Monthly Archives: March 2013

CYBER ATTACK: THE NEXT PEARL HARBOR

The history of warfare is filled with the constant evolution of increasingly dangerous and more ingenious weapons and tactics. Prehistoric man replaced rocks with spears. Bows and arrows were developed. Gunpowder superseded them. Tanks made cavalry obsolete, airplanes and helicopters made mobility a key factor. Missiles with nuclear warheads are now the mark of a major power. History may be turning yet another corner, as our civilization becomes so heavily dependent on computers that the ability to manipulate an opponent’s systems for aggressive purposes becomes a potent weapon.

America faces a number of cyberspace threats. The most serious are from those wishing to engage in espionage to steal both military and technological secrets, and from those who wish to turn the nation’s own computer systems against it by dismantling defense systems and committing sabotage against key civilian infrastructure. Cyber attacks have escalated by 1,700% since 2009, costing intellectual property theft losses over $400 billion.

An armed attack following a cyber assault would be exceptionally effective. Key defense systems could be disabled, leading to a military that is deaf, dumb, and blind, defending a nation that may have its electrical, energy, water, transportation and other crucial systems heavily disrupted.

Last July, General Keith Alexander, the commander of the U.S. Cyber Command, openly worried that the United States was not adequately prepared for a cyber attack. He noted that on a scale one one to ten in preparedness, the U.S. was at about a three. He emphasized that the time to stop a cyber attack is less than a minute–far less time than preparing for an incoming missile attack.

The Mandiant Corporation has just released a scathing expose of China’s aggressive, persistent and wide scale assault on American computer systems. The organization has been tracking Beijing’s threat for several years. In 2004, it reported that the ongoing attacks on global systems, which they referred to as “Advanced Persistent Threats,” (APT) were probably authorized by the Chinese Government.

The federal government has been cognizant of the threat for some time. In 2011, U.S. Rep. Michael Rogers (R-Michigan) warned that: “China’s economic espionage has reached an intolerable level and I believe that the United States and our allies in Europe and Asia have an obligation to confront Beijing and demand that they put a stop to this piracy.”

That same year, The Office of the U.S. National Counterintelligence Executive reported to Congress that “foreign economic collection and industrial espionage against the United States represent significant and growing threats to the nation’s prosperity and security. Cyberspace–where most business activity and development of new ideas now takes place–amplifies these threats by making it possible for malicious actions, whether they are corrupted insiders or foreign intelligence services (FIS) to quickly steal and transfer massive quantities of data while remaining anonymous and hard to detect.”

While there are a number of private and governmental actors somewhat active in cyber espionage, as well as several who could be seen as potential assailants in a cyber attack, two stand out far more than the rest: China and Russia. (Iran is also seen as a lesser but significant threat.) According to the National Counterintelligence Office, “Chinese actors are the world’s most active and persistent perpetrators of economic espionage. U.S. private sector firms and cyber security specialists have reported an onslaught of computer network intrusions that have originated in China, but the IC cannot confirm who was responsible. Russia’s intelligence services are conducting a range of activities to collect economic information and technology from U.S. targets.”

The Mandiant Report settles the question of who in China is responsible for that nation’s cyber attacks and cyber espionage. Beijing’s armed forces are clearly at the center of the threat. Specifically, a shadowy unit of the People’s Liberation Army known as the 2nd Bureau, operating within the General Staff Department’s 3rd Department, most commonly known as Unit 61398. According to the report, Unit 61398 is physically located in the Pudong New Area of Shanghai, at a 130,663 square foot building built in 2007. Staffing may be in the thousands, by personnel who are not only training in computer security but in the English language as well.

Shanghai, the location of Unit 61398

According to the report, Unit 61398, which Mandiant calls Advanced Persistent Threat 1 (APT1) “has systematically stolen hundreds of terabytes of data from at least 141 organizations, and has demonstrated the capability and intent to steal from dozens of organizations simultaneously…Apt1 focuses on compromising organizations across a broad range of industries in English speaking countries… [and] maintains an extensive infrastructure of computer systems around the world.”

The powerful nature of a computer-assaulting organization that is a direct part of the Chinese military made the decision to release this information a risky one for Mandiant, which notes that it is “Acutely aware of the risk this report poses for us. We expect reprisals from China as well as an onslaught of criticism.” The reality of a foreign military attacking an American corporation for performing its civic duty in revealing a threat of this type should not be lost on anyone. It is, in essence, the beginning of a new level both of warfare, and of a fundamental threat to American free speech rights.

General Alexander has noted that China’s espionage efforts have resulted in “The greatest transfer of wealth in history.”

The Department of Defense notes that China makes extensive use of stolen military technology, saving their armed forces billions of dollars and decades of time. Following major security breeches in the Clinton administration, including the transfer of a supercomputer, security measures were enhanced, but were loosened again under President Obama.

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The reality of a foreign military attacking an American corporation for performing its civic duty in revealing a threat of this type should not be lost on anyone. It is, in essence, the beginning of a new level both of warfare, and of a fundamental threat to American free speech rights.
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A number of Republicans in Congress and the White House have supported legislation enhancing American cyber security, but legitimate concerns about further enhancing the federal government’s power have stymied enactment attempts. Rep. Rogers, a Michign Republican, has written extensively on America’s vulnerability to cyber attacks. He has described the potential of “cyber catastrophes” and has introduced bipartisan legislation, along with Rep. Dutch Ruppersberger (D-Mo.)

Rogers has also emphasized that the U.S. government should enact a price from the Chinese government for their assaults and espionage. According to a Bloomberg news report, one American metallurgical company, for example, lost technology worth a billion dollars spent over a decade of development time to Chinese computer espionage.

As a stopgap measure, President Obama issued an executive order on February 12 providing an optional means for key infrastructure companies to give government contractors near real-time information about cyber attacks.

According to Information Week’s Matthew Schwartz, the Defense Research Projects Agency (DARPA) and the U.S. Air Force both individually requested vendors to prepare concepts for defending against cyber attacks.

When the New York Analysis began researching the issue of cyber warfare in 2012, the problem was one that received comparatively little attention in the media. The Obama Administration had previously made a decision that confronting this serious threat to the U.S., and indeed western, national security was not worth the risk of endangering Sino-American relations.

Recent revelations, which came not from federal intelligence agencies but from the private sector, have disclosed that intrusions into defense, government, corporate and journalistic computers came not from hackers or civilians, but from the Chinese armed forces themselves. The continuous scale and scope of assaults on the systems of America and its allies leads to the inescapable conclusion that China is conducting warfare-caliber operations against Western computers.

The recent assault on South Korean financial and media computer systems is now reported to have originated, at the request of North Korea, from China. This is indicative of the extraordinary scope and activism of China’s cyber war efforts. A recent report in the Wall Street Journal noted that “The world has never seen a state devote such large resources to siphoning off data from private companies to advance a broad range of national interests, political and economic. China’s penchant for online theft and sabotage could change the world economic order.”

In a recent Washington Times article, Cheryl Chumley quoted an industry expert who believes that “Cybersercurity is to 2013 what the space program was to the 1950s and 1960s, and the United States is in an aggressive race with China and Russia to develop cyberweapons that can damage infrastructure.”

Cyber war has already emerged from the pages of science fiction onto real world battlefields. General Keith Alexander has noted that this offensive technology has been employed in disputes throughout the former Soviet empire in Estonia, Georgia, Latvia, Lithuania, Azerbaijan, and Kyrgystan. In a delayed response to this threat, DARPA (the Defense Advanced Research Project Agency) and various other portions of the U.S. defense establishment have attempted to provide the U.S. with cyber war capabilities, some of which may have been used against Iran’s nuclear development program.

While American computer systems have already been subjected to serious assaults from China, the possibility exists for even more harsh attacks. It would not take an all-out war for this to occur. A Beijing assault against Taiwan, or even aggressive action against American allies in the Philippines, Japan, or South Korea, as has already occurred within the past year could prompt a preliminary move to neutralize any American response. A Slatemagazine article posed the very real question: would an American president rush to aide an ally if it meant that a key infrastructure system, for example, the electrical grid of America’s eastern seaboard, could be destroyed via a cyber attack?

American efforts are considerably late. Defense authority Bill Gertz, writing in the Washington Free Beacon, reports that President Obama turned down “a serious of options designed to dissuade China from further attacks” during a three month period starting in August 2011. The result of this decision has been further vulnerability of the U.S. private sector, which according to U.S. cyber commander General Keith Alexander may cost American industry about $250 billion annually.

Cyber war has already emerged from the pages of science fiction onto real world battlefields.

While the White House has finally acknowledged the threat, its response appears to be tepid. An executive order issued on February 13, 2013, “Improving Critical Infrastructure Cyber security” attempts to facilitate increased vigilance and protective measures within the private sector. The Administration has also criticized its own federal agencies, other than the Department of Defense and the General Services Administration, for not making adequate progress towards the 2014 gal of enhanced cyber security.

The National Security Council has outlined the President’s “10 point near-term actions” to support a cyber strategy policy:

• Appoint a cybersecurity policy official responsible for coordinating the Nation’s cybersecurity policies and activities.
• Prepare for the President’s approval an updated national strategy to secure the information and communications infrastructure.
• Designate cybersecurity as one of the President’s key management priorities and establish performance metrics
• Designate a privacy and civil liberties official to the NSC cybersecurity directorate.
• Conduct interagency-cleared legal analyses of priority cybersecurity- related issues.
• Initiate a national awareness and education campaign to promote cybersecurity.
• Develop an international cybersecurity policy framework and strengthen our international partnerships.
• Prepare a cybersecurity incident response plan and initiate a dialog to enhance public-private partnerships.
• Develop a framework for research and development strategies that focus on game-changing technologies that have the potential to enhance the security, reliability, resilience, and trustworthiness of digital infrastructure.
• Build a cyber security-based identity management vision and strategy, leveraging privacy-enhancing technologies for the Nation.

A reasonable argument could be made that while these steps are all appropriate and necessary, they completely fail to provide any penalty for the dramatic and costly theft of American civilian and military technology-valued at $250 billion annually for many years-taken by China’s military, or to put forth a suggested response for similar ongoing and future actions by Beijing’s armed forces.

In what can only be seen as a weak response to China’s actions, the president’s National Security Advisor Tom Donilon recently stated that Chinese leaders need to “recognize the urgency and scope of the problem, along with the risks it imposes to international trade and to the regulation of Chinese industry in the world.”

The Washington Post reported on March 10 that the President signed a classified directive that requires an “imminent” or ongoing threat of an attack that could result in death or damage to the national security before a military cyber-action can be taken to thwart it. This is, in essence, a form of unilateral American disarmament in the face of the massive Chinese heist of private U.S. Industrial/intellectual property.

The costs to the taxpayer may be even greater, both in terms of jobs, investment, and future defense expenses. The vast sums appropriated to pay for cutting-edge military technology by U.S. citizens has been appropriated to pay for China’s armed forces, which thanks to the stolen information, now equal America’s.

The vast sums appropriated to pay for cutting-edge military technology by U.S. citizens has been appropriated to pay for China’s armed forces, which thanks to the stolen information, now equal America’s.

The legislative branch has been concerned about this growing challenge for some time. Previously, the New York Analysis reported on the bipartisan efforts of Rep. Mike Rogers (R-MI) and Rep. Dutch Ruppersberger (D-MO). In the Senate, Joseph Lieberman (Ind-CT) introduced S. 2105-the “Cybersecurity Act of 2012,” which “Directs the Secretary of Homeland Security (DHS), in consultation with owners and operators of critical infrastructure, the Critical Infrastructure Partnership Advisory Council, and other federal agencies and private sector gencis, to: (1) conduct a top-level assessment of cybersecurity risks to determine which sectors face the greatest imminent riskes, and beginning with the sectors identified as having the highest priority, conduct, on a sector-by sector basis, cyber risk assessment of the critical infrastructure; (2) establish a procedure for the designation of critical infrastructure; (3) identify and develop risk-based cybersecurity performance requirements; and (4) implement cyber response and restoration plans. Set forth requirements for securing critical infrastructure, including notification of cyber risks and threats and reporting of significant incidents affecting critical infrastructure.”

In addition to Russia, China, and the U.S., nations such as Iran and India are rapidly developing cyber war technologies.

As this article was being finalized, the Washington Post reported that American intelligence assets have been so devoted to anti-terrorist duties that they may have provided inadequate attention to the larger threats from China, Russia and other key threats.

FOREIGN POLICY SCORECARD

As President Obama begins his second term, it’s appropriate to review America’s foreign policy challenges, and how the White House has responded to significant international events during the past four years. The NEW YORK ANALYSIS researched international perspectives, as well as American think tanks and analysts, to gain the most objective perspective.

THE WHITE HOUSE RATES ITSELF

The White House described its foreign policy accomplishments recently as the President delivered his State of the Union address:

“President Obama has pursued national security policies that keep the American people safe, while turning the page on a decade of war and restoring American leadership abroad. Since President Obama took office, the United States has devastated al Qaeda’s leadership. Now, thanks to our extraordinary servicemen and women, we have reached a pivotal moment-we definitively ended the war in Iraq and have begun to wind down the war in Afghanistan. Meanwhile, we have refocused on a broader set of priorities around the globe that will allow the United States to be safe, strong, and prosperous in the 21stCentury. To advance America’s national security, the President is committed to using all elements of American power, including the strength of America’s values. The National Security Policy…lays out a strategic approach for advancing American interests, including the security of the American people, a growing U.S. economy, support for our values, and an international order that can address 21st century challenges.”

INTERNATIONAL PERSPECTIVES

In 2012, the Pew Research Center’s Global Attitudes Project found that “Global approval of President Barack Obama’s policies has declined significantly since he first took office, while overall confidence in him and attitudes toward the U.S have sipped modestly as a consequence. …Europeans and Japanese remain largely confident in Obama, albeit less so than in 2009, while Muslim publics remain largely critical. ..support for Obama has waned significantly in China, Since 2009, confidence in the American President has declined by 24 percentage points and approval of his policies has fallen by 3 points. Mexicans have also soured on his policies, and many fewer express confidence in him today.”

THE CHALLENGES

There has been substantial deterioration in Washington’s influence throughout the globe, both due to America’s economic troubles and the diminution of confidence in the will or capability of the United States to successfully project its military power.

The Middle East
• Washington has engaged in a precipitous withdrawal from Iraq, eliminating the pro-democracy gains made during the U.S. occupation. Iran has entered the vacuum left by the United States;
• The White House refused to arm Syrian rebels against the pro-Iranian Assad regime, which has engaged in extraordinary human rights violations against its own people;
• It didn’t provide even verbal support for reformers in Iran, and has shown reluctance to take vigorous diplomatic action to dissuade the Iranian nuclear program. (See the NY Analysis study, Iranian American nuclear negotiations” 10-29-12);
• It supported a movement that led to an Islamic fundamentalist takeover of Egypt;
• It has significantly cooled down the formerly warm relations Washington had enjoyed with Israel;
• The U.S. did not respond to the assassination of its own ambassador in Benghazi. (See the NY Analysis study, “The Benghazi Report, 12/24/12)and virtually apologized for being the victim of this assault by blaming it on an American video that was subsequently shown to be irrelevant to the incident.
All this has recast the US as a far less powerful player in the region than it was over the past several decades, and has had the destabilizing effect of strengthening Tehran.

Afghanistan

By announcing a draw-down date in Afghanistan, and doing so at a time when there is less than solid confidence in that nation’s military capability to protect itself or the civilian government to rule effectively, the dangerous possibility of a return to power by the Taliban looms large.

Asia

In Asia, the lessening of American naval power, while China’s maritime prowess has increased, has led to several dire consequences. In 2012, Beijing’s navy occupied a resource-rich offshore region belonging to the Philippines. The Obama Administration failed to intervene in this most significant act of aggression in that part of the planet since the end of World War 2. Similarly, the perception of U.S. reluctance to flex its muscles in the defense of its allies has led to extremely tense showdowns between China and Japan. All this has occurred as Beijing has built its armed forces to superpower levels.

North Korea’s long-standing belligerence (See the NY Analysis study, North Korea’s dangerous threat, 2-1-13) has entered a new and more dangerous phase, with its rapidly developing nuclear and ICBM capabilities. The Pyongyang regime openly states that these dangerous technologies are aimed at the United States. There has been little effective response from Washington. Writing in the Washington Post, Jennifer Rubin stated: “Unfortunately, the international community is all out of “swift and credible action,” and President Obama has sought to cut missile defense programs that are “necessary to defend ourselves and our allies.” And in touting the disastrous six-party talks that have resulted in serial cheating, the president reveals himself to be entirely feckless. (It is also a reminder that his secretary of defense nominee, who backed the Global Zero initiative, is equally clueless.) Danielle Pletka of the American Enterprise Institute wryly observes, “I think Kim Jong Eun will discover that it takes more than a nuclear test to get Barack Obama’s attention in the new age of retreat and decline.”

Europe

In Europe, the Obama Administration’s inclination to seek accommodations with Moscow at the expense of NATO has greatly disturbed U.S. allies such as Poland. The still unexplained coolness the White House has demonstrated towards the United Kingdom has yet to yield any crisis-level results, but remains a worrisome factor.

Russia

Despite Washington’s attempts to strengthen ties with Russia, that nation has engaged in its greatest arms buildup since the Cold War (See the NY Analysis study, “The Cold War Returns, 8-23-12) and has once again taken to sending its nuclear-capable bombers and submarines to patrols directly off the American coastline. As this edition went to print, Russian bombers circled the major U.S. base on the Pacific island of Guam.

The Americas

In the Americas, the Cuban/Venezuelan axis continues to strengthen, and for the first time since the Cuban Revolution, Havana’s influence in Latin America and Caribbean organizations has risen substantially. China’s growing commercial interests have increased Beijing’s influence in the region significantly, and Iran’s ongoing attempts to become a player is distressing.(See the NY Analysis study, China in Latin America 8-16-12.) Cuba’s recent rise to the leadership of the CELAC organization (Communidad de estados latinoamericanos y caribenos) symbolizes Washington’s diminished clout under the Obama Administration. An Associated Press report called Obama’s re-election “a relief to leftist forces “from Caracas to Havana to La Paz.”

We continue our review of the Obama Administration’s foreign policy record by examining international views.
Newly appointed Secretary of State John F. Kerry’s first major speech was delivered last week at the University of Virginia in Charlottesville. He outlined the Obama Administration’s approach to foreign policy by stating “that if we do the right things, the good things, the smart things over there, it will strengthen us here at home.”

Kerry spoke at length about a number of issues, including the environment, trade, human rights abuses, gender inequality, and corruption. His most passionate remarks were reserved for America’s foreign assistance programs, noting that: “Foreign assistance is not a giveaway. It’s not charity. It is an investment in a strong America and in a free world. Foreign assistance lifts other people up and then reinforces their willingness to link arms with us in common endeavors. And when we help others crack down on corruption, that makes it easier for our own compliance against corruption, and it makes it easier for our companies to do business as well.”

The Secretary repeatedly noted that helping other nations develop strong economies will eventually benefit American businesses.

Kerry complained that his Department’s allocation “was just over one percent of our national budget.”

His sole mention of threats facing the United States came towards the end of his speech, when he noted that “When we join with other nations to reduce the nuclear threats, we build partnerships that mean we don’t have to fight those battles alone.”

Surprisingly, Kerry completely omitted any mention of the major international conflicts, threats and incidents that in the past would have headlined the start of a new Secretary of State’s tenure. These include:

• recent Russian bombers engaging in aggressive flybys of U.S. coastlines and military bases;
• China and Japan standing at the brink of armed conflict;
• Beijing’s recent aggression against a resource-rich area belonging to the Philippines,
• development of nuclear ICBM technology which it openly states is directed against America;
• Iran’s atomic program, and its continuous abuses in the Middle East;
• Syrian President Assad’s attacks on his own populace;
• the rise of Islamic Fundamentalism in Egypt;
• the growing threat from leftist dictatorships in Latin America;
• or of the increased international attempts to extend censorship over the Internet.
Perhaps most notable by its absence was any mention of the ongoing cyber attacks by China’s People’s Liberation Army on American government, military, corporate and infrastructure computer systems.

The Secretary’s first weeks as America’s top diplomat were also marked by consternation over his travel plans. According to the State Department, Kerry’s planned trip to the Middle East includes visits to Turkey, Egypt, Saudi Arabia, the United Arab Emirates, and Qatar. Notably excluded from the list is Israel, which had long been considered America’s chief ally in the region.

The snub to that nation is more keenly felt as a consequence of the President’s nomination of Chuck Hagel for Secretary of Defense. Hagel has a long and controversial history of anti-Israeli comments. It has been reported that up to fifteen Republican senators have requested that the White House withdraw his name. Similar to Kerry’s concentration on foreign aid as opposed to foreign conflicts and threats, Hagel is seen as opposed to the use of American force abroad.

The lack of any mention of immediate threats to U.S. safety from the exceptional arms buildups by Russia, China, North Korea and Iran, even as the U.S. cuts its own military, was surprising.

The Secretary’s reign at the State Department began with Moscow’s humiliating refusal to return his phone call for six days, perhaps a reflection of America’s shrunken international status in the eyes of powerful nations.

GLOBAL PERSPECTIVES

In 2012, the Pew Research Center’s Global Attitudes Project found that “Global approval of President Barack Obama’s policies has declined significantly since he first took office, while overall confidence in him and attitudes toward the U.S have slipped modestly as a consequence. …Europeans and Japanese remain largely confident in Obama, albeit less so than in 2009, while Muslim publics remain largely critical. ..support for Obama has waned significantly in China, Since 2009, confidence in the American President has declined by 24 percentage points and approval of his policies has fallen by 3 points. Mexicans have also soured on his policies, and many fewer express confidence in him today.”

The Voice of Russia:
“One should mention that during his election campaign President Barack Obama promised to focus more on the missile issue in relations with Russia. Now that he has been re-elected the question is whether he will keep his promise? … The same one may expect from the talks between President Vladimir Putin and the US National Security Advisor Thomas Donilon scheduled for late February-early March. Some sources say that Mr. Donilon will hand over a special message from Mr. Obama to Mr. Putin concerning the future of the US-Russian relations, including in the sphere of disarmament and arms control. Certainly, no details have been disclosed so far. In his recent TV interview Mr. Donilon said that “due to a chill in US-Russia relations and now that election campaigns are over in both countries the White House is ready to discuss steps to make the bilateral relations more productive. Meanwhile, the new US Secretary of State John Kerry is likely to visit Moscow in late February, Mr. Lavrov said after the International Security Conference in Munich. There Mr. Lavrov had talks with the U.S. Vice-President Joe Biden and discussed the prospects for the development of the Russian-US relations. I think we should be cautiously optimistic about these prospects.”

European Council on Foreign Relations:
“Europeans did not always get what they wanted from their relationship with Washington in 2012. The euro crisis continued to cast a long shadow on transatlantic relations and in particular generated tensions between the US and Germany, with Obama supporting calls by France, Italy, and Spain for a growth strategy. The lack of full visa reciprocity is also still a sore point, especially for Poland. The Israel-Palestine issue also remains a point of contention, with Europeans able to resist diplomatic US demarches but still too divided to influence US policy in any meaningful way, as the vote on the non-member state status for Palestine illustrated. Obama also allowed his Secretary of Transportation to exempt US airlines from complying with the EU Emissions Trading System in spite of European gestures of goodwill. In the longer term, as the US energy revolution locks it into dependence on fossil fuels (shale gas and tight oil), transatlantic tensions over climate change could increase.”

Germany’s Speigel online describes Obama’s foreign policy as “not working,” and provides examples. “the White House did not even stand up for itself when it came to the question of human rights in China. The president, who had said only a few days earlier that freedom of expression is a universal right, was coerced into attending a joint press conference … at which questions were forbidden…Obama’s new foreign policy has also been relatively unsuccessful elsewhere…”

The United Kingdom’s Telegraph describes the President’s foreign policy as being “in tatters,” and questions the President’s commitment to the principles of freedom, and ponders whether in his second term how committed he would be to “the basic principle that every American schoolchild is taught: that his country not only believes in freedom for its own citizens, but that it has a moral mission to support and defend those who seek liberty everywhere in the world. Its people are instructed by their founding documents not to think of themselves merely as the fortunate residents of a lucky country but as bearers of an eternal truth-the universal human rights to which all peoples can and should aspire…He told Eastern Europe that it should now be expected to look after itself, as he withdrew American missile cover. He retreated dramatically from confrontation in the middle east.”

The Jerusalem Post notes that “Obama’s foreign policies in country after country and region after region indicates that his policies have been more damaging to US national interest than those of any president since Jimmy Carter. And unlike Obama, Americans widely recognized that Carters foreign policies were failed and dangerous.”

Indo-Asian News Services writes that “[I]t is felt that the Obama Administration has failed to develop a sustained policy helping India achieve its economic and security goals…”

East Asia Forum
(China): “The gap between Chinese and American power has been reduced, providing the material preconditions for a more equal bilateral exchange. Especially after the Olympic Games, the success of China’s model of development is increasingly apparent. Comprehensive national power is on the rise and China’s growing military and defence capabilities were showcased by the national day military parade in October 2009.”
We began our Foreign Policy Scorecard by reviewing the numerous challenges facing the United States, and continued by discussing international perspectives. This week, we examine American viewpoints.

AMERICAN VIEWPOINTS

Bloomberg news service decries the lack of “spine” in the Administration’s policies, and notes that “compared with a decade ago, the landscape for democracy promotion is less favorable. U.S. and European models for governance are tarnished, “authoritarian capitalism” a la China and Russia is on the rise, and governments indicate that his policies have been more damaging to US national interests than those of any president since Jimmy Carter. And unlike Obama, Americans widely recognized that Carter’s foreign policies were failed and dangerous. Governments from Venezuela to Egypt are blocking traditional methods of spreading democratic values and institutions.” The article noted that the Obama Administration undermined U.S. credibility by choosing not to vigorously support Iranians who risked their lives to protest suspected election results.

Brooking: In a “Memo to The President,” Brooking’s Mark Indyk and Robert Kagan write: “It is a time of uncertainty and instability for the world, and for the United States; but it is also a moment of opportunity. Almost a century ago, when the United States entered the First World War, the philosopher John Dewey observed that the world was at a “plastic juncture.” He and many other progressives believed that the unsettled world of their day offered the United States and the other democratic powers a chance to remold the international system into something better. Americans walked away from that challenge and would embrace it only after a second catastrophic breakdown of world order. Today, we are at another “plastic juncture.” Will America turn inward and away from an increasingly messy world? Or will we launch a new effort to strengthen and extend, both geographically and temporally, the liberal world order from which Americans and so many others around the world have benefited?

“The answer depends very much on how you choose to make use of your next four years in office. Unfortunately, there is not a lot to show for your first four years. In many respects, this is understandable. The economic crisis that you inherited made steady concentration on foreign policy more challenging. The two wars you inherited in the Greater Middle East had been bungled by your predecessor and cost the United States dearly, both materially and in terms of reputation. You began to restore that reputation through your own global appeal and the efforts of your Secretary of State.

You have done especially well in raising America’s profile and deepening our engagement in East Asia. However, so far it is hard to list many durable accomplishments. Most of the major challenges are much as you found them when you took office, or worse: from the stalled Middle East peace process and turmoil in the Arab world to Iran’s continuing march toward a nuclear weapons capability to China’s increasing assertiveness in East Asia. Your understandable preoccupation with reelection has left much of the world wondering: Where is the United States?”

The Hudson Institute noted that “For years, Obama and his national security team argued that, by and large, America’s problems in the world resulted not from aggression or the ideological extremism of hostile actors abroad, but were the bitter fruit of America’s history of bullying, selfishness and militarism, especially during the George W. Bush administration. They complained that America had long been acting like a rogue nation, arrogant in defying the rights of others, self-serving in defining its interests in national rather than global terms, and unilateralist in refusing to constrain itself to actions approved by multilateral institutions or endorsed by progressive commentators …

The Obama administration has had plenty of time to test its diplomatic theories. …Obama first spoke of “reset” less than 12 months after Russia invaded Georgia, a U.S. friend and partner. Soon after that, the Russian-built Bushehr nuclear reactor in Iran began operations. As rebels tried to bring down the government of Syria’s Bashar al-Assad in early 2011, Russia supplied the Syrian dictator with military equipment by sea. Reuters reports that Moscow sold Damascus $1 billion dollars of military hardware since the uprising began. Secretary of State Hillary Clinton warned Russia in June 2012 against sending helicopters to assist the Syrian regime in its attacks against civilians and rebels. In August 2011, Putin, then the prime minister, accused the United States of living “like a parasite” on the world economy. At a May 2012 international missile defense conference in Moscow, Russia’s top military officer Gen. Nikolai Makaro denounced U.S-NATO plans to build defenses against ballistic missiles launched from the Middle East. Referring to potential Eastern European sites for such defenses, General Makarov made a remarkable threat: “A decision to use destructive force pre-emptively will be taken if the situation worsens.”

In short, in the 39 months since Obama announced that great powers do “not show strength by dominating or demonizing other countries,” Russia has exerted itself to defy the United States and NATO and increase its political investment in rogue regimes — in particular in Syria and Iran. In the three-and-a-half years since the policy’s inception, the Obama reset has been a head-shaking disappointment.”

Heritage Foundation:”Libya. Egypt. Syria. Iran, Russia. China. America’s relations with the world aren’t looking too good…[Preident Obama’s] political approach to foreign policy-making decisions that appeal to a political base rather than making military sense-is putting American lives and American interests in danger. All the while, he is gutting the defense budget, supposedly to free up money for his domestic agenda. This is weakening defense and military readiness, which is a perilous strategy.” Heritage’s Helle C. Dale writes that “president Obama has been mugged by reality in three key areas: Iran, Russia, and counterterrorism.”

The Hoover Institution, discussing the Middle East, notes that “Hatred of America has increased over the last four years even as our influence has diminished, and the region is heading toward more violence and more assaults on human rights.”

CONCLUSION

There is a significant disconnect between the Obama Administration’s view of its own foreign policy achievements and that of both U.S. and International observers and governments. While the President clearly seeks to concentrate on America’s weak economy and a broad social change agenda, it will be impossible to either ignore the deteriorating international condition or to continue on the same course he has pursued during his first term.

DISABILITY INCREASE MASKS UNEMPLOYMENT CRISIS

The recently increased unemployment numbers, as bad as they are, may actually be significantly worse than reported.

According to a number of studies, the use-or abuse– of Social Security Disability Insurance (SSDI) may mask a large number of individuals who would otherwise be among those who are counted as out of work. According to a study reported in Forbes,www.forbes.com/sites/adamhortung/2012/08/22/is-disability-the-new-unemployment-insurance/, there is now one individual collecting disability for every twelve in the workforce.

The Social Security Disability Insurance program, established in the 1950s, was intended to provide support and medical care for those incapable of working due to injury or disease.

According to figures released by the Social Security Administration, 8,827,795 people were receiving SSDI in 2012. www.ssa.gov/oact/STATSdibStat.html, a significant increase over the 7,427,203 in 2008, the year before the current administration took office. The government spent $132 billion on the program in 2011, over twice as much as it did just about a decade ago.

The relationship between the devastated U.S. economy and the rise in disability claims is not coincidental. According to the Business Insider publication, “Since mid-2010, precisely the time millions of U.S. citizens used up all of their 99 weeks of unemployment insurance, disability claims have risen by 2.2 million. Those on disability are not counted in the workforce and are not considered unemployed.”

In recent times, many applicants are thought to have manageable, rather than truly disabling, medical or injury issues. David Autor, an MIT economics professor, described SSDI as “our big welfare program” In a Wall Street Journal interview.

The number of applicants to SSDI has grown even though data from the Bureau of Labor Statistics indicates that the American workplace is getting safer all the time (according to Forbes, there were, in 2010, 3.5 total recordable cases of non-fatal occupational injury and illness per 100 full-time workers, down from 5.0 less than a decade ago, and 11 per 100 in 1973, a net decline of 3.7 percent every year for four decades. Additionally, the American workplace is increasingly becoming a low-hazard white collar environment.)

A Business Insider review noted that over 99% of all SSDI beneficiaries remain in the program until retirement age.

The rise in SSDI beneficiaries also clears up another mystery, according to the National Center for Policy Analysis. “The population is growing, yet the work force is shrinking. In 2000, the civilian labor force participation rate peaked at more than 67%. In may [of 2012] it stands at 63.8 percent…Social Security Disability claims may be having an impact…Since the beginning of 2009, more than 5 million people have applied for social security disability. About one and one-half million have started receiving benefits. In 1980, about 2.8 million workers were receiving disability, along with about 1.8 million of their dependents. By 2010, those numbers had increased to 8.2 million workers and 2.1 million dependents (not including adult disabled children.). To put this in context, in 1980 about 3% of the working age population (ages 18 to 65) received disability payments. In 2010, more than 5 percent of the working age population received disability payments.”

Investors.com news.investors.com/business/ notes that “since the recession ended in June of 2009, the number of new enrollees to the Social Security Disability program is twice the job growth figure. …the big factor in the recent surge is the slow pace of the economic recovery…the number of applicants was up 24% compared with 2008.”

Even when the employment picture improves, some states have noticed continuously climbing SSDI applications.

This confirms a recent study by Baruch College’s Na Yin.Paa2013.princeton.edu/papers/132786 Yin writes that in economic downturns, those with health limitations who would find jobs may skip both searching for work and applying for unemployment benefits and instead apply for disability programs. Yin points out that this has four detrimental effects: First, it increases the administrative costs of screening due to the larger number of applicants; second, it may increase the probability of errors in screening as the new pool of applicants would contain more able applicants resulting in both denying legitimate claims due to the administrative burden, as well as accepting able applicants into the program; third, it may affect job prospects of applicants negatively if/when they are denied disability insurance as they have stopped searching for new jobs and perhaps reduce their investments in their own human capital; and finally, longer average years receiving disability considering the low rates of termination of benefits due to health recovery or income from work above the SGA level.

The problem was noted by the White House in a December 2011 report on “unemployment Insurance Extensions and Reforms in the American Jobs Act”www.whitehouse.gov/sites/default/files/ui_report_final_121511.pdf , which reports:

“An important potential avenue for leaving the labor force, especially for older job seekers, is to apply for disability benefits through the Social Security Disability Insurance (SSDI) program. SSDI applications generally rise when unemployment is high. Unemployed workers with significant or persistent illnesses or injury can qualify for SSDI despite the fact that some applicants would continue to work if they still had a job. According to recent research, the average SSDI enrolle stays in the program for many years and ultimately receives benefits of over $240,000 (Autor & Dugan 2006). Workers on SSDI rarely return to the labor force, resulting in a loss to society of the economic contribution those workers would have made…(Krueger and Mueller) find that applications for SSDI by unemployed workers older than age 50 increase as these workers get close to exhausting their unemployment benefits.”

An analysis by the Brookings Institutewww.brookings.edu/research/articles/2012/07/longterm-unemployment-burtless , echoing the White House summary, both illustrates the issue and illuminates why it is becoming an increasingly difficult issue. Gary Burtless, the study’s author, describes SSDI as an “option” for middle-aged and older workers. He notes that “disability is a fuzzy legal concept. Large numbers of jobless workers manage to meet the legal standard when work prospects are poor to nil…Sadly, once workers are enrolled in the SSDI program, few ever return to work.”

The “fuzzy legal concept” of disability is described by the Organization for Economic Cooperation and Development http://www.oecd.org/washington/: notes that mental disorders such as depression and anxiety have increased by more than three times from the 10% of awards thirty years ago to thirty-three percent currently. Emphasized that “less stringent screening procedures, more attractive benefits and a waning need for less-skilled workers have bolstered SSDI claims.”

Another worrisome phenomenon associated with SSDI is the practice of “double dipping,” recently described in a Fiscal Times www.thefiscaltimes.com/articles/2012/09/12/117000-Americans-get-jobless-and-disability-benefits.aspx.tp=1 article, which noted that 117,000 Americans get both unemployment and disability benefits.

The long range effect of increasing numbers of SSDI assistance is going to be particularly dire. Business Insider notes that at current growth rates, 7% of the adult population could be receiving benefits by 2018.

The system is headed towards bankruptcy just five years from now, according to the Social Security Administration www.ssa.gov/oact/trsum/index.html

AMERICA’S IGNORED FISCAL CRISIS

Statistical Data Continues
to Show an Economy in Peril

A stunning array of highly disturbing recently released economic indicators illustrate how badly the American economy is faring. Far more than a cyclical downturn or a slow rebound from the “Great Recession,” the U.S. economy is failing on many levels, and to an unprecedented degree.

Equally unsettling is the relative equanimity with which official Washington and the mainstream media have responded to the statistics–when they have responded at all. While exceedingly slight and temporary variations in some indicators are heralded as signs that the climate has improved, long term structural realities and enduringly troublesome numbers are virtually ignored.

Blaming the current crisis–and it is a crisis–on the aftermath of the Great Recession can no longer be accepted as within the realm of reason. Since the conclusion of the Second World War, no post-recession period has been as severe as what America now endures. The actions that have been taken in an unsuccessful attempt to jump-start the economy appear to have resulted in more harm than good, but there is no admission of failure on the part of those responsible. Without a change in course, there is little hope that improvement can occur.

A great deal of attention has been paid to the “Fiscal Cliff” and the federal debt and deficit debates. But without a sound and growing economy, no remedies to those issues will prove viable.

STATISTICS INDICATE
THE EXTENT OF THE CRISIS

America slipped into recession at the end of 2012. According to the U.S. Commerce Department, real GDP (gross domestic product — the output of goods and services produced by labor and property located in the United States) decreased at an annual rate of 0.1 percent in the fourth quarter of 2012. Economists had expected an increase of 1%.

Unemployment, now at 7.9%, is higher than when President Obama took office. According to the U.S. Department of Labor, long Term unemployment represents 38.1% of the unemployed. This continues the highly disturbing trend of long term unemployment being at historic highs during the past four years. In January of 2009, when the current administration took office, there were 2.6 million people classified as long term unemployed. The current number, which has fluctuated slightly over the past several months, is 4.7 million, accounting for an unmanageable 38.1 percent of all those unemployed. This number may well be the least reliable Bureau of Labor statistics number, since it omits those who have gone off the charts in a variety of ways. Further, numerous studies have noted that the longer an individual is unemployed, the more difficult it is to find employers willing to hire them. Therefore, the high long term unemployment rate remains one of the most troublesome long-term challenges for recovery.

Americans are becoming poorer. The 2013 Assets & Opportunity Scorecard reveals that 44% of American households are liquid asset poor; one in three has no savings account, and 56% of consumers have subprime credit scores.

Taxes hikes have hit Americans hard. Despite widespread statements from the White House that the fiscal cliff deal meant no new taxes for middle income Americans, a rise in the payroll tax from 4.2 to 6.2% has taken a sharp bite from over 70% of all workers.

Gas prices are up. According to a recent AAA survey the national average price for a gallon of regular unleaded gasoline is $3.35. This price is four cents more expensive than the prior week and six cents more than the prior month. Despite significant supplies of gas, the cost per year to the average American family has risen sharply during the past four years, from $2,816.40 in 2009 to $4,112.40 currently.

Food prices are rising. According to the U.S.D.A, the inflation forecast for both all food and food-at-home (grocery store) prices in 2013 is an increase of 3 to 4 percent. This forecast represents an annual increase that is above the historical average for both indexes. Inflation is expected to remain strong, especially in the first half of 2013, for most animal-based food products due to higher feed prices. Furthermore, inflation is expected to be above the historical average for food categories such as cereals and bakery products as well as other foods.

Exports are down. During the 4th quarter of 2012, exports plummeted 5.7%.

All of these frightening economic indicators have occurred even after (some argue because of) nearly a trillion dollars in “stimulus” spending was pumped into the economy by Washington, and an artificially low interest rate maintained by the Federal Reserve in attempt to ease, at least superficially, the effects of a failing economy.

In a recent report, the St. Louis Federal Reserve noted that: “the U.S. national debt now exceeds 100 percent of the Gross Domestic Product.”

According to a “Fix the Debt” analysis, The United States gross national debt is currently more than $16 trillion and growing by more than $3 billion every day. Last fiscal year alone (fy2012), the debt rose more than $1.3 trillion, the fourth year in a row that the deficit has exceeded the trillion dollar mark.”

According to a CBS study,”The Debt rose $4.899 trillion during the two terms of the Bush presidency. It has now gone up $4.939 trillion since President Obama took office.” Despite that enormous sum, no appreciable gain can be discerned for the nation.

The Pew Research Center recently conducted a poll indicating that the number of Americans who place fixing the debt as a high priority jumped from 53% four years ago to 72% currently.

Repeatedly, White House officials emphasize that they took office in the aftermath of a serious recession. However, as noted by a recent study byDinah Walker,”The economic expansion following the 2008 recession has been the weakest of the post World War II era and remains an outlier among postwar recessions along several dimensions.” The nation appeared to begin to recover strongly from the recession at first. However, when the effects of essentially misguided policies took place, the recovery went into a tailspin.

GLOBAL TRENDS 2030

What do current trends indicate for the future of both individuals and nations? That questions is the central focus of the new “Global Trends 2030: Alternative Worlds” report by the U.S. National Intelligence Council (NIC), a government organization that is the U.S. center for long-term strategic analysis.

Established in 1979, the NIC has attempted to “act as a bridge between the intelligence and policy communities.” The NIC’s National Intelligence Officers, from government, academia, and the private sector, are the intelligence community’s senior experts on a range of regional and functional issues.

According to the NIC, its Global Trends 2030 is intended to stimulate thinking about the rapid and vast geopolitical changes characterizing the world today and possible global trajectories over the next 15 years. As with the NIC’s previous Global Trends reports, it does not seek to predict the future, which it admits would be impossible, but instead provide a framework for thinking about possible futures and their implications.

The NIC utilized in-depth research, detailed modeling and a variety of analytical tools from public, private and academic sources from 20 nations for the report, as well as the offerings from contributors to an open web site.

The report describes a world in which American power and influence is significantly reduced, along with the rest of western civilization.

Any endeavor of this sort must be viewed with a panoply of caveats. Jeffrey Gedmin, president of the London-based think tank, the Legatum Institute,points out that that “A century ago, two popular forecasts stood out: one that the advent of international trade would soon make war obsolete; the other, that the one nation poised to play a leading role for peace in the world was Germany.” Today, even the most well-reasoned predictions by the most informed experts stand an equal chance of being as completely wrong as that, and so the results of Global Trends 2030 must be viewed skeptically.

All that being said, certain beliefs about the future, and actions based on those beliefs, can become self-fulfilling prophesies. A nation that believes it is in decline, and rejects its core values, may take actions that make that mere possibility an eventual reality.Similarly, a nation with few resources and with the odds dramatically against it can prevail and prosper. There were few who would have bet that the American Revolution could succeed; before the Battle of Britain, the United Kingdom appeared doomed.

Reflecting this, Gemin is concerned that “In the United States, what made America of the past great–things such as risk, thrift, self-reliance, humility, and deferred gratification–have slowly been fading as central tenets of America life and key ingredient of the American dream. In foreign policy, we’ve always been at our best when we balance interests and values, and fuse American values to universal values, so that we can work closely with and appeal to the enlightened interests of other nations.”

Certainly, the United States of the past four years appears poised for decline. An already substantive national debt has been turned into an immediate crisis, thanks to four years of trillion-dollar plus annual deficits. Worse yet, the vast sums were not invested in the national future, but were, essentially, transferred from productive citizens to government programs whose major accomplishment was increasing the popularity of elected officials.

America has endured periods of extraordinary crisis in the past. The invasions of 1812, the Civil War of the 1860s, the Great Depression of the 1930s are salient examples of dire challenges that were met and conquered. In more recent memory, the United States at the end of the 1970’s seemed the model of a power in decline.

National pride had reached its nadir after the Watergate scandal and an ignominious end to the war in Vietnam. Massive government errors had resulted in fuel disruptions. The Apollo space program, which placed men on the moon and significantly boosted national pride and the value of U.S. international trade, was prematurely concluded. Inflation of over 20% plagued the economy. Foreign policy errors had produced major problems in the Middle East, particularly in Iran. Anti-U.S. forces increased their sway in Latin America. Internationally, it appeared that the Soviet Union was becoming the world’s greatest power.

But American policy, both at home and abroad, changed dramatically in the 1980s. An optimistic new president helped virtually eliminate inflation. His dedication to rebuilding American military strength tamed the Russian bear and brought an end to the possibility of Moscow becoming an international hegemon. Along with a Pope that had seen the face of evil and was prepared to openly confront it, a Polish labor leader who refused to submit to tyranny, and an English Prime Minister more bold than any since Churchill, the world changed in ways that appeared impossible just a few short years before.

The condition of the United States today is remarkably similar to that of the late 1970s, and perhaps, even worse. The national economy remains mired in a dismal period of high unemployment and extremely slow growth. Vast spending programs have produced no noticeable gains. American military strength has reached a low point in relation to other nations not seen since the Carter Administration, and the potential impact of deep budget cuts may further and dramatically weaken it. Similar to the premature end of the Apollo program, we currently have no ability to place astronauts in orbit for purposes both practical and inspirational. The public’s lack of confidence in the federal government is at Watergate levels. The debacle of the failed attempt to rescue American hostages in Iran at the end of the ’70’s has its echo in the failure of the current Administration to rescue the U.S. ambassador in Benghazi.

The question of whether the United States can recover as it did in the 1980’s remains unresolved. The Global Trends 2030 report reviews current conditions, and makes projections based on them.
PART 2

In last week’s edition, we introduced the U.S. Intelligence Council’s
(IC) new “Global Trends 2030: Alternative Worlds” report, and discussed its broad outline. We now look into the reports’ specific thoughts on the trends and outcomes the agency believes will create our future.

Once again, we provide a caveat: predictions are merely interpretations of current trends and conditions, and cannot foresee with accuracy how events will actually develop. As the author Mark Steyn has noted, “None of us knows how things will stand in 2030, any more than most of our forebears in 1908 could have predicted the collapses of the Russian, Turkish, Austrian, and German empires within a decade.”

There are criteria that neither the Global 2030 report or any other similar attempt can calculate. The relative military, economic, and social strength of any nation will depend on both specific factors and hard facts such as the availability of resources, and nonspecific criteria such as cultural shifts. A nation may have a major change brought on not by any hard fact, but by a change in attitude. Some Soviet leaders noted that they believed their cause was lost when their youth, who were swayed by western rock n’ roll, began adopting western norms of dress and taste.

While it remains too early to tell, a similar seismic shift may now be occurring in the United States. The alteration in public attitudes, reflected in presidential elections, between the era of Ronald Reagan and that of Barack Obama could not be more drastic.

Reagan preached the doctrine of free markets, and gave rise to significant economic improvement over the financial challenges of the 1970s. Obama’s emphasis is on social entitlements above all else. The nation, as a consequence, concurrently endures a prolonged period of high unemployment and an ongoing period of little or no growth.

A similar comparison may be made in the dramatically different international relationships and “hard” power attitudes of the two administrations. Reagan confronted Soviet power by an unprecedented peacetime buildup of military force, and maintaining strong relationships with traditional allies such as the United Kingdom. The result was an end to the Soviet empire.

Confronted with a similar challenge from China, the Obama administration takes the opposite course, as it seeks to deemphasize and further reduce an already sharply diminished American military. It has distanced itself from traditional allies such as the United Kingdom and Israel, and seeks warmer ties with Moscow.

The Major Changes:
Tectonic shifts between now and 2030

The IC believes that there will be seven major “tectonic shifts” between now and 2030:

1. According to the report, the middle class throughout the developing world will expand substantially both in numbers and in percentage of the population.

2. A wider spectrum of instruments of war-especially precision strike capabilities, cyber instruments, and bioterror weaponry-will become accessible. Individuals and small groups will have the capability to perpetuate large-scale violence and disruption-a capability formerly the monopoly of states.

3. U.S, European, and Japanese share of global income is projected to fall from 56% today to well under half by 2030. By 2020, emerging markets share of financial assets is projected to almost double.

4. Whereas in 2012 only Germany and Japan have matured beyond a median age of 45 years, most European countries, South Korea, and Taiwan will have entered the post-mature age category by 2030. Migration will become more globalized as both rich and developing countries suffer from workforce shortages.

5. Today’s roughly 50% urban population will climb to nearly 60%, or 4.9 billion people, in 2030. Africa will gradually replace Asia as the region with the highest urbanization growth rate. Urban center are estimated to generate 80% of economic growth; the potential exists to apply modern technologies and infrastructure, promoting better use of scarce resources.

6. Demand for food is expected to rise by at least 35% by 2030 while demand for water is expected to rise by 40%. Nearly half of the world’s population will live in areas experiencing severe water stress. Fragile states in Africa and the Middle East are most at risk of experiencing food and water shortages, but China and India are also vulnerable.

7. With shale gas, the US will have sufficient natural gas to meet domestic needs and generate potential global exports for decades to come. Increased oil production from difficult-to-access oil deposits would result in a substantial reduction in the US net trade balance and faster economic expansion. Global spare capacity may exceed over 8 million barrels, at which point OPEC would lose price controls and crude oil prices would collapse, causing a major negative impact on oil-export economies.

OUTCOMES

Based on these trends, Global 2030 then explores the “best and worst outcomes” they could foreshadow. NY Analysis comments are encapsulated within [brackets.]

TRADE: International GDP expanded by an extraordinary 32% from 1980 to 2005. World merchandise imports/exports increased over seven-fold. Currently, however, the Doha trade round has stalled.

Worst case scenario: Prospects for trade are dim. Destabilizing trade imbalances make multilateral trade coordination difficult, although protectionism is unlikely.

Best case scenario: Concessions by both developing and emerging markers lead to productive agreements.

CLIMATE CHANGE: Annual meetings have failed to yield any new post-Kyoto comprehensive agreements. [It should be noted that internationally, revelations about falsified data have caused appropriate increased skepticism, along with the continued discussion of the possibility raised that climate change may be due in siginficant part to nonhuman factors.]

Worst case scenario: Global economic slowdown makes it impossible for the U.S., China and other major emitters to reach meaningful agreement. The result leaves UN-sponsored climate negotiations in a state of collapse, with greenhouse gas emissions unchecked.

Best case scenario: Cheaper and more plentiful natural gas makes emissions target easier to achieve, but so-called “two degree” target would be unlikely to be met. As disparities between rich and poor countries decrease, rising powers may be more prepared to make economic sacrifices.

NUCLEAR PROLIFERATION:
Global 2030 discusses how the establishment and near universal adoption of the
Nuclear Non-Proliferation Treaty (NPT) has facilitated the emergence of a powerful international norm against nuclear proliferation. Unilateral action and military force has been employed to address non-compliance in some cases.

Worst case scenario: Iran and North Korea trigger others’ active interest in acquiring or developing nuclear weapons. Terrorists or extremist elements also acquire WMD material. The erosion to NPT spills over, potentially triggering a total breakdown in the international system.

Best case scenario: Iran and North Korea are dissuaded from further WMD development. Terrorist groups do not acquire WMDs. The West may need to extend the nuclear umbrella to countries feeling threatened by proliferation. [However, in response to the current American administration’s intent to substantially reduce the U.S. nuclear arsenal, this may prove difficult.]

RESPONSIBILITY TO PROTECT (R2P): Multilateral efforts to prevent violent physical repression have been sporadic and partially successful, especially since the end of the Cold War. [Throughout the Islamic world, the repression of females has risen sharply in nations adopting a strict brand of Sharia as the central law.]

Worst case scenario: Western countries have become increasingly isolated. The lack of international consensus prevents UNSC from acting to impose sanctions, authorize military force, or make referrals to the International Criminal Court. Facing political and economic constraints, the US and Europe would only be capable of taking ad hoc actions to prevent atrocities.

Best case scenario: Western engagement with India, Brazil, and other rising democracies would lead to greater consensus on R2P, particularly the basis for military intervention.

FAILING STATES/UNGOVERNED SPACES: Multilateral efforts to date have been sporadic, spotty, and under-resourced. Most have focused on acute security threats.

Worst case scenario: As a result of shrinking international commitments, criminal and terrorist networks flourish. UN and regional organizations find themselves further under-resourced to combat growing challenges. Resources in fragile states are squandered, adding to corruption and governance problems. Increase in number of failed states.

Best case scenario: Emerging powers see their interests threatened by failing states. With a growing consensus, the G-20 facilitates burden sharing among major powers, the UN, and regional groups. Regional organizations assume greater responsibilities for fragile states in their neighborhoods.

PART 3
THE FUTURE OF CONFLICT

In the aftermath of World War I, many believed that the scale of the conflict and the resulting destruction made it “The War to End All Wars.” Similarly, following the conclusion of World War II, the advent of nuclear weapons led many to believe that the dire threat of devastation on a global scale rendered the possibility of another conventional conflict unthinkable. A half century later, the downfall of the Soviet Empire led some observers to conclude that the world had arrived at the end of history, at least as it related to warfare, as noted by author Yoshihiro Francis Fukuyama.

None of the optimistic forecasts proved even remotely accurate, of course. Currently, many are arguing that the U.S. military budget can be significantly reduced because no large scale conflicts are in sight. The facts, however, indicate that that rosy prediction will prove as disappointing as its predecessors.

Throughout the globe, potential adversaries are rapidly developing powerful militaries, including two powers that rival the United States in technological prowess and significantly outnumber the U.S. in several categories of weapons.

How does the National Intelligence Council see the future of conflict? We continue our review of its Global 2030 report with an examination of its analysis on the future of warfare. The agency’s analysis breaks down its discussion into intrastate and interstate areas.

GLOBAL 2030’S REVIEW OF
INTRASTATE CONFLICT POTENTIAL

The report notes that “the proportion of youthful countries experiencing one or more violent intrastate conflicts declined from 25% in 1995 to 15% in 2005.” The potential for future armed disputes varies sharply depending on location.

In South America and Asia, maturing age structures (median age above 25years) are declining. That probably indicates a lessening of the chance for fighting. However, in the western, central and eastern portions of sub-Saharan Africa, in the Middle East, South Asia, and in a number of Asian-Pacific island areas, the reverse is true.

Competition for natural resources, especially arable land and water, and the presence of disproportionate amounts of young males will serve as provocative factors leading to conflict. Our NEW YORK ANALYSIS review adds Islamic extremism as a key factor prompting this danger. The harsh lack of tolerance for other faiths, and even for different interpretations of the Moslem religion, render Islamic extremism a major source of intrastate and interstate conflict.

Global 2030 notes that the increased availability of sophisticated weaponry renders this civil warfare far more dangerous than in the past. While terrorism, subversion, sabotage and insurgency will continue their traditional roles, the use of precision missiles and similar devices will bring many aspects of conventional warfare into play.

INTERNATIONAL CONFLICT

The type of large scale, nation vs. nation warfare that became unfortunately familiar over the Twentieth Century has not been particularly prominent in the past decade, but the NEW YORK ANALYSIS believes that significant storm clouds are brewing.

For Americans, the main danger remains the massive and unprecedented buildup of China’s armed forces. Buoyed by a powerful economy, Beijing has invested heavily in matching the U.S. technology edge. The full extent of that nation’s military budget cannot be accurately outlined, since significant portions are hidden.

Satellite killing weapons, electromagnetic pulse devices that can cripple U.S. carriers, stealth aircraft, and a growing naval force render it a significant threat to the United States military. China’s land forces vastly outnumber their American counterparts in many key areas.

Beyond the mere existence of a powerful military, a newly belligerent attitude on the part of Beijing is also apparent. China’s navy has occupied a mineral-rich off- shore region belonging the Philippines, and is currently feuding with Japan and several other neighboring states concerning territorial disputes.

China also has the financial and diplomatic clout to reign in North Korea (which recently announced the test of a nuclear capable missile targeting the U.S.) but has failed to do so.

Second only to China in serving as a significant threat to America is Russia, which under Vladimir Putin has returned to a cold war emphasis on military might. Renewed patrols off the U.S. coast by nuclear-capable bombers and submarines, and significant funding of new air and naval force construction clearly indicate that Moscow is once again a potent potential problem for the U.S.

Russia has expressed distress over the diplomatic independence of the former satellite states of the Soviet Union. The possibilities of a NATO/Russian dispute over this will continue to exist for some time.

GLOBAL 2030’S REVIEW OF
INTERSTATE CONFLICT POTENTIAL

Global 2030 accurately points out that the number of traditional nation vs. nation conflicts have been at historically low levels over the past decade.

Optimistically, while noting the rise of new powers, The National Intelligence Council stresses that while “new powers are rising…they stand to benefit from the existing international order and are therefore status quo oriented. An increasing number of states have consciously or implicitly chosen to maintain military capabilities far below their inherent capabilities.”

However, the report goes on to note that “A more fragmented international system increases the risks. Additionally, increased resources competition, spread of lethal technologies, and spillover from regional conflicts increase the potential for interstate conflicts…Future wars in Asia and the Middle East could include [a] nuclear element. Information superiority will be increasingly vital. Proliferation of standoff missiles will increase the capacity of non-state actors. [The] distinction between regular and irregular forms of warfare may fade as some state-based militaries adopt irregular tactics.”

Global 2030 notes that while the chances for interstate conflict are historically low, they are nevertheless rising. In addition to the possibility of a Sino-American or Russian/NATO dispute, the possibility of a Russo-Chinese conflict may rise in the future, as well. While Moscow and Beijing have drawn significantly closer in their mutual animosity towards Washington, Russia continues to cast a wary eye on China’s need for resources, which exist within Moscow’s territory, and the increasingly powerful forces Beijing now fields.

In addition to the increased demand for resources, the existence of new technologies lowers the threshold for the start of some forms of conflict, which may quickly escalate from cyber attacks to full blown warfare. According to The National Intelligence Council,, “Cyber weapons can take various forms including viruses (self-replicating programs that require human action to spread), worms (a sub-class of viruses that can spread without human action) Trojan horses (malicious software programs hidden within a legitimate program) denial-of-service attacks (bombarding servers with messages that make them crash) and phishing (rogue emails and websites that trick people into revealing password information.)

Similarly, the relatively inexpensive use of bio-weapons could allow lesser powers or terrorist groups to cause massive harm.

In addition to cyberspace and biotechnology, the use of electro magnetic pulse technology technology can be employed by a secondary power to render a modern military and an advanced economy virtually helpless. The NEW YORK ANALYSIS believes that nations such as North Korea or Iran could pose a significant danger to the western powers through these “non-lethal” weapons.

Since the conclusion of the Second World War, conflict on a global scale has not plagued the planet, although significant interstate conflicts have occurred between nations. Unfortunately, while historically low levels of international combat have been reached, the growing danger from newly empowered nations, asymmetrical warfare, scarce resources, and inexpensive technologies may bring this relatively benign period to an end before 2030.

AMERICAN TAXPAYER RELIEF ACT

Despite the proverbial sighs of relief over the passage of the “American Taxpayer Relief Act,” (ATRA) the measure only briefly–and barely– halts the nation from falling off the fiscal cliff.

Contrary to the claims of the White House, the ATRA does not prevent substantial tax hikes from hitting the middle class. The Tax Policy Center reports that the middle class takes a bigger hit proportionately than the so-called wealthy. 77.1% of all filers will pay more, at an average of $1,250 annually, due to the increase in the employee-paid portion of the payroll tax. A breakdown of the impact:

_____________________________________________________________

INCOME (in thousands) : Yearly cost of increased payroll tax

20 $400
30 $600
40 $800
50 $1000
60 $1200
70 $1400
80 $1600
90 $1800
100 $2000
110 $2200
113,700 $2274

________________________________________________________________________________

In addition, the new 3.8% Medicare tax (a result of President Obama’s health care legislation) will hit workers hard.

Although the Bush tax cuts are made permanent, and the alternative minimum tax “patch” to protect the middle class is extended. Overall, the legislation represents the largest tax increase in two decades, and essentially reverses the paradigm established by the Reagan Administration.

A Drag On The Economy?

Nouriel Roubini, writing in the Financial Times, notes that the ATRA imposes a 1.2% drag on an already floundering economy that was only growing at only about 2%. Bloomberg reports that the payroll tax hike will pull over $100 billion out of US economy.

Perhaps reflective of that, “emergency” extended unemployment benefits, along with tax refunds for low income families and college students, will continue, at a cost of about $24 billion. Social Security, Medicare, and Medicaid will not be cut. Some studies indicate that this will eventually require $48 trillion in funding.

The ATRA does not address either the yearly federal budget deficits, which for four consecutive years has exceeded $1 trillion, or the long term national debt, which currently stands at $16,432,706,000,000. The Congressional Budget Officehttp://www.cbo.gov/ estimates that $4 trillion will be added to the national debt over the next decade, even if the sequestration cuts are fully implemented.

The implementation of sequestration cuts remains on the immediate horizon.

A major goal of the ATRA was the implementation of the President’s goal to increase taxes on higher income groups, although the “millionaire tax” was always a misnomer, since taxpayers earning in the $250,000 range will be detrimentally affected.

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KEY ATRA TAX INCREASES

MAXIMUM INCOME TAX RATE: INCREASED FROM 35% ($388,350 JOINT& SINGLE FILERS) TO 39.6% ON $450,000 JOINT TO $400,000 SINGLE

MAXIMUM RATE ON LONG-TERM CAPITAL GAINS & DIVIDENDS: INCREASED FROM 15% ($70,700 JOINT, 35,350 SINGLE TO 20% ($450,000 JOINT, 400,000 SINGLE)

PERSONAL EXEMPTION ELIMINATION & PEASE ITEMIZED DEDUCTION ELIMINATION: ($300,000, $250,000 SINGLE)

SOCIAL SECURITY PAYROLL TAX PAID BY EMPLOYEES: INCREASED FROM 4.2% ON EARNINGS UP TO $110,000 TO 6.2% ON EARNINGS UP TO $113,700

ESTATE TAX TOP RATE: INCREASED FROM 35% ON $5 MILLION TO 40% ON $5 MILLION

The biggest hit is on top 1%, a longstanding Obama goal. Those making $2.7 million will pay average $444,000 more in 2013. Households with income in the $500,000-1 mill pay average $14,800 more. The top marginal rate increases from 35 to 39.6%; those top earners would also pay increased taxes on dividends, capital gains, and carried interest income of private equity managers; the top rate increased to 23.8%. They also lose the $1,000 per child tax credit.

However, Bloomberg reports that a number of $500,000+ households can offset higher rates because deductions are subtracted from gross before the rate assessment.

States such as New York and California, with a higher average cost-of-living and salaries reflective of that, will be hit the hardest.

In addition, the death tax rate is upped to 40 from 35%. (Considering that it was 0% in 2010, that’s quite a leap.) The first $5 million is exempt for individuals, first $10 million for families.

Loopholes Continue

Some favored endeavors will receive or continue to receive special treatment. Extensive charges of crony capitalism have been levied, particularly since about $40 billion in breaks to special interests are contained in the measure. Of particular note is the tax credit given to Hollywood, a favored White House industry, which extends a production tax break for the first $15 million of production costs–and provides an extra $5 million break if the production takes place in traditionally Democrat depressed areas.

The White House has stated that $600 billion will be raised over ten years, significantly short of the original goal of $1.4 trillion.

While the measure was advertised as an attempt to both raise revenue and cut costs, the balance is tilted sharply in favor of tax hikes over spending cuts. According to a Heritage review of the bill, the measure has a 10:1 ratio of tax increases to spending cut; Breitbart estimates that the ratio is actually 41:1.

The ATRA delays by two month the implementation of automatic spending cuts.

According to the Wall Street Journal, “the most serious skirmish will arrive toward the end of February, when the U.S. treasury is expected to be unable to pay all the government’s bills unless Congress boosts the federal borrowing limits. Then on March 1, the across-the-board spending cuts of the fiscal cliff, deferred in this…deal are scheduled to be slicing into military and domestic programs. And on March 27, a government shutdown looms unless Congress approves funding for government operations for the reminder of the fiscal year, which ends September 30.”

CONSERVATIVE CRITICS

Conservative critics have voiced sharp objections. Rep. Rob Whitman (Va-R) explains his vote against the bill as follows:

“I regretfully voted against the American Taxpayer Relief Act…because it unfortunately does what Congress does best-kicks the can down the road…I could not vote for this bill because it does nothing to reform our long-term spending problems, which are the real drivers of our debt and deficits. In addition, this bill postpones sequestration, the disastrous defense cuts for only two months. This creates even more uncertainty for our defense industry, which is so vital to the security of this nation. This bill is the epitome of what is wrong with Washington-waiting until the last minute to pass a package negotiated by only a few…”

The most serious issues that were to be addressed by ATRA remain unresolved. The next round of negotiations, which begin almost immediately, will likely be even more contentious.