Conversion from the National Security Personnel System to Other Pay Schedules: Issues for Congress
Most federal employees (59.1%) are paid on the General Schedule (GS), a pay scale that consists of 15 pay grades in which an employee's pay increases are to be based on performance and length of service. Some Members of Congress, citizens, and public administration scholars have argued that federal employee pay advancement should be more closely linked to job performance than it currently is on the GS. With these concerns in mind and with explicit congressional authorization, the Department of Defense (DOD) began developing the National Security Personnel System (NSPS) in 2003 as a unique pay scale attempting to more closely link employee pay to job performance. NSPS was beset by criticisms since it went into effect in 2006. The system faced legal and political challenges from unions and employees who claimed it was inconsistently applied and caused undeserved pay inequities, among other concerns. On October 7, 2009, House and Senate conferees reported a version of the National Defense Authorization Act for Fiscal Year 2010 that included language to terminate NSPS. On October 8, 2009, the House agreed to the conference report. The Senate agreed to the conference report on October 22, 2009. On October 28, 2009, the President signed the bill into law (P.L. 111-84). DOD must now return employees currently enrolled in NSPS to the GS or to the pay system that previously applied to them or their position. If the employee's position did not exist prior to NSPS or if the previous pay scale was abolished during NSPS's lifetime, DOD must determine an appropriate pay scale for the employee. The return to the GS or other pay system must be completed by January 1, 2012, pursuant to the law. NSPS was initially intended to cover all DOD employees, but had a total final enrollment of roughly 227,000 DOD employees or 31.7% of the department's 717,000-person workforce. DOD has announced that it anticipates that approximately 75% of employees in NSPS will be placed in the GS by September 30, 2010. The remaining 25% of employees–most of whom would be placed in pay scales other than the GS–may take longer to transition out of NSPS. P.L. 111-84 included language preventing any employee from suffering a loss or decrease in pay as a result of the elimination of NSPS. Pursuant to statute, some transitioning employees have been placed on “retained pay,” which allows them to maintain their NSPS rate of pay instead of transitioning to the GS pay rate assigned to their job's grade. In such cases, the GS rate of pay assigned to the employee's position may not reach the pay level the employee achieved under NSPS. Retained pay, pursuant to statute, requires that an employee receive half of the annual pay adjustment given to employees who are at the maximum payable rate for their GS grade (step 10). Some NSPS employees may argue that the cap on their annual pay increase amounts to a loss in pay, and, therefore, violates P.L. 111-84. This report focuses on the transition of employees from NSPS to non-NSPS pay systems. It does not address the operation of NSPS or other pay schedules. The report discusses how the transition is scheduled to occur and analyzes congressional options for oversight or legislative action.
The Budget Reconciliation Process: The Senate’s "Byrd Rule"
Reconciliation is a procedure under the Congressional Budget Act of 1974 by which Congress implements budget resolution policies affecting mainly permanent spending and revenue programs. The principal focus in the reconciliation process has been deficit reduction, but in some years reconciliation has involved revenue reduction generally and spending increases in selected areas. Although reconciliation is an optional procedure, it has been used most years since its first use in 1980 (20 reconciliation bills have been enacted into law and three have been vetoed). During the first several years' experience with reconciliation, the legislation contained many provisions that were extraneous to the purpose of implementing budget resolution policies. The reconciliation submissions of committees included such things as provisions that had no budgetary effect, that increased spending or reduced revenues when the reconciliation instructions called for reduced spending or increased revenues, or that violated another committee's jurisdiction. In 1985 and 1986, the Senate adopted the Byrd rule (named after its principal sponsor, Senator Robert C. Byrd) on a temporary basis as a means of curbing these practices. The Byrd rule was extended and modified several times over the years. In 1990, the Byrd rule was incorporated into the Congressional Budget Act of 1974 as Section 313 and made permanent (2 U.S.C. 644). A Senator opposed to the inclusion of extraneous matter in reconciliation legislation may offer an amendment (or a motion to recommit the measure with instructions) that strikes such provisions from the legislation, or, under the Byrd rule, a Senator may raise a point of order against such matter. In general, a point of order authorized under the Byrd rule may be raised in order to strike extraneous matter already in the bill as reported or discharged (or in the conference report), or to prevent the incorporation of extraneous matter through the adoption of amendments or motions. A motion to waive the Byrd rule, or to sustain an appeal of the ruling of the chair on a point of order raised under the Byrd rule, requires the affirmative vote of three-fifths of the membership (60 Senators if no seats are vacant). The Byrd rule provides six definitions of what constitutes extraneous matter for purposes of the rule (and several exceptions thereto), but the term is generally described as covering provisions unrelated to achieving the goals of the reconciliation instructions. The Byrd rule has been in effect during Senate consideration of 18 reconciliation measures from late 1985 through the present. Actions were taken under the Byrd rule in the case of 14 of the 18 measures. In total, 65 points of order and 52 waiver motions were considered and disposed of under the rule, largely in a manner that favored those who opposed the inclusion of extraneous matter in reconciliation legislation (46 points of order were sustained, in whole or in part, and 43 waiver motions were rejected).
State, Foreign Operations, and Related Programs: FY2011 Budget and Appropriations
The annual State, Foreign Operations, and Related Agencies appropriations bill has been the primary legislative vehicle through which Congress reviews the U.S. international affairs budget and influences executive branch foreign policy making in recent years, as Congress has not regularly considered these issues through a complete authorization process for State Department diplomatic activities since 2003 and for foreign aid programs since 1985. Funding for Foreign Operations and State Department/Broadcasting programs has been steadily rising since FY2002, after a period of decline in the 1980s and 1990s. Ongoing assistance to Iraq and Afghanistan, as well as large new global health programs and rapidly increasing assistance to Pakistan, has kept the international affairs budget at historically high levels in recent years. The change of Administration in 2009 did not disrupt this trend. On February 1, 2010, President Obama submitted a budget proposal for FY2011 that requests $58.49 billion for the international affairs budget, a 16% increase over the enacted FY2010 funding level. If $1.8 billion in “forward funding” of FY2010 priorities appropriated in FY2009 supplemental legislation is counted toward FY2010 rather than FY2009 totals, as it has been by the Administration, the increase would be 12%. The Administration has also requested $4.46 billion in supplemental FY2010 foreign operations funds for activities in Afghanistan, Pakistan, and Iraq and $1.7 billion for humanitarian relief and reconstruction effort in Haiti. If these supplemental funding requests were enacted, the FY2011 request would be 3% above the FY2010 enacted level, or represent level funding if the FY2009 forward funding is attributed to the FY2010 total. This report focuses only on the $56.65 billion requested for programs and activities funded through the State-Foreign Operations appropriations bill, which excludes some portions of the International Affairs request and includes funding for certain commissions requested as part of other budget functions. The Administration requested significant increases for building State and USAID capacity; aid to Afghanistan, Pakistan, and Iraq; and activities under the Administration's Global Health, Food Security, and Global Climate Change initiatives. Programs for which the Administration recommended reduced funding, compared with enacted FY2010 levels, are contributions to international organizations, commissions and foundations, and peacekeeping operations. This report analyzes the FY2011 request, recent-year funding trends, and congressional action related to FY2011 State-Foreign Operations legislation. The report will be updated to reflect changes in legislative status
Instability and Humanitarian Conditions in Chad
As the Sahel region weathers another year of drought and poor harvests, the political and security situation in Chad remains volatile, compounding a worsening humanitarian situation in which some 2 million Chadians are at risk of hunger. In the western Sahelian region of the country, the World Food Program warns that an estimated 60% of households, some 1.6 million people, are currently food insecure. Aid organizations warn that the situation is critical, particularly for remote areas in the west with little international aid presence, and that the upcoming rainy season is likely to further complicate the delivery of assistance. In the east, ethnic clashes, banditry, and fighting between government forces and rebel groups, both Chadian and Sudanese, have contributed to a fragile security situation. The instability has forced over 200,000 Chadians from their homes in recent years. In addition to the internal displacement, over 340,000 refugees from the Central African Republic (CAR) and Sudan's Darfur region have fled violence in their own countries and now live in refugee camps in east and southern Chad, according to the United Nations High Commissioner for Refugees (UNHCR). With Chadian security forces stretched thin, the threat of bandit attacks on the camps and on aid workers has escalated. The instability has also impacted some 700,000 Chadians whose communities have been disrupted by fighting and strained by the presence of the displaced. The United Nations and the European Union (EU) began deployment of a multidimensional presence in Chad and the CAR in late 2007 to improve regional security so as to facilitate the safe and sustainable return of refugees and displaced persons. The U.N. mission, known as MINURCAT, assumed peacekeeping operations from the EU force in March 2009, but it faced logistical challenges in its deployment and a shortage of troops. In January 2010, the Chadian government requested that the mission's mandate not be renewed. After consultations between the government and the U.N. Secretariat, the U.N. Security Council resolved in May 2010 to begin a reduction in MINURCAT's presence in Chad, to be completed by December 31, 2010. The Chadian government has expressed a commitment to protecting civilians and humanitarian workers, but some observers question the capacity of its security forces to fulfill this mandate. A January 2010 agreement between the governments of Chad and Sudan has led to improved relations between the two countries, and they have allegedly ceased to provide support for each other's respective rebel groups. Legislative elections, postponed since 2007, are scheduled for November 10, 2010, and presidential elections are to be held in April 2011. This report will be updated as events warrant.
Brazil’s WTO Case Against the U.S. Cotton Program
U.S. and Brazilian trade negotiators reached agreement on June 17, 2010, on a “Framework agreement” regarding a World Trade Organization (WTO) dispute settlement case over U.S. cotton subsidies and GSM-102 agricultural export credit guarantees. The Framework agreement–which lays out a number of “steps and discussions”–represents a path forward toward the ultimate goal of reaching a negotiated solution to the dispute, while avoiding WTO-sanctioned trade retaliation by Brazil against U.S. goods and services. The Framework includes quarterly discussion on potential limits of trade-distorting U.S. cotton subsidies (recognizing that actual changes will not occur prior to the 2012 farm bill) and provides benchmarks for further changes to the GSM-102 program. The so-called Brazil cotton case is a long-running WTO dispute settlement case (DS267) initiated by Brazil–a major cotton export competitor–in 2002 against specific provisions of the U.S. cotton program. In September 2004, a WTO dispute settlement panel found that certain U.S. agricultural support payments and guarantees–including (1) payments to cotton producers under the marketing loan and counter-cyclical programs, and (2) export credit guarantees under the GSM-102 program–were inconsistent with WTO commitments. In 2005, the United States made several changes to both its cotton and GSM-102 programs in an attempt to bring them into compliance with WTO recommendations. However, Brazil argued that the U.S. response was inadequate. A WTO compliance panel ruled against the United States in December 2007, and the ruling was upheld on appeal in June 2008. In August 2009, a WTO arbitration panel–assigned to determine the appropriate level of retaliation–announced that Brazil's trade countermeasures against U.S. goods and services could include two components: (1) a fixed amount of $147.3 million for cotton payments, and (2) a variable amount based on GSM-102 program spending. The arbitrators also ruled that Brazil would be entitled to cross-retaliation if the overall retaliation amount exceeded a formula-based variable annual threshold. Cross-retaliation involves countermeasures in sectors outside of the trade in goods, most notably in the area of U.S. copyrights and patents. Based on the arbitrators' formulas, using 2008 data, Brazil announced in December 2009 that it would impose trade retaliation against up to $829.3 million in U.S. goods, including $268.3 million in eligible cross-retaliatory countermeasures. In March 2010, Brazil released a list of 102 goods of U.S. origin that would be subject to import tariffs of up to 100%, followed by a preliminary list of U.S. patents and intellectual property rights that it could restrict. Brazil announced an April 6 deadline for imposing the tariffs, which led to intense negotiations between Brazil and the United States to find a mutual agreement and avoid the trade retaliation. In early April, 2010, the United States offered a three-point proposal including establishment of a $147.3 million annual fund to provide technical assistance and capacity-building for Brazil's cotton sector, near-term modifications to the operation of the GSM-102 program, and special recognition for certain Brazilian beef imports into the United States. As a result, Brazil agreed to postpone the implementation of countermeasures until April 22. On April 20, the two parties signed a memorandum of understanding (MOU) that detailed the specifics of the $147.3 million fund. As a result, Brazil extended the suspension of trade retaliation until mid-June. The aforementioned “Framework agreement” is intended to delay any trade retaliation until after the 2012 farm bill, when potential changes to U.S. domestic cotton subsidies will be evaluated.
The Americans with Disabilities Act and Emergency Preparedness and Response
The Americans with Disabilities Act (ADA) provides broad nondiscrimination protection for individuals with disabilities in employment, public services, and public accommodations and services operated by private entities. Although the ADA does not include provisions specifically discussing its application to disasters, its nondiscrimination provisions are applicable to emergency preparedness and responses to disasters. In order to further the ADA's goals, President Bush issued an Executive Order on July 22, 2004, relating to emergency preparedness for individuals with disabilities and establishing the Interagency Coordinating Council on Emergency Preparedness and Individuals with Disabilities. The Department of Homeland Security (DHS) issued its Nationwide Plan Review Phase 2 Report, which includes a discussion of people with disabilities and emergency planning and readiness. The National Council on Disability has also issued recommendations on emergency preparation and disaster relief relating to individuals with disabilities. The Post-Katrina Emergency Management Reform Act of 2006 added the position of Disability Coordinator to FEMA.
The "Volcker Rule": Proposals to Limit "Speculative" Proprietary Trading by Banks
In 1933, during the first 100 days of President Franklin D. Roosevelt's New Deal, the Securities Act of 1933 and the Glass-Steagall Act (GSA) were enacted, setting up a pervasive regulatory scheme for the public offering of securities and generally prohibiting commercial banks from underwriting and dealing in those securities. Banks are subject to heavy, expensive prudential regulation, while the regulation of securities firms is predominately built around registration, disclosure of risk, and the prevention and prosecution of insider trading and other forms of fraud. While there are two distinct regulatory systems, the distinguishing lines between the traditional activities engaged in by commercial and investment banks became increasingly difficult to discern as a result of competition, financial innovation, and technological advances in combination with permissive agency and judicial interpretation. One of the benefits of being a bank, and thus being subject to more extensive regulation, is access to what is referred to as the “federal safety net,” which includes the Federal Deposit Insurance Corporation's (FDIC's) deposit insurance, the Federal Reserve's discount window lending facility, and the Federal Reserve's payment system. In the wake of the Great Recession of 2008, there have been calls to reexamine the activities that should be permissible for commercial banks in light of the fact that they receive governmental benefits through access to the federal safety net. Some have called for the reenactment of the provisions of the GSA that imposed affiliation restrictions between banks and securities firms, which were repealed by the Gramm-Leach-Bliley Act (GLBA) in 1999. While neither the House- nor the Senate-passed version of H.R. 4173, the comprehensive financial regulatory reform proposals of the 111th Congress, includes provisions that would reenact the GSA, both bills do propose curbs on “proprietary trading” by banking institutions. H.R. 4173, newly titled the Dodd-Frank Wall Street Reform and Consumer Protection Act, which is modeled on the Senate version, would limit the ability of commercial banking institutions and their affiliated companies and subsidiaries to engage in trading unrelated to customer needs and investing in and sponsoring hedge funds or private equity funds. Such an approach has been referred to as the “Volcker Rule,” having been urged upon Congress by Paul Volcker, former Chairman of the Board of Governors for the Federal Reserve System and current Chairman of the President's Economic Recovery Advisory Board. This report briefly discusses the permissible proprietary trading activities of commercial banks and their subsidiaries under current law. It then analyzes the Volcker Rule proposals under the House- and Senate-passed financial reform bills and under the Conference Report. Appendix A, Appendix B, and Appendix C of the report provide the full legislative language in each.
Trade Law: An Introduction to Selected International Agreements and U.S. Laws
U.S. trade obligations derive from international trade agreements, including the General Agreement on Tariffs and Trade (GATT), the other World Trade Organization (WTO) agreements, and additional bilateral and regional trade agreements, as well as domestic laws intended to implement those agreements or effectuate U.S. trade policy goals. This report provides an overview of both sources of U.S. trade obligations, focusing on a select group of agreements, provisions, and statutes that are most commonly implicated by U.S. trade interests and policy. Historically, parties to international trade agreements were obligated to reduce two kinds of trade barriers: tariffs and non-tariff trade barriers. Whereas the former may hinder an imported product's ability to compete in a foreign market by imposing an additional cost on the product's entry into the market, the latter has the potential to bar an import from entering that market altogether by, for example, restricting the number of such imports that can enter the market or imposing prohibitively strict packaging and labeling requirements. Consequently, at their most basic, international trade agreements obligate their parties to convert at least some of their non- tariff trade barriers into tariffs, set a ceiling on the tariff rates for particular products, and then progressively reduce those rates over time. In addition, international trade agreements have increasingly broadened their scope to target domestic policies that appear to operate as unfair trade practices and to establish elaborate trade dispute settlement mechanisms. As illustrated in this report, the typical international trade agreement today disciplines its parties' use of tariffs and trade barriers, authorizes its parties to use discriminatory trade measures to remedy certain unfair trade practices, and establishes a dispute settlement body. Domestic trade laws, meanwhile, can broadly be classified as laws (1) authorizing trade remedies, including remedies for violations of trade agreements, countervailing duties for subsidized imports, and antidumping duties for imports sold at less than their normal value, (2) setting domestic tariff rates and providing special duty-free or preferential tariff treatment for certain products, and (3) authorizing the imposition of trade sanctions to protect U.S. security or achieve other policy goals. In addition to describing these domestic laws, this report summarizes the constitutional authorities of Congress and the executive branch over international trade. Finally, the report identifies many of the federal agencies and entities charged with overseeing the development of new trade agreements and the administration and enforcement of federal trade laws. Among the federal agencies and entities discussed are the United States Trade Representative (USTR), the International Trade Administration (ITA), the International Trade Commission (ITC), the United States Customs and Border Protection (CBP), and the United States Court of International Trade (CIT). This report is not intended as a comprehensive review of trade law. It is an introductory overview of the legal framework governing trade-related measures. The agreements and laws selected for discussion are those most commonly implicated by U.S. trade interests, but there are U.S. trade obligations beyond those reviewed in this report.
The SBA Disaster Loan Program: Overview and Possible Issues for Congress
Through its Disaster Loan Program, the Small Business Administration (SBA) has been a major source of assistance for the restoration of commerce and households in areas stricken by natural and human-caused disasters since the agency's creation in 1953. SBA offers direct loans to businesses to help repair, rebuild, and recover from economic losses after a disaster, but approximately 80% of the agency's approved direct disaster loans are made to individuals and households (renters and property owners) to help repair and replace homes and personal property. The SBA Disaster Loan Program includes four categories of loans for disaster-related losses: (1) Home Disaster Loans, (2) Business Disaster Loans, (3) Economic Injury Disaster Loans (EIDL), and (4) Pre-Disaster Mitigation Loans. Home disaster loans are used by homeowners and renters to repair or replace their disaster-damaged primary residences or personal property. SBA regulations limit home loans to $200,000 for the repair or replacement of real estate and $40,000 for the repair or replacement personal property. Business disaster loans help businesses of all sizes and nonprofit organizations repair or replace disaster-damaged property, including inventory and supplies. Both Business Disaster Loans and EIDLs are limited by law to $2 million per applicant. The two programs also provide assistance to small businesses, small agricultural cooperatives (but not enterprises), and certain private, nonprofit organizations that have suffered substantial economic injury resulting from a physical disaster or an agricultural production disaster. Since 1953, SBA has approved roughly 1.9 million disaster loans for a total of more than $47 billion (nominal dollars). Congressional interest in the Disaster Loan Program has increased in recent years primarily because of concerns about the program's performance in responding to the 2005 and 2008 hurricane disasters. Supporters of the Disaster Loan Program argue that it is an important form of assistance to help victims recover from disasters. Critics argue that the responsibility for disaster recovery should be borne by homeowners through the purchase of private insurance. Supporters reply that by covering individuals and households unable to afford private insurance, the program fills a need not met by traditional market mechanisms. This report describes the SBA Disaster Loan Program, including the types of loans available to individuals, households, businesses, and nonprofit organizations. It highlights eight issues of potential congressional concern: (1) the pace of implementation of the Small Business Disaster Response and Loan Improvement Act of 2008 (P.L. 110-246), (2) SBA's loan processing procedures, (3) the funding of the Disaster Loan Program, (4) the potential need for loan forgiveness and waivers, (5) the roles and responsibilities of SBA in a potential National Recovery Framework, (6) the use of disaster loans to replace allegedly toxic drywall, (7) the transfer of the Disaster Loan Program to FEMA, and (8) the perceived increase in federal spending for disasters. This report also discusses some of the reforms contained in Title VII of H.R. 3854, the Small Business Financing and Investment Act of 2009, which passed the House on October 29, 2009, and was referred to the Senate Committee on Small Business and Entrepreneurship. H.R. 3854 contains provisions intended to address some of the programmatic and policy issues associated with the SBA Disaster Loan Program.
The 2010 Oil Spill: Criminal Liability Under Wildlife Laws
The United States has laws that make it illegal to harm protected wildlife. Those laws could be used to prosecute those who caused the 2010 oil spill. Perhaps the most famous of these laws is the Endangered Species Act (ESA), which provides for both criminal and civil penalties for acts that harm species listed under the act. The Marine Mammal Protection Act (MMPA) also provides for civil and criminal punishment when an action takes a marine mammal. The Migratory Bird Treaty Act (MBTA) makes it a crime to kill migratory birds. While there are endangered species and marine mammals in the area affected by the Gulf of Mexico oil spill, it is more likely that any criminal prosecution would use the MBTA rather than the ESA or the MMPA. This is because the MBTA is a strict liability statute in relevant part, unlike the other laws. Accordingly, the prosecution does not have to show that the defendant(s) intended to harm wildlife. The prosecution does not have to prove that the defendants knew their action(s) would lead to an oil spill to find liability. The MBTA was used to prosecute Exxon following the Exxon Valdez spill and has been used for decades to find corporations and even their employees criminally liable for the deaths of protected birds.
The United Arab Emirates (UAE): Issues for U.S. Policy
The UAE's relatively open borders, economy, and society have won praise from advocates of expanded freedoms in the Middle East while producing financial excesses, social ills such as prostitution and human trafficking, and relatively lax controls on sensitive technologies acquired from the West. These concerns–as well as concerns about the UAE oversight and management of a complex and technically advanced initiative such as a nuclear power program–underscored dissatisfaction among some Members of Congress with a U.S.-UAE civilian nuclear cooperation agreement. The agreement was signed on May 21, 2009, and submitted to Congress that day. It entered into force on December 17, 2009. Despite its social tolerance and economic freedom, the UAE government is authoritarian, although with substantial informal citizen participation and consensus-building. Assessments by a wide range of observers say that members of the elite routinely obtain favored treatment in court cases, business opportunities, and influence on national decisions. The UAE federation president, Shaykh Khalifa bin Zayid al-Nuhayyan, technically serves a five-year term, renewable by the Federal Supreme Council (composed of the seven heads of the individual emirates), although in practice leadership changes have generally taken place only after the death of a leader. After several years of resisting electoral processes similar to those instituted by other Gulf states, and despite an absence of popular pressure for elections, the UAE undertook its first electoral process in December 2006. The process was criticized as far from instituting Western-style democratic processes, because the electorate was limited and selected by the government, and it voted for only half of the membership of a body with limited powers. The other half of the body continues to be appointed. Partly because of substantial UAE federal government financial intervention, the political and social climate has remained calm through the ongoing global financial crisis and recession, which has hit Dubai emirate particularly hard and called into question its strategy of ambitious, investment-fueled development. Many expatriate workers left UAE after widespread layoffs, particularly in the financial and real estate sectors. During the crisis, there have been somewhat more criticism of and official crackdowns against expatriate social behavior that many UAE citizens have always considered offensive. For details and analysis of the U.S.-UAE nuclear agreement and legislation concerning that agreement, see CRS Report R40344, The United Arab Emirates Nuclear Program and Proposed U.S. Nuclear Cooperation, by Christopher M. Blanchard and Paul K. Kerr.
From Solicitor General to Supreme Court Nominee: Responsibilities, History, and the Nomination of Elena Kagan
On May 10, 2010, President Obama nominated Solicitor General Elena Kagan to replace retiring Justice John Paul Stevens. If confirmed, Elena Kagan would be the first serving Solicitor General to be appointed to the Court since the elevation of Thurgood Marshall in 1967. She would also be only the fifth of 111 Justices to come to the bench with such experience. Given that Solicitor General Kagan has made few public statements on important legal and policy issues, some have looked to her record as Solicitor General for some indication of her views. Others have looked to her time as Solicitor General as an important element of her professional experience, especially in light of the criticism of some that her lack of judicial and litigation experience make her unqualified to sit on the bench. Understanding the role and responsibilities of the Solicitor General can provide a useful backdrop against which to evaluate Elena Kagan's statements and official actions and assess her professional qualifications. The role of the Solicitor General is unique in the American legal system. Not only does the Solicitor General represent the interests of the United States government before the Court, but the office is also charged with assisting the Supreme Court in the exercise of its judicial function. Through repeated opportunities to argue before the Court, some suggest that the office of the Solicitor General has built a “special relationship” with the Supreme Court based on trust and interdependence established over multiple and continuing interactions. The Court relies on the Solicitor General to perform a “gatekeeping” function by recommending for review only the most meritorious of the government's cases and providing the highest quality arguments for the Court's consideration. Through these actions, the Solicitor General seeks to convince the Supreme Court that the government's position is the correct one. Although scholars disagree on the exact nature of the office's influence, most of the time, the Solicitor General is successful in this task. Despite this close relationship and the institutional knowledge that comes with it, few of the 45 Solicitors General have been appointed to the Supreme Court. Since the creation of the office in 1870, only four former or current Solicitors General have been elevated to the highest bench. The first, William Howard Taft, served in both the executive and judicial branches before his joining the Court, most notably as the 27th President of the United States. Stanley Reed, who was elevated directly from the position of Solicitor General to the Court, spent most of his professional career in private practice and had never been a judge before becoming an Associate Justice. Robert Jackson, like Reed, had no judicial experience before his appointment. He had, however, served in five different positions in the Department of Justice, including that of Attorney General, prior to his elevation. Unlike Reed and Jackson, Thurgood Marshall, a former federal appellate judge, had little experience in private practice and had only served as a government attorney for two years prior to his nomination to the Court. However, between working as the director and general counsel of the NAACP Legal Defense Fund for 21 years and serving as Solicitor General, Justice Marshall had extensive Supreme Court litigation experience before joining the bench. If Elena Kagan is confirmed, she would be the fifth Solicitor General to serve on the Court. Although service as the Solicitor General has generally been viewed as an important and relevant qualification, her lack of judicial and litigation experience has raised questions by some as to whether she is qualified to sit on the Court. Although the ultimate judgment as to appropriate qualifications to be a Supreme Court Justice must be left to the Senate, it is clear that the experience of serving as Solicitor General provides the occupant of the office with unique insights into the Supreme Court.
Foreign Investment in U.S. Securities
Foreign capital inflows are playing an important role in the U.S. economy by bridging the gap between domestic supplies of and demand for capital. In 2008, as the financial crisis and global economic downturn unfolded, foreign investors looked to U.S. Treasury securities as a “safe haven” investment, while they sharply reduced their net purchases of corporate stocks and bonds. In 2009, foreign capital inflows continued to drop as private investors sharply retrenched, while official purchases of U.S. Treasury securities by foreign governments rose sharply. Foreign investors now hold more than 50% of the publicly held and traded U.S. Treasury securities. The large foreign accumulation of U.S. securities has spurred some observers to argue that this large foreign presence in U.S. financial markets increases the risk of a financial crisis, whether as a result of the uncoordinated actions of market participants or by a coordinated withdrawal from U.S. financial markets by foreign investors for economic or political reasons. Congress likely would find itself embroiled in any such financial crisis through its direct role in conducting fiscal policy and in its indirect role in the conduct of monetary policy through its supervisory responsibility over the Federal Reserve. Such a coordinated withdrawal seems highly unlikely, particularly since the vast majority of the investors are private entities that presumably would find it difficult to coordinate a withdrawal. The financial crisis and economic downturn, however, have sharply reduced the value of the assets foreign investors acquired, which may make them more hesitant in the future to invest in certain types of securities. As a result of the financial crisis of 2008, foreign investors curtailed their purchases of corporate securities, a phenomenon that was not unique to the United States. In a sense, the slowdown in the U.S. economy and rise in the personal rate of saving have eased somewhat the need for foreign investment. The importance of capital inflows may well change as the federal government's budget deficits rise over the course of the economic downturn.. This report analyzes the extent of foreign portfolio investment in the U.S. economy and assesses the economic conditions that are attracting such investment and the impact such investments are having on the economy. Over the course of the recent recession, foreign investors have often favored dollar-denominated investments due to a number of factors, including the evaluation that such investments are a “safe haven” investment during times of uncertainty; comparatively favorable returns on investments, a surplus of saving in other areas of the world, the well-developed U.S. financial system, and the overall stability and relative rate of growth of the U.S. economy. Capital inflows also allow the United States to finance its trade deficit because foreigners are willing to lend to the United States in the form of exchanging the sale of goods, represented by U.S. imports, for such U.S. assets as U.S. businesses and real estate, stocks, bonds, and U.S. Treasury securities. Despite improvements in capital mobility, foreign capital inflows do not fully replace or compensate for a lack of domestic sources of capital. Economic analysis shows that a nation's rate of capital formation, or domestic investment, seems to have been linked primarily to its domestic rate of saving. This report relies on a comprehensive set of data on capital flows, represented by purchases and sales of U.S. government securities and U.S. and foreign corporate stocks, bonds, into and out of the United States, that is reported by the Treasury Department on a monthly basis.
Financing the U.S. Trade Deficit
The U.S. merchandise trade deficit is a part of the overall U.S. balance of payments, a summary statement of all economic transactions between the residents of the United States and the rest of the world, during a given period of time. Some Members of Congress and other observers have grown concerned over the magnitude of the U.S. merchandise trade deficit and the associated increase in U.S. dollar-denominated assets owned by foreigners. The recent slowdown in global economic activity has reduced global trade flows and, consequently, reduced the size of the U.S. trade deficit. This report provides an overview of the U.S. balance of payments, an explanation of the broader role of capital flows in the U.S. economy, an explanation of how the country finances its trade deficit or a trade surplus, and the implications for Congress and the country of the large inflows of capital from abroad. The major observations indicate that • Foreign official investors sharply increased their purchases of U.S. Treasury securities in 2009 in response to uncertainty associated with disruptions in global financial markets. During the same period, foreign private investors sharply reduced their purchases of U.S. corporate stocks and bonds compared with 2008. • The inflow of capital from abroad supplements domestic sources of capital and likely allows the United States to maintain its current level of economic activity at interest rates that are below the level they likely would be without the capital inflows. • Foreign official and private acquisitions of dollar-denominated assets likely will generate a stream of returns to overseas investors that would have stayed in the U.S. economy and supplemented other domestic sources of capital had the assets not been acquired by foreign investors.
Intelligence Reform After Five Years: The Role of the Director of National Intelligence (DNI)
The Intelligence Reform and Terrorism Prevention Act of 2004 (P.L. 108-458) was the most significant legislation affecting the U.S. intelligence community since the National Security Act of 1947. Enacted in the wake of the 9/11 Commission's final report, the 2004 act attempted to ensure closer coordination among intelligence agencies especially in regard to counterterrorism efforts. Most notably, the Intelligence Reform Act established the position of Director of National Intelligence (DNI) with more extensive authorities to coordinate the nation's intelligence effort than those formerly possessed by Directors of Central Intelligence. The DNI speaks for U.S. intelligence, he briefs the President, has authority to develop the budget for the national intelligence effort and manage appropriations made by Congress, and, to some extent, can transfer personnel and funds from one agency to another. The Office of the DNI (ODNI), a staff of some 1,600 officials along with additional contract personnel, works to carry out the DNI's responsibilities. Observers are divided over the success of the DNI position and the ODNI. Three DNIs have been successively appointed and confirmed; none served more than two years. A number of innovations have been undertaken in the intelligence community to encourage coordination and information sharing. However, some observers remain skeptical of the need for a DNI or ODNI. A widespread perception is that coordinative mechanisms and authorities as currently established are inadequate to the goal of creating a more flexible and agile intelligence effort. Still others see cooperative efforts in the intelligence community as a test-case of the extent to which independent federal agencies can work closely together without being merged under a single leader. Congress has monitored the work of DNIs and the ODNI, but oversight has thus far been largely informal, given the absence of enacted intelligence authorization legislation since 2004, shortly after passage of the Intelligence Reform Act. Some outside observers would repeal the act, but there appears to be little enthusiasm among Members to undo a major piece of legislation and return to the status quo ante. On the other hand, there appears to be limited sympathy for creating a “Department of Intelligence,” directly managed by one official. The roles of the DNI and the ODNI are likely to form the backdrop for congressional consideration of intelligence authorization legislation for FY2010 (H.R. 2701 and S. 1494) and for FY2011. In addition, confirmation hearings for General James R. Clapper, Jr., nominated by President Obama on June 7, 2010, to serve as the fourth DNI, are likely to include consideration of the responsibilities of the position. Additional information on issues related to the DNI and the ODNI can be found in CRS Report RL33539, Intelligence Issues for Congress, by Richard A. Best Jr.; CRS Report RL34231, Director of National Intelligence Statutory Authorities: Status and Proposals, by Richard A. Best Jr. and Alfred Cumming; and CRS Report R41284, Intelligence, Surveillance, and Reconnaissance (ISR) Acquisition: Issues for Congress, by Richard A. Best Jr.