congress's deliberations in a future farm bill.

The Food, Conservation, and Energy Act of 2008 (the 2008 farm bill) became law P.L. 110-246 when the House and Senate voted to override President Bush's veto on June 18, 2008. The conference agreement on the bill (H.R. 2419) had been enacted, vetoed by the President, and overridden (P.L. 110-234), but inadvertently excluded the trade title. Both chambers repassed the conference agreement (with the trade title) as H.R. 6124; it was again vetoed and again overridden as P.L. 110-246. The 2008 farm bill contained a forestry title and forestry provisions in other titles. General forestry legislation is within the jurisdiction of the Agriculture Committees, and past farm bills have included provisions addressing forestry, especially on private lands. Most federal forestry programs are permanently authorized, and thus do not require reauthorization in the farm bill. The forestry title (Title VIII) of the 2008 farm bill amended the Cooperative Forestry Assistance Act of 1978 (P.L. 95-313; 16 U.S.C. §§ 2101-2114) in several ways. It added national priorities for forestry assistance, required statewide forest assessments, created a new community forest and open space conservation program (to protect forests threatened with conversion to non-forest uses), established a new Coordinating Committee, added an Emergency Forest Restoration Program, and authorized competitive allocation for some forestry assistance funding. The title also directed cooperation and collaboration with Indian tribes, amended the Lacey Act to restrict imports of illegally logged wood products, authorized changes to certain national forest timber contracts, and provided grants to Hispanic-serving institutions. In addition, it reauthorized and extended four existing programs. Other titles also contained provisions affecting forestry. The conservation title (Title II) modified most programs to include forestry activities and directed the creation of infrastructure for environmental services markets (including carbon markets). The trade title (Title III) included a section requiring lumber importers to report on imports and fees paid, to assure implementation of the 2006 U.S.-Canada Softwood Lumber Agreement. The energy title (Title IX) included woody biomass in many programs. Finally, the tax title (Title XV) included provisions to authorize new tax-exempt forest conservation bonds, to modify income deductions for qualified timber income, and to modernize and clarify the tax treatment of timber real estate investment trusts (REITs). Other forestry provisions were suggested by various interests, and might be considered in the next farm bill. Funding is one issue, as half the mandatory spending for the Forest Land Enhancement Program (FLEP) was cancelled and the program was not reauthorized. Protecting communities from wildfire continues to be a priority for some, while controlling invasive species is a priority for others. Assisting forest-dependent communities in diversifying their economies has also been debated. Finally, some have expressed interest in trying to provide payments for ecosystem services—forest values that have not traditionally been sold in the marketplace.

Many congressional policymakers have an ongoing interest in whether the number of U.S. scientists and engineers is sufficient to meet the needs of U.S. employers, to spur economic growth and job creation through innovation, to maintain U.S. global technological leadership and industrial competitiveness, and to address other important national and societal needs. To help ensure an adequate science and engineering (S&E) workforce, Congress has established and funded a variety of federal programs. These programs are intended to foster improved science, technology, engineering, and mathematics (STEM) skills among students; to incentivize students to pursue degrees in science and engineering through tools such as fellowships, assistantships, and traineeships; and to provide graduate and postgraduate research experiences at U.S. colleges and universities through the financing of university-based research. The 115 th Congress is considering a wide variety of legislation to promote STEM education. In addition, Congress is considering changes to immigration policies, among them the number of visas and processes associated with F-1 visas, H-1B visas, L-1 visas, and legal permanent residency ("green cards"), to address U.S. S&E workforce needs. As Congress develops policies and programs and makes appropriations to help address the nation's needs for scientists and engineers, it may consider past, current, and projected S&E workforce trends. Among the key factors that labor economists examine for evidence of labor shortages are employment growth, wage growth, and unemployment rates relative to other occupations. This report provides employment, wage, and unemployment information for the computer occupations, mathematical occupations, engineers, life scientists, physical scientists, and S&E management occupations, as follows: The section on " Current Employment, Wages, and Unemployment " provides a statistical snapshot of occupational employment, wage, and unemployment data for the S&E workforce in 2016 (the latest year for which data are available). The section on " Recent Trends in Employment, Wages, and Unemployment " provides a perspective on how S&E employment, wages, and unemployment changed during the period 2012-2016. The section on " Employment Projections, 2016-2026 " provides an analysis of projections by the Bureau of Labor Statistics for how the number employed in S&E occupations is expected to change during the 2016-2026 period, as well as how many openings will be created by growth, labor force exits, and occupational transfers. A final section, " Concluding Observations ," provides stakeholder perspectives that Congress may consider as it seeks to ensure that the United States has an adequate S&E workforce to meet the demands of the 21 st century. Most experts agree that there is no authoritative definition of which occupations comprise the science and engineering (S&E) workforce. Rather, the selection of occupations included in any particular analysis of the S&E workforce may vary. Some analysts, policymakers, and organizations may refer to the group in different ways (e.g., the scientific and technical workforce, the STEM workforce) and include varying sets of occupations. In 2011, the Bureau of Labor Statistics (BLS), in defining the STEM occupations for a particular analysis, stated, "This is only one possible definition of STEM occupations; other definitions exist that may be better suited for other uses." The size of the S&E workforce varies substantially depending on which occupations are included in the definition. In its 2016 Science and Engineering Indicators report, the National Science Board (NSB) stated, "In 2013, estimates of the size of the S&E workforce ranged from approximately 6 million to more than 21 million depending on the definition used," further noting that "when defined by occupation, the S&E workforce totals between 6.2 million and 6.3 million people according to the most recent estimates." The policy debate about the adequacy of the U.S. S&E workforce has focused largely on the computer occupations, mathematical occupations, engineers, and physical scientists. For purposes of this report, these occupations, along with life scientists (a part of the natural sciences, with physics and chemistry) and S&E management occupations, are collectively referred to as the S&E workforce. Notably, this group does not include social scientists (e.g., economists, survey researchers, psychologists, sociologists, urban and regional planners, anthropologists, archeologists, geographers, historians, political scientists) or S&E-related technicians. As defined this way, the size of the S&E workforce in 2016 was approximately 6.9 million. This report uses a modified version of the Standard Occupation Classification (SOC) system to categorize scientists and engineers. The report taxonomy includes six S&E occupational groups, each composed of closely related detailed occupations: Computer occupations— computer and information research scientists; computer systems analysts; computer programmers; software developers, applications; software developers, systems software; database administrators; network and computer systems administrators; computer user support specialists; computer network support specialists; information security analysts; web developers; computer network architects; and computer occupations, all other. Mathematical occupations— actuaries; mathematicians; operations research analysts; statisticians; and mathematical science occupations, all other. Engineers— aerospace, agricultural, biomedical, chemical, civil, computer hardware, electrical, electronics (except computer), environmental, health and safety (except mining safety engineers and inspectors), industrial, materials, mechanical, mining and geological (including mining safety engineers), nuclear, and petroleum engineers; engineers, all other; and marine engineers and naval architects. Life scientists— animal scientists; food scientists and technologists; soil and plant scientists; biochemists and biophysicists; microbiologists; zoologists and wildlife biologists; biological scientists, all other; conservation scientists; foresters; epidemiologists; medical scientists (except epidemiologists); and life scientists, all other. Physical scientists— astronomers; physicists; atmospheric and space scientists; chemists; materials scientists; environmental scientists and specialists (including health); geoscientists (except hydrologists and geographers); hydrologists; and physical scientists, all other. Science and engineering managers— computer and information systems managers, architectural and engineering managers, and natural sciences managers. A description of the detailed occupations is provided in the Appendix A . Figures illustrating the educational composition of each S&E occupation are provided in Appendix B . This report relies on federal government employment, wage, and unemployment data from the following sources: The Occupational Employment Statistics (OES) , a survey of nonfarm establishments conducted by the U.S. Department of Labor's Bureau of Labor Statistics and state workforce agencies, is the source of employment and wage data for the 2012-2016 period. The survey provides employment and wage estimates annually for over 800 occupations. According to BLS, "employees" are all part-time and full-time workers who are paid a wage or salary. The survey does not cover the self-employed, owners and partners in unincorporated firms, household workers, or unpaid family workers. For this report, the wage statistic used is the occupational "mean wage," an average wage calculated by summing the wages of all the employees in a given occupation and then dividing the total wages by the number of employees. The Current Population Survey (CPS) , a monthly survey of households conducted for BLS by the Department of Commerce's Bureau of the Census, is the source of the unemployment data in this report. CPS data are also used to supplement OES data in BLS employment projections (discussed below). BLS's Employment Projections , a biennial product of BLS, provide occupational employment and industry employment projection data for 10-year periods. The latest projections, covering the 2016-2026 period, were published in October 2017. According to BLS, for most industries, the OES survey provides data for the occupational staffing patterns—the distribution of wage and salary employment by occupation in each industry—and Current Employment Statistics (CES) data provide information on total wage and salary employment in each nonfarm industry. While OES data include only wage and salary, nonfarm employment, the employment data in the projections also include agricultural industry employment and the self-employed (derived from CPS data) to arrive at base year employment levels for each occupation. The " Recent Trends in Employment, Wages, and Unemployment " section provides information on changes in employment, wages, and unemployment for the period 2012 to 2016. The " Employment Projections, 2016-2026 " section relies entirely on the most recent Bureau of Labor Statistics biennial employment projections for the 2016-2026 time frame. It is important to note that a wide range of factors can affect the size and occupational composition of the U.S. S&E workforce. Among these factors are global and domestic economic conditions; the development and market adoption of new technologies; capital cost and availability; the level of public and private funding for research and development; changes in scientific, technological, and market opportunities; the size, knowledge, and skills of the U.S.-born labor force; the size, knowledge, and skills of the foreign-born labor force in the United States; and changes in business practices regarding the use of foreign-based science and engineering capabilities. This report does not attempt to attribute changes in the U.S. S&E workforce to any of these factors specifically. In addition, a variety of factors may affect the comparability of OES data over time: Although the OES survey methodology is designed to create detailed cross-sectional employment and wage estimates for the U.S., States, metropolitan and nonmetropolitan areas, across industry and by industry, it is less useful for comparisons of two or more points in time. Challenges in using OES data as a time series include changes in the occupational, industrial, and geographical classification systems, changes in the way data are collected, changes in the survey reference period, and changes in mean wage estimation methodology, as well as permanent features of the methodology. In its examination of current trends, CRS chose the 2012-2016 time period, in part, to enhance comparability of data across the period by reducing inconsistencies that may result from changes in the OES occupational classification system, and in part to provide a current perspective on trends in the S&E occupations. The OES survey used the same occupational categories (based on the 2010 Standard Occupational Classification) throughout the 2012-2016 period. The Bureau of Labor Statistics makes a number of estimates in developing its employment projections. These estimates include "the future size and composition of the population, as well as on the trends in labor force participation rates of different age, gender, race, and ethnic groups, a total of 136 separate categories" as well as other factors such as economic growth, technological innovation, changes in business practices or production methods, replacement of one product or service by another, organizational restructuring of work, changes to the size of business establishments, offshore and domestic outsourcing, and expected employment change in a segment of an industry where an occupation is more concentrated relative to expected employment changes in other segments of the same industry. For its 2016-2026 projections, BLS replaced its previous methodology for estimating "occupational replacement needs" with a new methodology for estimating "occupational separations." According to BLS, the occupational replacement methodology "is no longer in use because BLS identified statistical and conceptual issues with the implementation of this method that compromised the accuracy and validity of the resulting estimates." Other factors may affect occupational projections as well, including changes to immigration laws and patterns, trade laws and practices, regulatory regimes, and social and educational patterns; wars and disasters; revolutionary advances in technology; and shifts in consumer tastes. The BLS evaluates the accuracy of its projections regularly and publishes these evaluations in its Monthly Labor Review . This section provides a snapshot of the S&E workforce in 2016, using employment, wages, and unemployment data. In 2016, the latest year for which Occupational Employment Statistics survey data are available, 6.9 million people were employed in the United States as scientists and engineers, accounting for 4.9% of total U.S. employment. Science and engineering employment was concentrated in two occupational groups—computer occupations and engineers—which together accounted for 81% of S&E jobs, with 57.6% and 23.6%, respectively. The remainder of S&E employment was accounted for by science and engineering managers (8.4%), life scientists (4.1%), physical scientists (3.8%), and mathematical occupations (2.4%). Employment totals and share of S&E occupational employment are presented in Figure 1 . (See Table 4 for more detailed 2016 employment data on specific S&E occupations.) Scientists and engineers have a mean annual wage that exceeds the mean annual wage for all occupations in the United States. In 2016, the mean annual wage for all scientists and engineers was $94,450; the mean annual wage for all occupations—professional and nonprofessional—was $49,630. S&E managers had the highest mean annual wage of all S&E occupational groups at $144,270, followed by engineers, $96,440; mathematical occupations, $88,320; computer occupations, $87,870; physical scientists, $87,320; and life scientists, $83,080. Scientists and engineers have lower mean annual wages than some other professionals, such as physicians and surgeons ($210,170), dentists ($178,670), and lawyers ($139,880). (See Figure 2 .) Table 1 shows the 2016 mean annual wage for each of the S&E occupational groups and individual S&E occupations, organized by S&E occupational group. The 2016 annual average unemployment rate for each S&E occupation is provided in Table 2 . In 2016, the unemployment rates for S&E occupations range from 0.2% for biological scientists to 5.2% for web developers. The unemployment rate for every S&E occupation other than web developers was below the overall unemployment rate of 4.9%. However, the unemployment rates for most S&E occupations were higher than the rates for some other professional occupations—including dentists (0.4%), physicians and surgeons (0.5%), lawyers (0.7%), and registered nurses (1.2%). This section provides information on changes in employment, wages, and unemployment for the period 2012 to 2016. During the 2012-2016 period, aggregate S&E employment increased by 747,040 jobs, rising from 6.2 million to 6.9 million, a compound annual growth rate of 2.9%. The growth in the S&E occupations exceeded growth in overall U.S. employment, which grew 1.9% CAGR during this same period. Growth rates for the S&E occupational groups and detailed occupations are provided in the following sections. Figure 3 illustrates the aggregate size and occupational composition of the S&E workforce in 2012 and 2016. Aggregate S&E employment increased by 747,040 from 2012 to 2016, led by growth in the computer occupations (540,880), engineering occupations (105,320), and mathematical occupations (46,700). Table 3 provides employment data—2012 employment, 2016 employment, changes in number employed, and the compound annual growth rates during the 2012 to 2016 period—for each S&E occupational group. The fastest growth rate among S&E occupational groups during this period was in mathematical occupations, which grew at 8.5% CAGR, while the largest increase in the number employed was in computer occupations, which added 540,880 jobs. The slowest growth rate among S&E occupational groups during this period was for physical scientists, which contracted by 1.1% CAGR. Table 4 provides 2012-2016 employment data for each of the S&E occupations, organized by S&E group. The data indicate that there was substantial variation in the number of jobs gained and lost among the S&E occupations, as well as in their growth rates. With respect to the number employed, the occupation with the largest gain was software developers, applications, which added 207,660 jobs, while the occupation experiencing the largest decrease was computer programmers, which lost 45,590 jobs. Some have speculated that some of the losses in computer programmers may be due to reclassification of these positions as other computer occupations (e.g., software developers). The S&E occupations with the fastest growth rates were mathematical scientists, all other (13.2% CAGR, 780 new jobs), and operations research analysts (12.1% CAGR, 39,970 new jobs). The occupation with the fastest decline was physical scientists, all other (-6.9% CAGR, loss of 6,270 jobs). Among the computer occupations, those with the fastest growth rates were computer occupations, all other (8.9% CAGR); software developers, applications (7.9% CAGR); and information security analysts (7.5% CAGR). The only computer occupation that experienced a decline in employment was computer programmers, which fell by 3.8% CAGR. Ten engineering occupations increased employment during this period, with the largest growth in industrial engineers (36,420, 3.9% CAGR), mechanical engineers (33,250, 3.1% CAGR), and civil engineers (29,700, 2.8% CAGR). Employment gains in these and other engineering occupations were offset by declines in eight engineering occupations, including aerospace engineers (-11,910, -3.9% CAGR); computer hardware engineers (-6,630, -2.2% CAGR); and petroleum engineers (-3,630, -2.6% CAGR). Growth in the mathematical occupations was led by operations research analysts (39,970, 12.1% CAGR), statisticians (7,870, 6.9% CAGR), and mathematical science occupations, all other (780, 13.2% CAGR). The remaining mathematical occupations declined: actuaries (-1,400, -1.7% CAGR) and mathematicians (-520, -4.3% CAGR). Among life scientists, medical scientists, except epidemiologists, had the largest employment growth (13,450, 3.4% CAGR), followed by biological sciences, all other (4,030, 3.1% CAGR), and microbiologists (3,120, 4.0% CAGR). Employment declined in three life science occupations: life scientists, all other (-1,050, -3.1% CAGR); foresters (-1,050, -2.9% CAGR); and zoologists and wildlife biologists (-930, -1.3% CAGR). The only physical sciences occupation with substantial growth was chemists (1,710, 0.5% CAGR). Environmental scientists and specialists, including health, remained essentially unchanged. Seven other physical sciences occupations declined, led by physical scientists, all other (-6,270, -6.9% CAGR), geoscientists, except hydrologists and geographers (-4,760, -3.6% CAGR), and physicists (-1,140, -1.6% CAGR). Two S&E management occupations grew: computer and information systems managers (42,770, 3.3% CAGR) and natural sciences managers (6,220, 3.1% CAGR). The number of architectural and engineering managers declined (-9,250, -1.3% CAGR). Table 5 shows the 10 S&E occupations with the largest employment growth from 2012 to 2016. The list includes five computer occupations, three engineering occupations, one mathematics occupation, and one S&E management occupation. Table 6 shows the 10 S&E occupations with the largest employment losses. The occupation with the greatest employment loss is computer programmers. As mentioned earlier, some have speculated that some of the losses in computer programmers may be due to reclassification of these positions as other computer occupations (e.g., software developers). The list includes five engineering occupations, two physical sciences occupations, one computer occupation, one mathematics occupation, and one S&E management occupation. Table 7 shows the 10 S&E occupations with the fastest growth rates. The occupation with the fastest growth rate was mathematical science occupations, all other (13.2% CAGR), adding 1,220 jobs from 2012 to 2016, followed by operations research analysts (12.1% CAGR), and computer occupations, all other (8.9% CAGR). The list includes five computer occupations, three mathematics occupations, one engineering occupation, and one life sciences occupation. Table 8 shows the 10 S&E occupations with the slowest growth rates. All 10 of these occupations have negative growth rates. This list includes at least one occupation from each of the engineering, physical sciences, life sciences, mathematics, and computer occupational groups. Between 2012 and 2016, mean wages for each S&E occupational group grew at about the same pace as the overall mean wage for all occupations, and only somewhat faster than inflation. Figure 4 illustrates the nominal and inflation-adjusted compound annual growth rates for each S&E occupational group, as well as for all occupations. The nominal growth rate of mean wages for all occupations during this period was 2.0% CAGR, while the fastest growth rate in the S&E occupational groups was for S&E managers (2.5% CAGR), followed by computer occupations (2.4% CAGR). All other S&E occupational groups had mean wage growth smaller than that of all occupations: life scientists (1.7% CAGR), engineers (1.5% CAGR), physical scientists (1.2% CAGR), and mathematic occupations (1.0% CAGR). Adjusted for inflation, mathematical occupations experienced a small decline (-0.1% CAGR) in mean wages between 2012 and 2016, while the other S&E occupational groups grew by less than 1.4% CAGR. Table 9 provides unemployment rates for the S&E occupational groups, as well as all for all workers (16 years and over) and selected professional and related occupations for the years 2012-2016. This table provides a perspective on how the unemployment rates of S&E occupational groups compare to the overall unemployment rate and other selected professional and related occupations, as well as how these rates changed during this period. Professional occupations (of which the S&E occupations are a part) historically have had lower unemployment rates than the overall workforce. As shown in Table 9 , S&E occupational groups had significantly lower unemployment rates than those of the overall workforce for the 2012-2016 period. Nevertheless, during this period the S&E occupational groups generally had unemployment rates that were comparable or higher than the rates for other selected professional occupations (e.g., lawyers, dentists, physicians and surgeons, registered nurses, accountants and auditors). This section provides an analysis of the Bureau of Labor Statistics occupational employment projections for the 2016-2026 period. The data for this projection period were released in October 2017. CRS analysis of Bureau of Labor Statistics employment projections indicates that the science and engineering workforce is expected to grow from 7.3 million to 8.2 million jobs between 2016 and 2026, an increase of 853,600 (11.7%) jobs over the 10-year period (1.1% CAGR). This growth rate is higher than the growth rate projected for all occupations (0.7% CAGR) during this period. In addition to the job openings created by growth in the number of jobs in S&E occupations, BLS projects that an additional 1.439 million scientists and engineers will exit the labor force due to factors such as retirement, death, and to care for family members. This brings the number of S&E job openings created by job growth and those exiting the workforce to nearly 2.3 million. In addition, BLS projects that there will be an additional 3.7 million openings created by occupational transfers in S&E positions during this period, that is, workers in S&E occupations who leave their jobs to take jobs in different occupations, S&E or non-S&E. The BLS projections do not include data that allow for a quantitative analysis of how many new workers (those not in the labor market in 2016) will be required for openings created by job growth, labor force exits, and occupational transfers, as there is no detail to how many of the S&E openings are expected to be filled by workers transferring into these openings from S&E occupations and from non-S&E occupations (that is, some workers may transfer from one S&E occupation to another, some may transfer from an S&E occupations to a non-S&E occupations, and still others may transfer from a non-S&E occupation into an S&E occupations). According to BLS, the projections methodology allows for multiple occupational transfers from the same position during the 10-year projection period, but only one occupational transfer in a given year. Employment projections for science and engineering occupational groups are provided in Table 10 . This table provides the following information for each group: 2016 actual employment; 2026 projected employment; the total change, total percentage increase, and compound annual growth rate in the number of jobs between 2016 and 2026; the annual average increase in the number of jobs; occupational separations, including labor force exits, occupational transfers, and total occupational separations; and total annual job openings (growth plus occupational separations). Among the S&E occupational groups, computer occupations are projected to see the largest increase in the number employed (546,100), the largest annual average number of labor force exits (75,800), and the largest annual average number of occupational transfers (217,300). Computer occupations, which accounted for 58.0% of all S&E jobs in 2016, are projected to account for 64.0% of the total growth in S&E occupations between 2016 and 2026. (See Figure 5 .) As a result, the share of all S&E jobs accounted for by computer occupations is projected to rise to 58.6% in 2026. Mathematical occupations are projected to have the fastest employment growth (2.5% CAGR), increasing their projected share of total S&E employment slightly from 2.5% in 2016 to 2.8% in 2026. The occupational groups that are projected to account for a smaller share of total S&E job growth than their share of total 2016 S&E employment are as follows: S&E M anagers —projected to account for 7.0% of total S&E job growth during the 2016-2026 period, down from their 8.3% share of S&E employment in 2016, resulting in their projected share of 2026 S&E employment falling to 8.1%. Engineers —projected to account for 16.2% of total S&E job growth during the 2016-2026 period, below their 23.0% share of S&E employment in 2016, thus reducing their projected share of 2026 S&E employment to 22.3%; Life Scientists —projected to account for 3.8% of total S&E job growth during the 2016-2026 period, below their 4.5% share of S&E employment in 2016, thus reducing their projected share of 2026 S&E employment to 4.4%; and Physical S cientists —projected to account for 3.2% of total S&E job growth during the 2016-2026 period, below their 3.8% share of S&E employment in 2016, thus reducing their projected share of 2026 S&E employment to 3.7%. Across all occupations (not just S&E occupations), BLS projects the number needed to replace those exiting the labor force (75.5 million) will be more than six times the number of new jobs created (11.5 million). For S&E occupations, the number needed to replace those exiting the workforce (1.4 million) is expected to be less than twice the number of new jobs created (0.9 million). For nearly all S&E occupational groups, labor force exits greatly exceed the number of projected new jobs in the occupation as for the workforce as a whole. For example, BLS projects 385,000 labor force exits in the engineering occupations and job growth of 138,900 between 2016 and 2026. However, for the mathematical occupations, the number of openings resulting from job growth (50,100) is expected to exceed the number of openings resulting from labor force exits (40,000) during this period. Figure 6 illustrates the composition of projected job openings by job growth, labor force exits, and occupational transfers for each S&E occupational group for the 2016-2026 period. Figure 7 illustrates the composition of total projected S&E job openings resulting from job growth, labor force exits, and occupational transfers by S&E occupational group for the 2016-2026 period. The Bureau of Labor Statistics' projected job growth and labor force for the S&E occupations vary substantially for the 2016-2026 projection period. Table 11 - Table 16 show the top 10 S&E occupations in terms of job growth, job losses, and labor force exits. Table 11 shows the 10 S&E occupations with the highest projected growth in jobs during the 2016-2026 projection period. These occupations account for 71.5% of total growth in S&E jobs. Seven of the ten S&E occupations on this list are in the computer occupations. One of the remaining three occupations is computer and information systems managers. The only two non-IT occupations in the top 10 are civil engineers and mechanical engineers. Table 12 shows the 10 S&E occupations with the smallest projected growth in jobs. The list includes occupations from computer, physical and life sciences, mathematics, and engineering occupations. The only S&E occupation projected to see a reduction in jobs is computer programmers. This could be due, in part, to a reclassification of jobs previously counted as computer programmers to software developers (applications and systems software). Table 13 shows the 10 S&E occupations with the fastest projected job growth rates. Statisticians (2.9%), software developers, applications (2.7% CAGR), and mathematicians (2.6% CAGR) are the fastest-growing S&E occupations. The remaining occupations on the list range from 1.3% to 2.5% CAGR, faster than the overall projected job growth rate for all occupations (0.7% CAGR). The list includes four mathematical occupations, three computer occupations, two physical sciences occupations, and one engineering occupation. The five non-S&E occupations with the highest growth rate for the projection period are also provided for context. Table 14 shows the 10 S&E occupations with the slowest projected job growth rates, ranging from -0.8% to 0.6% CAGR, each below the overall projected job growth rate of 0.7% CAGR. The list includes five engineering occupations and architectural and engineering managers. Of the remaining four, three are life sciences occupations and one is a computer occupation. Table 15 shows the 10 S&E occupations with the most projected job openings due to growth, labor force exits, and occupational transfers. Five of the ten occupations are computer occupations and one is computer and information systems managers. In addition, three occupations on the list are engineering occupations—civil, mechanical, and industrial engineers—and one is a mathematical occupation. These 10 occupations account for $60.8% of all projected job openings in S&E occupations. Table 16 shows the 10 S&E occupations with the fewest projected job openings. These 10 occupations account for less than 1% of all S&E job openings during the projection period. The list includes occupations from life sciences, physical sciences, engineering, and mathematics. Scientists and engineers are widely believed to be essential to U.S. technological leadership, innovation, manufacturing, and services, and thus vital to U.S. economic strength, national defense, and other societal needs (e.g., treating and preventing diseases, ensuring access to affordable energy, protecting and restoring the environment). The adequacy of the U.S. science and engineering workforce has been an ongoing concern of Congress for more than 60 years. Congress has enacted many programs to support the education and development of scientists and engineers. Congress has also undertaken broad efforts to improve science, technology, engineering, and math (STEM) skills to prepare a greater number of students to pursue science and engineering (S&E) degrees. Some policymakers have sought to increase the number of foreign scientists and engineers working in the United States through changes in visa and immigration policies. While there is a broad consensus on the important role of scientists and engineers in the United States, policymakers, business leaders, academicians, S&E professional society analysts, economists, and others hold diverse views with respect to the adequacy of the S&E workforce and related policy issues. In particular, there are varying perspectives about whether a shortage of scientists and engineers exists in the United States, what the nature of such a shortage might be (e.g., too few people with S&E degrees, a mismatch of worker skills and employer needs), and whether the federal government should undertake policy interventions to address a putative shortage or allow market forces to work in this labor market. Here are some general ways in which their views may be expressed: There is a shortage. There is a shortage (or a looming shortage) of scientists and engineers (or alternatively, an inadequate supply of workers with degrees in science and engineering fields), and this may result in the loss of U.S. scientific, engineering, technological, and industrial leadership, with consequent effects on areas such as economic growth, job creation, standard of living, and national security. There is not a shortage. Assertions of a broad shortage of scientists and engineers are not supported by the data when considering indicators such as employment growth, wage growth, and unemployment rates. More scientists and engineers are needed regardless of the existence of a shortage. Historically, federal policies, programs, and investments have contributed to the development of the United States' scientific and engineering workforce. Regardless of whether demand currently exceeds supply, increasing the number of U.S. scientists and engineers will increase U.S. innovation, economic performance, and job creation. Even if there is not a shortage of scientists and engineers, jobs in many occupations require a higher level of STEM knowledge than ever before. Students who earn S&E degrees gain thinking skills, problem-solving skills, and STEM knowledge that will enable them to be successful not only in S&E occupations, but also in S&E-related careers and in non-S&E fields where they can apply their S&E knowledge and skills. Government interventions in the S&E labor market to address perceived shortages may introduce inefficienc i es. Federal government efforts to increase the number of scientists and engineers by incentivizing the pursuit of degrees in S&E disciplines and/or increasing immigration quotas may result in less efficient operation of the S&E labor market. For example, too many students may be educated in S&E for the number of jobs available and graduates who find S&E jobs may receive lower salaries. Workforce projections are unreliable for predicting shortages . Long-term projections for S&E occupations are unreliable. Relying on such projections may result in the preparation of too many or too few students with S&E degrees or in mismatches between the students' education and market needs. Among the difficulties in making long-term projections are unexpected changes in the mix of industrial output or employment due to technological or market changes, factor substitution (e.g., substitution of capital for labor) due to changes in prices, changes in retirement behavior, the availability of foreign labor, labor market demographics, and government policies. There may be shortages in certain indu stries, occupations, or fields. Shortages may exist in some S&E occupations or for certain employers, for example in new and emerging S&E fields (e.g., nanotechnology); cyclical industries (e.g., aerospace); in fields where foreign scientists and engineers may not be employed due to export control laws; and for employers otherwise limited, in general or for specific purposes, to using only U.S. citizens. The labor market will resolve such needs . If markets are allowed to operate freely (i.e., without government interventions), any short-term "shortages" will be resolved as wages equilibrate demand and supply, as the labor supply increases (e.g., as more students earn S&E degrees) in response to market signals, or through substitution of alternative inputs. The potential adverse consequences of even discrete shortages require government interventions. These shortages should be met with federal efforts to increase supply or the United States may face the loss of technological leadership in new and emerging fields, lower economic performance, and diminished national security. Industry assertions of shortages are driven by a desire to reduce costs and/or increase current knowledge . Industry assertions of S&E shortages are driven primarily by a desire to lower their labor costs through increased supply by providing a continuous stream of young, lower-cost recent college graduates through education, training, and immigration. These new hires can replace older, higher-cost workers with less current knowledge. The real issue is a skills mismatch, not a shortage of people. The difficulty employers have in meeting their S&E workforce needs (in particular their information technology workforce needs) results primarily from a mismatch between the specific skills—or combinations of knowledge, skills, and experience—needed by employers and those held by S&E workers. Expanding i mmigration can help address the shortage. Immigration policies directed at increasing the number of foreign scientists and engineers in the United States put the creativity of the world's best and brightest to work for the U.S. economy and reduce the loss of U.S.-educated foreign nationals with S&E degrees (i.e., returning to their countries of origin, working in countries other than the United States or their countries of origin). Expanding i mmigration will dampen the market signals that would otherwise drive more U.S. students into science and engineering. Visa and immigration policies directed at increasing the number of foreign scientists and engineers in the United States may, by increasing the overall supply of scientists and engineers, depress wages, increase unemployment, and reduce career opportunities for U.S. scientists and engineers; discourage American students from pursuing S&E degrees and careers; and cloud labor market signals (e.g., wage growth, unemployment rates) to students considering pursuing S&E degrees and careers. U.S. students lag those of other nations in STEM knowledge ; federal efforts to improve STEM education are needed . U.S. students lag foreign students in STEM knowledge, and this may result in fewer and/or less-talented U.S. scientists and engineers, lower economic growth, and reduced economic competitiveness. Federal policies and programs can help to build a stronger K-12 STEM education system. International assessments do not reflect the adequacy of U.S. student STEM knowledge. Standardized tests used to compare the STEM knowledge of U.S. K-12 students to those of other nations do not appropriately reflect the STEM knowledge of U.S. students, the adequacy of their preparation to pursue S&E degrees and occupations, or their future capabilities as scientists and engineers. These disparate perspectives contribute to a variety of opinions on the roles the federal government should play in fostering the development of the S&E workforce, including the merits of federal policies focused on increasing the number of students pursuing S&E degrees; increasing the number of foreign scientists and engineers admitted to the United States; increasing the number and share of underrepresented minorities and women in science and engineering; improving K-12 STEM education; and improving career information and counseling for high school students. As Congress considers approaches to bolstering U.S. competitiveness and scientific, engineering, technological, and industrial leadership, it may consider these perspectives and opinions. Appendix A. S&E Occupational Descriptions and Entry-Level Education Requirements Appendix B. Composition of S&E Occupations by Education Level Together with its biannual employment projections, BLS publishes data on the educational composition of occupations. BLS uses data collected as part of the American Community Survey (ACS) for this purpose. The ACS uses a compressed version of the Standard Occupational Classification (SOC) system that includes multiple SOC codes under a single ACS code. A crosswalk of SOC codes to ACS codes is provided at the end of this appendix. The occupational composition of each of the ACS occupational classifications corresponding to the SOC codes for S&E occupations used in this report is illustrated below in chart form. For these charts, CRS has aggregated educational levels below the associate's degrees into a category called "Less than an Associate's degree." This category includes "less than high school diploma," "high school diploma or equivalent," and "some college, no degree."

The adequacy of the U.S. science and engineering workforce has been an ongoing concern of Congress for more than 60 years. Scientists and engineers are widely believed to be essential to U.S. technological leadership, innovation, manufacturing, and services, and thus vital to U.S. economic strength, national defense, and other societal needs. Congress has enacted many programs to support the education and development of scientists and engineers. Congress has also undertaken broad efforts to improve science, technology, engineering, and math (STEM) skills to prepare a greater number of students to pursue science and engineering (S&E) degrees. In addition, some policymakers have sought to increase the number of foreign scientists and engineers working in the United States through changes in visa and immigration policies. Policymakers, business leaders, academicians, S&E professional society analysts, economists, and others hold diverse views with respect to the adequacy of the S&E workforce and related policy issues. These issues include whether a shortage of scientists and engineers exists in the United States, what the nature of such a shortage might be (e.g., too few people with S&E degrees, mismatched skills and needs), and whether the federal government should undertake policy interventions to address such a putative shortage or to allow market forces to work in this labor market. Among the key indicators used by labor economists to assess occupational labor shortages are employment growth, wage growth, and unemployment rates. In 2016, there were 6.9 million scientists and engineers (as defined in this report) employed in the United States, accounting for 4.9% of total U.S. employment. Science and engineering employment was concentrated in two S&E occupational groups, computer occupations (57.6%) and engineers (23.6%), with the rest accounted for by S&E managers (8.4%), physical scientists (3.8%), life scientists (4.1%), and those in mathematical occupations (2.4%). From 2012 to 2016, S&E employment increased by 747,040, a compound annual growth rate (CAGR) of 2.9%, while overall U.S. employment grew by 1.9% CAGR. Viewed only in aggregate, the increase in S&E employment masks the varied degrees of growth and decline in detailed S&E occupations. In 2016, the mean wage for all scientists and engineers was $94,450, while the mean wage for all other occupations was $49,630. Between 2012 and 2016, the nominal mean wages of the S&E occupational groups grew between 1.0% CAGR (mathematical occupations) and 2.5% CAGR (S&E managers). Inflation-adjusted wage growth for each of the S&E occupational groups was less than 1.4% CAGR, and in the case of mathematical occupations was negative. Nominal wage growth for all occupations in the economy was 2.0%; real wages grew by 0.9%. Compared to the overall workforce, the S&E occupational groups had significantly lower unemployment rates for the 2012-2016 period. In general, though, the professional occupations (of which the S&E occupations are a part) historically have had lower unemployment rates than the workforce as a whole. In 2016, with the exception of life scientists, the unemployment rates for S&E occupational groups (2.0%-2.9%) were higher than other selected professional occupations, including lawyers (0.7%), physicians and surgeons (0.5%), dentists (0.4%), and registered nurses (1.2%). Life scientists had an unemployment rate of 0.6%. The Bureau of Labor Statistics (BLS) projects that the number of S&E jobs will grow by 853,600 between 2016 and 2026, a growth rate (1.1% CAGR) that is somewhat faster than that of the overall workforce (0.7%). In addition, BLS projects that 5.179 million scientists and engineers will be needed due to labor force exits and occupational transfers (referred to collectively as occupational separations). BLS projects the total number of openings in S&E due to growth, labor force exits, and occupational transfers between 2016 and 2026 to be 6.033 million, including 3.477 million in the computer occupations and 1.265 million in the engineering occupations.

Declaring it necessary to bring to justice those responsible for the terrorist attacks on the United States of September 11, 2001, President Bush signed a Military Order (M.O.) authorizing the trial by military commission of certain non-citizens. The order directed the Secretary of Defense to establish the procedural rules for the operation of the military commissions convened pursuant to the M.O. The Department of Defense implemented regulations and convened commissions; however, one of the accused petitioned for habeas corpus in federal district court and the Supreme Court invalidated the regulations as inconsistent with the Uniform Code of Military Justice (UCMJ ) and the Geneva Conventions. This report provides a brief overview of procedural rules applicable in selected historical and contemporary tribunals for the trials of war crimes suspects. The chart that follows compares selected procedural safeguards employed in criminal trials in federal criminal court with parallel protective measures in military general courts-martial, international military tribunals used after World War II, including the International Military Tribunal (IMT or "Nuremberg Tribunal"), and the International Criminal Courts for the former Yugoslavia (ICTY) and Rwanda (ICTR). The chart identifies a selection of basic rights in rough order of the stage in the criminal justice process where they might become most important. The text of the chart indicates some of the procedural safeguards designed to protect these rights in different tribunals. Recognizing that fundamental fairness relies on the system of procedural safeguards as a whole rather than individual rules, the chart is intended only as an outline to compare some of the rules different courts and tribunals might use to safeguard certain rights. The Constitution imposes on the government a system of restraints to provide that no unfair law is enforced and that no law is enforced unfairly. What is fundamentally fair in a given situation depends in part on the objectives of a given system of law weighed alongside the possible infringement of individual liberties that system might impose. In the criminal law system, some basic objectives are to discover the truth, punish the guilty proportionately with their crimes, acquit the innocent without unnecessary delay or expense, and prevent and deter further crime, thereby providing for the public order. Military justice shares these objectives in part, but also serves to enhance discipline throughout the armed forces, serving the overall objective of providing an effective national defense. The equation for international criminal law may also consider foreign policy elements as well as international law and treaty obligations. The Fifth Amendment to the Constitution provides that "no person shall be ... deprived of life, liberty, or property, without due process of law." Due process includes the opportunity to be heard whenever the government places any of these fundamental liberties at stake. The Constitution contains other explicit rights applicable to various stages of a criminal prosecution. Criminal proceedings provide both the opportunity to contest guilt and to challenge the government's conduct that may have violated the rights of the accused. The system of procedural rules used to conduct a criminal hearing, therefore, serves as a safeguard against violations of constitutional rights that take place outside the courtroom. The Bill of Rights applies to all citizens of the United States and all aliens within the United States. However, the methods of application of constitutional rights, in particular the remedies available to those whose rights might have been violated, may differ depending on the severity of the punitive measure the government seeks to take and the entity deciding the case. The jurisdiction of various entities to try a person accused of a crime could have a profound effect on the procedural rights of the accused. The type of judicial review available also varies and may be crucial to the outcome. International law also contains some basic guarantees of human rights, including rights of criminal defendants and prisoners. Treaties to which the United States is a party are expressly made a part of the law of the land by the Supremacy Clause of the Constitution, and may be codified through implementing legislation. International law is incorporated into U.S. law. The law of war, a subset of international law, applies to cases arising from armed conflicts (i.e., war crimes). It is unclear exactly how the law of war applies to the current hostilities involving non-state terrorists, and the nature of the rights due to accused terrorist/war criminals may depend in part on their status under the Geneva Conventions. The Supreme Court has ruled that Al Qaeda fighters are entitled at least to the baseline protections applicable under Common Article 3 of the Geneva Conventions, which includes protection from the "passing of sentences and the carrying out of executions without previous judgment pronounced by a regularly constituted court, affording all the judicial guarantees which are recognized as indispensable by civilized peoples." The federal judiciary is established by Article III of the Constitution and consists of the Supreme Court and "inferior tribunals" established by Congress. It is a separate and co-equal branch of the federal government, independent of the executive and legislative branches, designed to be insulated from the public passions. Its function is not to make law but to interpret law and decide disputes arising under it. Federal criminal law and procedures are enacted by Congress and housed primarily in title 18 of the U.S. Code. The Supreme Court promulgates procedural rules for criminal trials at the federal district courts, subject to Congress's approval. These rules, namely the Federal Rules of Criminal Procedure (Fed. R. Crim. P.) and the Federal Rules of Evidence (Fed. R. Evid.), incorporate procedural rights that the Constitution and various statutes demand. The chart cites relevant rules or court decisions, but makes no effort to provide an exhaustive list of authorities. The Constitution, in order to provide for the common defense, gives Congress the power to raise, support, and regulate the armed forces, but makes the President Commander-in-Chief of the armed forces. Article III does not give the judiciary any explicit role in the military, and the Supreme Court has taken the view that Congress' power "[t]o Make Rules for the Government and Regulation of the land and naval Forces" is entirely separate from Article III. Therefore, courts-martial are not considered to be Article III courts and are not subject to all of the rules that apply in federal courts. Although military personnel are "persons" to whom the Bill of Rights applies, in the military context it might be said that discipline is as important as liberty as objectives of military justice. Also, the Constitution specifically exempts military members accused of a crime from the Fifth Amendment right to a grand jury indictment, from which the Supreme Court has inferred there is no right to a civil jury in courts-martial. However, in part because of the different standards provided in courts-martial, their jurisdiction is limited to those persons and offenses the military has a legitimate interest in regulating. Courts-martial jurisdiction extends mainly to service members on active duty, prisoners of war, and persons accompanying the armed forces in time of declared war, as well as certain violators of the law of war. Congress regulates the armed forces largely through title 10 of the U.S. Code, which contains as Chapter 47 the Uniform Code of Military Justice (UCMJ) regulating the system of military courts-martial. The Supreme Court has found the procedures Congress set through the UCMJ to provide adequate procedural safeguards to satisfy constitutional requirements and the interest in maintaining a strong national defense. Congress has delegated to the President the authority to make procedural rules for the military justice system. The President created the Rules for Courts-Martial (R.C.M.) and the Military Rules of Evidence (Mil. R. Evid.) pursuant to that delegation. The comparison chart will cite provisions of the UCMJ and the applicable rules, as well as military appellate court opinions as applicable. Defendants are not able to appeal their courts-martial directly to federal courts, but may seek relief in the form of a writ of habeas corpus, although review may be limited. However, Congress has provided for a separate system of reviewing convictions by court-martial, which includes a civilian appellate court. In cases in which the convening authority approves a sentence of death, or, unless the defendant waives review, approves a bad-conduct discharge, a dishonorable discharge, dismissal of an officer, or confinement for one year or more, the Court of Criminal Appeals for the appropriate service must review the case for legal error, factual sufficiency, and appropriateness of the sentence. The Court of Appeals for the Armed Forces (CAAF) exercises appellate jurisdiction over the services' Courts of Criminal Appeals, with respect to issues of law. The CAAF is an Article I court composed of five civilian judges appointed for 15-year terms by the President with the advice and consent of the Senate. Its jurisdiction is established in Article 67 of the UCMJ (10 U.S.C. § 867), and is discretionary except in death penalty cases. The Constitution empowers the Congress to declare war and "make rules concerning captures on land and water," to define and punish violations of the "Law of Nations," and to make regulations to govern the armed forces. The power of the President to convene military commissions flows from his authority as Commander in Chief of the Armed Forces and his responsibility to execute the laws of the nation. Under the Articles of War and subsequent statute, the President has at least implicit authority to convene military commissions to try offenses against the law of war. There is, therefore, somewhat of a distinction between the authority and objectives behind convening military courts-martial and commissions. Rather than serving the internally directed purpose of maintaining discipline and order of the troops, the military commission is externally directed at the enemy as a means of waging successful war by punishing and deterring offenses against the law of war. Jurisdiction of military commissions is limited to time of war and to trying offenses recognized under the law of war or as designated by statute. While case law suggests that military commissions could try U.S. citizens as enemy belligerents, the Military Order of November 13, 2001 limits their jurisdiction to non-citizens. As non-Article III courts, military commissions are not subject to the same constitutional requirements that are applied in Article III courts. Congress has delegated to the President the authority to set the rules of procedure and evidence for military tribunals, applying "the principles of law and the rules of evidence generally recognized in the trial of criminal cases in the United States district court" insofar as he considers it practicable. The rules "may not be contrary to or inconsistent with the UCMJ" and must be uniform insofar as practicable with courts-martial. The United States first used military commissions to try enemy belligerents accused of war crimes during the occupation of Mexico in 1847, and made heavy use of them in the Civil War. However, prior to the President's Military Order, no military commissions had been convened since the aftermath of World War II. Because of the lack of standards of procedure used by military commissions, it is difficult to draw a meaningful comparison with the other types of tribunals. For a comparison of the Department of Defense rules for military commissions that were struck down in Hamdan to recent legislative proposals, see CRS Report RL31600, The Department of Defense Rules for Military Commissions: Analysis of Procedural Rules and Comparison with Proposed Legislation and the Uniform Code of Military Justice , by [author name scrubbed]. Prior to the twentieth century, war crimes were generally tried, if tried at all, by belligerent States in their own national courts or special military tribunals. After World War I, the Allies appointed a 15-member commission to inquire into the legal liability of those responsible for the war and the numerous breaches of the law of war that it occasioned. It recommended the establishment of an international military tribunal to prosecute those accused of war crimes and crimes against humanity. After Germany refused to comply with the locally unpopular provision of the peace treaty requiring it to turn over accused war criminals to the Allied forces for trial, a compromise was reached in which Germany agreed to prosecute those persons in its national courts. Of 901 cases referred to the German Supreme Court for trial at Leipzig, only 13 were convicted. Because German nationalism appeared to have hindered the earnest prosecution of war criminals, the results were largely seen as a failure. In the aftermath of World War II, the Allies applied lessons learned at Leipzig and formed special international tribunals for the European and Asian theaters. In an agreement concluded in London on August 8, 1945, the United States, France, Great Britain and the Soviet Union together established the International Military Tribunal (IMT) at Nuremberg for the trial of war criminals. The four occupying powers also established Control Council Law No. 10, authorizing military tribunals at the national level to try the less high-profile war crimes and crimes against humanity. The evidentiary rules used at Nuremberg and adopted by the Tokyo tribunals were designed to be non-technical, allowing the expeditious admission of "all evidence [the Tribunal] deems to have probative value." This evidence included hearsay, coerced confessions, and the findings of prior mass trials. It has also been argued that the tribunals violated the principles of legality by establishing ex post facto crimes and dispensing victor's justice. However, while the historical consensus seems to have accepted that the Nuremberg Trials were conducted fairly, some observers argue that the malleability of the rules of procedure and evidence could and did have some unjust results, in particular as they were applied by the national military tribunals. The Tokyo tribunal decisions were subject to criticism by dissenters on the Supreme Court in the Yamashita case. Some argue that procedural safeguards considered sufficient for the World War II tribunals would not likely meet today's standards of justice. The jurisdiction of the Nuremberg Tribunal was based on universally applicable international law regulating armed conflict, and its authority was based on the combined sovereignty of the Allies and Germany's unconditional surrender. The Tribunal rejected the defendants' contention that the tribunal violated fundamental legal principles by trying them for conduct that was not prohibited by criminal law at the time it was committed. The Nuremberg Tribunal also adopted the doctrine of individual responsibility for war crimes, rejecting the idea that state sovereignty could protect those responsible from punishment for their misdeeds. Twenty-four Nazi leaders were indicted and tried as war criminals by the International Military Tribunal (IMT). The indictments contained four counts: (1) crimes against the peace, (2) crimes against humanity, (3) war crimes, and (4) a common plan or conspiracy to commit the aforementioned acts. Nineteen of the defendants were found guilty, three were acquitted, one committed suicide before the sentence, and one was physically and mentally unfit for trial. Sentences ranged from death by hanging (twelve), life imprisonment (three), and imprisonment for ten to twenty years (four). The International Military Tribunal for the Far East (IMTFE) in Tokyo was established by a Special Proclamation of General Douglas MacArthur as the Supreme Commander in the Far East for the Allied Powers. Many provisions of the IMTFE were adapted from the London Agreement. The Tokyo tribunal tried only the most serious crimes, crimes against peace. General MacArthur appointed eleven judges, one from each of the victorious Allied nations who signed the instrument of surrender and one each from India and the Philippines, to sit on the tribunal. General MacArthur also appointed the prosecutor. Of the twenty-five people indicted for crimes against peace, all were convicted, with seven executed, sixteen given life imprisonment, and two others serving lesser terms. Some 300,000 Japanese nationals were tried for conventional war crimes (primarily prisoner abuse) and crimes against humanity in national military tribunals. The U.N. Security Council (UNSC), acting under its Chapter VII authority of the U.N. Charter, established two ad hoc criminal courts, the International Criminal Tribunal for the former Yugoslavia (ICTY) and the International Criminal Tribunal for Rwanda (ICTR). Both tribunals are still operating, and employ virtually identical procedural rules. Their jurisdiction is coexistent with that of national courts, but they also may assert primacy over national courts to prevent trials of the same individuals in more than one forum. Their jurisprudence may provide important precedent for the interpretation of Common Article 3. Based in the Hague, Netherlands, the ICTY has jurisdiction to try crimes conducted within the territory of the former Yugoslavia, including the crime of "ethnic cleansing," whether committed in the context of an international war or a war of non-international character. It tries violations of the Geneva Conventions of 1949, violations of the laws or customs of war, genocide, and crimes against humanity when committed in the context of an armed conflict. It is composed of sixteen permanent independent judges, who are elected by the UN General Assembly from a list of nominations provided by the Security Council. It has an Appeals Chamber consisting of seven judges, five of whom sit on a panel in any given case. The Prosecutor, an independent organ of the court appointed by the UN Security Council on the recommendation of the UN Secretary-General, investigates and prosecutes those responsible for covered offenses. When the Prosecutor finds that sufficient evidence exists to try an individual, he issues an indictment, subject to the approval of a judge from the Trial Chamber. The ICTR, based in Arusha, Tanzania, was established by the UN Security Council in response to genocide and other systematic, widespread, and flagrant violations of humanitarian law applicable in the context of a non-international armed conflict, that is, Common Article 3 of the Geneva Conventions and Additional Protocol II, genocide, and crimes against humanity. Its structure and composition are similar to those of the ICTY. As of June 2006, the ICTR has tried 28 accused, convicting 25 and acquitting three. Twenty-seven defendants are undergoing trial, and another fourteen await trial.

Declaring it necessary to bring to justice those responsible for the terrorist attacks on the United States of September 11, 2001, President Bush signed a Military Order (M.O.) authorizing the trial by military commission of certain non-citizens. The order directs the Secretary of Defense to establish the procedural rules for the operation of the military commissions convened pursuant to the M.O. The Department of Defense prepared regulations providing for procedures of military commissions, but these were invalidated by the Supreme Court in Hamdan v. Rumsfeld. The Bush Administration has proposed legislation to reinstate military commissions for the trials of suspected terrorists. This report provides a brief overview of procedural rules applicable in selected historical and contemporary tribunals for the trials of war crimes suspects. The chart that follows compares selected procedural safeguards employed in criminal trials in federal criminal court with parallel protective measures in military general courts-martial, international military tribunals used after World War II, including the International Military Tribunal (IMT or "Nuremberg Tribunal"), and the International Criminal Courts for the former Yugoslavia (ICTY) and Rwanda (ICTR). For comparison of the Department of Defense rules for military commissions that were struck down in Hamdan to recent legislative proposals, see CRS Report RL31600, The Department of Defense Rules for Military Commissions: Analysis of Procedural Rules and Comparison with Proposed Legislation and the Uniform Code of Military Justice, by [author name scrubbed].