Author: Dan Durak

Dan Durak is a second-year MPP student currently working as a research assistant with Federal Financial Analytics, a proprietary think tank in Dupont Circle. He received his bachelors' degree in political science from American University, and is interested in a wide-range of policy topics, including financial services, immigration, transportation, and public-private partnerships. Dan previously interned with the late Senator Frank Lautenberg (D-NJ), the American Enterprise Institute, Brookings Institution, ML Strategies government consulting, and the Congressional Research Service. He grew up in Bayonne, NJ, where he participated in high school mock trial and competed as a nationally-ranked pairs figure skater. Dan relives his glory days by teaching figure skating and beginner ice hockey lessons on the weekends in Rockville, MD.

Running on Empty? The Colorado River in Crisis

A combination of environmental issues, states’ authority, and individual water rights linger over the future of the Colorado River. Recently, The Denver Post published an article that called on the incoming Trump administration to protect the Colorado River basin, which said that the country is extremely close to experiencing its first water shortage declaration. To better prepare contingency plans for drought and put water savings plans into place, The Post calls on federal assistance to help secure the future of this vital water supply.

Years of drought affecting the Western states have had a major impact on the river’s water supply, as well as the major water reserves that it stocks. States have difficulty in rolling back water usage as well, as many states continue to count the actual river water as a separate entity from the groundwater reserves, essentially double-counting the available water for use. As the population is set to continue its growth in the major western cities, is there a way federal and state governments work to improve the life of this vital river?

 

Problems facing the Colorado River

At 1,450 miles, the Colorado River supplies water to nearly 40 million people and traverses the landscape of seven Western states – Colorado, Wyoming, Utah, Nevada, New Mexico, Arizona, and California. Nearly 70 percent of the residents of these states rely on the Colorado River for their water supply. This is all in addition to supporting 15 percent of the nation’s food supply and filling two of its largest water reserves, Lake Mead and Lake Powell.

According to the U.S. Drought Monitor, the most recent conditions place each of the seven states that rely on the Colorado in some level of drought that ranges from abnormally dry to ‘exceptional drought.’ Of these states, five are ranked among the top three worst categories for drought. In California, 93 percent of the state has been experiencing severe drought conditions, along with 86 percent of Nevada, 34 percent of Utah, 29 percent of Arizona, and 11 percent of New Mexico. Through its outlook for the first quarter of 2017, the Drought Monitor expects the drought to persist for nearly all of Southern California, large swaths of Arizona and large parts of Nevada (as well as a large stretch of the southern Midwest and southeastern United States).

As the Western states have experienced years of drought and dwindling water supplies, many state governments have allowed businesses and individuals to tap into groundwater sources. According to an article published by ProPublica in July 2015, nearly 60 percent of California’s water comes from underground, and nearly half of Arizona’s water supply is pumped from aquifers. However these two sources of water are linked and drawing water from one will most surely result in the eradication of the other.

The use of river water for other purposes in the West is a major factor that is contributing to the dwindling resources. As National Geographic reports, agriculture consumes 78 percent of the Colorado River’s water while municipalities and industry use the remaining 22 percent via diverted aqueducts and pipelines.  Many of the crops require water that is diverted from the river itself or drawn from groundwater sources. States like California grow water-intensive crops like almonds and rice, while Arizona’s continued growth of cotton typically requires 60 percent more water to grow than is required to harvest wheat.

Expected population growth links these separate issues and brings this problem to the policy forefront. In the Las Vegas, Nevada and northern Arizona area population is expected to grow nearly 25 percent from 2020 to 2030, and surrounding areas in southern Utah and northern Arizona are expected to grow between 15 to 25 percent over the same period of time. ProPublica expects the population in the Denver metropolitan area to grow by 56 percent within the next 25 years, which would bring its population to nearly 4 million by 2030. As these major population centers continue to grow, their reliance on the Colorado River to meet demands will further exacerbate the declining water levels.

 

Governing the Colorado 

Historically, claims to river and water rights in the United States fall under two systems: either 1) riparian water rights or 2) appropriation rights. In the West, appropriation water rights are much more common and were put in place to protect the first settlers who laid claim to river water from any latecomers. This priority exists during times of shortage, and appropriators (those using water diverted from the river) are only able to use the water that is needed, which means excess must be returned to the source. In other words, use it or lose it.

To complicate matters, Western states are currently operating at a water deficit, in that there is an over-allocation of river water. This problem began in the 1920s, when water was divvied up between the Colorado River states to keep any one populous state from taking complete ownership. However, this was done by calculating the flow based on an abnormally wet year, with an 18 million acre-feet river flow with nearly 4.8 trillion gallons of water. Within a few years the river had only a 12 million acre-feet flow, but this did not stop the breakdown of river water among the several states. In 2015, Scientific American reported that 16.5 million acre-feet of water flow had been allocated among the states, yet the river had been flowing at a rate of 12.4 million acre-feet per year.

Why is the over-allocation continuing to plague Western states? Water politics in the West have taken on a ‘third rail’ aspect, in that changing the status quo is politically risky and therefore not always viable. For example, two of the states shown to be suffering from severe drought conditions – California and Arizona – still continue to count groundwater resources as separate from the river resources, which essentially double-counts the water available for use. In California, while recent legislation did begin to regulate the withdrawal of groundwater it did not address the interconnection between groundwater and surface water. In fact, the legislation prevents state regulators from addressing the interconnection between both sources of water for local plans until 2025.

 

What happens next?

As the new Secretary of the Interior, Ryan Zinke, oversees the Bureau of Reclamation and US Geological Survey, both of which enforce federal laws over the Colorado River. As a Congressman, Zinke was a supporter of the federal Land and Water Conservation Fund, and while he has advocated for a review of “job-killing regulations” he does support infrastructure improvements for the National Park Service. To many, Zinke’s opposition to regulating greenhouse gas emissions, and his stance on climate change is troubling and may not help in the long run to improve conditions with the Colorado River.

There is a potential for federal action here. Since states have tied their own hands when it comes to addressing the relationship between groundwater and river water, management at the federal level could tackle this challenge. New management at the could direct conservation efforts; for example farmers can be incentivized to grow alternative crops that require less water for growth through subsidies dispersed at the federal level. Federal agencies can also consistently measure water flow and issue guidance to direct state agencies to use this data in their allocation of resources.

In a recent letter to the new Secretary, Latino leaders from Western states requested his leadership on three key priorities related to the Colorado River. They included working with Governors to balance the water levels in the lower basin states (Arizona, California, and Nevada), collaborating with the Mexican Ambassador to ensure the continuation of adequate water levels in Lake Mead to support water for their shared environment, and using market-based tools and collaborative solutions to ensure the water supply. During his confirmation hearing, Zinke alluded to the collaboration between his department and the basin states, and the U.S. already has an agreement with Mexico to ensure water levels.

In addition to these recommendations, Congress could push legislation to clearly define the linkage between groundwater and river water to prevent double counting and find a balance to the ‘use it or lose it’ problem that comes with appropriation rights, perhaps through a regulated market system to sell access to unused resources. Major cities and urban areas could be directed to come up with their own conservation plans and require businesses within their jurisdiction to implement conservation efforts for industries that use plenty of water. Good performers can be incentivized to continue their trend and serve as a model for industries struggling to adapt.

While these major problems continue to hinder the flow of the Colorado River, they highlight the need for combined local, state and federal solutions to solve the problem. Through efforts to recognize the link between surface and groundwater, like in California, and hearings at the federal level to address the entire western water system, conservation and modernization efforts can begin to take root and bring life back to the Colorado River.

Image Source: Shutterstock

Stringent Cyber Policy Under a Trump Administration?

Over the final years of the Obama administration, cybersecurity had become a top priority of government agencies.  Massive compromises of citizen data have propelled the issue to the forefront of discussions to reshape government, most recently the Office of Personnel Management (OPM).  After campaigning on a robust response to cybersecurity, what will the Trump administration do to improve the cyber resilience of government institutions?

From 2014 to 2015, OPM announced that there were major breaches of government databases that impacted over 22 million current and former federal employees.   An initial hack, made sometime in early 2014, was not first reported to the public, and was only revealed to the public by a New York Times article in July 2014.  It was suspected that the breach impacted nearly 400,000 current and former federal employees and may have been caused by stolen keycards.

A second breach, believed to have begun in December 2014, was not revealed to the public until June 2015 when OPM reported that 4 million current and former federal employees had their personal information compromised.  Within the next few months FBI Director James Comey estimated that an additional breach of data impacted 18 million individuals, and an OPM investigation fixed this number at 19.7 million individuals.

 

The Obama Administration’s Response

An audit released by the Inspector General for OPM highlighted the IT security management system and high turnover of information security officers as two key concerns in the agency’s cybersecurity role.  Additionally, the audit found many of the investigative service technology systems used by OPM were past due for security checkups.  While OPM’s Federal Investigative Service, which conducts civilian background checks, remains within the agency, it is now secured by the Department of Defense and is now the National Background Investigation Bureau.

 

In December, the Obama administration’s Commission on Enhancing National Cybersecurity released a comprehensive report on Securing and Growing the Digital Economy.  Among several recommendations the Commission suggested a national cybersecurity public-private program as a forum to address cyber concerns and for all agencies that interface with the public to use strong authentication software.  Additionally they set forth several workforce planning initiatives to attract 100,000 new cybersecurity practitioners by 2020, and a motion to move federal agencies into a management approach based on enterprise risk management to better adapt to challenges and design better solutions.

 

The Commission’s report noted however that the Obama administration was mostly powerless to implement any of these recommendations, as they were released with a little over two months left before Trump took office.  This highlights the approach that has been taken toward cyber reform within the past few years, which has been mostly through executive memorandum or orders and little legislation.  One of those few pieces of legislation was the Cybersecurity Information Sharing Act of 2015, which gave private companies the legal protection to share information with government to help protect consumers.

 

The Trump Administration’s Approach

The Trump administration can change course from the previous administration by undoing or overturning executive orders or memorandums on cyber initiatives.  However, efforts on the congressional front are already showing that cybersecurity efforts are a top priority for the 115th Congress.  The National Defense Authorization Act (NDAA), passed by Congress before their final recess in 2016, includes several provisions for workforce planning that focus on attracting top cyber talent to the Department of Defense.  Congressional action on this front adheres to the belief that the best way to remain on the forefront with cyber resilience is to hire the best talent.  

 

According to President Trump’s platform, there will be a comprehensive review to all cyber defenses within the country and continued work across all levels of government to respond to cyber incidents.  Additionally, there will be a push for ‘offensive’ cyber warfare in response to the attacks and government system compromises within previous years.  The proposals given in Trump’s platform are more broad strokes, and may not reflect what next steps will be taken.

 

After the San Bernadino shooting, Trump called for a boycott of Apple products when the company signaled that it wouldn’t assist the FBI in breaking into the iPhone of the shooters.  According to some security and privacy experts, calling on a private company to give its secure communications over to government so easily is an area of concern.  While the cooperation of private companies with government falls in line with Obama cybersecurity recommendations, the encryption of consumer data by private companies is a level of protection that many feel is necessary given the frequent cyber breaches in the U.S.  Trump’s comments suggest that the new administration may be more willing to compel private companies to cooperate with federal investigations on data breaches, which can be helpful in better understanding attacks and preventing future compromises of data.

 

Beyond the President, what will top policymakers in the new administration do with cyber reform? Of the appointments announced so far, Trump’s pick for Attorney General, Senator Jeff Sessions (R-AL), provides some insight into what cyber could resemble under the next administration.  As a member of the Senate Judiciary Committee, Sessions also stood in solidarity with the FBI over its battle with Apple over encryption.  He also supports greater power for the NSA and other surveillance agencies that may limit civil protections, and an amendment he proposed for the Email Privacy Act would have allowed government officials to demand data from tech companies without a warrant in emergency situations.

Fewer privacy protections in place and stringent requirements for companies to share data with government entities resembles a cyber environment that caters less to consumer protections and more to security concerns. However, the sharing of data between private and public entities, while mandatory, may improve the government’s response to cyber attacks in the new administration.

Image source: New America

Trucking Along: A Future for Speed-Limiting Devices?

Senator Chuck Schumer (D-NY) has recently pushed for the Department of Transportation (DOT) to finalize a rule that would require electronic speed-limiting devices for large trucks and buses.  As DOT and other agencies prep for the incoming Administration and industry groups battle over the effectiveness of such a rule, it’s unlikely for the rule to be finalized in the waning days of the current Administration.  Under the next President and Transportation Secretary, could there be a final rule on this technology?   

Background on Speed-Restricting Technology

In August, DOT initially proposed a rule to implement technology within trucks and buses to limit their speeds at either 60, 65, or 68 mph.  The proposal would require all trucks weighing more than 26,000 pounds to be equipped with a speed-limiting device that would prevent excessive speed.   The rhetoric behind this device suggest limiting the speed of larger vehicles on the road can help prevent further accidents and even save lives.  When the rule was first announced, DOT Secretary Foxx said that the benefits to speed limiting devices also included a potential $1.1 billion in saved fuel costs and millions of gallons of gas saved annually, as slower speeds reduced fuel dependency.

The original proposal was developed by both the National Highway Traffic Safety Administration (NHTSA) and Federal Motor Carrier Safety Administration (FMCSA) within DOT.  After reviewing industry and consumer comments and once a final rule is set, the NHTSA would be responsible for establishing a new Federal motor vehicle safety standard to require the use of the device.  The standard would also need to record the settings of the device (dates and times of maintenance and when the device was installed), which would also need to comply with the diagnostic system of the vehicles.  The FMCSA would then be responsible for enforcing the standard.

The Benefits and Problems with Speed-Limiting Devices

The American Trucking Association (ATA), one of the trade groups that represents the trucking industry, has supported the proposed rule and noted that about 70 percent of trucking companies already use electronic limiters.  ATA also noted that speed is a contributing factor to nearly 29 percent of all fatal crashes.  Senator Schumer has been a proponent of the DOT proposal, highlighting during a press conference that in 2014 of the 10,742 police-reported large truck crashes in New York, 990 were related to unsafe speed.  Implementing this rule, Schumer said, would save nearly 1,000 lives each year.  

According to the cost-benefit analysis that accompanied the proposed rule, the reduced speed would cost industry per annum approximately $1.5 billion for those limited at 60 mph, $514 million at 65 mph, and $206 million for those at 68 mph.  However, these costs would easily be offset by the fuel savings benefits that would accompany lower speeds.  By also using the value of a statistical life to determine costs associated by fatalities on the road, as well as costs associated with injuries, damage, and insurance that accompany traffic collisions the proposal makes clear that the rule will be beneficial if implemented.

While the ATA already noted that many trucks and buses already have the speed-limiting devices in place, other industry groups are not in support of the proposed measure.  The Owner-Operator Independent Drivers’ Association (OOIDA), a group of independent truckers and smaller owners, believe the rule takes control out of the hands of drivers and actually puts them at risk on the road.  The trade association notes that “there is no clear evidence that the use of speed limiters will improve safety,” and notes that the rule would cause a variance of speed on the highway which studies have shown increase the risk of an accident.

The OOIDA highlights profit as an additional concern.  As the trade association representing independent and small business owners, the cost burden of compliance with equipping vehicles and delivery delays are serious issues.  The association asserts that driving below a 70 mph speed limit could cost drivers 50-55 miles per day, which equals $85.25 per day or $22,165 per year.  Instead of speed-limiting technology, small business owners and OOIDA support mandatory entry-level driver training programs to improve the quality of the drivers in large trucks.

Next Steps

This DOT proposed rule is merely one of dozens that remains on the chopping block for agencies as they enter the final weeks of the Obama Administration.  With new Cabinet-level and sub-cabinet leadership replaced in January it is highly unlikely for DOT to put forth a final rule within the last weeks of the Obama Administration, despite the best efforts of the soon-to-be Senate Minority Leader, Chuck Schumer.

President-elect Trump has tapped former Labor Secretary Elaine Chao to serve as the new Transportation Secretary under his Administration.  Chao, the wife of Senate Majority Leader Mitch McConnell, still needs Senate confirmation before she can begin managing the Department.  As Labor Secretary under President Bush, Chao received some criticism for her management of the Labor department when she was questioned by the Government Accountability Office for not pursuing labor violations.  Additionally, the mine disasters at Sago Mine and Crandall Canyon had highlighted lax enforcement of standards by the Mine Safety and Health Administration, especially since Chao had cut mine safety inspections prior to the disasters.

Despite her critics, Trump’s selection has been seen by many to reflect his seriousness in enacting one of his core campaign pledges for infrastructure development within his first 100 days.  As the longest-serving Secretary of Labor since Frances Perkins (1933 – 1945), Chao served the duration of the Bush administration and has served in many federal agencies prior to her service.  She would also be the first Asian-American to head the department, and the first with this background appointed by the Trump administration.

The incoming Administration has said it would issue a temporary moratorium on new agency regulations that are not compelled by Congress or by public safety to eliminate ‘intrusive regulations.’  Under this regulatory environment it seems a final rule on speed-limiting technology will not be a DOT priority with a Trump Administration.  Yet, with Chao’s prior bureaucratic experience and a campaign pledge for infrastructure reform, there may be a future for speed-restricting devices under Secretary Chao and President Trump.

Image source: Associated Press

G-7 Cybersecurity Accord Aims to Protect Financial Institutions

The Group of Seven (G-7) leaders recently agreed on a set of guidelines to better protect global financial institutions from cyberattacks.  This non-binding accord recognizes the recent pervasive cyberattacks that have hit accounts of major institutions, including the U.S. Federal Reserve.  While the accord signals attention to this international problem, does it really have the ability to better secure the financial integrity of institutions?  Will a new administration seek to pursue cybersecurity through a multinational lens, or will it seek a unilateral approach?

Cyber Policy So Far

Congress passed the Cybersecurity Information Sharing Act of 2015 to make it easier for private companies to share cyber threat information with each other and also with government entities.  The Obama Administration built on the legislation by setting forth a Cybersecurity National Action Plan (CNAP), calling for more funding to modernize government IT systems and place Federal Chief Information Security Officers to implement these changes in agencies across government.  CNAP also partnered with large private companies, like Google, Microsoft, and MasterCard to make it easier for their customers to have more secure accounts and data security.

Cybersecurity is a crucial concern not only for public and private entities, but also for consumers.  Executive Order 13681, ‘to improve the security of consumer financial transactions’ is a 2014 example of an effort to secure government payments, federal transactions online, and better find the perpetrators of theft from financial cybercrimes.  In both its 2015 and 2016 annual reports, the U.S. Financial Stability Oversight Council (FSOC) highlighted cybersecurity as a top priority for agencies to better protect consumer information and the entire financial system.

This past summer, the Administration released a Presidential Policy Directive (PPD) on U.S. Cyber Incident Coordination, to better differentiate significant cyber incidents, categorize government efforts, designate lead agencies to specific categories, and ensure a consistent response with national preparedness.

An Integrated Problem

Attention toward cybersecurity has spiked in the previous weeks with malicious attacks on the internet infrastructure.  On Friday, October 21, a massive internet outage was brought on by requests from millions of IP addresses that disrupted the internet directory services at least three times throughout the day.  The same problem of permeability is an issue for the international financial system.  Prior to the announcement of the G-7 Accord, hackers used the closed communication system that central banks use to send false money transfer requests to the Federal Reserve Bank of New York.  The requests were to move money out of the Bangladesh Bank’s accounts and into ones set up by the hackers, which lead to an estimated $81 million in stolen assets.

What does a G-7 Accord do?

The G-7 nations are a group of industrialized democracies that meet to discuss global economic governance, energy, and international security.  Formerly the G-8, the nations include the U.S., Japan, Canada, France, Germany, Italy and the U.K., with Russia removed from the group after its annexation of Crimea.  An accord from the group spells out a common doctrine that all member states will adopt as a baseline for their own national policies or legislation to work off of.

The G-7 Fundamental Elements of Cybersecurity for the Financial Sector breaks down the high-level fundamental pieces of cybersecurity into eight elements:

  • a cybersecurity strategy and framework informed by national, international and financial industry standards that would respond to specific attacks;
  • governance structures for clear reporting lines, as well as cyber risk tolerance policies for regulatory or oversight bodies;
  • identify activities and services that have cyber risk, identify controls to protect and manage the risks;
  • establish effective monitoring processes, whether on-site, supervisory, or even through joint public-private exercises;
  • establish timely containment, notification, and coordination of cyber incidents and response activities;
  • ensure quick and recovery of operations once stability is regained;
  • allow safe information sharing among entities to share insights; and
  • allow for continuous review and learning.

While broad, the Accord does already match current U.S. efforts in cybersecurity especially with the recent Presidential Policy Directive and the 2015 Cybersecurity Act.  Bringing all member nations under a similar rules regime could make it easier for non-affiliated and even state-sponsored hackers to be tracked and thwarted when engaging in major cyber incidents.  As the Accord reads,

“Public authorities within and across jurisdictions can use the elements as well to guide their public policy, regulatory, and supervisory efforts. Working together, informed by these elements, private and public entities and public authorities can help bolster the overall cybersecurity and resiliency of the international financial system.”

As a non-binding accord, the guidelines have little authority to completely guide the national priorities of the G-7 nations.  While representatives from the nations have agreed to these broad strokes in policy, the entire web of international cybersecurity can succumb to the adage that “a chain is only as strong as its’ weakest link.”  When major financial institutions and central banks interact with entities in each of these nations there are plenty of opportunities for hackers to take advantage of less strenuous cyber policy.  With no concrete mandate for each member to fully comply, there can be little guarantee that a G-7 Accord can protect international financial systems from a cyberattack.

What happens under the next Administration?

Trump’s proposal calls for an immediate review of all cyber defenses and develop protocols and cyber awareness for government employees.  Like the Obama Administration’s protocols, Trump calls for joint task forces throughout the U.S. to coordinate cyber threats and make recommendations to U.S. Cyber Command for offensive and defensive cyber tasks.  He also calls for the development of offensive cyber capabilities to respond to independent and state actors.

While executive actions can guide how agencies implement policy, only Congress can appropriate funding toward cyber initiatives to address the G-7 elements.  International coordination in this arena can help guide the administration, but in no way does this dictate national policy or direct legislative or executive action.  Instead the G-7 Accord can only guide the Administration in its’ quest for effective cyber policy to protect financial institutions, meaning it packs less of a punch that it would appear.

From their proposals, it seems that cybersecurity will continue to be a top priority across the federal government under a Trump administration.  Since both proposals fall within the eight elements set forth in the G-7 Accord, Trump would be poised to continue and even exceed the guidance set forth by the industrial powers.  Despite these ongoing efforts, the cyber infrastructure linking the global financial system remains at risk to the independent actions of highly skilled hackers.

Image source: The Hill

Sinking into Debt: Can Congress move quickly enough to save Puerto Rico?

Facing over $72 billion in debt, Puerto Rico is in the midst of a battle within the US legal system and Congress to help bring relief to its 3 million US citizens. As a territory, existing law does not allow P.R. the types of bankruptcy options that are afforded to US cities or states. With a large portion of its payments due in May, time is of the essence to provide relief for Puerto Rico. Rare bipartisan support in the House leadership and the Executive branch have created a unique policy opportunity that could be a light at the end of the tunnel for the struggling Commonwealth.

On Tuesday, March 22, Speaker Ryan announced that the House Committee on Natural Resources will take up a relief bill on April 13 to assist the territory, with a discussion draft of the legislation likely ready by the end of March [1]. Once Congress returns from its recess on April 12, it will have to act quickly to meet the May payment deadline when $400 million in debt payments are due [2]. If all goes according to plan, what provisions would a meaningful relief bill include? Would Congress even consider such a piece of legislation in a contentious election cycle?

What’s Happening with Puerto Rico?

Puerto Rico’s financial troubles have been ongoing for nearly a decade, when the island territory lost a special tax-exempt status from Congress as it battled the 2007 economic recession. As economic conditions worsened and the government raised taxes to pay off its growing debt, many citizens left and headed for the mainland while still maintaining their U.S. citizenship. As their debts became due, the territory had to continue raising taxes or deferring payments to bondholders, ultimately digging themselves into a $72 billion hole [3].

pr debt

(Washington Post, 2015)

During oral arguments before the Supreme Court on March 22, bondholders and the Commonwealth disputed Puerto Rico’s bankruptcy status. Federal bankruptcy law prevents territories and other non-states (that includes Washington, D.C.) from using Chapter 9 bankruptcy or from creating their own bankruptcy legislation. Puerto Rico took such action in 2015 when it passed legislation to restructure its debt, and bondholders have argued that this clearly violates federal statute. While it appears that Justice Sotomayor may have supported Puerto Rico, Justices Breyer and Kagan both seemed to agree that the Court could not justify the Commonwealth’s actions within the language of the current US bankruptcy code.

What Would a Relief Bill Look Like?

In October of 2015, the White House issued a series of legislative proposals to help bring Puerto Rico off its debt-cliff. President Obama called on Congress to:

  • Give Chapter 9 bankruptcy protection to municipalities and the Commonwealth
  • Provide independent fiscal oversight and assistance with proper accounting and disclosure procedures
  • Give Puerto Rico access to the Earned-Income Tax Credit (EITC) to support growth
  • Help expand access and quality of Medicaid coverage to the Commonwealth’s population.

Providing Puerto Rico with the proper tools to restructure its debt is also at the center of a November 2015 proposal from the Treasury Department, which said the Commonwealth should receive a federal bankruptcy regime specifically tailored to its large debt (debt service alone takes 1/3 of governmental revenue of the Commonwealth) and status as a territory. The Treasury Department notes that Puerto Rico would gain restructuring authority for its debts only if it accepts an independent fiscal oversight board to help streamline spending.

Some measures have already been introduced by Congress on both sides of the aisle, including separate legislation authored by Senator Menendez (D-NJ), Senator Orrin Hatch (R-UT), and Representative Sean Duffy (R-SC). While each of these bills offer creation of an independent fiscal oversight board of some sort, only Sen. Hatch’s legislation does not call for placing Puerto Rico under the Chapter 9 bankruptcy provisions. According to GovTrack, Senator Menendez’s legislation currently has a 22% chance of making it past committee, and a 10% chance of being enacted, which means the language within Menendez’s bill is more likely to exist in a comprehensive relief bill.

While it is unclear what the final text of the relief bill will include, it is likely to consist of an oversight mechanism to monitor fiscal spending and a payment plan or restructuring plan to help pay-off at least some of the Commonwealth’s $72 billion debt. An early outline of the GOP draft bill that has been leaked to the press confirms these two points, as well as a stay on any lawsuits regarding debt payments. Any final legislative package would also need to consider the bondholders that are awaiting fulfillment of their payment obligations.

What Happens Next?

The House Natural Resources Committee is set to hold a hearing on the relief bill on April 13, when the bill can be passed from Committee to the full House for a vote. If Speaker Ryan is adamant about passing this relief package, a floor vote should quickly follow. The Senate, which has offered several versions of relief packages as well from both sides of the aisle, would have to follow suit quickly before the May deadline to help Puerto Rico meet its payments. If the Supreme Court delivers a decision on the Commonwealth’s status before the legislation is completed, this could further complicate Puerto Rico’s pathway to recovery.

Image source: Matt McClain, Washington Post
[1] Speaker Ryan had previously committed lawmakers to have a plan for relief completed by this date.
[2] It is interesting to note that, upon their return on April 12, the House of Representatives will only have 62 days left in session before the end of term.
[3] For a great, easy-to-read summary on the background of Puerto Rico’s debt situation, I recommend Vox’s piece from August 2015, http://www.vox.com/2015/7/1/8872553/puerto-rico-crisis.

May it Please the Court…but Mostly the Senate

 

Justice Scalia’s recent passing has created a political hailstorm, bringing  the third branch of government into the heat of electoral primary politics. Earlier this month, President Obama announced via SCOTUS blog his intention to fulfill his responsibilities as the commander-in-chief and nominate a justice to the Court, saying that his nominee would have “a sterling record…a deep respect for the judiciary’s role…an understanding of the way the world really works” [1]. Republican’s stated opposition to any nominee has created a unique policy challenge that can be addressed through Constitutional powers wielded by the President, but a long-term solution to the Court’s vacancy will be much more difficult to reach.

Learning from the Past

Article II of the Constitution requires federal judges and executive appointments be confirmed with the ‘advice and consent’ of the Senate. The Constitution also notes that when vacancies arise during a recess of the Senate, the President can fill them via commissions that expire at the end of the next session. Presidents have previously used the recess appointment power to fill several vacancies, with a recent notable example being Richard Cordray’s appointment as Director for the Consumer Financial Protection Bureau (CFPB) in 2012, his reappointment in 2013, and final Senate confirmation in July of 2013.

Recess appointments for the Supreme Court are not unheard of, but haven’t been used since Eisenhower administration. In October of 1953, Eisenhower appointed Earl Warren as Chief Justice to fill the vacancy left by the death of the former chief, Fred Vinson. Months later in March 1954, the Senate confirmed his appointment.  Eisenhower later nominated William Brennan and Potter Stewart via recess appointments to the Court with subsequent Senate confirmations in 1956 and 1958, respectively.

The recess appointment tool could help President Obama fill the vacancy on the high court, but it would need to be tailored specifically to meet recent parameters set by the Supreme Court itself. After Obama used this power to fill three vacancies on the National Labor Relations Board in 2012, the Court ruled unanimously that the appointments were unconstitutional because the Senate was not actually in recess over their twenty-day break. Justice Breyer’s majority opinion highlighted that the Senate met in pro forma sessions and thus the appointments did not meet the constitutional requirement of taking place during a recess.  Breyer stated bluntly that “For purposes of the Recess Appointments Clause, the Senate is in session when it says that it is.”

To effectively handle not only the Supreme Court vacancy but also the growing backlog of executive appointments and federal judges, the President retains the ability to set recess appointments without the advice or consent of the U.S. Senate [2]. While powerful, the appointment here provides only a temporary fix for a long-term problem, as the appointments would eventually expire without retroactive Senate approval.  

Senate Opposition

As Chair of the Senate Judiciary Committee, Senator Grassley (R-IA) stated that there would be no consideration of a Supreme Court nominee until the next President takes office in 2017. Despite harsh criticism from congressional Democrats and presidential candidates, Grassley’s push to wait for a new President to fill the Court’s vacancy is not an entirely unheard of position. During the 1992 nomination of Clarence Thomas, then-Chairman of the Senate Judiciary Committee Joseph Biden voiced his opposition to a confirmation and instead pushed for the next administration to fill the vacancy. Similar remarks were made by Senator Schumer in 2007, noting that the Senate should “reverse the presumption of confirmation” to the high court and instead only fill vacancies to the Court in extraordinary circumstances, should vacancies arise.

The Senators’ comments not only reflect the political nature of the confirmation process, but also the long-term importance of filling the vacancies of the nation’s highest Court.  An appointee with more left-leaning ideologies would have the ability to defend and uphold the more progressive policies of the Obama administration for decades, while a more conservative jurist can just as easily reverse the decisions and change the court’s direction on same-sex marriage, immigration, affirmative action, and environmental regulation.

While recess appointments can help Obama bypass a Senate in opposition, the Republican majority can also meet in pro forma sessions and avoid declaring a recess to hinder the appointment. Another option available to the Administration is to wait, allowing the next president to fill the position. While also a plausible but controversial decision, the effects of a prolonged court vacancy could be detrimental to the Obama administration’s legacy since any tie decision (a 4-4 ruling) would automatically uphold rulings from the lower court. This could lead to powerful rulings on teacher pay into unions, nonprofits declaring exemptions to help pay employee’s birth control, state abortion laws, and affirmative action.

Outlook

The recess appointment remains a plausible solution for the President in his search for a Supreme Court appointee, but is only a temporary fix subject to the next Congress.  As the Administration works to find a long-term fix, it seems likely the election cycle and the possibility of another Democratic administration will drive Senate Republicans out of their hard-line position to conduct a hearing on an Obama nominee before the November elections [3].   

[1] ‘Blogger-In-Chief,’ or ‘BLOTUS’ were floated as presidential nicknames after this post.
[2] At least thirty federal judges and several other executive agency appointments await Senate confirmation, some of whom have been waiting for over a year.  
[3] There are fourteen Republican Senators up for re-election in November including Senators Grassley (R-IA) and Vitter (R-LA), both members of the Senate Judiciary Committee.

Connectivity Error: The Access Gap in Broadband Internet

As part of her campaign infrastructure plan, Democratic presidential front runner Hillary Clinton called for connecting 100 percent of households by 2020 with affordable, high-speed internet access. Her proposal highlights a gap in broadband internet access within lower income and rural communities, and seeks to eradicate it through affordable solutions and investment in free Wi-Fi for public spaces. Current federal agency programs and partnerships with private companies have also attempted to bridge this gap, however the U.S. is 23rd in the world for best broadband access. Despite these shortcomings, alternative solutions at the state and local level have given new hope to the possibility of bridging the internet access gap, and as a result, fulfilling Clinton’s campaign proposal.

According to a January 2015 White House report, the access gap refers the nearly 51 million Americans that cannot purchase wired broadband connection with speeds up to 25 megabits per second (Mbps). The report also highlights that 63% of the these 51 million Americans have access to speeds of 100Mbps[1] or greater with available internet broadband, the speed at which the Department of Education says is the baseline to support 21st century digital learning. At a recent Brooking’s Institution event which highlighted the internet access gap, scholars noted that the federal government plays a vital role in removing these barriers to access and affordability which often compound disparities in education and wealth throughout the country. Many efforts at the federal agency level have sought to address these barriers, including Administration programs and massive funding distributed as a result of the American Recovery and Reinvestment Act (ARRA).

ConnectHome, an Obama administration initiative launched by the Department of Housing and Urban Development (HUD), seeks to build public-private partnerships between internet service providers and businesses to provide computer training and technical support.  Additionally, the program encourages education groups to offer services for students and young adults looking to engage in SAT prep courses of job training. Thus far, the program is active across 28 communities, including one tribal nation, reaching a total of 275,000 homes in public housing.

Within the Department of Commerce, the National Technology and Information Administration (NTIA) manages different programs to expand access to and quality of internet connectivity. For example, BroadbandUSA works with key stakeholders to provide technical assistance and improve quality. When Congress passed the American Recovery and Reinvestment Act in 2009 (ARRA), several new programs sought to expand broadband to particular areas, including the Rural Utility Service’s Broadband Initiatives Program and Broadband Technology Opportunity Program within the Commerce Department.

Despite this progress, not all agency programs have been as successful. Last summer, Politico reported the Rural Utility Services’ mismanagement of nearly $277 million in ARRA funding intended for broadband access to rural communities. Of the 192 different projects that relied on this funding, 42 projects (totaling $300 million) were never started. Additionally, the program has to date only impacted several hundred thousand residents, a serious shortcoming from the 7 million residents originally projected to benefit from the funding.

While federal programs have been able to deliver broadband internet, state and local efforts have also been somewhat successful in their drive to expand broadband internet access. For example, municipal broadband provided by local governments has the ability to connect underserved communities while competing with private providers to drive prices down and increase the quality of service. In one such instance, the Vermont Telecommunications Authority (VTA) launched a $100 million project to provide grants for infrastructure projects in underserved areas for commercial, residential, and community institutions. The VTA was able to lease services to different internet service providers that would meet their stringent requirements.

Chattanooga, Tennessee provided a successful public solution to the internet access gap based on speed of service. The city recently began offering 10 gigabit[2] broadband speeds to 170,000 customers within the urban area, beating the speed of the local competition –a 2 gigabit-speed Comcast service. Similar high-speed services have been offered to smaller populations in Salisbury, North Carolina and Springfield, Vermont, where faster speeds benefit local businesses, households, and schools.

Public intervention into the broadband service sector has been met with hostility from several private companies that claim an interference with the free market system. Providers fearful of losing their market share have already taken action to prevent public involvement in their business. From a policy perspective, a delicate balance should be struck between business growth and the government’s ability to provide services for everyone.

Broadband for All: A Way Forward

In particular, two pieces of legislation introduced last year might provide an interesting solution to this problem. First, the ‘Federal Spectrum Incentive Act’ would give the FCC tools to make more electromagnetic spectrum available for auction from federal agencies. As the single largest user of spectrum, auctioning within the federal government could greatly assist private companies which are looking to carve out a greater market share and expand their business.

Second, the ‘Broadband Community Act of 2015’ could protect local and municipal governments by providing broadband services to individuals or businesses. Maintaining the government as a possible competitor will force larger providers to consider lowering prices or improving service to remain in business. If passed, this legislation would greatly assist needy communities that are often neglected by larger providers.

A lack of broadband internet access can stifle education, the economy, and the competitiveness of the U.S. labor force. Expanding broadband access to underserved areas continues to be the sole objective of several federal agencies, dozens of grant programs, and even public services at the municipal level.  To improve these efforts, policymakers should pass legislation both to maintain the government’s ability to service neglected areas and to encourage the sale of unused spectrum to private companies that can turn it into broadband for consumer use. A comprehensive, long-term solution requires the interplay of private business’ innovation with the government’s resources and its all-encompassing mandate. This dual approach could be the key to meeting the goal of 100 percent household access by 2020.

[1] For comparison’s sake EagleSecure operates at speeds of 100-150 Mbps, which many complain is still too lethargic.

[2] 1 gigabit = 1,000 Mbps.

Image source: Shutterstock