Month: April 2019

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Foreign Policy Update

CHINA

President Trump recently called out China for its ongoing theft of American intellectual property that has amounted to hundreds of billions of dollars in stolen technology. The goal of the ongoing US-China trade negotiations, according to Secretary of State Michael Pompeo, is to create a deal that ensures US technology will be safe if a company does business in China, and if there is a loss, to create a mechanism to recover it. Pompeo pointed out in an interview with Maria Bartiromo that the United States is “serious” about the issue and its “obligation” to the American business community.

Trade issues in recent weeks have become more complicated as negotiations with Washington are increasingly muddied by China’s human rights abuses and mistreatment of its Uighur Muslim minority population. Reports coming out of China conclude that Beijing is holding over one million of its citizens in detention camps, or prisons, under horrific conditions. In one case, after Secretary Pompeo met with a victim, members of his extended family were rounded up and put into prison as a threat to others who might consider talking to the outside world.

NORTHERN TRIANGLE COUNTRIES: Guatemala, Honduras, and El Salvador

Guatemala, Honduras, and El Salvador, known as the three Northern Triangle countries, account for a large percentage of the illegal aliens crossing the southern US border. These nations, according to Secretary Pompeo, have received hundreds of millions of dollars in aid to stem the flow but have failed to stop the caravans. The United States announced recently it will stop the flow of aid to the Northern Triangle countries until Washington sees progress being made in resolving the issue.

Our mission, noted Pompeo, “…by telling them that this aid will be conditioned on the change in their behavior, is to convince them that they ought to have the will, that they need to try, they need to work at it. We’ll work with them to build out their capacity to do so, but we have not yet seen enough demonstration of their commitment to actually preventing these folks from crossing into Mexico and making this dangerous trek across Mexico, and then coming unlawfully into the United States.”

Illegal immigrants typically see the risk of staying in their country as outweighing the possible benefits and opportunities found in the United States. The number of people entering the United States illegally has skyrocketed in recent weeks with often as many as 3,400 people crossing the southern border in a single day. Not all are escaping poverty or political persecution. Many of these individuals are human traffickers or transporting narcotics. Without control of the southern border the US Government has no way to know who is crossing or what they are carrying. Pompeo said we must stem the human tide and reform immigration rules.

IRAN

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The “maximum pressure” campaign being conducted by Washington against the regime in Iran is a multi-pronged approach to force Tehran to drop its nuclear weapons development program. The actions taken by the Trump Administration are extensive and starting to work. They include a watch list designating over 970 Iranian entities and individuals as a threat to the US along with 26 rounds of economic sanctions. The US Government has imposed sanctions on over 70 Iran-linked financial institutions and more than 75 oil tankers have been denied the flags to sail. According to the State Department, SWIFT has disconnected every sanctioned Iranian bank from its system and also disconnected the Central Bank of Iran.

Among other actions over 1.5 million barrels of Iranian oil taken off the market, and over 20 importers of Iranian oil are reduced to zero countries today. This has driven down the price of Iranian oil exports. It is in addition to the $10 billion in revenue that has been denied Iran from destructive activities since May 2018. According to the State Department, over 100 corporations have now exited the Iranian market, effectively denying the country billions in  investment dollars.

Sanctions typically take an extended period of time to produce a profound economic impact on a nation’s economy. Iran is feeling the pain now as the rial, its currency, has lost two-thirds of its value. The State Department says economic reports indicate Iran is in a recession, and inflation has hit a record 40 percent. Iran’s total trade has declined by nearly 25 percent since March 2018. In addition to US actions, the European community has pushed back against Iran.

Recently, representatives from over 70 countries toured the “Iran Materiel Display,” exposing the type of lethal aid that Tehran is sending to Yemen, Bahrain, and Afghanistan. The display included ballistic missiles, attack UAV’s, and explosive boats, among other items. The regime’s goal in sending these weapons to its partners is to support them in attacking international shipping and the Gulf’s civilian infrastructure. Others are joining the US effort to contain Iran and it appears to be making progress toward changing Iran’s behavior.

DARIA NOVAK served in the United States State Department during the Reagan Administration, and currently is on the Board of the American Analysis of News and Media Inc., which publishes usagovpolicy.com and the New York Analysis of Policy and Government.  Each Saturday, she presents key updates on U.S. foreign policy from the State Department.

Illustration: Pixabay


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White House 2019 Economic Report

In March, The White House Council of Economic Advisers presented its 2019 Economic Report of the President to Congress. The New York Analysis of Policy and Government presents a summary of the key points:

The 2019 Economic Report of the President provides   Congress with “timely and authoritative information concerning economic developments and economic trends.”

The Report presents evidence that the Trump Administration’s policy actions and priorities are thus far delivering economic results..

For the second consecutive year, the U.S. economy outperformed expectations and broke from recent trends by a substantial margin. The real GDP in the first three quarters of 2018 grew at a compound annual rate of 3.2 percent—above the Trump Administration’s own Q4-over-Q4 forecast for the second successive year—the unemployment rate declined by 0.4 percentage point, to a near-50-year low of 3.7 percent, and employment growth averaged 223,000 jobs per month. Growth in labor productivity, which averaged just 1.0 percent between 2009:Q3 and 2016:Q4, doubled to 2.0 percent in 2018. Capital expenditures by nonfinancial businesses rose 13.9 percent at a compound annual rate through 2018:Q3.

The strong economic performance in 2017 and 2018 was not merely a continuation of trends already under way during the postrecession expansion, but rather constituted a distinct break from the previous pace of economic and employment growth since the start of the current expansion in 2009:Q3. Consistent with conclusions in the 2018 Economic Report of the President, investment, manufacturing employment, worker compensation, and new startups have all risen sharply in the two years since the 2016 election.

In addition, overall economic output by the third quarter of 2018 was $250 billion, or 1.3 percent, larger than projected by the 2009:Q3–2016:Q4 trend, with the compound annual growth rate up 1.2 percentage points over trend. Higher output growth was driven by a marked rise in real private investment in fixed assets, which was 10.6 percent over the trend as of the third quarter. In the first three quarters of 2018, the contribution of real private nonresidential fixed investment to GDP growth rose from 0.6 percentage point, the average of the preceding expansion, to 1.0 percentage point, while investment as a share of GDP rose to its second-highest level for any calendar year since 2001. Real private nonresidential fixed investment by nonfinancial businesses rose 8.3 percent at a compound annual rate through 2018:Q3, climbing to a level 14.7 percent above that projected by the 2009:Q3–2016:Q4 trend. As of December 2018, average nominal weekly earnings of goods producing production and nonsupervisory workers had risen $2,300 above trend on an annualized basis.

These departures from the recent trend are not accidental but rather reflect the Trump Administration’s deliberate measures to create and maintain conditions under which the U.S. economy can achieve maximum employment, production, and purchasing power. These conditions are generally achieved by providing maximum scope for the efficiency of free enterprise and competitive market mechanisms, and ensuring that those mechanisms are operative in both domestic and global markets.

We find that by lowering the cost of capital, the 2018 Tax Cuts & Jobs Act [TCJA] had an instant and large effect on business expectations, with firms immediately responding to the TCJA by upwardly revising planned capital expenditures, employee compensation, and hiring. We also observe revised capital plans translating into higher capital expenditures and real private investment in fixed assets, with nonresidential investment in equipment, structures, and intellectual property products growing at a weighted average annual rate of about 8 percent from 2017:Q4 through 2018:Q3, climbing to $150 billion over the pre-TCJA expansion trend of 2009:Q3 through 2017:Q4. (Equipment investment trends are calculated through 2017:Q3, because the TCJA’s allowance of full expensing of new equipment investment was retroactive to September 2017.) In addition to tallying more than 6 million workers receiving bonuses directly attributed to the TCJA, with an average bonus size of $1,200, we also estimate, real disposable personal income per household rose to $640 over the trend by the third quarter of 2018, or 16 percent of the CEA’s estimated long-run effect of $4,000 per household. In real terms, median usual weekly earnings of all full-time wage and salary workers were up $805 over trend on an annualized basis.

 Their is evidence of a reorientation of U.S. investment from direct investment abroad to investment in the United States, as the TCJA attenuated incentives to shift productive assets and profits to lower-tax jurisdictions. Specifically, in the first three quarters after the TCJA’s enactment, U.S. direct investment abroad declined by $148 billion, while the United States’ direct investment position in eight identified tax havens declined by $200 billion. Based on extensive evidence from a large body of corporate finance literature, we conclude that shareholder distributions through share repurchases are an important margin of adjustment to a simultaneous positive shock to cash flow and investment, constituting the primary mechanism whereby efficient capital markets reallocate capital from mature, cash-abundant firms without profitable investment opportunities to emerging, cash-constrained firms with profitable investment opportunities.

As the first Administration to use regulatory cost caps to reduce the cumulative burden of Federal regulation, the Trump Administration in 2017 and 2018 issued more deregulatory actions than regulatory actions and reversed the long-standing trend of rising regulatory costs. By raising the cost of conducting business, regulation can prevent valuable business and consumer activities.

Regulations in one industry affect not only the regulated industry or sector but also the economy as a whole. We find that this implies that official measures understate regulatory costs and therefore also understate the regulatory cost savings of the Trump Administration’s regulatory reforms because they do not account for relevant opportunity costs, especially those accruing outside the regulated industry. The official data show that from 2000 through 2016, the annual trend was for regulatory costs to grow by an average of $8.2 billion each year. In contrast, in 2017 and 2018 Federal agencies took deregulatory actions that resulted in costs savings that more than offset the costs of new regulatory actions. The official data show that in fiscal year 2017, the deregulatory actions saved $0.6 billion in annualized regulatory costs (with a net present value of $8.1 billion); and in fiscal year 2018, the deregulatory actions saved $1.4 billion in annualized regulatory costs (with a net present value of $23 billion). Looking at just three important deregulatory case studies, the CEA calculates that the three actions will reduce annual regulatory costs by an additional $27 billion.

Consistent with the robust pace of economic growth in the United States, the labor market is the strongest that it has been in decades, with an unemployment rate that remained under 4 percent for much of 2018.  Employment is expanding and wages are rising at their fastest pace since 2009. Whenever both quantity and price go up in a market, this must be partly driven by a rise in demand. This suggests that an important change in the labor market has been an increase in the demand for labor, induced potentially by a supply-side expansion enabled by tax reform and deregulation. Although the low unemployment rate is a signal of a strong labor market, there is a question as to whether the rapid pace of hiring can continue and whether there are a sufficient number of remaining potential workers to support continued economic growth. This pessimistic view of the economy’s potential, however, overlooks the extent to which the share of prime-age adults who are in the labor market remains below its historical norm.

Potential workers could be drawn back into the labor market through Administration policies designed to reduce past tax and regulatory distortions and to encourage additional people to engage in the labor market. Policies that intend to increase labor force participation include reducing the costs of child care, working with the private sector to increase employer training and reskilling initiatives, and pursuing criminal justice reform to increase labor force engagement among affected communities. We also highlight the potential benefits of reducing occupational licensing, and incentivizing investment in designated Opportunity Zones to improve economically distressed areas, as provided for in the TCJA.

The Report reviews the rationales commonly offered for government intervention in healthcare and explain why such interventions often, and unnecessarily, restrict choice and competition, demonstrating that the resulting government failures are frequently more costly than the market failures they attempt to correct. In light of recent public proposals to dramatically increase According to Deligiannidis, “Since synthetic oxytocin is such an obscure thing for the general public, that they see it http://davidfraymusic.com/gallery-4/ levitra 20 mg as part of the fun and enjoyment of their sex life. Apples are rich in cheap soft viagra nutrients and causes excitement in men. Which medication is the best for this problem but that is really not the buy viagra without consultation case. However, like any other capsule or jelly shape ED drug, commander viagra Oral Jelly does not improve an aged people’s sexual arousing condition on its own. government intervention in healthcare markets, such as “Medicare for All,” the Report analyzes how these proposals eliminate or decrease choice and competition. As a result, these proposals would be inefficient, costly, and likely reduce, as opposed to increase, the population’s health. Funding them would create large distortions in the economy, with the universal nature of “Medicare for All” constituting a particularly inefficient way to finance healthcare for lower- and middle- income people.

The Report contrasts such proposals with the Trump Administration’s actions that are increasing healthcare choice and competition for healthcare. It focuses on the elimination of the Affordable Care Act’s individual mandate penalty, which will enable consumers to decide for themselves what value they attach to purchasing insurance and which we project will generate $204 billion in value over 10 years. Expanding the availability of association health plans and short-term, limited-duration health plans will increase consumer choice and insurance affordability. We find that taken together, these three sets of actions will generate a value of $453 billion over the next decade. On the pharmaceutical front, the Food and Drug Administration is increasing price competition by streamlining the drug application and review process at the same time that record numbers of generic drugs are being approved, price growth is falling, and consumers have already saved $26 billion through the first year and a half of the Administration. In addition, the influx of new, brand name drugs resulted in an estimated $43 billion in annual benefits to consumers in 2018.

Coal production stabilized in 2017 and 2018 after a period of contraction in 2015 and 2016. The United States is now a net exporter of natural gas for the first time in 60 years, and petroleum exports are increasing at a pace that suggests positive net exports by 2020. Taking advantage of America’s abundant energy resources is a key tenet of the Trump Administration’s plan for long-term economic growth as well as national security. This is best achieved by recognizing that price incentives and the role of technological innovation—which is guided by the price incentive in a market economy like that of the United States—are critical for understanding the production of both renewable natural resources and nonrenewable natural resources like petroleum.

By enabling domestic production, the Administration seeks to facilitate the evolution of the U.S. economy’s role in global markets. Since the President took office, the U.S. fossil fuels sector has set production records. These were led by technological improvements, tax changes that lowered the cost of investing in mining structures, elevated global prices, and deregulatory actions that raised the expected returns of energy projects. The Report documents 65 deregulatory actions affecting the energy sector that were completed through the end of fiscal year 2018, with projected present value savings of over $5 billion.

The Report identifies that the absence of actuarially fair pricing of implicit government guarantees of financial institutions and markets was a major factor exacerbating the crisis. Unfortunately, we also find that the salient legislative response to the crisis—the 2010 Dodd-Frank Act—not only failed to resolve this flaw but also excessively raised regulatory complexity, with the increased cost of compliance falling disproportionately on small and midsized financial institutions, which account for a disproportionate share of commercial and industrial lending to small and medium-sized enterprises.

In addition to articulating the Administration’s approach to achieving the Seven Core Principles for financial regulation, established by Executive Order 13772, the Report also demonstrates how the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 released small and medium-sized banks from the more restrictive provisions of Dodd-Frank, while preserving heightened regulatory oversight of genuinely systemically important financial institutions.

The Report analyzes how technological change in information technology is likely to affect future U.S. labor markets. We begin by reviewing the latest developments in artificial intelligence (AI) and automation, concluding that a narrow, static focus on possible job losses leads to a misleading picture of the likely effects of AI on the Nation’s economic well-being. Technological advances might eliminate specific jobs, but they do not generally eliminate work, and over time they will likely greatly increase real wages, national income, and prosperity.

For example, technological change enabled many agricultural economies to transition from having a majority of the economy being devoted to food production to a small percentage of the economy being able to better feed its population than before. Automation can complement labor, adding to its value, and even when it substitutes for labor in certain areas, it can lead to higher employment in other types of work and raise overall economic welfare. That appears likely to be the case as AI applications diffuse through the economy in the future, though important new challenges will arise concerning cybersecurity. Indeed, AI appears poised to automate or augment economic tasks that had long been assumed to be out of reach for automation.

Despite the economic resurgence of the past two years, there has been a rise in interest in vacating the free enterprise principles that have been instrumental to that recovery, and in turning instead to more socialized production methods that have generally been abandoned in countries that have tried them. The Report discusses “Markets versus Socialism,” to reviewing the empirical evidence on the economic effects of varying degrees of socialization of productive assets and the income generated by those assets. Friedrich von Hayek argued that the essential role of a competitive market price mechanism is to communicate dispersed and often incomplete knowledge, whereby firms will expand and consumers contract activity when prices are high and vice versa when prices are low, with both sides of the market thereby being guided by prices to equate demand with supply. The Report finds that experiences of socialism that do not use prices to guide production and consumption this way have generally been characterized by distorted incentives and failures of resource allocation—in some extreme instances, on a catastrophic scale.

In addition to quantifying the human and economic costs of highly socialist systems, the Report  also estimates the effects of more moderate degrees of socialization. We find that even among market economies, average income and consumption are lower in those with relatively high levels of government taxes and transfers as shares of output—such as Denmark, Sweden, Norway, and Finland—than in the United States. This is because the relatively high average tax rates on middle incomes that finance this “Nordic model” also disincentivize generating income in the first place. Finally, the Report estimates that if the recent U.S. proposals for socialized medicine in terms of “Medicare for All” were implemented and financed by higher taxes, GDP would decline by 9 percent, or about $7,000 per person, in 2022.

The Report analyzes important macroeconomic developments in 2018 and presents the Trump Administration’s full, policy-inclusive economic forecast for the next 11 years, including risks to the forecast. Overall, assuming full implementation of the Trump Administration’s economic policy agenda, the Report  projects real U.S. economic output to grow at an average annual rate of 3.0 percent between 2018 and 2029. We expect growth to moderate, from just over 3.0 percent in 2018 and 2019, as the capital-to-output ratio asymptotically approaches its new, post–corporate tax reform steady state and as the near-term effects of the TCJA’s individual provisions on the rate of growth dissipate into a permanent level effect.

Partially offsetting this moderation are the expected contributions of the supply-side effects of the Trump Administration’s current and future deregulatory actions; the permanent extension of the personal income tax provisions of the TCJA; and the Administration’s infrastructure proposal. There are  potential downside risks to the forecast, including nonimplementation, or repeal, of the Trump Administration’s economic policy agenda, slowing economic growth in major economies outside the United States, and the possible adverse economic effects of recent public proposals for “Medicare for All” and a top marginal income tax rate of 70 percent.

The Report  demonstrates that the strong economic performance in 2017 and 2018 constituted a sharp break from the previous pace of economic and employment growth since the start of the present expansion, reflecting the Administration’s reprioritization of economic efficiency and growth over alternative policy aspirations that subordinated growth. A unified agenda of tax, regulatory, labor, healthcare, financial, and energy market reforms that enhance the role of market prices is a more efficient and effective approach to unleashing the growth potential of the U.S. economy.

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One-Sided Harshness

There has been much written about how harsh American politics has become.  The fact exists that the nastiness remains, for the most part, one-sided.  Despite the wailing over President Trump’s tweets, the lion’s share of the vitriolic comments, and the radical positions, come from the Left.   In contrast, the Right has been comparatively restrained in its descriptions of the increasingly extreme and dangerous comments and positions emanating from the Progressive side.

Consider the extraordinary ideas pushed recently by Democrats.  The late Rep. John Dingle, (D-Michigan) shortly before his passing, advocated abolishing the United States Senate. There has also been considerable advocacy on the left for eliminating the Electoral College. Those acts, alone, would fundamentally alter the entire governing structure of the Constitution. The motive for restructuring the most successful republic in world history is not based on any profound practical or intellectual complaint. It comes from a crass and cold calculation that a fundamental transformation from a federal system to one dominated by a central government would allow the left’s centers of power, the large cities, to essentially monopolize power.

It would also be a crucial step in allowing socialism to flourish. That political/economic system, in its hundred-year existence, has failed in every jurisdiction it has been tried across the globe, and resulted in political tyranny and increased poverty.  The most recent example is Venezuela, and the many American leftists who hailed the leadership of Hugo Chavez and Nicolas Maduro have yet to face substantial criticism by the left-friendly media. The label “extremist” is not frequently used against its advocates.

Positions against religion have been taken, including the rapid growth and acceptability of anti-Semitism in the Democratic Party, the attack on First Amendment rights of religious institutions (seen in the mandates of Obamacare,) and the sharp questioning of Catholic nominees for judicial positions by Senators such as Diane Feinstein (D-Ca.), Kamala Harris (D-Ca.), and Mazie Hirono (D-Hawaii) who have implied that followers of that religion may not be fit for the bench have become commonplace.

Noah Freldman, writing in Bloomberg stressed that “Senator Dianne Feinstein owes a public apology to judicial nominee Amy Coney Barrett — and an explanation to all Americans who condemn religious bias. During Barrett’s confirmation hearings…before the Senate Judiciary Committee, Feinstein, the California Democrat, insinuated an anti-Catholic stereotype that goes back at least 150 years in the U.S. — that Catholics are unable to separate church and state because they place their religious allegiances before their oath to the Constitution.”

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Steve Cortes, writing in Real Clear Politics  reported: Sens. Mazie Hirono and Kamala Harris, in written questions to District Court judge nominee Brian Buescher, challenged his suitability for the bench because he belongs to [The Knights of Columbus.]  Hirono claimed that the Knights have taken “extreme positions” such as affirming Catholic belief in traditional marriage and even asked Buescher, ‘If confirmed, do you intend to end your membership with this organization to avoid any appearance of bias?’…Harris wrote that ‘the Knights of Columbus, an all-male society comprised of primarily Catholic men … opposes a woman’s right to choose.’ Anyone who further dares to personally embrace longstanding Christian doctrine on the sanctity of life, including the unborn, should also seek employment outside of the federal bench.  Such anti-Catholic bias represents not just a discriminatory affront, but also an unconstitutional religious litmus test for appointees…”

The most basic concepts of the Bill of Rights have been targeted by Progressive politicians and advocates. Senate Minority Leader Charles Schumer (D-NY) called for restrictions on the First Amendment. Democrat lawmakers in Hawaii seek to abolish the Second Amendment.

Perhaps most profoundly, Progressives have advocated for eliminating the very concept of U.S. citizenship. H.R. 1, introduced by Rep. Sarbanes (D-Maryland) would protect jurisdictions that allow illegal aliens to cast votes. It passed with near-unanimous support by House Democrats (but will not survive in the U.S. Senate.)

It cannot escape notice that even as deeply radical concepts are pushed by the left, they are hardly ever characterized by the media as “extreme.”  That label seems to be reserved for moderates and conservatives who generally seek to merely preserve the traditional practices of America’s governing structure, its economic system, and societal norms.

Illustration: Pixabay

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Trump Moves to Protect US From EMP

The long-neglected threat of an electromagnetic pulse (EMP) disaster which could devastate the United States has finally been addressed. The path to protecting the nation has been set by the White House.

In 2018, A declassified report from the Congressional Commission to Assess the Threat to the United States from Electromagnetic Pulse (EMP) Attack, first obtained by the Washington Free Beacon, warned that China, Russia, North Korea, and Iran had developed the technology for an EMP attack against America.  The danger lurks not only from war.  A repeat of the long-overdue “Carrington Effect,” a result of natural sun cycles, could cripple the entire U.S. electrical grid.

In extraordinary testimony  delivered in 2017 to the House of Representatives Committee on Homeland Security, Dr. William R. Graham, Chairman, and  Dr. Peter Vincent Pry, chief of staff,  of the Commission to Assess the Threat to America from Electromagnetic Pulse (EMP) revealed explosive details, including decades of neglect of the menace, how Russia transferred EMP technology to North Korea, and how North Korea already has the capacity to wreck devastation across the United States. 

The two experts noted that . ‘Primitive’ and ‘Super-EMP’ Nuclear Weapons are both EMP Threats. The EMP Commission found that even primitive, low-yield nuclear weapons are such a significant EMP threat that rogue states, like North Korea, or terrorists may well prefer using a nuclear weapon for EMP attack, instead of destroying a city: “Therefore, terrorists or state actors that possess relatively unsophisticated missiles armed with nuclear weapons may well calculate that, instead of destroying a city or military base, they may obtain the greatest political-military utility from one or a few such weapons by using them—or threatening their use—in an EMP attack. In 2004, two Russian generals, both EMP experts, warned the EMP Commission that the design for Russia’s Super-EMP warhead, capable of generating high intensity EMP fields over 100,000 volts per meter, was ‘accidentally’ transferred to North Korea. They also said that due to ‘brain drain,’ Russian scientists were in North Korea, as were Chinese and Pakistani scientists according to the Russians, helping with the North’s missile and nuclear weapon programs. In 2009, South Korean military intelligence told their press that Russian scientists are in North Korea helping develop an EMP nuclear weapon. In 2013, a Chinese military commentator stated North Korea has Super-EMP nuclear weapons.”

An “Electromagnetic pulse” is a burst of electromagnetic energy.  EMPs have the potential to negatively affect technology systems on Earth and in space.  A high-altitude EMP (HEMP) is a type of human-made EMP that occurs when a nuclear device is detonated at approximately 40 kilometers or more above the surface of Earth.  A geomagnetic disturbance (GMD) is a type of natural EMP driven by a temporary disturbance of Earth’s magnetic field resulting from interactions with solar eruptions.  Both HEMPs and GMDs can affect large geographic areas.

To address the potentially existential crisis, President Trump recently signed an Executive Order (EO) “Coordinating National Resilience to Electromagnetic Pulses.”https://www.whitehouse.gov/presidential-actions/executive-order-coordinating-national-resilience-electromagnetic-pulses/ The EO notes that “An electromagnetic pulse (EMP) has the potential to disrupt, degrade, and damage technology and critical infrastructure systems.  Human-made or naturally occurring EMPs can affect large geographic areas, disrupting elements critical to the Nation’s security and economic prosperity, and could adversely affect global commerce and stability.  The Federal Government must foster sustainable, efficient, and cost-effective approaches to improving the Nation’s resilience to the effects of EMPs.”

According to Homeland Security Secretary Kirstjen Nielsen, “EMPs pose a potential threat to our nation’s critical infrastructure, and this executive order will advance our national goal of increased resilience across all infrastructure sectors. DHS remains committed to working with our interagency partners to ensure a more resilient, prepared America by reducing the risk of  EMP events. DHS is grateful for the president’s leadership on this critical issue and continued commitment to protecting our country and keeping Americans safe.”

The executive order outlines DHS’ lead role in implementing the following activities: 

  • Provide timely information on credible EMP threats and events to stakeholders;
  • Take a risk-informed approach to understand and enhance resilience to the effects of EMP across all critical infrastructure sectors, including coordinating the identification of national critical functions and prioritization of associated critical infrastructure at greatest risk to the effects of EMP;
  • Coordinate response to and recovery from the effects of EMP on critical infrastructure;
  • Consider EMP scenarios as a factor in preparedness exercises;
  • Conduct R&D to better understand and more effectively model the effects of EMP on national critical functions, and then develop technologies and guidelines to protect this critical infrastructure;
  • Maintain survivable means to provide necessary emergency information to the public during and after an EMP event; and
  • Develop quadrennial EMP risk assessments, with the first risk assessment delivered within 1 year of this order.
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The executive order will foster increased resilience to EMP events through better data gathering, testing, risk assessments, and private sector coordination. It directs departments and agencies to coordinate and streamline efforts, while fostering an environment that promotes private sector innovation to strengthen our critical infrastructure.

More must be done. The resources, from both Washington and the private sector, need to be dedicated to the task of hardening the nation’s critical facilities.

Photo: Pixabay

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Fighting the Illegal Drug Trade

Last year, the Department of Justice (DOJ)  “surged resources to those areas most affected by violence and drug abuse, targeting the most violent offenders, and concentrated on holding traffickers accountable.”

According to the Drug Enforcement Agency’s (DEA) most recent National Drug Threat Assessment:

Controlled prescription drugs remain responsible for the largest number of overdose deaths of any illicit drug class since 2001. These drugs are the second most commonly abused substance. Traffickers are now disguising other opioids as controlled prescription drugs to gain access to this market.

Heroin-related drug-poisoning deaths almost doubled between 2013 and 2016. This has been exacerbated by the increased adulteration of heroin with fentanyl and other synthetic opioids. Heroin available in U.S. markets is primarily sourced from Mexico, where opium poppy cultivation and heroin production have both increased significantly in recent years.

Of all opioids, the abuse of illicit fentanyl and other synthetic opioids has led to the greatest number of deaths in the United States. Fentanyl is increasingly available in the form of counterfeit prescription pills marketed for illicit street sales, and also sold by traffickers on its own, without the presence of other drugs.

Mexican transnational criminal organizations, including the Sinaloa Cartel and Jalisco New Generation Cartel, remain the greatest criminal drug threat in the United States. The cartels are the principal wholesale drug sources for domestic gangs responsible for street-level distribution.

National and neighborhood-based street gangs and prison gangs continue to dominate the market for the street sales and distribution of illicit drugs in their respective territories throughout the country. Drug trafficking remains the major income source for gangs.

Executive Summary of the 2018 National Drug Threat Assessment

The 2018 National Drug Threat Assessment (NDTA) is a comprehensive strategic assessment of the threat posed to the United States by domestic and international drug trafficking and the abuse of illicit drugs. The report combines federal, state, local, and tribal law enforcement reporting; public health data; open source reporting; and intelligence from other government agencies to determine which substances and criminal organizations represent the greatest threat to the United States.

Illicit drugs, as well as the transnational and domestic criminal organizations who traffic them, continue to represent significant threats to public health, law enforcement, and national security in the United States. Drug poisoning deaths are the leading cause of injury death in the United States; they are currently at their highest ever recorded level and, every year since 2011, have outnumbered deaths by firearms, motor vehicle crashes, suicide, and homicide. In 2016, approximately 174 people died every day from drug poisoning. The opioid threat (controlled prescription drugs, synthetic opioids, and heroin) has reached epidemic levels and currently shows no signs of abating, affecting large portions of the United States. Meanwhile, as the ongoing opioid crisis justly receives national attention, the methamphetamine threat remains prevalent; the cocaine threat has rebounded; new psychoactive substances (NPS) are still challenging; and the domestic marijuana situation continues to evolve.

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Controlled Prescription Drugs (CPDs): CPDs are still responsible for the most drug-involved overdose deaths and are the second most commonly abused substance in the United States. As CPD abuse has increased significantly, traffickers are now disguising other opioids as CPDs in attempts to gain access to new users. Most individuals who report misuse of prescription pain relievers cite physical pain as the most common reason for abuse; these misused pain relievers are most frequently obtained from a friend or relative.

Heroin: Heroin use and availability continue to increase in the United States. The occurrence of heroin mixed with fentanyl is also increasing. Mexico remains the primary source of heroin available in the United States according to all available sources of intelligence, including law enforcement investigations and scientific data. Further, significant increases in opium poppy cultivation and heroin production in Mexico allow Mexican TCOs to supply high-purity, low-cost heroin, even as U.S. demand has continued to increase.

Fentanyl and Other Synthetic Opioids: Illicit fentanyl and other synthetic opioids — primarily sourced from China and Mexico—are now the most lethal category of opioids used in the United States. Traffickers— wittingly or unwittingly— are increasingly selling fentanyl to users without mixing it with any other controlled substances and are also increasingly selling fentanyl in the form of counterfeit prescription pills. Fentanyl suppliers will continue to experiment with new fentanyl-related substances and adjust supplies in attempts to circumvent new regulations imposed by the United States, China, and Mexico.

Cocaine: Cocaine availability and use in the United States have rebounded, in large part due to the significant increases in coca cultivation and cocaine production in Colombia. As a result, past-year cocaine initiates and cocaine-involved overdose deaths are exceeding 2007 enchmark levels. Simultaneously, the increasing presence of fentanyl in the cocaine supply, likely related to the ongoing opioid crisis, is exacerbating the re-merging cocaine threat.

Methamphetamine: Methamphetamine remains prevalent and widely available, with most of the methamphetamine available in the United States being produced in Mexico and smuggled across the Southwest Border (SWB). Domestic production occurs at much lower levels than in Mexico, and seizures of domestic methamphetamine laboratories have declined steadily for many years.

Marijuana: Marijuana remains the most commonly used illicit drug in the United States. The overall landscape continues to evolve; although still illegal under Federal law, more states have passed legislation regarding the possession, use, and cultivation of marijuana and its associated products. Although seizure amounts coming across the SWB have decreased in recent years, Mexico remains the most significant foreign source for marijuana available in the United States. Domestic marijuana production continues to increase, as does the availability and production of marijuana-related products.

New Psychoactive Substances (NPS): The number of new NPS continues to increase worldwide, but remains a limited threat in the United States compared to other widely available illicit drugs. China remains the primary source for the synthetic cannabinoids and synthetic cathinones that are trafficked into the United States. The availability and popularity of specific NPS in the United States continues to change every year, as traffickers experiment with new and unregulated substances.

Mexican Transnational Criminal Organizations (TCOs): Mexican TCOs remain the greatest criminal drug threat to the United States; no other group is currently positioned to challenge them. The Sinaloa Cartel maintains the most expansive footprint in the United States, while Cartel Jalisco Nueva Generacion’s (CJNG) domestic presence has significantly expanded in the past few years. Although 2017 drug-related murders in Mexico surpassed previous levels of violence, U.S.-based Mexican TCO members generally refrain from extending inter-cartel conflicts domestically.

Colombian TCOs: Colombian TCOs’ majority control over the production and supply of cocaine to Mexican TCOs allows Colombian TCOs to maintain an indirect influence on U.S. drug markets. Smaller Colombian TCOs still directly supply wholesale quantities of cocaine and heroin to Northeast and East Coast drug markets.

Dominican TCOs: Dominican TCOs dominate the mid-level distribution of cocaine and white powder heroin in major drug markets throughout the Northeast, and predominate at the highest levels of the heroin and fentanyl trade in certain areas of the region. They also engage in some street-level sales. Dominican TCOs work in collaboration with foreign suppliers to have cocaine and heroin shipped directly to the continental United States and its territories from Mexico, Colombia, Venezuela, and the Dominican Republic. Family members and friends of Dominican nationality or American citizens of Dominican descent comprise the majority of Dominican TCOs, insulating them from outside threats.

Asian TCOs: Asian TCOs specialize in international money laundering by transferring funds to and from China and Hong Kong through the use of front companies and other money laundering methods. Asian TCOs continue to operate indoor marijuana grow houses in states with legal personal-use marijuana laws and also remain the 3,4- ethylenedioxymethamphetamine (MDMA, commonly known as Ecstasy) source of supply in U.S. markets by trafficking MDMA from clandestine laboratories in Canada into the United States.

Gangs: National and neighborhood-based street gangs and prison gangs continue to dominate the market for the street-sales and distribution of illicit drugs in their respective territories throughout the country. Struggle for control of these lucrative drug trafficking territories continues to be the largest factor fueling the street-gang violence facing local communities. Meanwhile, some street gangs are working in conjunction with rival gangs in order to increase their drug revenues, while individual members of assorted street gangs have profited by forming relationships with friends and family associated with Mexican cartels.

Illicit Finance: TCOs’ primary methods for laundering illicit proceeds have largely remained the same over the past several years. However, the amount of bulk cash seized has been steadily decreasing. This is a possible indication of TCOs’ increasing reliance on innovative money laundering methods. Virtual currencies, such as Bitcoin, are becoming increasingly mainstream and offer traffickers a relatively secure method for moving illicit proceeds around the world with much less risk compared to traditional methods.

Photo: Cocaine taken off market by the DEA (DEA)

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Quick Analysis

Energy Independence: Mission Accomplished

Despite the ubiquitous, always-on media cycle, one of the most important news stories of the past half-century has been barely discussed: America’s stunning rise from energy dependence to its new role as a net exporter of that vital commodity.

As 2018 drew to a close, the United States exported more oil than it imported for the first time in seven decades. Investors.com headlined the concept appropriately: “Trump just achieved what every president since Nixon had promised: energy independence.”

Last September, The  Energy Information Administration (EIA) noted “The United States likely surpassed Russia and Saudi Arabia to become the world’s largest crude oil producer earlier this year, based on preliminary estimates in EIA’s Short-Term Energy Outlook (STEO). In February, U.S. crude oil production exceeded that of Saudi Arabia for the first time in more than two decades. In June and August, the United States surpassed Russia in crude oil production for the first time since February 1999.”

 In terms of global supply, U.S. oil production rose at the fastest pace in history. It was the largest one-year increase in oil production that the world has ever seen.

It’s not just oil.

On March 14, the EIA reported that U.S. natural gas production hit a new record high in 2018, growing by 10 billion cubic feet per day in 2018,  an 11% increase from 2017. The growth was the largest annual increase in production on record, reaching a record high for the second consecutive year. U.S. natural gas production measured as gross withdrawals averaged 101.3 Bcf/d in 2018, the highest volume on record. U.S. natural gas production measured as marketed production and dry natural gas production also reached record highs at 89.6 Bcf/d and 83.4 Bcf/d, respectively.

2017 marked the first time in 60 years the U.S. exported more natural gas than it imported.

Energy independence was a key campaign theme for Donald Trump during his presidential campaign.

A Forbes review outlined what steps the Trump Administration took to bring about the change. They included: Auctioning off 77 million acres in the Gulf of Mexico for oil and gas drilling; Directing the Environmental Protection Agency to rescind the Clean Power Plan; Ordering the Treasury Department to “eliminate barriers to the financing of highly efficient overseas coal energy plants”; and, Approving the Keystone XL and Dakota Access pipelines.

Reuters noted that “President Donald Trump’s administration has sought to expand energy production on public lands, which stagnated during a multi-year surge in output on private lands, by rolling back federal environmental protections such as methane emissions curbs, expanding lease sales, and trimming royalty rates.”

The dramatic change has significant foreign policy implications. On March 12, an exuberant Secretary of State Michael R. Pompeo  stated:

“Now, recent history should remind us all that we’re not just producing energy for Americans…In August of last year, the United States surpassed Russia as the world’s top producer. When it comes to global supply, U.S. oil production rose at the fastest pace in history, the largest one-year increase in oil production that the world has ever seen…I’m confident that the American system – leaving the commanding heights in the hands of private risk-takers – will allow that industry to continue to grow and export as well…

“Our plentiful oil supplies allow us to help our friends secure diversity for their energy resources. We don’t want our European allies hooked on Russian gas through the NordStream II project any more than we ourselves want to depend on Venezuela for our oil supplies.

“This need, this desperate need for diversification is why we exported more crude oil last year to countries all across the globe. Places as diverse as India, Japan, China, the Republic of Korea, Italy, Ireland, the United Arab Emirates. The list is long. It’s why, shortly before the United States made its first LNG shipment to Europe, it made it to a place that people don’t think about, the country of Portugal that now has access to American energy resources…

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“Last April, we formalized a commitment to bolster Vietnam’s energy security. In October, the State Department hosted its first dialogue with Australia on energy security. And these operations, these opportunities will just be the beginning.

“But truth is, here’s my point: We’re not just exporting American energy, we’re exporting our commercial value system to our friends and to our partners. The more we can spread the United States model of free enterprise, of the rule of law, of diversity and stability, of transparency and transactions, the more successful the United States will be and the more successful and secure the American people will be.

“Our model matters now, frankly, more than ever in an era of great power rivalry and competition where some nations are using their energy for malign ends, and not to promote prosperity in the way we do here in the West. They don’t have the values of freedom and liberty, of the rule of law that we do, and they’re using their energy to destroy ours.

“Take China, just for starters. China’s illegal island-building in international waterways isn’t simply a security matter.

“By blocking development in the South China Sea through coercive means, China prevents ASEAN members from accessing more than $2.5 trillion in recoverable energy reserves. To contrast, the United States Government promotes energy security for those Southeast Asian nations. We want countries in the region to have access to their own energy. We want to help them. We want to create partnerships. We want transparent transactions, not debt traps…

“And we all know the story in Russia. It invaded Ukraine to gain access to oil and gas reserves. It in turn deprived Ukraine of the possibility of developing those resources for itself and using its pipelines and its networks to bring energy to its own people. Rather, it uses those pipelines to put pressure – political pressure – on the people of Ukraine.

“The story isn’t too terribly different in Syria. Assad covets the oil fields to the east of the Euphrates River in the eastern part of the country. He wants those resources, he wants those wealth to continue to impoverish the people of Syria, and use those resources for himself and the cronies who are around him.

“Perhaps there’s no clearer example than in Iran. Iran uses its energy exports to exert undue influence all across the Middle East, most particularly today on Iraq. While the United States is working to develop an independent, sovereign Iraq, Iran is using its energy to create a vassal state. We have worked hard over the past months to reduce the flow of Iranian crude oil around the world, to convince the Iranian leadership to protect its citizens and deliver to its citizens what it is they’re asking for, and to reduce the risk of terror and instability throughout the Middle East.

“There could not be more of a contrast about how America uses its energy resources than how the leaders of the Islamic Republic of Iran use theirs.

“And finally, as we see in the headlines today, Cuba props up Venezuela’s Maduro regime. That’s because Venezuela ships 50,000-some-odd barrels of oil today at a subsidized price to Cuba, providing roughly 30 percent of its overall energy needs.”

Illustration: Energy Information Administration