Russia ‘moves troops, helicopters and armoured vehicles’ to its border with North Korea
‘New weapons’ displayed during military parade in North Korea to celebrate Kim Il SungA symphony orchestra played as one of Kim’s missiles hurtled into the US and revealed a smouldering Stars and Stripes flag.
Military figures watched on gleefully as uniformed troops from the Korean State Merited Chorus belted out a series of tuneless numbers.
And in a verse unlikely to make its way onto Broadway any time soon, one warbled: “Our proud Hwasong rocket blasts off” and “it flies as quickly as a flash of lightning to challenge imperialism”.
Others played trumpets as the 90s-style film saw a ballistic missile roar into America.
Accompanying it are the words: “If US imperialists move an inch toward us, we will immediately hit them with nukes.”
The bizarre video was played at the 105th birthday celebration of Kim’s late grandfather Kim Il-Sung at the weekend.
His regime had earlier that day put on a huge military procession to show off the country’s ballistic missile arsenal.
North Korea propaganda video shows US aircraft carrier being blown up
Story 2: Obama’s Iran Nuclear Agreement Legacy Heading Towards The Wastebasket? No. Certification Granted and Sanctions Suspended — All Talk–No Action — Bad Appeasement Deal Stands — Videos —
The Iran Nuclear Deal
How the Iran nuclear deal works, explained in 3 minutes
Iran and the Bomb
Published on May 12, 2014
Many countries have nuclear weapons, and many more want them. Only one, though, has its neighbors and the world terrified. That country is Iran. Why is everyone so concerned? Because the Islamic theocracy has repeatedly threatened to destroy Israel, sponsors global terrorism, and would leverage the deterrence effect of a nuclear weapon to advance their anti-Western and anti-American interests. Bret Stephens, foreign affairs columnist for the Wall Street Journal explains the one thing you really need to know in order to understand why we can’t let Iran get the bomb–they may actually use it.
The Iran Nuclear Deal Explained
The Iran Nuclear Deal Explained
Donald Trump on Iran Nuclear Agreement (C-SPAN)
Trump on Iran: ‘They will know I am not playing games’
Donald Trump on nuke deal: They are laughing at us in Iran
Sec. Rex Tillerson Warns ‘Unchecked’ Iran Could Follow Path Of North Korea | NBC Nightly News
Trump administration certifies Iran compliant with nuclear deal – donald trump news
Tillerson announces NSC will review the Iran nuclear deal
Secretary of State Rex Tillerson says Iran could be the next North Korea
Tillerson Threatens Iran: ‘The Great Destabilizer’?
Trump Shies Away From Striking Down Obama Era Iran Deal: Why It Doesn’t Matter
What’s In The Iran Nuclear Deal?
Implementation of the JCPOA: Is It Working?
Tillerson Toughens Tone on Iran After U.S. Confirms Nuclear Deal Compliance
By GARDINER HARRIS APRIL 19, 2017
President Trump at the White House on Wednesday. During the 2016 campaign, he denounced the nuclear agreement with Iran as “the worst deal ever.”CreditAl Drago/The New York Times
WASHINGTON — Secretary of State Rex W. Tillerson described a landmark Iran nuclear deal as a failure on Wednesday, only hours after the State Department said Tehran was complying with its terms. But the top United States diplomat stopped short of threatening to jettison the 2015 agreement that was brokered by world powers, or saying whether the Trump administration would punish Iran with new sanctions.
The whiplash left Republicans on Capitol Hill, who had universally excoriated the agreement to limit Iran’s nuclear program and voted against its implementation, uncertain of how to respond. Its architects, however, said they were cautiously optimistic that the deal would stay in place.
The nuclear deal “fails to achieve the objective of a non-nuclear Iran,” Mr. Tillerson said. “It only delays their goal of becoming a nuclear state.”
He said that Iran continued to threaten the United States and the rest of the world, and he announced that the Trump administration was reviewing ways to counter challenges posed by Tehran.
It was an attempt to clarify a State Department certification, issued shortly before a midnight deadline on Tuesday, that said Iran was complying with the nuclear agreement that also eased crippling international sanctions against the Islamic republic’s economy. During the 2016 campaign, President Trump denounced the agreement as “the worst deal ever,” and Vice President Pence promised to rip it up.
In a hastily called news conference at the State Department on Wednesday, Mr. Tillerson likened Iran to North Korea, whose nuclear weaponry and burgeoning missile technology is what the administration now believes is the gravest risk to world peace and security. Mr. Pence visited Seoul, South Korea, this week to declare that the United States was united with its allies to stem North Korea’s threat.
The Iran deal “represents the same failed approach to the past that brought us to the current imminent threat that we face from North Korea,” Mr. Tillerson told reporters. “The Trump administration has no intention of passing the buck to a future administration on Iran. The evidence is clear: Iran’s provocative actions threaten the United States, the region and the world.”
Once the National Security Council completes a review of the nuclear deal, Mr. Tillerson said, “we will meet the challenges Iran poses with clarity and conviction.”
Hours earlier, late on Tuesday night, Mr. Tillerson sent a terse letter to Speaker Paul D. Ryan pledging to evaluate whether earlier suspension of sanctions against Iran, as required under the terms of the nuclear agreement, “is vital to the national security interests of the United States.”
A man of few words, Mr. Tillerson has sometimes found that his cryptic remarks create more confusion than clarity among allies, friends and even adversaries. Earlier on Wednesday, Sean Spicer, the White House press secretary, offered little additional information about the Iran certification. He refused to say whether the Trump administration would add the Iran deal to a series of other stunning foreign policy reversals it has made by deciding to retain it instead of ripping it up or renegotiating the agreement as promised.
“I think part of the review, the interagency process, is to determine where Iran is in compliance with the deal and to make recommendations to the president on the path forward,” Mr. Spicer said.
The enigmatic remarks left top Republicans on Capitol Hill nonplused. Senator Tom Cotton, the Arkansas Republican who led congressional opposition to the Iran deal, said in a statement that the administration’s “certification is shaky, and it doesn’t mean that the intentions behind Iran’s nuclear program are benign.”
Senator Bob Corker, Republican of Tennessee and chairman of the Foreign Relations Committee, said the Trump administration appeared to be preparing a tougher line against Iran.
“Secretary Tillerson made clear that regardless of Iran’s technical compliance with the nuclear deal, the administration is under no illusion about the continued threat from Tehran and is prepared to work closely with Congress to push back,” Mr. Corker said in a statement on Wednesday.
Tuesday’s certification extends sanctions relief for Iran in exchange for continued constraints on its nuclear program. American sanctions, as approved by Congress, were suspended instead of revoked; they can be reimposed with the stroke of a presidential pen.
The Trump administration has given itself 90 days to complete its review, but it will need to make a series of decisions in coming weeks about whether to continue its support of the deal, which was also brokered with Britain, China, France, Germany and Russia. Those governments, along with representatives of the United States and Iran, will meet next week in Vienna to review the pact’s progress.
Mr. Trump faces a mid-May deadline, as imposed by Congress, to decide whether to continue the suspension of sanctions.
Backing away from the agreement would spur enormous consternation across Europe and in Moscow.
In their first congratulatory phone calls to Mr. Trump after his electoral victory, both President Vladimir V. Putin of Russia and Chancellor Angela Merkel of Germany emphasized the need to keep the Iran deal in place. And after her first meeting with Mr. Tillerson in February, Federica Mogherini, the European Union’s foreign minister, said the Trump administration pledged “to stick to the full strict implementation of the agreement in all its parts.”
Analysts and former government officials said it was unlikely the Trump administration would renounce the Iran agreement.
“I’m glad this deal has held up to this point, and I hope it continues to hold up,” said Wendy Sherman, a former under secretary of state who was deeply involved in negotiating terms of the deal during the Obama administration.
Robert Einhorn, a senior fellow at the Brookings Institution who was involved in Iran policy under President Barack Obama, said it was “pretty much a foregone conclusion” that Mr. Trump would keep the nuclear agreement in place.
Still, the administration has sought since its first days in office to ratchet up pressure on Iran. In January, before he resigned, Michael T. Flynn, then the national security adviser, walked into the White House briefing room and declared that the administration was “officially putting Iran on notice” after it launched a ballistic missile.
The Trump administration has returned the United States to closer ties with its traditional Arab friends in the Middle East, including Saudi Arabia and the United Arab Emirates. Part of those ties means supporting those nations, which are overwhelmingly Sunni Muslim, in their intense rivalry with Iran, a Shiite power.
By contrast, by the end of his second term, Mr. Obama had begun to view those sectarian tensions with a jaundiced eye, believing the United States should not intervene in a millennium-old religious struggle.
Earlier on Wednesday, Mr. Tillerson attended a United States-Saudi Arabia chief executive summit meeting where he declared that he was “pleased to be here today to reaffirm the very strong partnership that exists between the United States and the kingdom of Saudi Arabia.”
Mark Dubowitz, chief executive of the Foundation for Defense of Democracies, a group that sought to defeat the Iran deal, said the administration may still walk away from the agreement or renegotiate it. He contended that the administration “should not be bound by arms control agreements that are deeply flawed.”
And even Ms. Sherman shied away from predicting it will remain in place. “I’m taking this one day at a time,” she said.
Formal negotiations toward the Joint Comprehensive Plan of Action on Iran’s nuclear program began with the adoption of the Joint Plan of Action, an interim agreement signed between Iran and the P5+1 countries in November 2013. For the next twenty months, Iran and the P5+1 countries engaged in negotiations, and in April 2015 agreed on an Iran nuclear deal framework for the final agreement and in July 2015, Iran and the P5+1 agreed on the plan.
Under the agreement, Iran agreed to eliminate its stockpile of medium-enriched uranium, cut its stockpile of low-enriched uranium by 98%, and reduce by about two-thirds the number of its gas centrifuges for 13 years. For the next 15 years, Iran will only enrich uranium up to 3.67%. Iran also agreed not to build any new heavy-water facilities for the same period of time. Uranium-enrichment activities will be limited to a single facility using first-generation centrifuges for 10 years. Other facilities will be converted to avoid proliferation risks. To monitor and verify Iran’s compliance with the agreement, the International Atomic Energy Agency (IAEA) will have regular access to all Iranian nuclear facilities. The agreement provides that in return for verifiably abiding by its commitments, Iran will receive relief from U.S., European Union, and United Nations Security Council nuclear-related economic sanctions.
In 1979, the Iranian Revolution took place, and Iran’s nuclear program, which had developed some baseline capacity, fell to disarray as “much of Iran’s nuclear talent fled the country in the wake of the Revolution.” Ayatollah Ruhollah Khomeini was initially opposed to nuclear technology; and Iran engaged in a costly war with Iraq from 1980 to 1988.
Starting in the later 1980s, Iran restarted its nuclear program, with assistance from Pakistan (which entered into a bilateral agreement with Iran in 1992), China (which did the same in 1990), and Russia (which did the same in 1992 and 1995), and from the A.Q. Khan network. Iran “began pursuing an indigenous nuclear fuel cycle capability by developing a uranium mining infrastructure and experimenting with uranium conversion and enrichment.” According to the nonpartisan Nuclear Threat Initiative, “U.S. intelligence agencies have long suspected Iran of using its civilian nuclear program as a cover for clandestine weapons development.” Iran, in contrast, “has always insisted that its nuclear work is peaceful”.
In August 2002, the Paris-based National Council of Resistance of Iran, an Iranian dissident group, publicly revealed the existence of two undeclared nuclear facilities, the Arak heavy-water production facility and the Natanz enrichment facility. In February 2003, Iranian President Mohammad Khatami acknowledged the existence of the facilities and asserted that Iran had undertaken “small-scale enrichment experiments” to produce low-enriched uranium for nuclear power plants. In late February, International Atomic Energy Agency (IAEA) inspectors visited Natanz. In May 2003, Iran allowed IAEA inspectors to visit the Kalaye Electric Company, but refused to allow them to take samples, and an IAEA report the following month concluded that Iran had failed to meet its obligations under the previous agreement.
In June 2003, Iran—faced with the prospect of being referred to the UN Security Council—entered into diplomatic negotiations with France, Germany, and the United Kingdom (the EU 3). The United States refused to be involved in these negotiations. In October 2003, the Tehran Declaration was reached between Iran and the EU 3; under this declaration Iran agreed to cooperate fully with the IAEA, sign the Additional Protocol, and temporarily suspend all uranium enrichment. In September and October 2003, the IAEA conducted several facility inspections. This was followed by the Paris Agreement in November 2004, in which Iran agreed to temporarily suspend enrichment and conversion activities, “including the manufacture, installation, testing, and operation of centrifuges, and committed to working with the EU-3 to find a mutually beneficial long-term diplomatic solution”.
In August 2005, Mahmoud Ahmadinejad, a hard-liner, was elected president of Iran. He accused Iranian negotiators who had negotiated the Paris Accords of treason. Over the next two months, the EU 3 agreement fell apart as talks over the EU 3’s proposed Long Term Agreement broke down; the Iranian government “felt that the proposal was heavy on demands, light on incentives, did not incorporate Iran’s proposals, and violated the Paris Agreement”. Iran notified the IAEA that it would resume uranium conversion at Esfahan.
In February 2006, Iran ended its voluntary implementation of the Additional Protocol and resumed enrichment at Natanz, prompting the IAEA Board of Governors to refer Iran to the UN Security Council. After the vote, Iran announced it would resume enrichment of uranium. In April 2006, Ahmadinejad announced that Iran had nuclear technology, but stated that it was purely for power generation and not for producing weapons. In June 2006, the EU 3 joined China, Russia, and the United States, to form the P5+1. The following month, July 2006, the UN Security Council passed its first resolution demanding Iran stop uranium enrichment and processing.Altogether, from 2006 to 2010, the UN Security Council subsequently adopted six resolutions concerning Iran’s nuclear program: 1696 (July 2006), 1737 (December 2006), 1747 (March 2007), 1803 (March 2008), 1835 (September 2008), and 1929 (June 2010). The legal authority for the IAEA Board of Governors referral and the Security Council resolutions was derived from the IAEA Statute and the United Nations Charter. The resolutions demanded that Iran cease enrichment activities and imposed sanctions on Iran, including bans on the transfer of nuclear and missile technology to the country and freezes on the assets of certain Iranian individuals and entities, in order to pressure the country. However, in Resolution 1803 and elsewhere the Security Council also acknowledged Iran’s rights under Article IV of the NPT, which provides for “the inalienable right … to develop research, production and use of nuclear energy for peaceful purposes”.[b]
In July 2006, Iran opened the Arak heavy water production plant, which led to one of the Security Council resolutions. In September 2009, U.S. President Barack Obama, revealed the existence of an underground enrichment facility in Fordow, near Qom saying, “Iran’s decision to build yet another nuclear facility without notifying the IAEA represents a direct challenge to the basic compact at the center of the non-proliferation regime.” Israel threatened to take military action against Iran.
In a February 2007 interview with the Financial Times, IAEA director general Mohamed ElBaradei said that military action against Iran “would be catastrophic, counterproductive” and called for negotiations between the international community and Iran over the Iranian nuclear program. ElBaradei specifically proposed a “double, simultaneous suspension, a time out” as “a confidence-building measure”, under which the international sanctions would be suspended and Iran would suspend enrichment. ElBaradei also said, “if I look at it from a weapons perspective there are much more important issues to me than the suspension of [enrichment],” naming his top priorities as preventing Iran from “go[ing] to industrial capacity until the issues are settled”; building confidence, with “full inspection” involving Iranian adoption of the Additional Protocol; and “at all costs” preventing Iran from “moving out of the [treaty-based non-proliferation] system”.
A November 2007 U.S. National Intelligence Estimate assessed that Iran “halted its nuclear weapons program” in 2003; that estimate and subsequent U.S. Intelligence Community statements also assessed that the Iranian government at the time had was “keeping open the ‘option’ to develop nuclear weapons” in the future. A July 2015 Congressional Research Service report said, “statements from the U.S. intelligence community indicate that Iran has the technological and industrial capacity to produce nuclear weapons at some point, but the U.S. government assesses that Tehran has not mastered all of the necessary technologies for building a nuclear weapon.”
In March 2013, the United States began a series of secret bilateral talks with Iranian officials in Oman, led by William Joseph Burns and Jake Sullivan on the American side and Ali Asghar Khaji on the Iranian side. In June 2013, Hassan Rouhani was elected president of Iran. Rouhani has been described as “more moderate, pragmatic and willing to negotiate than Ahmadinejad”. However, in a 2006 nuclear negotiation with European powers, Rouhani said that Iran had used the negotiations to dupe the Europeans, saying that during the negotiations, Iran managed to master the conversion of uranium yellowcake at Isfahan. The conversion of yellowcake is an important step in the nuclear fuel process. In August 2013, three days after his inauguration, Rouhani called for a resumption of serious negotiations with the P5+1 on the Iranian nuclear program. In September 2013, Obama and Rouhani had a telephone conversation, the first high-level contact between U.S. and Iranian leaders since 1979, and U.S. Secretary of State John Kerry had a meeting with Iranian foreign minister Mohammad Javad Zarif, signaling that the two countries had an opening to cooperation.
After several rounds of negotiations, on 24 November 2013, the Joint Plan of Action, an interim agreement on the Iranian nuclear program, was signed between Iran and the P5+1 countries in Geneva, Switzerland. It consisted of a short-term freeze of portions of Iran’s nuclear program in exchange for decreased economic sanctions on Iran, as the countries work towards a long-term agreement. The IAEA began “more intrusive and frequent inspections” under this interim agreement. The agreement was formally activated on 20 January 2014. On that day, the IAEA issued a report stating that Iran was adhering to the terms of the interim agreement, including stopping enrichment of uranium to 20 percent, beginning the dilution process (to reduce half of the stockpile of 20 percent enriched uranium to 3.5 percent), and halting work on the Arak heavy-water reactor.
The agreement between the P5+1+EU and Iran on the Joint Comprehensive Plan of Action (JCPOA) is the culmination of 20 months of “arduous” negotiations.
The agreement followed the Joint Plan of Action (JPA), an interim agreement between the P5+1 powers and Iran that was agreed to on 24 November 2013 at Geneva. The Geneva agreement was an interim deal, in which Iran agreed to roll back parts of its nuclear program in exchange for relief from some sanctions. This went into effect on 20 January 2014. The parties agreed to extend their talks with a first extension deadline on 24 November 2014 and a second extension deadline set to 1 July 2015.
An Iran nuclear deal framework was reached on 2 April 2015. Under this framework Iran agreed tentatively to accept restrictions on its nuclear program, all of which would last for at least a decade and some longer, and to submit to an increased intensity of international inspections under a framework deal. These details were to be negotiated by the end of June 2015. The negotiations toward a Joint Comprehensive Plan of Action were extended several times until the final agreement, the Joint Comprehensive Plan of Action, was finally reached on 14 July 2015. The JCPOA is based on the framework agreement from three months earlier.
Subsequently the negotiations between Iran and the P5+1 continued. In April 2014, a framework deal was reached at Lausanne. Intense marathon negotiations then continued, with the last session in Vienna at the Palais Coburg lasting for seventeen days. At several points, negotiations appeared to be at risk of breaking down, but negotiators managed to come to agreement. As the negotiators neared a deal, U.S. Secretary of State John Kerry directly asked Iranian Foreign Minister Mohammad Javad Zarif to confirm that he was “authorized to actually make a deal, not just by the [Iranian] president, but by the supreme leader?” Zarif gave assurances that he was.
Ultimately, on 14 July 2015, all parties agreed to a landmark comprehensive nuclear agreement. At the time of the announcement, shortly before 11:00 GMT, the agreement was released to the public.
The final agreement’s complexity shows the impact of a public letter written by a bipartisan group of 19 U.S. diplomats, experts, and others in June 2015, written when negotiations were still going on. That letter outlined concerns about the several provisions in the then-unfinished agreement and called for a number of improvements to strengthen the prospective agreement and win their support for it. After the final agreement was reached, one of the signatories, Robert J. Einhorn, a former U.S. Department of State official now at the Brookings Institution, said of the agreement: “Analysts will be pleasantly surprised. The more things are agreed to, the less opportunity there is for implementation difficulties later on.”
The final agreement is based upon (and buttresses) “the rules-based nonproliferation regime created by the Nuclear Non-Proliferation Treaty (NPT) and including especially the IAEA safeguards system.”
Souvenir signatures of lead negotiators on the cover page of the JCPOA document. The Persian handwriting on top left side is a homage by Javad Zarif to his counterparts’ efforts in the negotiations: “[I am] Sincere to Mr. Abbas [Araghchi] and Mr. Majid [Takht-Ravanchi].”
Iran’s current stockpile of low-enriched uranium will be reduced by 98 percent, from 10,000 kg to 300 kg. This reduction will be maintained for fifteen years. For the same fifteen-year period, Iran will be limited to enriching uranium to 3.67%, a percentage sufficient for civilian nuclear power and research, but not for building a nuclear weapon.However, the number of centrifuges is sufficient for a nuclear weapon, but not for nuclear power. This is a “major decline” in Iran’s previous nuclear activity; prior to watering down its stockpile pursuant to the Joint Plan of Action interim agreement, Iran had enriched uranium to near 20% (medium-enriched uranium). These enriched uranium in excess of 300 kg of up to 3.67% will be down blended to natural uranium level or be sold in return for natural uranium, and the uranium enriched to between 5% and 20% will be fabricated into fuel plates for the Tehran Research Reactor or sold or diluted to an enrichment level of 3.67%. The implementation of the commercial contracts will be facilitated by P5+1. After fifteen years, all physical limits on enrichment will be removed, including limits on the type and number of centrifuges, Iran’s stockpile of enriched uranium, and where Iran may have enrichment facilities. According to Belfer, at this point Iran could “expand its nuclear program to create more practical overt and covert nuclear weapons options”.
For ten years, Iran will place over two-thirds of its centrifuges in storage, from its current stockpile of 19,000 centrifuges (of which 10,000 were operational) to no more than 6,104 operational centrifuges, with only 5,060 allowed to enrich uranium, with the enrichment capacity being limited to the Natanz plant. The centrifuges there must be IR-1 centrifuges, the first-generation centrifuge type which is Iran’s oldest and least efficient; Iran will give up its advanced IR-2M centrifuges in this period. The non-operating centrifuges will be stored in Natanz and monitored by IAEA, but may be used to replace failed centrifuges. Iran will not build any new uranium-enrichment facilities for fifteen years.
Iran may continue research and development work on enrichment, but that work will take place only at the Natanz facility and include certain limitations for the first eight years. This is intended to keep the country to a breakout time of one year.
Iran, with cooperation from the “Working Group” (the P5+1 and possibly other countries), will modernise and rebuild the Arak heavy water research reactor based on an agreed design to support its peaceful nuclear research and production needs and purposes, but in such a way to minimise the production of plutonium and not to produce weapons-grade plutonium. The power of the redesigned reactor will not exceed 20 MWth. The P5+1 parties will support and facilitate the timely and safe construction of the Arak complex. All spent fuel will be sent out of the country. All excess heavy water which is beyond Iran’s needs for the redesigned reactor will be made available for export to the international market based on international prices. In exchange, Iran received 130 tons of uranium in 2015 and in late 2016 was approved to receive 130 tons in 2017. For 15 years, Iran will not engage in, or research on, spent fuel reprocessing. Iran will also not build any additional heavy-water reactors or accumulate heavy water for fifteen years.
Iran’s Fordow facility will stop enriching uranium and researching uranium enrichment for at least fifteen years; the facility will be converted into a nuclear physics and technology center. For 15 years, Fordow will maintain no more than 1,044 IR-1 centrifuges in six cascades in one wing of Fordow. “Two of those six cascades will spin without uranium and will be transitioned, including through appropriate infrastructure modification,” for stable radioisotope production for medical, agricultural, industrial, and scientific use. “The other four cascades with all associated infrastructure will remain idle.” Iran will not be permitted to have any fissile material in Fordow.
Iran will implement an Additional Protocol agreement which will continue in perpetuity for as long as Iran remains a party to the Nuclear Non-Proliferation Treaty (NPT). The signing of the Additional Protocol represents a continuation of the monitoring and verification provisions “long after the comprehensive agreement between the P5+1 and Iran is implemented”.
A comprehensive inspections regime will be implemented in order to monitor and confirm that Iran is complying with its obligations and is not diverting any fissile material.[c]
The IAEA will have multilayered oversight “over Iran’s entire nuclear supply chain, from uranium mills to its procurement of nuclear-related technologies“. For declared nuclear sites such as Fordow and Natanz, the IAEA will have “round-the-clock access” to nuclear facilities and will be entitled to maintain continuous monitoring (including via surveillance equipment) at such sites. The agreement authorizes the IAEA to make use of sophisticated monitoring technology, such as fiber-optic seals on equipment that can electronically send information to the IAEA; infrared satellite imagery to detect covert sites, “environmental sensors that can detect minute signs of nuclear particles”; tamper-resistant, radiation-resistant cameras. Other tools include computerized accounting programs to gather information and detect anomalies, and big data sets on Iranian imports, to monitor dual-use items.
The number of IAEA inspectors assigned to Iran will triple, from 50 to 150 inspectors.
If IAEA inspectors have concerns that Iran is developing nuclear capabilities at any non-declared sites, they may request access “to verify the absence of undeclared nuclear materials and activities or activities inconsistent with” the agreement, informing Iran of the basis for their concerns. The inspectors would only come from countries with which Iran has diplomatic relations. Iran may admit the inspectors to such site or propose alternatives to inspection that might satisfy the IAEA’s concerns. If such an agreement cannot be reached, a process running to a maximum of 24 days is triggered. Under this process, Iran and the IAEA have 14 days to resolve disagreements among themselves. If they fail to, the Joint Commission (including all eight parties) would have one week in which to consider the intelligence which initiated the IAEA request. A majority of the Commission (at least five of the eight members) could then inform Iran of the action that it would be required to take within three more days. The majority rule provision “means the United States and its European allies—Britain, France, Germany and the EU—could insist on access or any other steps and that Iran, Russia or China could not veto them”. If Iran did not comply with the decision within three days, sanctions would be automatically reimposed under the snapback provision (see below).
As a result of the above, the “breakout time”—the time in which it would be possible for Iran to make enough material for a single nuclear weapon—will increase from two to three months to one year, according to U.S. officials and U.S. intelligence.[d] An August 2015 report published by a group of experts at Harvard University‘s Belfer Center for Science and International Affairs concurs in these estimates, writing that under the JCPOA, “over the next decade would be extended to roughly a year, from the current estimated breakout time of 2 to 3 months”. The Center for Arms Control and Non-Proliferation also accepts these estimates. By contrast, Alan J. Kuperman, coordinator of the Nuclear Proliferation Prevention Project at the University of Texas at Austin, disputed the one-year assessment, arguing that under the agreement, Iran’s breakout time “would be only about three months, not much longer than it is today”.
The longer breakout time would be in place for at least ten years; after that point, the breakout time would gradually decrease. By the fifteenth year, U.S. officials state that the breakout time would return to the pre-JCPOA status quo of a few months. The Belfer Center report states: “Some contributors to this report believe that breakout time by year 15 could be comparable to what it is today—a few months—while others believe it could be reduced to a few weeks.”
Reuters reported that exemptions were granted to Iran prior to January 16, 2016. The reported purpose of the exemptions was so that sanctions relief and other benefits could start by that date, instead of Iran being in violation. The exemptions included: (a) Iran able to exceed the 300 Kg of 3.5% LEU limit in the agreement; (b) Iran able to exceed the zero Kg of 20% LEU limit in the agreement; (c) Iran to keep operating 19 “hot cells” that exceed the size limit in the agreement; (d) Iran to maintain control of 50 tonnes of heavy water that exceed the 130 tonne limit in the agreement by storing the excess at an Iran-controlled facility in Oman. In December 2016, the IAEA published decisions of the Joint Commission that spell out these clarifications of the JCPOA.
Eight years into the agreement, EU sanctions against a number of Iranian companies, individuals and institutions (such as the Revolutionary Guards) will be lifted.
The United States will “cease” application of its nuclear-related secondary sanctions by presidential action or executive waiver.Secondary sanctions are those that sanction other countries for doing business with Iran. Primary U.S. sanctions, which prohibit U.S. firms from conducting commercial transactions with few exceptions, are not altered by the JCPOA.
This step is not tied to any specific date, but is expected to occur “roughly in the first half of 2016”.
However, all U.S. sanctions against Iran related to alleged human rights abuses, missiles, and support for terrorism are not affected by the agreement and will remain in place. U.S. sanctions are viewed as more stringent, since many have extraterritorial effect (i.e., they apply worldwide). EU sanctions, by contrast, apply only in Europe.
No new UN or EU nuclear-related sanctions or restrictive measures will be imposed.
If Iran violates the agreement, any of the P5+1 can invoke a “snap back” provision, under which the sanctions “snap back” into place (i.e., are reimplemented).
Specifically, the JCPOA establishes the following dispute resolution process: if a party to the JCPOA has reason to believe that another party is not upholding its commitments under the agreement, then the complaining party may refer its complaint to the Joint Commission, a body created under the JCPOA to monitor implementation. If a complaint made by a non-Iran party is not resolved to the satisfaction of the complaining party within thirty-five days of referral, then that party could treat the unresolved issue as grounds to cease performing its commitments under the JCPOA, notify the United Nations Security Council that it believes the issue constitutes significant non-performance, or both. The Security Council would then have thirty days to adopt a resolution to continue the lifting of sanctions. If such a resolution is not adopted within those thirty days, then the sanctions of all of the pre-JCPOA nuclear-related UN Security Council resolutions would automatically be re-imposed. Iran has stated that in such a case, it would cease performing its nuclear obligations under the deal. The effect of this rule is that any permanent member of the Security Council (United States, United Kingdom, China, Russia and France) can veto any ongoing sanctions relief, but no member can veto the re-imposition of sanctions.
Snapback sanctions “would not apply with retroactive effect to contracts signed between any party and Iran or Iranian individuals and entities prior to the date of application, provided that the activities contemplated under and execution of such contracts are consistent with this JCPOA and the previous and current UN Security Council resolutions”.
Ankit Panda of The Diplomat states that this will make impossible any scenario where Iran is non-compliant with the JCPOA yet escapes re-imposition of sanctions. Mark Dubowitz of the Foundation for Defense of Democracies (which opposes the agreement) argues, however, that because the JCPOA provides that Iran could treat reinstatement of sanctions (in part or entirely) as grounds for leaving the agreement, the United States would be reluctant to impose a “snapback” for smaller violations: “The only thing you’ll take to the Security Council are massive Iranian violations, because you’re certainly not going to risk the Iranians walking away from the deal and engaging in nuclear escalation over smaller violations.”
Pictured here, Iranian foreign affairs minister and U.S. secretary of state shaking hands at the end of negotiations on 14 July 2015, Vienna. They shook hands on 26 September 2013 in the United Nations Headquarters for the first time.
Story 3: Radical Islamic Terrorist Attack In Paris, France Target Police One Officer Killed and One Wounded and One Shooter Killed and One Escaped — Videos —
One Officer Killed, One Wounded In Paris Shooting | NBC News
Trump Says Paris Shooting Looks Like Terror Attack
BREAKING Paris ISLAMIC Terrorist with Machine Gun kills police officer 2nd hurt April 20 2017 News
BREAKING!!! TERROR ATTACK IN PARIS!!!
Paris shooting ‘looks like another terrorist attack’ Trump says: ‘It just never ends’
The U.S. president addressed the assault on two police officers at a news conference Thursday afternoon in the White House’s East Room
French police say the incident involving at least two gunman was probably a ‘terrorist act’
‘We have to be strong, and we have to be vigilant, and I’ve been saying it for a long time,’ Trump said
By Francesca Chambers, White House Correspondent For Dailymail.com
PUBLISHED: 16:23 EDT, 20 April 2017 | UPDATED: 17:26 EDT, 20 April 2017
President Donald Trump says a shooting in Paris today ‘looks like another terrorist attack.’
The U.S. president addressed the assault on two police officers at a news conference Thursday afternoon.
‘It just never ends,’ he said of the terror threat from the White House’s East Room.
French police say the incident involving at least two gunman was probably a ‘terrorist act.’
President Donald Trump says a shooting in Paris today ‘looks like another terrorist attack.’
White House press secretary Sean Spicer said just before the news conference began that Trump had been briefed on the shooting that happened while he was meeting with the Italian prime minister.
‘Condolences from our country to the people for France again. It’s happening it seems,’ Trump said from the podium. ‘I just saw it as I was walking in, so it’s a terrible thing and it’s a very, very terrible thing that’s going on in the world today.’
Trump did not comment on the assault at the top of his remarks but said after he was asked for a reaction, ‘It looks like another terrorist attack, and what can you say? It just never ends.
‘We have to be strong, and we have to be vigilant, and I’ve been saying it for a long time,’ Trump told Fox News’ John Roberts.
France is in the process of holding a national election. The first round of voting begins on April 23.
A gunman wielding an AK-47 killed one police officer and wounded another today on the Champs-Elysees. The assailant was killed in the showdown with police, Paris police have said. Another suspect is believed to have been involved, as well.
Police just two days ago arrested two men in southern Marseille with weapons and explosives who were suspected of preparing an attack to disrupt the first-round of the presidential election on Sunday.
France is in a state of emergency and at its highest possible level of alert since a string of terror attacks that began in 2015 and have killed over 230 people.
Thousands of troops and armed police have been deployed to guard tourist hotspots such as the Champs Elysees or other potential targets like government buildings and religious sites.
‘Stay back, stay back!’ Police warn after shooting in Paris
Police closed off the popular avenue (pictured) after a policeman was killed during a shooting incident in the French capital
A French police officer was tonight shot dead on the Champs Elysees in Paris (pictured) – just as presidential candidates took part in a TV debate nearby
Up until now, polls showed voters more concerned about unemployment and their spending power than terrorism or security, though analysts warned this would change in the event of further bloodshed.
For weeks, centrist Emanuel Macron and National Front (FN) leader Marine Le Pen have been out in front.
Scandal-plagued conservative Francois Fillon and far-left firebrand Jean-Luc Melenchon have closed the gap substantially in the last two weeks.
Opinion polls now show there is a chance that any of the four leading candidates could reach the second-round run-off on May 7 if none of them reach a majority in this weekend’s election.
Footage potentially show s the moments after the Paris shootingPolice say the suspect was from an eastern Paris in suburb, despite ISIS naming him as a Belgian national on their Amaq news agency.
He is thought to have been known to security services for “extremist links”.
The shooter’s house in an eastern Paris suburb and other addresses are being searched by officers, a source told Reuters.
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Cops have said they are hunting a second suspect who may or may not be involved in the incident.
Local police advised people to avoid the area after shots were fired at around 9pm local time.
Witnesses said the attacker pulled up beside a stationery police car and fired through the window.
“He parked just behind the van and he got out with a Kalashnikov and I heard six gunshots,” a witness named Chelloug said.
“I thought they were firecrackers, because we all looked around the road and there was no one.
“In fact, he was hidden behind the van and shooting at the police.
Eyewitness of the Paris shooting says he heard six gun shots between police and the gunman
Two French police officers killed by gunman in Paris ‘terror’ attack”I think he hit a policeman. As soon as the policeman opened the door of the van, he fell, I think.
“As soon as we saw that, we all ran back inside (a building). We hid and I went up to the first floor and we saw them (the policeman) shoot him (the perpetrator).”
He added: ” I was afraid. I have a two year-old girl and I thought I was going to die… He shot straight at the police officer.”
President Francois Hollande said officials are “convinced” the incident is a terror attack.
Paris Prosecutor’s anti-terror office has opened an inquiry.
Eyewitness of the Paris shooting says he heard six gun shots between police and the gunman
ISIS claims it was behind Paris police shootingYvan Assioma of the police union Alliance said: “The exact circumstances are still unclear but I can confirm the tragic death of one of our colleagues. Our thoughts are very much with the family.
“One or several attackers have been shot dead by the police. Some officers were hit but the bullets were stopped by their bulletproof vests, but two were hit.
“Nothing is being ruled out for the time being, terrorism or a criminal act.”
Champs-Elysees in Paris evacuated after two police officers shot dead
French police closes traffic on Champs Elysees after shootingA Government spokesperson said: “An automatic weapon was used against police, a weapon of war.
“The shooting started shortly after 9pm, when a car stopped alongside a stationary police car.
“A man immediately got out and opened fire on the police car, fatally wounding a police officer. He also wounded a second one, it would seem very seriously.”
The shooting happened near the Métro station Franklin D Roosevelt and the Marks and Spencer store on the Champs-Elysées.
It is one of the most famous streets in the world and a busy tourist hub.
Armed police and emergency services have been spotted at the scene.
Armed officers tak e position behind a kiosk on the Champs ElyséesFrance’s President Francois Hollande has scheduled an emergency meeting following the shootings.
French Presidential candidates Marine Le Pen and Francois Fill0n have cancelled their trips tomorrow.
The shooting comes just just days ahead of France’s presidential election.
On Tuesday, days after police arrested two men in southern Marseille with weapons and explosives who were suspected of preparing an attack to disrupt the first-round of the presidential election on Sunday.
Policeman shot dead and ‘two seriously injured’ on Champs-Élysé, Paris
Police officers evacuate people off the Champs Elysees after ‘terror attack’France is in a state of emergency and at its highest possible level of alert since a string of terror attacks that began in 2015, which have killed over 230 people.
The UK Foreign Office said: “The British Embassy is in contact with local authorities and urgently seeking further information following reports of a shooting incident on the Champs-Elysees in Paris.
“You should remain vigilant and follow the advice of the local security authorities and/or your tour operator.
“If you’re in the area and it is safe to do so, contact your friends and family to tell them you are safe.”
Story 4: Republicans Return Repeal Replace Obamacare — Compromise Should Pass House by April 28, 2017 Videos —
House Republicans Close To Obamacare Repeal
Published on Apr 20, 2017
House Freedom Caucus and moderate Republicans are edging closer to a deal on repealing Obamacare. The agreement, brokered by House Freedom Caucus chairman Mark Meadows (R-NC) and Tuesday Group co-chairman Tom MacArthur (R-NJ), would allow states to eliminate Obamacare’s community rating system, a rule that prohibits health insurers from pricing health care plans based on age, gender, or health status. States that repeal Obamacare’s community rating rules would have to join a federal high-risk pool or establish a local high-risk pool to obtain the waiver.
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The developing plan from House Republicans to push forward their overhaul of the US healthcare system has one big problem: timing.
A new amendment leaked Wednesday night appears to be a compromise between the leaders of the conservative House Freedom Caucus and moderate Tuesday Group that could produce some movement on the bill in that timeframe.
But Congress faces another looming deadline by April 28: funding the federal government. If no new funding bill is passed by next Friday, parts of the federal government will shut down.
Washington is not known for multitasking, and it could be difficult to get a funding bill passed as the White House and lawmakers push to add policy proposals to the funding bill. Given the political ramifications of the issue, the shutdown fight could consume the calendar.
According to Politico, the White House and Congress are considering passage of a one-week extension on funding in order to hash out a more considered funding bill and possibly give the House time to take up the AHCA, which became colloquially known as “Trumpcare.”
Barring such an extension, however, it would be highly unlikely that the American Health Care Act moves forward before Trump’s 100th day in the Oval Office.
The full text of the proposed amendment, obtained by Politico’s Jake Sherman and Anna Palmer, states that the waiver would be granted by the federal government if the state can prove that it has an alternative to “reduce premium costs, increase the number of persons with healthcare coverage, or advance another benefit to the public interest in the state.”
Essential health benefits require insurers to cover a baseline of health procedures such as prenatal care and emergency room visits. Community rating means that insurers must charge people living in the same area the same price for insurance regardless of things such as age, gender, or preexisting conditions.
“The gist of this is that federal protections for pre-existing conditions and required benefits remain…unless a state doesn’t want them to,” tweeted Larry Levitt, senior vice president at health policy think thank The Kaiser Family Foundation on Thursday.
However, this means that the Trump administration, most likely Secretary of Health and Human Services Tom Price, would have final say on whether or not a waiver is granted.
While the deal was reportedly reached by conservative House Freedom Caucus chair Rep. Mark Meadows and moderate Tuesday Group chair Rep. Tom MacArthur, it also bears similarities to a previous deal that drew the ire of moderates for going too far in pulling back protections.
Additionally, it does not address the concerns of moderates such as the defunding of Medicaid expansion or the estimates that the Affordable Health Care Act could leave up to 24 million fewer people without health coverage over the next 10 years.
The Washington Post’s Robert Costa reported after the amendment’s outline was leaked that the GOP leadership is planning to release the exact language for the amendment later on Thursday and are targeting Wednesday for a vote on the revised bill, but that could change.
The amendment comes the day after reports that the White House was pushing for a deal to be completed by the end of next week in order to show progress during Trump’s first 100 days as president. Additionally, House Speaker Paul Ryan said in London on Wednesday that the GOP was putting the “finishing touches” on an Obamacare deal.
Passing the AHCA, even with the proposed changes, would be difficult in the short-term as Congress must also pass a bill to fund the federal government before parts of it shut down on April 28.
Mnuchin: Most significant tax code change since Reagan 9 Hours Ago | 01:19
The Trump administration is close to bringing forward “major tax reform,” Treasury Secretary Steven Mnuchin said Thursday, days after he tempered expectations for how quickly it will pass.
Mnuchin, who this week backed off of his earlier goal of passing tax reform by August, said the White House will unveil a plan “very soon.” However, the Trump administration previously missed several of its deadlines for releasing its tax plan.
In terms of timing, he said he hoped passing a tax overhaul will not “take till the end of the year.”
Mnuchin spoke at the Institute of International Finance Washington Policy Summit, where White House chief economic advisor Gary Cohn was set to appear later Thursday.
In a Financial Times interview published Monday, Mnuchin said getting a bill to President Donald Trump‘s desk before August is “highly aggressive to not realistic at this point.” He said in February that he wanted to see “very significant” tax reform passed by Congress’ August recess.
The business community has hoped Republicans can move quickly on overhauling the American tax system, a prospect that partly fueled stock market gains in the months following Trump’s election. However, political realities have tempered expectations for changes to the tax system.
Republicans attempted to pass legislation to replace the Affordable Care Act before moving to a tax reform bill. That effort failed late last month, and Mnuchin said the setback contributed to his assessment that passing a tax overhaul by August could be difficult.
Trump put the pressure back on Tuesday after Mnuchin and Cohn appeared to walk back expectations for how quickly tax reform will happen. He called out Mnuchin by name during a speech at Snap-on headquarters in Wisconsin.
“So we’re in very good shape on tax reform. We have the concept of the plan. We’re going to be announcing it very soon,” Trump said at that time. “But health care, we have to get the health care taken care of, and as soon as health care takes care of we are going to march very quickly. You’re going to watch. We’re going to surprise you. Right, Steve Mnuchin? Right?”
Even though the president sounded optimistic Tuesday, the Trump administration has set deadlines for tax policy before that have not come to pass. In late February, Trump said the tax plan was “very well finalized,” only a day after press secretary Sean Spicer said it would be released “in the next couple weeks.
Republicans have refocused on resurrecting the effort to repeal the ACA, better known as Obamacare, as they get set to return from a recess next week. House GOP leaders are trying to balance the concerns of the both the party’s conservative and moderate wings as they try to follow through on a major campaign pledge.
Mnuchin said Thursday that “whether health care gets done or health care doesn’t get done, we’re going to get tax reform done.”
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PUBLISHED: 02:20 EDT, 10 April 2017 | UPDATED: 10:56 EDT, 10 April 2017
President Donald Trump has scrapped the tax plan he campaigned on and is going back to the drawing board in a search for Republican consensus behind legislation to overhaul the U.S. tax system.
The administration’s first attempt to write legislation is in its early stages and the White House has kept much of it under wraps. But it has already sprouted the consideration of a series of unorthodox proposals including a drastic cut to the payroll tax, aimed at appealing to Democrats.
Some view the search for new options as a result of Trump’s refusal to set clear parameters for his plan and his exceedingly challenging endgame: reducing tax rates enough to spur faster growth without blowing up the budget deficit.
Administration officials say it’s now unlikely that a tax overhaul will meet the August deadline set by Treasury Secretary Steve Mnuchin.
Off plan: Donald Trump is abandoning the tax overhaul he campaigned on
Tough deadline: Steven Mnuchin, the Treasury Secretary who was at the table when Trump was briefed on the Syria missile strikes, had set an the August deadline for tax reform
But the ambitious pace to figure out a plan reflects Trump’s haste to move quickly past a bruising failure to broker a compromise within his own party on how to replace the health insurance law enacted under President Barack Obama.
The White House is trying to learn the lessons from health care. Rather than accepting a bill written by the lawmakers, White House officials are taking a more active role.
Administration officials have signaled that they want to pass tax legislation with only Republican votes, yet they’ve also held listening sessions with House Democrats.
White House aides say the goal is to cut tax rates sharply enough to improve the economic picture in depressed rural and industrial pockets of the country where many Trump voters live.
But the administration so far has swatted down alternative ways for raising revenues, such as a carbon tax, to offset lower rates.
Trump, who brands himself as a deal-maker, has not said which trade-offs he might accept and he has remained noncommittal on the leading blueprint, from Rep. Kevin Brady, chairman of the Ways and Means Committee.
Brady, a Republican from Texas, has proposed a border adjustment system, which would eliminate corporate deductions on imports, to raise $1 trillion over 10 years that could fund lower corporate tax rates.
But that possibility has rankled retailers who say it would lead to higher prices and threaten millions of jobs, while some lawmakers have worried that the system would violate World Trade Organization rules.
Brady has said he intends to amend the blueprint but has not spelled out how he would do so.
Other options are being shopped on Capitol Hill.
One circulating this past week would change the House Republican plan to eliminate much of the payroll tax and cut corporate tax rates. This would require a new dedicated funding source for Social Security.
The change, proposed by a GOP lobbyist with close ties to the Trump administration, would transform Brady’s plan on imports into something closer to a value-added tax by also eliminating the deduction of labor expenses.
This would bring it in line with WTO rules and generate an additional $12 trillion over 10 years, according to budget estimates.
Those additional revenues could then enable the end of the 12.4 percent payroll tax, split evenly between employers and employees, that funds Social Security, while keeping the health insurance payroll tax in place.
This approach would give a worker earning $60,000 a year an additional $3,720 in take-home pay, a possible win that lawmakers could highlight back in their districts even though it would involve changing the funding mechanism for Social Security, according to the lobbyist, who asked for anonymity to discuss the proposal without disrupting early negotiations.
Although some billed this as a bipartisan solution, and President Barack Obama did temporarily cut the payroll tax after the Great Recession, others note it probably would run into firm opposition from Democrats who are loathe to be seen as undermining Social Security.
The White House would not comment on the plan, but said a value-added tax based on consumption is not under consideration ‘as of now,’ according to a White House statement.
The lack of detail about how to significantly rewrite tax laws for the first time in 30 years may provide Trump some time to build consensus among Republicans. But without Trump laying down his hand, lawmakers appear reluctant to back a plan that will likely stir controversy.
How will markets react? Stocks rallied after the election on the promise of lower taxes and fewer regulations, but the Dow has dipped 1.2 percent over the past month
Stock markets take a hit after Trump’s healthcare defeat
‘Because there are trade-offs, congressmen need cover from the president to withstand the lobbyists and constituents who are going to complain,’ said Bill Gale, an economist at the Brookings Institution who worked at the White House Council of Economic Advisers during President George H.W. Bush’s administration.
The Trump administration appears to have shut out the economists who helped assemble one of his campaign’s tax overhaul plans, which independent analyses show would have increased the budget deficit.
‘It’s a little frustrating that they feel they have to write a new tax plan when they have a tax plan,’ said Steven Moore, an economist at the conservative Heritage Foundation who helped formulate tax policy for the Trump campaign.
Rob Portman, the Republican senator from Ohio, a member of the Senate Finance Committee, said that all of the trial balloons surfacing in public don’t represent the work that’s being done behind the scenes.
‘It’s not really what’s going on,’ Portman said. ‘What’s going on is they’re working with on various ideas.’
Investors are beginning to show some doubts that Trump can deliver. Stocks rallied after his election on the promise of lower taxes and fewer regulations, but the Dow Jones Industrial Average has dipped 1.2 percent over the past month as the path for health care and tax revisions has become muddied.
‘The White House is going to need its own clear direction, or it’s going to need to defer to Congress, but saying that your plan is forthcoming and then not producing a plan kind of puts everything in stasis,’ said Alan Cole, an economist at the conservative Tax Foundation.
The BAT is a bad idea. There are far better ways to shrink the federal budget deficit.
By GENE EPSTEIN
March 18, 2017
“Anytime I hear border adjustment, I don’t love it,” Donald Trump told The Wall Street Journal shortly before his inauguration, noting that the proposed border adjustment tax was “too complicated.”
Trump isn’t always right when he makes off-the-cuff remarks such as that, but this time he was. The proposed border adjustment tax is so complicated that even its advocates can’t agree on how its disruptive effects on the U.S. economy will play out, and there’s nothing to love about that. The BAT is a bad idea, and it should be scrapped. And while taking it off the table will bring more red ink to the federal budget, there are better ways to stanch the bleeding than subjecting the economy to the trauma of a BAT.
Despite protestations to the contrary, the border adjustment levy is a tax hike embedded in the program of tax reductions that House Republicans put forward last June under the rubric of “A Better Way.” It’s there, presumably, to help offset the effect of the administration’s planned cuts, since the Republicans’ stated aim is to keep those cuts revenue-neutral. Barron’s fully supports the goal of not adding to deficits that, before too long, will be running above $1 trillion a year, given repeated warnings from the nonpartisan Congressional Budget Office about the risk of a financial crisis, due to exploding debt.
The attraction of a BAT is that it could generate an estimated $100 billion a year in revenue. There may be reasons to challenge that estimate, but we’ll accept it for now. There are, however, better ways to slash the fiscal deficit by $100 billion a year than the Better Way plan, and most fall under the heading of spending cuts.
President Trump has spoken about “waste, fraud, and abuse” in “every agency” of the federal government. Indeed, he promised that “we will cut so much, your head will spin.” He should therefore find plenty to love in our proposed reductions in spending. Just for starters, if all corporate welfare were cut from the budget, as much as $100 billion a year could be saved, about matching the total expected from the BAT.
The president also favors slashing the top rate on corporate income to 15% from 35%. Barron’s has proposed a more modest cut, to 22% (“Cut the Top U.S. Corporate Tax Rate to 22%,” Nov. 26, 2016). The Republican package calls for a reduction to 20%, which is close enough to our original proposal and which we believe should boost revenue rather than shrink it.
A list of potential cuts and revenue enhancements, totaling $200 billion, is in the table at the bottom of this page.
THE BETTER WAY PLAN, as noted, would reduce the top federal tax rate on corporate profits to 20% from 35%—which is all to the good. The proposed tax cut would not only be revenue-neutral; it would probably be revenue-enhancing.
In a study released this month by the London-based Centre for Policy Studies, analyst Daniel Mahoney traces the effect on revenue from Britain’s cuts in the corporate tax rate over a 34-year period. According to his calculations, the take from the corporate tax has added three-tenths of a percentage point annually to gross domestic product since rates were slashed.
Similarly, last year, in calling for a maximum U.S. rate of 22%, we traced the significant decline in the average top rate on corporate income for 19 countries in the Organization for Economic Cooperation and Development, which includes the U.S. and the United Kingdom. Over 33 years, their average tax take as a share of GDP rose six-tenths of a percentage point.
While that might not sound like much, every tenth of a percentage point of U.S. nominal GDP is worth $18.9 billion. So if revenue from the corporate tax rises by, say, three-tenths of a percentage point, to 2.5%—a conservative guess—that increase would translate into a bonus of nearly $57 billion a year in revenue. That alone gets us more than halfway to the $100 billion value of a BAT.
The idea of a revenue-enhancing cut in the corporate income tax was put forward in 1978, when economist Arthur Laffer was first cited as arguing that some rate decreases could generate enough added economic growth that the government wouldn’t lose revenue over the long run—and might, in fact, even gain revenue. Laffer also noted that most tax hikes generate less revenue than a conventional “static” analysis indicates, and that most tax cuts lose less.
Laffer’s “dynamic” analysis covered all of the behavioral changes likely to result from a cut. To begin with, if the tax collector claims a lower share of income, there is an incentive to produce more income. Second, a lower rate means there’s less incentive to spend time and effort avoiding the tax.
Corporations don’t pay taxes; only people do. And there is a tendency to forget that if a corporation nets more profits as a result of a lower tax, those funds will soon take the form of salaries, dividends, and capital gains, and will be taxed in those forms.
The second factor, less tax avoidance, applies with special force to a rollback of corporate taxes. As we noted last year, bringing down the top rate to 22% from 35% would dramatically reduce corporate flight to low-tax jurisdictions in the rest of the world.
Following the publication of our article, the CBO released a study confirming that U.S corporate tax rates are among the highest in the world. Among the Group of 20 countries—including Japan, China, Russia, Germany, France, Canada, and the U.K.—the U.S. is No. 1, 3, and 4, respectively, in “top statutory corporate tax rate,” “average corporate tax rate,” and “effective corporate tax rate.” The Better Way plan would narrow this gap significantly and make the U.S. more competitive.
But when it comes to the Better Way plan for cutting tax rates on personal income, Barron’s believes that there would be a loss of revenue even after taking into account behavioral changes. The revenue reduction from the proposed personal income-tax cuts has been estimated, on a static basis, at an average of $98 billion a year. We can assume that dynamic losses would run 10% less, or $88 billion, mainly because lower taxes are likely to encourage people to work.
Still, $88 billion a year is a huge loss of revenue. Barron’s proposes that the Better Way plan consider splitting the difference and going halfway on the tax cut, thus saving $44 billion.
THE REVENUE-ENHANCING corporate tax cut would include a special kicker in the form of the border adjustment tax. The BAT would deny corporations the ability to deduct the cost of imports from their taxable income, while all income earned from exports would be exempt from the 20% levy.
This means that companies selling imported goods in the domestic market would be taxed on the sale’s full proceeds—not just on the profit earned—which could more than offset the gains from the corporate tax reduction. At the same time, as noted, there would be no tax on the sale of exports.
The GOP’s Big Three Key players in the border adjustment tax debate: Senate Majority Leader Mitch McConnell, above, and House Speaker Paul Ryan and President Donald Trump, below. McConnell has said that he hasn’t made up his mind about the levy. Alex Wong/Getty Images
The BAT would bring uncertainty and disruption to the U.S. economy, making it hard to predict whether it really would raise $100 billion annually in revenue. The basic idea is that, because the U.S. imports more than it exports, the export exemption would be more than offset by hitting imports hard. Regardless of how it shakes out, the value of the transactions affected by the BAT is huge.
The U.S. trade deficit—the difference between exports and imports—ran at just 3.4% of real GDP in 2016, much lower than the 5.5% peak of 2005. But the actual gross flows of exports and imports are much larger than the difference between the two flows. Exports last year were valued at $2.2 trillion, or 12.8% of real GDP, and imports at $2.7 trillion, or 16.2% (see chart). Given those magnitudes, the tax plan is likely to require massive readjustments throughout the economy.
That’s why major importers, like Wal-Mart Stores, are objecting—and why exporters are clearly pleased. As you might expect, then, the BAT is pitting exporters against importers, creating needless discord at a time when the country is surely suffering from more discord than it can handle.
THE POSITION PAPER for the Better Way asserts that by “exempting exports and taxing imports,” the BAT does “not” consist of the “addition of a new tax.” But of course, the BAT’s designers know that imports normally exceed exports by about $500 billion a year. Apply a back-of-the-envelope 20% to that $500 billion, and you get the hoped-for $100 billion in revenue. So the maneuver of “exempting exports and taxing imports” certainly looks and sounds like a new tax.
The Better Way statement also argues that there is an imbalance in the tax treatment of imports and exports that the BAT must remedy. “In the absence of border adjustments,” it states, “exports from the United States implicitly bear the cost of the U.S. income tax, while imports do not bear any federal income tax cost. This amounts to a self-imposed unilateral penalty on American exports and a self-imposed unilateral subsidy for U.S. imports.”
Ryan strongly supports the tax. Chip Somodevilla/Getty Images
But all other countries impose this “implicit cost” on exports through their own corporate income tax. And since the Better Way would slash America’s top rate to 20%, this implicit cost would finally become competitive with that of other nations.
Some supporters of the BAT like it precisely because it would help exports and penalize imports. The mercantilist view of economics implicit in that aim was discredited in Adam Smith’s 1776 treatise, The Wealth of Nations. And apart from the massive dislocations that will occur if imports shrink, this calls into question whether the projected $100 billion a year in revenue is realistic. As Alan Greenspan once wisely said, “Whatever you tax, you get less of.”
Then again, whether we really will get fewer imports depends a lot on the exchange value of the dollar. Other supporters of the BAT predict that the dollar will respond by appreciating against other currencies, conforming to the dictates of textbook fundamentals. If the dollar appreciates enough, the advantage to exporters and disadvantage to importers will be nullified. Without getting into the technicalities of how all this would work, we concede that it is all quite possible.
But as currency analysts and traders can tell you, exchange rates are subject to all kinds of forces and can spend long periods flouting textbook fundamentals. So whether the dollar will really strengthen in response to the BAT is anyone’s guess. But even if it does, a much stronger greenback would bring other disruptions. American investors with holdings denominated in foreign currencies would take a huge hit. And America’s tourist industries, which are already hurting from what the Los Angeles Times has called a “Trump slump,” would be hurt even more, as the cost of traveling to the States jumps.
There are other questions. Would the World Trade Organization challenge the BAT? Might our trading partners respond in ways that would be unfavorable to us? The border adjustment tax is an experiment in Rube Goldberg economics that the U.S. can do without.
SINCE REVENUE NEUTRALITY is the goal of the Better Way package, what about making up for the $100 billion a year in revenue that the border adjustment tax is supposed to generate?
Whether this tax really will raise as much as $100 billion depends on how imports and exports respond, which is hard to predict. Also, the reduction in the corporate income tax would probably be revenue-enhancing and could generate more than $50 billion in annual revenue.
The president has declared that “anytime I hear border adjustment, I don’t love it” and has voiced concern that it’s overly complicated. Michael Reynolds/Getty Images
We note that the full title of the House Republican plan is “A Better Way: Our Vision for a Confident America,” which leaves room for a vision that includes cost-cutting, along with tax-cutting.
That discussion revealed much low-hanging fruit. For example, the Medicare system is rife with “improper payments,” which Medicare itself estimates at 11% of its spending in 2016. That’s probably a low estimate, because those who get improperly paid tend to keep these payments hidden. Barron’s calculated that if the improper-payment rate could be halved, it would save more than $400 billion over 10 years.
That would contribute $40 billion a year to the $100 billion shortfall from forgoing the BAT. To that we add $65 billion, and perhaps as much as $100 billion, by eliminating corporate welfare.
The Better Way statement properly criticizes the tax code for being “littered with hundreds of preferences and subsidies that pick winners and losers” and “direct resources to politically favored interests.” Spending on corporate welfare is another form of subsidy that picks winners and losers and directs funds to politically favored interests.
IN A 2012 PAPER, “Corporate Welfare in the Federal Budget,” the Cato Institute identified nearly $100 billion worth of yearly spending on corporate handouts, broadly defined, that could be ended. At Barron’s request, Cato senior fellow Chris Edwards updated the scoring on just 10 of the institute’s 40 categories of corporate welfare and came up with $66 billion in potential cuts.
High on Edwards’ list: farm subsidy programs, which redistribute taxpayer money to relatively rich agribusinesses and landowners. That the farm industry receives subsidies makes about as much sense as channeling funds to the restaurant industry, which could well be riskier than farming, based on its high failure rate. This form of corporate welfare goes back to the Great Depression of the 1930s. But whatever argument might have been made for it then hardly applies today, with the yearly tab currently at $25 billion.
Also on the corporate welfare list: pork-barrel handouts administered by the Department of Housing and Urban Development, totaling $13 billion, which go under the heading of “community development,” and which distribute funds to such recipients as museums, recreational facilities, and parking lots. Whatever one may think about the worthiness of these projects, they are better left to states and localities.
Another $10 billion could be saved by abolishing the Universal Service Fund, through which the Federal Communications Commission subsidizes telecommunications companies, among others. A creation of the Telecommunications Act of 1996, this attempt to pick winners and losers is more unnecessary than ever in this dynamic and competitive industry.
PRESIDENT TRUMP PROMISED to “drain the swamp” of Washington’s special interests. One route toward that admirable goal would be to cut corporate welfare. Trump should repeat his objections to a border adjustment tax that would favor the interests of some businesses over others. He can help make U.S. corporations great again by weaning them off subsidies and reducing their tax burdens.
And there are many other provisions that would reduce penalties on work, saving, investment, and entrepreneurship. No, it’s not quite a flat tax, which is the gold standard of tax reform, but it is a very pro-growth initiative worthy of praise.
That being said, there is a feature of the plan that merits closer inspection. The plan would radically change the structure of business taxation by imposing a 20 percent tax on all imports and providing a special exemption for all export-related income. This approach, known as “border adjustability,” is part of the plan to create a “destination-based cash flow tax” (DBCFT).
When I spoke about the Better Way plan at the Heritage Foundation last month, I highlighted the good features of the plan in the first few minutes of my brief remarks, but raised my concerns about the DBCFT in my final few minutes.
Allow me to elaborate on those comments with five specific worries about the proposal.
Concern #1: Is the DBCFT protectionist?
It certainly sounds protectionist. Here’s how the Financial Timesdescribed the plan.
The border tax adjustment would work by denying US companies their current ability to deduct import costs from their taxable income, meaning companies selling imported products would effectively be taxed on the full value of the sale rather than just the profit. Export revenues, meanwhile, would be excluded from company tax bases, giving net exporters the equivalent of a subsidy that would make them big beneficiaries of the change.
Charles Lane of the Washington Postexplains how it works.
…the DBCFT would impose a flat 20 percent tax only on earnings from sales of output consumed within the United States… It gets complicated, but the upshot is that the cost of imported supplies would no longer be deductible from taxable income, while all revenue from exports would be. This would be a huge incentive to import less and export more, significant change indeed for an economy deeply dependent on global supply chains.
That certainly sounds protectionist as well. A tax on imports and a special exemption for exports.
But proponents say there’s no protectionism because the tax is neutral if the benchmark is where products are consumed rather than where income is earned. Moreover, they claim exchange rates will adjust to offset the impact of the tax changes. Here’s how Lane explains the issue.
…the greenback would have to rise 25 percent to offset what would be a new 20 percent tax on imported inputs — propelling the U.S. currency to its highest level on record. The international consequences of that are unforeseeable, but unlikely to be totally benign for everyone. Bear in mind that many other countries — China comes to mind — can and will manipulate exchange rates to protect their own short-term interests.
For what it’s worth, I accept the argument that the dollar will rise in value, thus blunting the protectionist impact of border adjustability. It would remain to be seen, though, how quickly or how completely the value of the dollar would change.
Concern #2: Is the DBCFT compliant with WTO obligations?
The United States is part of the World Trade Organization (WTO) and we have ratified various agreements designed to liberalize world trade. This is great for the global economy, but it might not be good news for the Better Way plan because WTO rules only allow border adjustability for indirect taxes like a credit-invoice value-added tax. The DBCFT, by contrast, is a version of a corporate income tax, which is a direct tax.
The column by Charles Lane explains one of the specific problems.
Trading partners could also challenge the GOP plan as a discriminatory subsidy at the World Trade Organization. That’s because it includes a deduction for wages paid by U.S.-located firms, importers and exporters alike — a break that would obviously not be available to competitors abroad.
Advocates argue that the DBCFT is a consumption-base tax, like a VAT. And since credit-invoice VATs are border adjustable, they assert their plan also should get the same treatment. But the WTO rules say that only “indirect” taxes are eligible for border adjustability. The New York Timesreports that the WTO therefore would almost surely reject the plan.
Michael Graetz, a tax expert at the Columbia Law School, said he doubted that argument would prevail in Geneva. “W.T.O. lawyers do not take the view that things that look the same economically are acceptable,” Mr. Graetz said.
A story in the Wall Street Journal considers the potential for an adverse ruling from the World Trade Organization.
Even though it’s economically similar to, and probably better than, the value-added taxes (VATs) many other countries use, it may be illegal under World Trade Organization rules. An international clash over taxes is something the world can ill afford when protectionist sentiment is already running high. …The controversy is over whether border adjustability discriminates against trade partners. …the WTO operates not according to economics but trade treaties, which generally treat tax exemptions on exports as illegal unless they are consumption taxes, such as the VAT. …the U.S. has lost similar disputes before. In 1971 it introduced a tax break for exporters that, despite several revamps, the WTO ruled illegal in 2002.
And a Washington Posteditorial is similarly concerned.
Republicans are going to have to figure out how to make such a huge de facto shift in the U.S. tax treatment of imports compliant with international trade law. In its current iteration, the proposal would allow corporations to deduct the costs of wages paid within this country — a nice reward for hiring Americans and paying them well, which for complex reasons could be construed as a discriminatory subsidy under existing World Trade Organization doctrine.
Concern #3: Is the DBCFT a stepping stone to a VAT?
If the plan is adopted, it will be challenged. And if it is challenged, it presumably will be rejected by the WTO. At that point, we would be in uncharted territory.
Would that force the folks in Washington to entirely rewrite the tax system? Would they be more surgical and just repeal border adjustability? Would they ignore the WTO, which would give other nations the right to impose tariffs on American exports?
One worrisome option is that they might simply turn the DBCFT into a subtraction-method value-added tax (VAT) by tweaking the law so that employers no longer could deduct expenses for labor compensation. This change would be seen as more likely to get approval from the WTO since credit-invoice VATs are border adjustable.
This possibility is already being discussed. The Wall Street Journal story about the WTO issue points out that there is a relatively simple way of making the DBCFT fit within America’s trade obligations, and that’s to turn it into a value-added tax.
One way to avoid such a confrontation would be to revise the cash flow tax to make it a de facto VAT.
One tax initiative that should be strangled before it sees the light of day is to give a tax rebate to exporters and to impose taxes on imports. …It’s a bad idea. Why do we want to make American consumers pay more for products while subsidizing foreign buyers? It also could put us on the slippery slope to our own VAT.
And that’s not a slope we want to be on. Unless the income tax is fully repealed (sadly not an option), a VAT would be a recipe for turning America into a European-style welfare state.
Concern #4: Does the DBCFT undermine tax competition and give politicians more ability to increase tax burdens?
Alan Auerbach, an academic from California who previously was an adviser for John Kerry and also worked at the Joint Committee on Taxation when Democrats controlled Capitol Hill, is the main advocate of a DBCFT (the New York Timeswrote that he is the “principal intellectual champion” of the idea).
He wrote a paper several years ago for the Center for American Progress, a hard-left group closely associated with Hillary Clinton. Auerbach explicitly argued that this new tax scheme is good because politicians no longer would feel any pressure to lower tax rates.
This…alternative treatment of international transactions that would relieve the international pressure to reduce rates while attracting foreign business activity to the United States. It addresses concerns about the effect of rising international competition for multinational business operations on the sustainability of the current corporate tax system. With rising international capital flows, multinational corporations, and cross-border investment, countries’ tax rates and tax structures are of increasing importance. Indeed, part of the explanation for declining corporate tax rates abroad is competition among countries for business activity. …my proposed reforms…builds on the [Obama] Administration’s approach…and alleviates the pressure to reduce the corporate tax rate.
This is very troubling. Tax competition is a very valuable liberalizing force in the world economy. It partially offsets the public choice pressures on politicians to over-tax and over-spend. If governments no longer had to worry that taxable activity could escape across national borders, they would boost tax rates and engage in more class warfare.
Concern #5: Does the DBCFT create needless conflict and division among supporters of tax reform?
As I pointed out in my remarks at the Heritage Foundation, there’s normally near-unanimous support from the business community for pro-growth tax reforms.
That’s not the case with the DBCFT.
The Washington Examiner reports on the divisions in the business community.
Major retailers are skeptical of the House Republican plan to revamp the tax code, fearing that the GOP call to border-adjust corporate taxes could harm them even if they win a significant cut to their tax rate. As a result, retailers, oil refiners and other industries that import goods to sell in the U.S. could provide a major obstacle to the Republican effort to reform taxes. …The effect of the border adjustment, retailers fear, would be that the goods they import to sell to consumers would face a 20 percent mark-up, one that would force retailers like Walmart, the Home Depot and Sears…to raise prices and lose customers.
A story from CNBC highlights why retailers are so concerned.
…retailers are nervous. Very nervous. …About 95 percent of clothing and shoes sold in the U.S. are manufactured overseas, which means imports make up a vast majority of many U.S. retailers’ merchandise. …If the GOP plan were adopted as it’s currently laid out, Gap pays 20 percent corporate tax on the $5 profit from the sweater, or $1. Plus, 20 percent tax on the $80 cost it paid for that sweater from the overseas supplier, or $16. That means the tax goes from $1.75 to $17 for that sweater, more than three times the profit on that sweater. Talk about a hit to margins. …Retailers certainly aren’t taking a lot of comfort in the economic theory of dollar appreciation. …the tax reform plan will dilute specialty retailers’ earnings by an average of 132 percent. …Athletic manufacturers could take a 40 percent earnings hit… Gap, Carter’s , Urban Outfitters , Fossil and Under Armour are most at risk under the plan.
And here’s another article from the Washington Examiner that explains why folks in the energy industry are concerned.
…the border adjustment would raise costs for refiners that import oil. In turn, that could raise prices for consumers. The border adjustment would amount to a $10-a-barrel tax on imported crude oil, raising costs for drivers buying gasoline by up to 25 cents a gallon, the energy analyst group PIRA Energy Group warned this week. The report warned of a “potential huge impact across the petroleum industry,” even while noting that the tax reform plan faces many obstacles to passage.
Concern #6: What happens when other nations adopt their versions of a DBCFT?
Advocates of the DBCFT plausibly argue that if the WTO somehow approves their plan, then other nations will almost certainly copy the new American system.
But is also has negative implications for the fight to protect America from a VAT. The main selling point for advocates of the DBCFT is that we need a border-adjustable tax to offset the supposed advantage that other nations have because of border-adjustable VATs (both Paul Krugman and I agree that this is nonsense, but it still manages to be persuasive for some people).
So what happens when other nations turn their corporate income taxes into DBCFTs, which presumably will happen? We’re than back where we started and misguided people will say we need our own VAT to balance out the VATs in other nations.
The bottom line is that a DBCFT is not the answer to America’s wretched business tax system. There are simply too many risks associated with this proposal. I’ll elaborate tomorrow in Part II and also explain some good ways of pursuing tax reform without a DBCFT.
Chairman Brady Acknowledges “Valid Concerns” About the Border Adjustment Tax Harming U.S. Businesses
Post by Freedom Partners
After months of insisting that a trillion-dollar Border Adjustment Tax (BAT) on American consumers is the best and only way to achieve pro-growth tax reform without adding to the deficit, Ways and Means Chairman Kevin Brady acknowledged that importers fearful of the new tax have “valid concerns.”
The proposed BAT from House Republicans would mean a new 20 percent tax on everything imported into the U.S., raising up to $1.2 trillion of new government revenue in the form of higher prices, shouldered by consumers. In effect, the regressive tax could undercut positive economic outcomes from lower rates and a simplified tax code through tax reform.
According to Chairman Brady, House Republicans need to “make sure that we allay the valid concerns of those that are importing today,” CNBC reports.
Freedom Partners Vice President of Policy Nathan Nascimento issued the following statement:
“Some of the ‘valid concerns’ that Chairman Brady acknowledges include a devastating new trillion-dollar tax hike, higher costs on everyday goods, fewer jobs, and less economic opportunity. We hope to work with the administration and Congress to get pro-growth tax reform done, but a 20 percent tax hike on all imports would only undermine the point of tax reform – which is to provide much-needed relief for taxpayers and the economy. A massive tax hike on all imports is bad policy, and Americans deserve a better plan that can unite lawmakers in both the House and Senate behind comprehensive tax reform.”
Americans for Prosperity has already identified more than $2 trillion in wasteful spending, unnecessary programs, and corporate welfare that ought to be eliminated before any new tax on U.S. consumers. Freedom Partners and its coalition allies support the efforts of Congress and the administration to bring comprehensive tax reform to reality in a way that protects all Americans from a massive tax hike.
U.S. Businesses Facing Massive Tax Increases Under A Border-Adjusted Tax System Have “Valid Concerns”
Wall Street Journal: “Some Retailers And Other Big Importers … Warn Of Tax Bills That Would Exceed Profits, Forcing Them To Pass Costs To Consumers. ”Cody Lusk, president of the American International Automobile Dealers Association, says his members are shocked that a Republican Congress is proposing a 20% tax on imports.” (Richard Rubin, “GOP Plan To Overhaul Tax Code Gets Held Up At The Border,” Wall Street Journal, 2/7/17)
LUSK: “We view this as a very, very serious potential blow to the auto sector and the economy.” (Richard Rubin, “GOP Plan To Overhaul Tax Code Gets Held Up At The Border,” Wall Street Journal, 2/7/17)
Financial Times: Border Tax Threatens To Devastate Importers Through Soaring Tax Bills. “Yet for Mr. Woldenberg the hope has turned to horror. Republicans are still promising the most sweeping changes since the Reagan reforms of 1986. But the only firm proposal on the table — from the House of Representatives — threatens to devastate his 150-person business because it includes a 20 per cent tax on imports … The problem for Mr. Woldenberg is that his goods come from China — 98 per cent of the products he sells in the US are imported. US factories could not produce them with the same low costs and specialized skills, he says. So he would have no choice but to pay the import levy. He estimates it would send his tax bill soaring to 165 per cent of earnings.” (Barney Jopson, Sam Fleming & Shawn Donnan, “Trump And The Tax Plan Threatening To Split Corporate America,” Financial Times, 2/13/17)
RICK WOLDENBERG: “To preserve cash flow I [would have to] raise my prices by a third, expect volume to go down by 40 per cent, and fire one out of five people.” (Barney Jopson, Sam Fleming & Shawn Donnan, “Trump And The Tax Plan Threatening To Split Corporate America,” Financial Times, 2/13/17)
RBC Capital Markets: Major Retailers Would Face Tax Bills That Exceed Their Operating Profits. “Major retailers like Wal-Mart, Best Buy, Costco and Dollar Tree would face tax bills that exceed their operating profits under House Republicans’ plans to create a ‘border adjustable’ business tax, RBC Capital Markets said. The investment bank sided with retailers in a debate over the proposal, saying in a research note it would have a ‘seriously adverse’ impact on them. ‘If the US moves to a border-adjusted tax system, most of our retailers would be forced to raise prices (and revenues) or meaningfully change their import/domestic sourcing mix, or their earnings would be materially reduced,’ it said.” (Brian Faler, “RBC Capital Markets: GOP Border-Adjustment Plan Bad For Retailers,” POLITICO Pro, 12/12/16)
POLITICO: “Retailers Fear Massive Tax Increases Under House Republican Tax Plan” “Many retailers fear that, even with Republicans promising to slash the corporate tax rate, they will still face big tax increases that in some cases will exceed their profits. On high alert over the proposal, retailers have begun a big lobbying campaign on the Hill, warning lawmakers and their aides that any tax hikes will get passed on to their constituents in the form of higher prices.” (Brian Faler, “Retailers Fear Massive Tax Increases Under House Republican Tax Plan,” POLITICO, 11/23/16)
The National Retail Federation Warns That A Border Tax Could Shut Businesses Down Completely. “‘Our members have told us that the import tax could be as high as five times their profits,’ said David French, chief lobbyist for the National Retail Federation. ‘I don’t know how viable some retailers would be in the face of this import tax.’” (Brian Faler, “Retailers Fear Massive Tax Increases Under House Republican Tax Plan,” POLITICO, 11/23/16)
POLITICO Pro: “Some Of The Biggest Losers Would Be Retailers Like Walmart, Best Buy And Home Depot That Import Massive Amounts Of Goods And Materials On Which They Would Suddenly Have To Pay Taxes.” “The border adjustment plan would affect individual companies differently, depending in part on how much they import and export. Some of the biggest losers would be retailers like Walmart, Best Buy and Home Depot that import massive amounts of goods and materials on which they would suddenly have to pay taxes.” (Brian Faler, “Some Companies May Never Pay Taxes Under Border-Adjustment Tax Plan,” POLITICO Pro, 1/9/17)
Axios: Cowen Research Released A Study Highlighting Some Of The Big Name Companies That Will Be Hurt By The Border Adjustments High Tax Hikes. “Cowen Research published a report Thursday that estimates the effect of the reform plan, and other planned measures, like eliminating the deductibility of interest and a headline corporate tax cut, on different industries and companies. Here are some of the big-name firms Cowen says will be hurt by reform: 1. Apple: The world’s largest company would see its tax bill jump because it won’t be able to deduct the expense of assembly abroad. 2. Constellation Brands: The largest beer importer in America will not be able to expense the cost of goods it brings across the border, like its Corona brand. 3. Gap: Between 50% and 80% of the retailer’s cost of the goods its sells comes from abroad. Walmart: 4. Walmart’s low margins means that it may not be able to survive a tax hike on imported goods without raising prices. 5. Target: Will suffer from the same conundrum as Walmart, but will be worse off since less of its revenue comes from domestically-sourced groceries. J.C. Penney: The department store has high debt loads, and interest on debt will not be deductible under the Republican plan. (Christopher Matthews, “These Companies Will Be Hit Hardest By GOP Tax Reform,” Axios, 1/27/17)
Border Adjustment Tax Would Result In Higher Costs For Hard-Working Families
Christian Science Monitor: Border Tax Could Raise Car Prices By Thousands Of Dollars. “Michigan-based Baum & Associates says that a border tax–one that applies not only to vehicles imported from factories abroad but also to foreign-made vehicle parts–could increase sticker prices by as much as $17,000 … Most increases would be smaller, but still very substantial. Volvo, for example, would need to up its prices by more than $7,500 to accommodate a border tax. Volkswagen wouldn’t be far behind, with increases of around $6,800. Even Detroit brands would see price upticks: Ford’s would climb $285, and General Motors’ would rise by nearly $1,000. Fiat Chrysler would have to boost prices by closer to $2,000.” (Richard Read, “How Trump’s Border Tax Could Raise Car Prices By Thousands Of Dollars,” Christian Science Monitor, 2/8/17)
Auto Sales Would Plummet Under A Border Adjustment Tax. “A report from UBS Securities says that the higher car prices would slash U.S. auto sales by about 2 million vehicles per year. That would more than erase the increased capacity and almost certainly result in layoffs.” (Richard Read, “How Trump’s Border Tax Could Raise Car Prices By Thousands Of Dollars,” Christian Science Monitor, 2/8/17)
More Than A Hundred American Businesses Are Opposing The Republican Border Tax: “Don’t Make Hard-Working Families Pay More On Essential Products.” “Nike, Rite Aid, The Gap, Best Buy and Abercrombie & Fitch have joined a new advocacy group aimed at killing House Republicans’ plans to create a border adjustable business tax. They are some of the more than 100 companies and trade associations behind Americans for Affordable Products, an organization launched today that is pushing lawmakers to dump a plan to begin taxing imports as part of a broader tax-code rewrite. The groups, which rely on imports, fear the House Republican plan will mean huge tax increase even as Republicans promise to simultaneously slash the corporate tax rate … Other well-known companies joining the effort include Target, Walmart, QVC, Petco, AutoZone, Macy’s and Levi Strauss.” (Brian Faler, “Border Adjustment Tax Opponents Launch New Group Targeting GOP Proposal,” Politico, 2/01/17)
“A Sweeping Tax Reform Proposal Meant To Boost U.S. Manufacturing Faces Mounting Pressure From Industries That Rely Heavily On Imported Goods …” “A sweeping tax reform proposal meant to boost U.S. manufacturing faces mounting pressure from industries that rely heavily on imported goods as President-elect Donald Trump and congressional Republicans work to finalize new tax legislation. As Republican members of the House of Representatives tax committee prepared to discuss tax reform this week, the panel received a letter from 81 industry groups rejecting the proposal known as ‘border adjustability.’ A lynchpin of the House Republican ‘Better Way’ agenda and viewed favorably by Trump’s team, the policy would help manufacturers by exempting export revenues from corporate taxes. But it would tax imports, hitting import-dependent industries.” (David Morgan, “U.S. Tax Reform Proposal On Border Trade Faces Growing Opposition,” Reuters, 12/15/16)
“Companies That Rely On Global Supply Chains Would Face Huge Business Challenges Caused By Increased Taxes And Increased Cost Of Goods.” “In a Dec. 13 letter to House Ways and Means Chairman Kevin Brady and incoming top Democrat Richard Neal, groups representing the auto and retailing industries, among others, said: ‘Companies that rely on global supply chains would face huge business challenges caused by increased taxes and increased cost of goods.’ They warned of ‘reductions in employment, reduced capital investments and higher prices for consumers’ as potential consequences.” (David Morgan, “U.S. Tax Reform Proposal On Border Trade Faces Growing Opposition,” Reuters, 12/15/16)
CNBC: Coach CEO Victor Luis Acknowledged That “Any Border Tax Will Lead To Higher Prices For The Consumer.” “If we see this border adjustment in an economy where 70 percent of GDP is driven by consumption that is driven on imports, any border tax will lead to higher prices for the consumer … That’s just a reality that we’ll have to face if it comes to that.” (Rachel Cao, “Coach CEO: Any Border Tax Will Lead To Higher Prices For The Consumer,” CNBC, 1/31/17)
National Retail Federation: The Border Adjustment Tax Could Cost The Average Family $1,700 In Just The First Year. “The imposition of a ‘border adjustment tax,’ a key provision of a pending House tax reform proposal, would end up seriously harming U.S. consumers. NRF analysis indicates that this plan could cost the average family $1,700 in the first year alone if the border adjustment provision is enacted. While economic theory suggests that trade flow of imports and exports would balance out over the long run due to offsetting exchange rate and price adjustments, there is no consensus as to the degree or the timing of these adjustments. In the near term, consumers would be left to pick up the significant tab while hoping that the economic theory proves out.” (Mark Mathews, “Border Adjustment Tax Would Cost American Households Up To $1,700 In First Year Alone,” National Retail Federation, 2/3/17)
NRF: Annual Family’s Savings Could Be Wiped Out By Nearly A Third. “For the average family, 27 percent of their savings (income after taxes and expenditures) could evaporate with the cost increases caused by the border tax.” (Mark Mathews, “Border Adjustment Tax Would Cost American Households Up To $1,700 In First Year Alone,” National Retail Federation, 2/3/17)
“Unmarried adults without children currently have only $443 left over annually after taxes and expenditures. If the border adjustment tax were enacted, they could see an $836 increase in costs — nearly 200 percent higher than their annual savings.”
“One-parent households, which are already in the red, could see an additional $1,000 added to their debt burden as they do what they can to make ends meet. Their apparel and footwear bills would increase by $271”
“The average family (married with children) could see their apparel costs (including shoes) increase by $437 a year.”
“Single people could see their annual gasoline bills rise by $189, a whopping 43 percent of their annual average savings.”
“Married couples with children could see their annual gasoline bill could increase by over $400.”
CNBC: “The Republicans’ Plan To Enact A Border Adjustment Tax Will Leave Consumers Digging Deeper Into Their Pockets,” Increasing The Price Of Everyday Goods Like Clothes And Shoes By 20 Percent. “It will force consumers to pay as much as 20 percent more for the products they need. Gasoline is estimated to go up as much as 35 cents a gallon,’ said ‘Americans for Affordable Products’ advisor Brian Dodge … ‘Common household goods, apparel, things that people count on every day, pajamas, will cost more and really just so a certain, select group of corporations can avoid paying taxes forever. We think that’s bad policy…” (Michelle Fox, “Consumers Could See 20% Price Hike With Border Adjustment Tax, Retail Group Says,” CNBC, 2//17)
Economists And Analysts Weigh-In Against Border Adjustments
Dan Mitchell, Cato Institute: “I’ve Never Understood Why Politicians Think It’s A Good Idea To Have Higher Taxes On What Americans Consume And Lower Taxes On What Foreigners Consume.” (Dan Mitchell, “A Remarkably Good And Reasonably Bold Tax Reform Plan From House Republicans,” International Liberty, 6/25/16)
President Of The New York Fed Bill Dudley: “… There Could Be A Lot Of Unintended Consequences.” “Another prominent critic of a ‘border adjustment tax’ emerged Tuesday: the president of the New York Federal Reserve. Bill Dudley was asked by Macy’s CEO Terry Lundgren at a meeting of the National Retail Federation trade group what he thinks of the idea of a border adjustment tax, which involves taxing imports at 20 percent, while making U.S. exports tax-free. … ‘I think that it will lead to a lot of changes in the value of the dollar, the price of imported goods in the U.S., and I’m not sure that would all happen very smoothly,’ Dudley said. ‘I also think there could be a lot of unintended consequences.’” (Michelle Caruso-Cabrera, “NY Fed’s Dudley Sees ‘A Lot Of Unintended Consequences’ From Border-Tax Plan,” CNBC, 1/17/17)
Stephen Moore, Heritage Foundation: Border Tax Unlikely To Be Enacted. “A Heritage Foundation economist who advised President Trump’s campaign said he doubts a proposal from House Republicans to tax imports and exempt exports will gain traction.” (Naomi Jagoda, “Trump Campaign Adviser: Border Tax Unlikely To Be Enacted,” The Hill, 2/7/17)
MOORE: “I think it’s a distraction.” (Naomi Jagoda, “Trump Campaign Adviser: Border Tax Unlikely To Be Enacted,” The Hill, 2/7/17)
Steve Forbes: Border Adjustment Amounts To “Sneaky, Anti-Consumer Tax.” “This levy will cost American consumers at least a trillion dollars over the next ten years … Prices for everyday items, such as socks, shoes and household appliances, will go up. So will tech devices like the iPad, not to mention automobiles and trucks. Gasoline? Millions of Americans will pay an additional 30 cents or more per gallon at the pump. Lower-income and struggling middle-class Americans will get hit the hardest.” (Steve Forbes, “OMG! House Republicans Are Preparing To Hit Consumers With A Horrible New Tax That Will Harm Trump And Hurt The Economy,” Forbes, 1/11/17)
POLITICO Pro: “Trump Adviser Larry Kudlow Slams Border-Adjustment Tax Plans.” “An economic adviser to President-elect Donald Trump slammed plans to create a so-called border adjustable business tax, and predicted it could kill efforts to overhaul the tax code. The House Republican proposal is overly complicated … said Larry Kudlow, who helped write Trump’s tax-reform plans.” (Brian Faler, “Trump Adviser Larry Kudlow Slams Border-Adjustment Tax Plans,” POLITICO Pro, 1/12/17)
KUDLOW: “That is an exercise in government planning and complexity that I believe is doomed to fail … I think the whole corporate tax reform, which is the most important pro-growth measure, will go down the drain over this … There’s a problem that exists, but this is not the right solution …” (Brian Faler, “Trump Adviser Larry Kudlow Slams Border-Adjustment Tax Plans,” POLITICO Pro, 1/12/17)
KUDLOW: “GOP’s Border Adjustment Tax Is ‘Voodoo Economics” “President-elect Donald Trump is correct to criticize the House Republican plan to tax cross-border trade … said Larry Kudlow, who served as a senior economic adviser to Trump’s campaign…’I hate to say this, but it’s ‘voodoo economics’” (R. Williams, “Larry Kudlow: GOP’s Border Adjustment Tax Is ‘Voodoo Economics,” Newsmax, 1/17/17)
I wrote yesterday to praise the Better Way tax plan put forth by House Republicans, but I added a very important caveat: The “destination-based” nature of the revised corporate income tax could be a poison pill for reform.
I listed five concerns about a so-called destination-based cash flow tax (DBCFT), most notably my concerns that it would undermine tax competition (folks on the left think it creates a “race to the bottom” when governments have to compete with each other) and also that it could (because of international trade treaties) be an inadvertent stepping stone for a government-expanding value-added tax.
Brian Garst of the Center for Freedom and Prosperity has just authored a new study on the DBCFT. Here’s his summary description of the tax.
The DBCFT would be a new type of corporate income tax that disallows any deductions for imports while also exempting export-related revenue from taxation. This mercantilist system is based on the same “destination” principle as European value-added taxes, which means that it is explicitly designed to preclude tax competition.
Since CF&P was created to protect and promote tax competition, you won’t be surprised to learn that the DBCFT’s anti-tax competition structure is a primary objection to this new tax.
First, the DBCFT is likely to grow government in the long-run due to its weakening of international tax competition and the loss of its disciplinary impact on political behavior. … Tax competition works because assets are mobile. This provides pressure on politicians to keep rates from climbing too high. When the tax base shifts heavily toward immobile economic activity, such competition is dramatically weakened. This is cited as a benefit of the tax by those seeking higher and more progressive rates. …Alan Auerbach, touts that the DBCFT “alleviates the pressure to reduce the corporate tax rate,” and that it would “alter fundamentally the terms of international tax competition.” This raises the obvious question—would those businesses and economists that favor the DBCFT at a 20% rate be so supportive at a higher rate?
Brian also shares my concern that the plan may morph into a VAT if the WTO ultimately decides that is violates trade rules.
Second, the DBCFT almost certainly violates World Trade Organization commitments. …Unfortunately, it is quite possible that lawmakers will try to “fix” the tax by making it into an actual value-added tax rather than something that is merely based on the same anti-tax competition principles as European-style VATs. …the close similarity of the VAT and the DBCFT is worrisome… Before VATs were widely adopted, European nations featured similar levels of government spending as the United States… Feeding at least in part off the easy revenue generate by their VATs, European nations grew much more drastically over the last half century than the United States and now feature higher burdens of government spending. The lack of a VAT-like revenue engine in the U.S. constrained efforts to put the United States on a similar trajectory as European nations.
And if you’re wondering why a VAT would be a bad idea, here’s a chart from Brian’s paper showing how the burden of government spending in Europe increased once that tax was imposed.
In the new report, Brian elaborates on the downsides of a VAT.
If the DBCFT turns into a subtraction-method VAT, its costs would be further hidden from taxpayers. Workers would not easily understand that their employers were paying a big VAT withholding tax (in addition to withholding for income tax). This makes it easier for politicians to raise rates in the future. …Keep in mind that European nations have corporate income tax systems in addition to their onerous VAT regimes.
And he points out that those who support the DBCFT for protectionist reasons will be disappointed at the final outcome.
…if other nations were to follow suit and adopt a destination-based system as proponents suggest, it will mean more taxes on U.S. exports. Due to the resulting decline in competitive downward pressure on tax rates, the long-run result would be higher tax burdens across the board and a worse global economic environment.
Brian concludes with some advice for Republicans.
Lawmakers should always consider what is likely to happen once the other side eventually returns to power, especially when they embark upon politically risky endeavors… In this case, left-leaning politicians would see the DBCFT not as something to be undone, but as a jumping off point for new and higher taxes. A highly probable outcome is that the United States’ corporate tax environment becomes more like that of Europe, consisting of both consumption and income taxes. The long-run consequences will thus be the opposite of what today’s lawmakers hope to achieve. Instead of a less destructive tax code, the eventual result could be bigger government, higher taxes, and slower economic growth.
My concern with the DBCFT is partly based on theoretical objections, but what really motivates me is that I don’t want to accidentally or inadvertently help statists expand the size and scope of government. And that will happen if we undermine tax competition and/or set in motion events that could lead to a value-added tax.
Let’s close with three hopefully helpful observations.
Helpful Reminder #1: Congressional supporters want a destination-based system as a “pay for” to help finance pro-growth tax reforms, but they should keep in mind that leftists want a destination-based system for bad reasons.
Based on dozens of conversations, I think it’s fair to say that the supporters of the Better Way plan don’t have strong feelings for destination-based taxation as an economic principle. Instead, they simply chose that approach because it is projected to generate $1.2 trillion of revenue and they want to use that money to “pay for” the good tax cuts in the overall plan.
That’s a legitimate choice. But they also should keep in mind why other people prefer that approach. Folks on the left want a destination-based tax system because they don’t like tax competition. They understand that tax competition restrains the ability of governments to over-tax and over-spend. Governments in Europe chose destination-based value-added taxes to prevent consumers from being able to buy goods and services where VAT rates are lower. In other words, to neuter tax competition. Some state governments with high sales taxes in the United States are pushing a destination-based system for sales taxes because they want to hinder consumers from buying goods and services from states with low (or no) sales taxes. Again, their goal is to cripple tax competition.
Something else to keep in mind is that leftist supporters of the DBCFT also presumably see the plan as being a big step toward achieving a value-added tax, which they support as the most effective way of enabling bigger government in the United States.
Helpful Reminder #2: Choosing the right tax base (i.e., taxing income only one time, otherwise known as a consumption-base system) does not require choosing a destination-based approach.
The proponents of the Better Way plan want a “consumption-base” tax. This is a worthy goal. After all, that principle means a system where economic activity is taxed only one time. But that choice is completely independent of the decision whether the tax system should be “origin-based” or “destination-based.”
The bottom line is that you can have the right tax base with either an origin-based system or a destination-based system.
Helpful Reminder #3: The good reforms of the Better Way plan can be achieved without the downside risks of a destination-based tax system.
The Tax Foundation, even in rare instances when I disagree with its conclusions, always does very good work. And they are the go-to place for estimates of how policy changes will affect tax receipts and the economy. Here is a chart with their estimates of the revenue impact of various changes to business taxation in the Better Way plan. As you can see, the switch to a destination-based system (“border adjustment”) pulls in about $1.2 trillion over 10 years. And you can also see all the good reforms (expensing, rate reduction, etc) that are being financed with the various “pay fors” in the plan.
I am constantly asked how the numbers can work if “border adjustment” is removed from the plan. That’s a very fair question.
But there are lots of potential answers, including:
Make a virtue out of necessity by reducing government revenue by $1.2 trillion.
Reduce the growth of government spending to generate offsetting savings.
Reduce the size of the tax cuts in the Better Way plan by $1.2 trillion.
I’m not pretending that any of these options are politically easy. If they were, the drafters of the Better Way plan probably would have picked them already. But I am suggesting that any of those options would be better than adopting a destination-based system for business taxation.
Ultimately, the debate over the DBCFT is about how different people assess political risks. House Republicans advocating the plan want good things, and they obviously think the downside risks in the future are outweighed by the ability to finance a larger level of good tax reforms today. Skeptics appreciate that those proponents want good policy, but we worry about the long-run consequences of changes that may (especially when the left sooner or late regains control) enable bigger government.
P.S. This is not the first time that advocates of good policy have bickered with each other. During the 2016 nomination battle, Rand Paul and Ted Cruz proposed tax reform plans that fixed many of the bad problems in the tax code. But they financed some of those changes by including value-added taxes in their plans. In the short run, either plan would have been much better than the current system. But I was critical because I worried that the inclusion of VATs would eventually give statists a tool to further increase the burden of government.
THE CORNER THE ONE AND ONLY. Speaker Ryan’s Use of Reporters’ Recorders to Explain His Border Tax Was Cute — But Misleading
Faced with growing opposition to their border-adjustment tax, congressional Republicans are nonetheless on the offensive trying to sell it. I have expressed my many reasons for opposing the tax, including my disbelief that Republicans would support a massive tax increase alongside what is otherwise a pro-growth tax reform. While they oppose tax increases to pay for spending increases in other contexts and usually make the case that spending increases should be paid for by spending cuts, Republicans continue to push for this massive new source of revenue, in spite of the distortions it would introduce.
Until now, supporters of the tax have used many questionable arguments. For instance, they claim we shouldn’t worry about the protectionist aspect of a tax that imposes a 20 percent rate to imports but exempts exports under the hope that the U.S. dollar will adjust fully and quickly. However, there are reasons to believe that while the U.S. currency will adjust, it won’t adjust fully (Federal Reserve Board chairwoman Janet Yellen is only the latest one to stress that point), it won’t adjust as quickly as they claim (especially if the tax is challenged under the World Trade Organization as the Europeans have warned is going to be the case), and it won’t result in unicorns and rainbows.
But the latest misguided statements about the border-adjustment tax comes from House speaker Paul Ryan — who ought to know better. During a press conference last week, he repeated the claim that United States was at a disadvantage because other countries’ exports are exempted from taxes while U.S. goods aren’t. [Ryan] noted that most other countries already border-adjust their taxes and tax goods based on whether they were consumed in their jurisdiction.
That comment is bound to confuse reporters because, as Mr. Ryan must know, no other country border-adjusts their corporate income tax. They border-adjust their Value Added Tax. Conflating the two is misleading, to say the least.
The Speaker picked up two reporters’ recorders to give an example of how goods are taxed currently. He suggested one was American-made and the other was Japanese-made. Early on, he dropped one of the recorders, saying “oops” and receiving laughter from the reporters. “Here’s what Japan does when they make this tape recorder: When they send it for export they take the tax off of it, and then it comes to America and it’s not taxed, and it comes through to compete against our good, which was taxed. Theirs was untaxed twice,” Ryan said. “When America makes something, like a tape recorder, we tax it, and then we send it to Japan. As it enters Japan it’s taxed again, to compete against their tape recorder,” he continued. “So we are doing it to ourselves. We are hurting our manufacturing and jobs. We are putting a bias against making things in America in the tax code. . . . That is why we think this is very important. This is good manufacturing policy.”
Oh boy, where do I begin? First, it is true that U.S. companies are at a disadvantage but it is not because of other countries’ tax codes. It is because our corporate-income-tax system has the highest rate of all OECD countries and because, unlike most of our competitors, it taxes U.S. companies’ profits no matter where they are earned in the world. The solution to this disadvantage is to reduce the rates and move to a territorial system. Oh, and by the way, unlike what Ryan and other proponents of a border-adjustment tax would like you to believe, you do not need to move to an expansive destination-based-cash-flow tax to have a territorial tax.
Now let me address the cute tape-recorder example used by the speaker. It is totally misleading because it conflates foreign countries corporate tax and VAT taxes and it paints a picture that is incorrect. For instance, he claims that Japanese exports are exempt from taxes. No, Japanese products exported to the U.S. are exempt from the Japanese VAT but the Japanese company is still paying U.S. corporate tax on its U.S. profits. And you know what? In that sense, the Japanese export is treated exactly like the U.S. goods sold in the U.S. In other words, the playing field is even! I repeat: Japanese goods in the U.S. are taxed like U.S. goods in the U.S.
How about U.S. exports in Japan? Well, it gets hit by the Japanese VAT in Japan and by the Japanese corporate tax but so are Japanese goods sold in Japan. Again, the only disadvantage faced by U.S. companies selling tape recorders abroad comes from the U.S. tax system, which requires that income earned in Japan be taxed by Uncle Sam at 35 percent after benefiting from a tax credit for tax paid in Japan. If the U.S. company decides to keep its Japanese income outside the U.S., the U.S. rate won’t apply.
Dan Mitchell explains why the VAT doesn’t change the terms of trade in this video.
Finally, economists have debunked the idea implied by the speaker that foreign VATs give an advantage to foreign exports — and therefor boost foreign exports. It is simply not true. It follows that imposing a border-adjustment tax in the U.S. will not boost U.S. exports either. Period.
Let me summarize this for you:
No, other countries do not border-adjust their corporate income tax.
Comparing other countries’ VATs and our corporate tax is problematic to say the least.
No, foreign exports sold in the U.S. do not have an advantage over U.S. goods sold in the U.S. Foreign VATs do not boost foreign exports.
A border tax in the U.S. will not boost our exports but it will hurt consumers and many U.S. retailers.
The disadvantage faced by U.S. companies exporting goods abroad comes from the terrible worldwide tax and high rates of the U.S. tax regime, not from other countries’ tax system.
The way to fix the U.S. disadvantage is not to create a new expansive tax that would penalize imports in the U.S. — including imports for the benefit of U.S. domestic companies — and would penalize U.S. consumers.
The Border Adjustment Tax, a proposal favored by House Speaker Paul Ryan, has aroused serious opposition from Republican senators.
FEB 21, 2017
Donald Trump is feeling good about taxes. In his gonzo press conference last Thursday, he assured Americans that “very historic tax reform” is absolutely on track and is going to be—wait for it!—“big league.” The week before, he told a bunch of airline CEOs that “big league” reform was “way head of schedule” and that his people would be announcing something “phenomenal” in “two or three weeks.” And at his Orlando pep rally this past weekend, he gushed about his idea for a punitive 35 percent border tax on products manufactured overseas. The magic is happening, people. And soon America’s tax code will be the best, most beautiful in the world.
But here’s the thing. What Trump doesn’t know about the legislative process could overflow the pool at Mar-a Lago. And when it comes to tax reform, even minor changes make Congress lose its mind. Weird fault lines appear, and the next thing you know, warring factions have painted their faces blue and vowed to die on the blood-soaked battlefield before allowing this marginal rate to change or that loophole to close.
Such drama has, in fact, already begun over the proposal percolating in the House. At issue: a provision known as the border adjustment tax—let’s call it BAT—which, shrunk to its essence, incentivizes domestic manufacturing by slapping a 20 percent levy on imports, while making U.S. companies’ export-revenues tax deductible.
BAT fans—most notably House Speaker Paul Ryan and Ways and Means Chairman Kevin Brady—pitch the provision as an economically elegant twofer: an America-First measure that discourages companies from moving operations overseas while creating a revenue stream ($1 trillion every decade or so) that allows the overall corporate tax rate to be slashed.
Opponents—most vocally Senators David Perdue and Tom Cotton—argue that a BAT is another grubby government cash grab that will ultimately hurt consumers when, say, Walmart has to jack up the prices of underwear, bananas, and Playstations. In a February 8 letter to colleagues, Perdue, who spent four decades in the business world, charged that the BAT is “regressive, hammers consumers, and shuts down economic growth.”Thus the battle lines are drawn. And, make no mistake, this will not be some bush-league, penny-ante skirmish. Behind the legislative factions are amassing some of the heaviest hitters in corporate America, ready to spend millions to sway debate on behalf of their team.Roughly speaking, companies that do a lot of exporting dig the BAT (think: Boeing, Merck, and Dow Chemical) while import-dependent retailers (including Target, Nike, and, yes, Walmart) fear it will destroy their bottom lines. The oil industry isn’t feeling much BAT love either. The Koch brothers want it dead, like, yesterday.At this point, anti-BATers have an edge. Why? Partly, because the provision is super complicated and almost impossible to explain in terms that don’t sound like something a coven of economists vomited up. Ask BAT fans why the provision won’t, in fact, hurt retailers or consumers, and you’re instantly hip-deep in talk of currency revaluation, purchasing power, and territorial taxation. Last Wednesday, one day after Paul Ryan tried to educate Senate Republicans on the wonders of BAT at their weekly policy lunch, Tom Cotton (who represents Walmart’s home state of Arkansas) snarked on the Senate floor, “Some ideas are so stupid only an intellectual could believe them.”This is in no way to suggest that the pro-BAT arguments are wrong. They simply don’t push the same buttons as anti-BAT warnings that Congress is poised to screw consumers in order to fund big tax cuts for corporations.For the past few weeks, in fact, an anti-BAT coalition called Americans for Affordable Products has been busy hawking this exact message. “This is a consumer tax—a means by which House Republicans are paying for other tax deductions,” asserted AAP member Brian Dodge. “It’s not about America First. It’s not a trade-deficit reduction tool. It is a pay-for.”AAP is lobbying lawmakers and staffers and doing public outreach. Last Wednesday, it dispatched eight CEOs to chat with Trump and Vice President Pence. “We view our job as leading a large education campaign,” said Dodge. “We believe the more that lawmakers understand about this proposal, the less inclined they’ll be to support it.”Of course, BAT fans are gearing up as well and promise to be equally aggressive. The day after the AAP roll out, the American Made Coalition launched, with an eye toward helping Ryan’s office spread the good word. “It takes time to educate both policy makers and businesses on what’s on the table,” said Brian Reardon, an adviser to the group.There is no place for subtlety in this war. Part of BAT supporters’ argument is that, without the provision, tax overhaul will implode altogether. Message: Get on board or kiss your once-in-a-lifetime reform opportunity good-bye.It’s a question of Senate math. To pass with a simple majority (and avoid a filibuster by Democrats), the GOP’s plan must go through under the procedure known as reconciliation. But to qualify for reconciliation, the package–which slashes both corporate and upper-bracket taxes–cannot blow a hole in the long-term budget. Without the $1 trillion in revenues from BAT, say advocates, there’s no way that hole can be plugged.“This is the only way at these rates and keeping things revenue neutral,” insisted a senior Republican aide. There is no other viable option. Period. End of story.But anti-BATers are eyeing a different Senate equation. To amass even a simple majority of votes, the BAT can lose only two of the 52 Republican members. (Unless Democrats cross the aisle, of course.) In addition to Cotton’s and Perdue’s open hostility, Senators John Boozman, Mike Rounds, John Cornyn, Tim Scott, and Mike Lee have all expressed reservations. “I have real concerns that this piece of the House blueprint will cause more disruption than necessary,” Lee said. “Will the dollar suddenly shoot up by 20 percent? Will U.S. manufacturers have to redo their international supply chains? These are all open questions.”
With the provision’s Senate prospects iffy, there’s less incentive for House conservatives to support something that smells even faintly like a tax. Both the current chairman of the Freedom Caucus, Mark Meadows, and the former chairman, Jim Jordan, have said they’d like reform done without a BAT.
“My reasoning is very basic,” Jordan told me. “Why in the world would we want to add another revenue stream?” You can debate the impact on exchange rates and purchasing power all day, said Jordan, but that doesn’t address many conservatives’ core objection. “We come at it from fundamental perspective,” he said. “The idea that you’re going to add an entirely new tax is a big problem.”
(BAT fans, for the record, dispute that this is a new tax. It is, they insist, replacing the existing system with an entirely new, far superior one that must be looked at, as Reardon put it, “holistically.”)
The only thing everyone can agree on is that this will be a long, ugly fight. If Trump drops his tariff idea and embraces BAT, it could boost the cause. But even then, he’d need to do major arm-twisting to get Senate skeptics on board (especially with the likes of Walmart and the Kochs twisting the other arm.) Like it or not, this is what the political big leagues are like: slow, messy, and infuriating.
The up side for Trump: He’ll have time to throw a lot more pep rallies on this topic before anything gets decided.
The Internal Revenue Service has recently released new data on individual income taxes for calendar year 2014, showing the number of taxpayers, adjusted gross income, and income tax shares by income percentiles.
The data demonstrates that the U.S. individual income tax continues to be very progressive, borne mainly by the highest income earners.
In 2014, 139.6 million taxpayers reported earning $9.71 trillion in adjusted gross income and paid $1.37 trillion in individual income taxes.
The share of income earned by the top 1 percent of taxpayers rose to 20.6 percent in 2014. Their share of federal individual income taxes also rose, to 39.5 percent.
In 2014, the top 50 percent of all taxpayers paid 97.3 percent of all individual income taxes while the bottom 50 percent paid the remaining 2.7 percent.
The top 1 percent paid a greater share of individual income taxes (39.5 percent) than the bottom 90 percent combined (29.1 percent).
The top 1 percent of taxpayers paid a 27.1 percent individual income tax rate, which is more than seven times higher than taxpayers in the bottom 50 percent (3.5 percent).
Reported Income and Taxes Paid Both Increased Significantly in 2014
Taxpayers reported $9.71 trillion in adjusted gross income (AGI) on 139.5 million tax returns in 2014. Total AGI grew by $675 billion from the previous year’s levels. There were 1.2 million more returns filed in 2014 than in 2013, meaning that average AGI rose by $4,252 per return, or 6.5 percent.
Meanwhile, taxpayers paid $1.37 trillion in individual income taxes in 2014, an 11.5 percent increase from taxes paid in the previous year. The average individual income tax rate for all taxpayers rose from 13.64 percent to 14.16 percent. Moreover, the average tax rate increased for all income groups, except for the top 0.1 percent of taxpayers, whose average rate decreased from 27.91 percent to 27.67 percent.
The most likely explanation behind the higher tax rates in 2014 is a phenomenon known as “real bracket creep.”  As incomes rise, households are pushed into higher tax brackets, and are subject to higher overall tax rates on their income. On the other hand, the likely reason why the top 0.1 percent of households saw a slightly lower tax rate in 2014 is because a higher portion of their income consisted of long-term capital gains, which are subject to lower tax rates.
The share of income earned by the top 1 percent rose to 20.58 percent of total AGI, up from 19.04 percent in 2013. The share of the income tax burden for the top 1 percent also rose, from 37.80 percent in 2013 to 39.48 percent in 2014.
Table 1. Summary of Federal Income Tax Data, 2014
Number of Returns
Adjusted Gross Income ($ millions)
Share of Total Adjusted Gross Income
Income Taxes Paid ($ millions)
Share of Total Income Taxes Paid
Income Split Point
Average Tax Rate
Note: Does not include dependent filers
High-Income Americans Paid the Majority of Federal Taxes
In 2014, the bottom 50 percent of taxpayers (those with AGIs below $38,173) earned 11.27 percent of total AGI. This group of taxpayers paid approximately $38 billion in taxes, or 2.75 percent of all income taxes in 2014.
In contrast, the top 1 percent of all taxpayers (taxpayers with AGIs of $465,626 and above) earned 20.58 percent of all AGI in 2014, but paid 39.48 percent of all federal income taxes.
In 2014, the top 1 percent of taxpayers accounted for more income taxes paid than the bottom 90 percent combined. The top 1 percent of taxpayers paid $543 billion, or 39.48 percent of all income taxes, while the bottom 90 percent paid $400 billion, or 29.12 percent of all income taxes.
High-Income Taxpayers Pay the Highest Average Tax Rates
The 2014 IRS data shows that taxpayers with higher incomes pay much higher average individual income tax rates than lower-income taxpayers.
The bottom 50 percent of taxpayers (taxpayers with AGIs below $38,173) faced an average income tax rate of 3.45 percent. As household income increases, the IRS data shows that average income tax rates rise. For example, taxpayers with AGIs between the 10th and 5th percentile ($133,445 and $188,996) pay an average rate of 13.7 percent – almost four times the rate paid by those in the bottom 50 percent.
The top 1 percent of taxpayers (AGI of $465,626 and above) paid the highest effective income tax rate, at 27.2 percent, 7.9 times the rate faced by the bottom 50 percent of taxpayers.
Taxpayers at the very top of the income distribution, the top 0.1 percent (with AGIs over $2.14 million), paid an even higher average tax rate, of 27.7 percent.
5% & 10%
Between 10% & 25%
Between 25% & 50%
Table 2. Number of Federal Individual Income Tax Returns Filed 1980–2014 (Thousands)
Source: Internal Revenue Service.
The Tax Reform Act of 1986 changed the definition of AGI, so data above and below this line not strictly comparable
The IRS changed methodology, so data above and below this line not strictly comparable
Between 5% & 10%
Between 10% & 25%
Between 25% & 50%
Table 3. Adjusted Gross Income of Taxpayers in Various Income Brackets, 1980–2014 ($Billions)
Source: Internal Revenue Service.
The Tax Reform Act of 1986 changed the definition of AGI, so data above and below this line not strictly comparable
The IRS changed methodology, so data above and below this line not strictly comparable
Between 5% & 10%
Between 10% & 25%
Between 25% & 50%
Table 4. Total Income Tax after Credits, 1980–2014 ($Billions)
Source: Internal Revenue Service.
The Tax Reform Act of 1986 changed the definition of AGI, so data above and below this line not strictly comparable
The IRS changed methodology, so data above and below this line not strictly comparable
Between 5% & 10%
Between 10% & 25%
Between 25% & 50%
Table 5. Adjusted Gross Income Shares, 1980–2014 (percent of total AGI earned by each group)
Source: Internal Revenue Service.
The Tax Reform Act of 1986 changed the definition of AGI, so data above and below this line not strictly comparable
The IRS changed methodology, so data above and below this line not strictly comparable
Between 5% & 10%
Between 10% & 25%
Between 25% & 50%
Table 6. Total Income Tax Shares, 1980–2014 (percent of federal income tax paid by each group)
Source: Internal Revenue Service.
The Tax Reform Act of 1986 changed the definition of AGI, so data above and below this line not strictly comparable
The IRS changed methodology, so data above and below this line not strictly comparable
Table 7. Dollar Cut-Off, 1980–2014 (Minimum AGI for Tax Returns to Fall into Various Percentiles; Thresholds Not Adjusted for Inflation)
The Tax Reform Act of 1986 changed the definition of AGI, so data above and below this line not strictly comparable
The IRS changed methodology, so data above and below this line not strictly comparable
Source: Internal Revenue Service.
Between 5% & 10%
Between 10% & 25%
Between 25% & 50%
Table 8. Average Tax Rate, 1980–2014 (Percent of AGI Paid in Income Taxes)
Source: Internal Revenue Service.
The Tax Reform Act of 1986 changed the definition of AGI, so data above and below this line not strictly comparable
The IRS changed methodology, so data above and below this line not strictly comparable
For data prior to 2001, all tax returns that have a positive AGI are included, even those that do not have a positive income tax liability. For data from 2001 forward, returns with negative AGI are also included, but dependent returns are excluded.
Income tax after credits (the measure of “income taxes paid” above) does not account for the refundable portion of EITC. If it were included, the tax share of the top income groups would be higher. The refundable portion is classified as a spending program by the Office of Management and Budget and therefore is not included by the IRS in these figures.
The only tax analyzed here is the federal individual income tax, which is responsible for more than 25 percent of the nation’s taxes paid (at all levels of government). Federal income taxes are much more progressive than federal payroll taxes, which are responsible for about 20 percent of all taxes paid (at all levels of government), and are more progressive than most state and local taxes.
AGI is a fairly narrow income concept and does not include income items like government transfers (except for the portion of Social Security benefits that is taxed), the value of employer-provided health insurance, underreported or unreported income (most notably that of sole proprietors), income derived from municipal bond interest, net imputed rental income, and others.
The unit of analysis here is that of the tax return. In the figures prior to 2001, some dependent returns are included. Under other units of analysis (like the Treasury Department’s Family Economic Unit), these returns would likely be paired with parents’ returns.
These figures represent the legal incidence of the income tax. Most distributional tables (such as those from CBO, Tax Policy Center, Citizens for Tax Justice, the Treasury Department, and JCT) assume that the entire economic incidence of personal income taxes falls on the income earner.
 There is strong reason to believe that capital gains realizations were unusually depressed in 2013, due to the increase in the top capital gains tax rate from 15 percent to 23.8 percent. In 2013, capital gains accounted for 26.6 percent of the income of taxpayers with over $1 million in AGI received, compared to 31.7 percent in 2014 (these calculations apply for net capital gains reported on Schedule D). Table 1.4, Publication 1304, “Individual Income Tax Returns 2014,” Internal Revenue Service, https://www.irs.gov/uac/soi-tax-stats-individual-income-tax-returns-publication-1304-complete-report.
 Here, “average income tax rate” is defined as income taxes paid divided by adjusted gross income.
Story 2: Stagnating United States Economy — The Great Stagnation — Videos —
American Stasis (Episode 3/5)
Why Governments Create Inflation
Tyler Cowen, “The Complacent Class”
TEDxEast – Tyler Cowen – The Great Stagnation
Tyler Cowen: The Great Stagnation
The American Dream and the Complacent Class
The Complacent Class (Episode 1/5)
The New Era of Segregation (Episode 2/5)
American Stasis (Episode 3/5)
The Missing Men (Episode 4/5)
Tyler Cowen: The Rise and Fall of the Chinese Economy
The Great Stagnation by Tyler Cowen
National Income and Product Accounts
Gross Domestic Product: Fourth Quarter and Annual 2016 (Third Estimate)
Corporate Profits: Fourth Quarter and Annual 2016
Real gross domestic product (GDP) increased at an annual rate of 2.1 percent in the fourth quarter of
2016 (table 1), according to the "third" estimate released by the Bureau of Economic Analysis. In the
third quarter of 2016, real GDP increased 3.5 percent.
The GDP estimate released today is based on more complete source data than were available for the
"second" estimate issued last month. In the second estimate, the increase in real GDP was 1.9 percent.
With this third estimate for the fourth quarter, the general picture of economic growth remains largely
the same; personal consumption expenditures (PCE) increased more than previously estimated (see
"Updates to GDP" on page 2).
Real gross domestic income (GDI) increased 1.0 percent in the fourth quarter, compared with an
increase of 5.0 percent in the third. The average of real GDP and real GDI, a supplemental measure of
U.S. economic activity that equally weights GDP and GDI, increased 1.5 percent in the fourth quarter,
compared with an increase of 4.3 percent in the third quarter (table 1).
The increase in real GDP in the fourth quarter reflected positive contributions from PCE, private
inventory investment, residential fixed investment, nonresidential fixed investment, and state and local
government spending that were partly offset by negative contributions from exports and federal
government spending. Imports, which are a subtraction in the calculation of GDP, increased (table 2).
The deceleration in real GDP in the fourth quarter reflected downturns in exports and in federal
government spending, an acceleration in imports, and a deceleration in nonresidential fixed investment
that were partly offset by accelerations in private inventory investment and in PCE, and upturns in
residential fixed investment and in state and local government spending.
Current-dollar GDP increased 4.2 percent, or $194.1 billion, in the fourth quarter to a level of $18,869.4
billion. In the third quarter, current-dollar GDP increased 5.0 percent, or $225.2 billion (table 1 and
The price index for gross domestic purchases increased 2.0 percent in the fourth quarter, compared
with an increase of 1.5 percent in the third quarter (table 4). The PCE price index increased 2.0 percent,
compared with an increase of 1.5 percent. Excluding food and energy prices, the PCE price index
increased 1.3 percent, compared with an increase of 1.7 percent (appendix table A).
Updates to GDP
The upward revision to the percent change in real GDP primarily reflected upward revisions to PCE and
to private inventory investment that were partly offset by downward revisions to nonresidential fixed
investment and to exports. Imports, which are a subtraction in the calculation of GDP, were revised
upward. For more information, see the Technical Note. For information on updates to GDP, see the
"Additional Information" section that follows.
Advance Estimate Second Estimate Third Estimate
(Percent change from preceding quarter)
Real GDP 1.9 1.9 2.1
Current-dollar GDP 4.0 3.9 4.2
Real GDI --- --- 1.0
Average of Real GDP and Real GDI --- --- 1.5
Gross domestic purchases price index 2.0 1.9 2.0
PCE price index 2.2 1.9 2.0
Real GDP increased 1.6 percent in 2016 (that is, from the 2015 annual level to the 2016 annual level),
compared with an increase of 2.6 percent in 2015 (table 1).
The increase in real GDP in 2016 reflected positive contributions from PCE, residential fixed investment,
state and local government spending, exports, and federal government spending that were partly offset
by negative contributions from private inventory investment and nonresidential fixed investment.
Imports, which are a subtraction in the calculation of GDP, increased (table 2).
The deceleration in real GDP from 2015 to 2016 reflected downturns in private inventory investment
and in nonresidential fixed investment and decelerations in PCE, in residential fixed investment, and in
state and local government spending that were partly offset by a deceleration in imports and
accelerations in federal government spending and in exports.
Current-dollar GDP increased 3.0 percent, or $532.5 billion, in 2016 to a level of $18,569.1 billion,
compared with an increase of 3.7 percent, or $643.5 billion, in 2015 (table 1 and table 3).
Real GDI increased 1.6 percent in 2016, compared with an increase of 2.5 percent in 2015 (table 1).
The price index for gross domestic purchases increased 1.0 percent in 2016, compared with an increase
of 0.4 percent in 2015 (table 4).
During 2016 (that is, measured from the fourth quarter of 2015 to the fourth quarter of 2016), real GDP
increased 2.0 percent, compared with an increase of 1.9 percent during 2015. The price index for gross
domestic purchases increased 1.5 percent during 2016, compared with an increase of 0.4 percent during
2015. Real GDI increased 1.9 percent during 2016, compared with an increase of 1.5 percent during
2015 (table 7).
Corporate Profits (table 12)
Profits from current production (corporate profits with inventory valuation adjustment and capital
consumption adjustment) increased $11.2 billion in the fourth quarter of 2016, compared with an
increase of $117.8 billion in the third quarter.
Profits of domestic financial corporations increased $26.5 billion in the fourth quarter, compared with
an increase of $50.1 billion in the third. Profits of domestic nonfinancial corporations decreased $60.4
billion, in contrast to an increase of $66.4 billion. The estimate of nonfinancial corporate profits in the
fourth quarter was reduced by a $4.95 billion ($19.8 billion at an annual rate) settlement between a U.S.
subsidiary of Volkswagen and the federal and state governments. For more information, see the FAQ,
"What are the effects of the Volkswagen buyback deal on GDP and the national accounts?”. The
rest-of-the-world component of profits increased $45.1 billion, compared with an increase of $1.3 billion.
This measure is calculated as the difference between receipts from the rest of the world and payments to
the rest of the world. In the fourth quarter, receipts increased $9.1 billion, and payments decreased
In 2016, profits from current production decreased $2.3 billion, compared with a decrease of $64.0
billion in 2015. Profits of domestic financial corporations increased $20.5 billion, compared with an
increase of $8.5 billion. Profits of domestic nonfinancial corporations decreased $47.0 billion, compared
with a decrease of $47.3 billion. The rest-of-the-world component of profits increased $24.3 billion, in
contrast to a decrease of $25.2 billion.
* * *
Next release: April 28, 2017 at 8:30 A.M. EDT
Gross Domestic Product: First Quarter 2017 (Advance Estimate)
Additional Resources available at www.bea.gov:
• Stay informed about BEA developments by reading the BEA blog, signing up for BEA’s email
subscription service, or following BEA on Twitter @BEA_News.
• Historical time series for these estimates can be accessed in BEA’s Interactive Data Application.
• Access BEA data by registering for BEA’s Data Application Programming Interface (API).
• For more on BEA’s statistics, see our monthly online journal, the Survey of Current Business.
• BEA's news release schedule
• NIPA Handbook: Concepts and Methods of the U.S. National Income and Product Accounts
Gross domestic product (GDP) is the value of the goods and services produced by the nation’s economy
less the value of the goods and services used up in production. GDP is also equal to the sum of personal
consumption expenditures, gross private domestic investment, net exports of goods and services, and
government consumption expenditures and gross investment.
Gross domestic income (GDI) is the sum of incomes earned and costs incurred in the production of GDP.
In national economic accounting, GDP and GDI are conceptually equal. In practice, GDP and GDI differ
because they are constructed using largely independent source data. Real GDI is calculated by deflating
gross domestic income using the GDP price index as the deflator, and is therefore conceptually
equivalent to real GDP.
Current-dollar estimates are valued in the prices of the period when the transactions occurred—that is,
at “market value.” Also referred to as “nominal estimates” or as “current-price estimates.”
Real values are inflation-adjusted estimates—that is, estimates that exclude the effects of price changes.
The gross domestic purchases price index measures the prices of final goods and services purchased by
The personal consumption expenditure price index measures the prices paid for the goods and services
purchased by, or on the behalf of, “persons.”
Profits from current production, referred to as corporate profits with inventory valuation adjustment
(IVA) and capital consumption adjustment (CCAdj) in the NIPAs, is a measure of the net income of
corporations before deducting income taxes that is consistent with the value of goods and services
measured in GDP. The IVA and CCAdj are adjustments that convert inventory withdrawals and
depreciation of fixed assets reported on a tax-return, historical-cost basis to the current-cost economic
measures used in the national income and product accounts.
For more definitions, see the Glossary: National Income and Product Accounts.
Annual rates. Quarterly values are expressed at seasonally-adjusted annual rates (SAAR), unless
otherwise specified. Dollar changes are calculated as the difference between these SAAR values. For
detail, see the FAQ “Why does BEA publish estimates at annual rates?”
Percent changes in quarterly series are calculated from unrounded data and are displayed at annual
rates, unless otherwise specified. For details, see the FAQ “How is average annual growth calculated?”
Quantities and prices. Quantities, or “real” volume measures, and prices are expressed as index
numbers with a specified reference year equal to 100 (currently 2009). Quantity and price indexes are
calculated using a Fisher-chained weighted formula that incorporates weights from two adjacent
periods (quarters for quarterly data and annuals for annual data). “Real” dollar series are calculated by
multiplying the published quantity index by the current dollar value in the reference year (2009) and
then dividing by 100. Percent changes calculated from real quantity indexes and chained-dollar levels
are conceptually the same; any differences are due to rounding.
Chained-dollar values are not additive because the relative weights for a given period differ from those
of the reference year. In tables that display chained-dollar values, a “residual” line shows the difference
between the sum of detailed chained-dollar series and its corresponding aggregate.
Updates to GDP
BEA releases three vintages of the current quarterly estimate for GDP: "Advance" estimates are
released near the end of the first month following the end of the quarter and are based on source data
that are incomplete or subject to further revision by the source agency; “second” and “third” estimates
are released near the end of the second and third months, respectively, and are based on more detailed
and more comprehensive data as they become available.
Annual and comprehensive updates are typically released in late July. Annual updates generally cover at
least the 3 most recent calendar years (and their associated quarters) and incorporate newly available
major annual source data as well as some changes in methods and definitions to improve the accounts.
Comprehensive (or benchmark) updates are carried out at about 5-year intervals and incorporate major
periodic source data, as well as major conceptual improvements.
The table below shows the average revisions to the quarterly percent changes in real GDP between
different estimate vintages, without regard to sign.
Vintage Average Revision Without Regard to Sign
(percentage points, annual rates)
Advance to second 0.5
Advance to third 0.6
Second to third 0.2
Advance to latest 1.1
Note - Based on estimates from 1993 through 2015. For more information on GDP updates, see Revision
Information on the BEA Web site.
The larger average revision from the advance to the latest estimate reflects the fact that periodic
comprehensive updates include major statistical and methodological improvements.
Unlike GDP, an advance current quarterly estimate of GDI is not released because data on domestic
profits and on net interest of domestic industries are not available. For fourth quarter estimates, these
data are not available until the third estimate.
Breaking News — Story 1: Obamagate Surveillance/Spying Scandal Spreading — Abuse of Power By Former National Security Adviser Susan Rice — Requested Revealing or Unmasking of American Citizen Identities Including Trump and Trump Campaign and Transition Teams For 7 Months (July 2016 – January 2017) — The Smoking Gun — Videos —
Rice asked for Trump transition associates to be unmasked
Where does the Susan Rice story go from here?
Hume talks Supreme Court fight, Susan Rice revelations
Jennings: New surveillance details are ‘political bombshell’
Report: Obama adviser Susan Rice sought to unmask Trump associates
Susan Rice Requested Intel to Unmask Names of Trump Transition Officials
Obama’s SPY Susan Rice CAUGHT SPYING ON TRUMP and Trump’s Team said Rush Limbaugh
Furious AG Sessions: we will convict some people to make the leaking stop
Susan Rice Unmasked Trump Team, 1566
Published on Apr 3, 2017
This video is about Susan Rice Unmasked Trump Team, 1566
President Obama’s National Security Advisor, Susan Rice, deliberately unmasked President-Elect Donald Trump, and other incoming Trump officials, according to reporter Michael Chernovich.
Furthermore, Chernovich learned that New York Times reporter Maggie Haberman has had this story for at least 48 hours, and has chosen to sit on it in an effort to protect the reputation of Obama.
According to Chernovich:
“The White House Counsel’s office identified Rice as the person responsible for the unmasking after examining Rice’s document log requests.”
“The reports Rice requested to see are kept under tightly-controlled conditions. Each person must log her name before being granted access to them.”
According to Chernovich two other people close to Obama had authorization to unmask the names of Americans as well: CIA Director John Brennan and then-Attorney General Loretta Lynch.
Yesterday, Fox News announced that House Intelligence Committee Chairman Devin Nunes, R-Calif, knew who unmasked General Michael Flynn, saying that the person was:
“… very well known, very high up, very senior in the intelligence world.”
I had speculated that that person may have been Jeh Johnson, the former Director of Homeland Security. We will see in the morning if the Fox report confirms that it was indeed Susan Rice.
If it was Rice, that puts the source of this felonious conduct right at the door of former President Obama.
Susan Rice On Unmasking Of Trump Team, ‘I Know Nothing’
Multiple Felonies Committed By Obama Admin. Obama Surveillance on Trump.
Obama Official Admits They Were Surveilling Trump & His Team, Unmasking Names & Leaking Intel
Team Obama Gets Caught Committing Political Espionage, Spying on Trump & His Team
Susan Rice Reportedly “Unmasked” Trump in Incidental Data Collection
Trump Proven 100% Right about Obama Admin “Wiretapping”(Surveilling) Him & His Team
Donald Trump’s Administration was Wiretapped | Rand Paul
Susan Rice, Ben Rhodes, John Brennan are suspects: James Comey Intelligence Hearing @ congressRand Paul Calls For Susan Rice To Testify On Unmasking Trump Officials
Susan Rice requested to unmask names of Trump transition officials, sources say
By Adam Housley
Published April 03, 2017
Multiple sources tell Fox News that Susan Rice, former national security adviser under then-President Barack Obama, requested to unmask the names of Trump transition officials caughtup in surveillance.
The unmasked names, of people associated with Donald Trump, were then sent to all those at the National Security Council, some at the Defense Department, then-Director of National Intelligence James Clapper and then-CIA Director John Brennan – essentially, the officials at the top, including former Rice deputy Ben Rhodes.
The names were part of incidental electronic surveillance of candidate and President-elect Trump and people close to him, including family members, for up to a year before he took office.
Expand / Contract
Rice was ambassador to the UN when she went on Sunday news shows to say the Benghazi attack was prompted by a video. (Fox News Photo)
It was not clear how Rice knew to ask for the names to be unmasked, but the question was being posed by the sources late Monday.
“What I know is this … If the intelligence community professionals decide that there’s some value, national security, foreign policy or otherwise in unmasking someone, they will grant those requests,” former Obama State Department spokeswoman and Fox News contributor Marie Harf told Fox News’ Martha MacCallum on “The First 100 Days. “And we have seen no evidence … that there was partisan political notice behind this and we can’t say that unless there’s actual evidence to back that up.”
White House Press Secretary Sean Spicer, asked about the revelations at Monday’s briefing, declined to comment specifically on what role Rice may have played or officials’ motives.
Expand / Contract
Rep. Devin Nunes, R-Calif., says he has seen incidental surveillance reports he fears were used for political reasons. (The Associated Press)
“I’m not going to comment on this any further until [congressional] committees have come to a conclusion,” he said, while contrasting the media’s alleged “lack” of interest in these revelations with the intense coverage of suspected Trump-Russia links.
When names of Americans are incidentally collected, they are supposed to be masked, meaning the name or names are redacted from reports – whether it is international or domestic collection, unless it is an issue of national security, crime or if their security is threatened in any way. There are loopholes and ways to unmask through backchannels, but Americans are supposed to be protected from incidental collection. Sources told Fox News that in this case, they were not.
This comes in the wake of Evelyn Farkas’ television interview last month in which the former Obama deputy secretary of defense said in part: “I was urging my former colleagues and, frankly speaking, the people on the Hill – it was more actually aimed at telling the Hill people, get as much information as you can, get as much intelligence as you can, before President Obama leaves the administration.”
Meanwhile, Fox News also is told that House Intelligence Committee Chairman Devin Nunes knew about unmasking and leaking back in January, well before President Trump’s tweet in March alleging wiretapping.
Nunes has faced criticism from Democrats for viewing pertinent documents on White House grounds and announcing their contents to the press. But sources said “the intelligence agencies slow-rolled Nunes. He could have seen the logs at other places besides the White House SCIF [secure facility], but it had already been a few weeks. So he went to the White House because he could protect his sources and he could get to the logs.”
As the Obama administration left office, it also approved new rules that gave the NSA much broader powers by relaxing the rules about sharing intercepted personal communications and the ability to share those with 16 other intelligence agencies.
Rice is no stranger to controversy. As the U.S. Ambassador to the UN, she appeared on several Sunday news shows to defend the adminstration’s later debunked claim that the Sept. 11, 2012 attacks on a U.S. consulate in Libya was triggered by an Internet video.
Rice also told ABC News in 2014 that Army Sgt. Bowe Bergdahl “served the United States with honor and distinction” and that he “wasn’t simply a hostage; he was an American prisoner of war captured on the battlefield.”
Bergdahl is currently facing court-martial on charges of desertion and misbehavior before the enemy for allegedly walking off his post in Afghanistan.
GOP Kentucky Sen. Rand Paul said he believes former National Security Advisor Susan Rice should testify before Congress on her request to unmask the names of Trump transition officials collected during routine intelligence-gathering operations.
Paul argued the situation should not be downplayed, saying reforms need to be made to prevent individuals from being blackmailed on personal aspects of their lives through unmasking. He noted there was nothing stopping the former administration from looking through Trump officials and national security advisors’ conversations during the transition window.
“If it is allowed, we shouldn’t be allowing it, but I don’t think should just discount how big a deal it is that Susan Rice was looking at these,” he told reporters Monday. “And she needs to be asked, ‘Did President Obama ask her to do this? Was this a directive from President Obama? I think she should testify under oath on this.”
Paul said he has long thought there are too many people with the ability to unmask individuals.
“The law says you can’t reverse target people, but how would you know that once you get inside the brain and the people that are unmasking people,” Paul continued. “So, what if I decided to unmask and I’m there and I only unmask the conversations of my Democrat opponents — shouldn’t there be more restrictions for unmasking people in the political process?”
He said he believes there should be two individuals at the top of the agency to allow for identities to be unmasked. Paul noted the process is indiscriminate, noting the United States previously captured every phone call in Italy for a month.
“Basically there’s no Fourth Amendment when you use these kinds of things, you go with a lower standard because we’ve got to protect the country and we don’t care about spying on foreigners,” he said, adding there are said to be millions of Americans caught up in the country’s foreign targeting.
Paul said the president did not bring up the matter on their golf trip Sunday, but he voiced his opinion on the matter.
Top Obama Adviser Sought Names of Trump Associates in Intel
By Eli Lake
APRIL 3, 2017 10:13 AM EDT
White House lawyers last month learned that the former national security adviser Susan Rice requested the identities of U.S. persons in raw intelligence reports on dozens of occasions that connect to the Donald Trump transition and campaign, according to U.S. officials familiar with the matter.
The pattern of Rice’s requests was discovered in a National Security Council review of the government’s policy on “unmasking” the identities of individuals in the U.S. who are not targets of electronic eavesdropping, but whose communications are collected incidentally. Normally those names are redacted from summaries of monitored conversations and appear in reports as something like “U.S. Person One.”
The National Security Council’s senior director for intelligence, Ezra Cohen-Watnick, was conducting the review, according to two U.S. officials who spoke with Bloomberg View on the condition of anonymity because they were not authorized to discuss it publicly. In February Cohen-Watnick discovered Rice’s multiple requests to unmask U.S. persons in intelligence reports that related to Trump transition activities. He brought this to the attention of the White House General Counsel’s office, who reviewed more of Rice’s requests and instructed him to end his own research into the unmasking policy.
The intelligence reports were summaries of monitored conversations — primarily between foreign officials discussing the Trump transition, but also in some cases direct contact between members of the Trump team and monitored foreign officials. One U.S. official familiar with the reports said they contained valuable political information on the Trump transition such as whom the Trump team was meeting, the views of Trump associates on foreign policy matters and plans for the incoming administration.
Rice did not respond to an email seeking comment on Monday morning. Her role in requesting the identities of Trump transition officials adds an important element to the dueling investigations surrounding the Trump White House since the president’s inauguration.
Both the House and Senate intelligence committees are probing any ties between Trump associates and a Russian influence operation against Hillary Clinton during the election. The chairman of the House intelligence committee, Representative Devin Nunes, is also investigating how the Obama White House kept tabs on the Trump transition after the election through unmasking the names of Trump associates incidentally collected in government eavesdropping of foreign officials.
Rice herself has not spoken directly on the issue of unmasking. Last month when she was asked on the “PBS NewsHour” about reports that Trump transition officials, including Trump himself, were swept up in incidental intelligence collection, Rice said: “I know nothing about this,” adding, “I was surprised to see reports from Chairman Nunes on that account today.”
Rice’s requests to unmask the names of Trump transition officials do not vindicate Trump’s own tweets from March 4 in which he accused Obama of illegally tapping Trump Tower. There remains no evidence to support that claim.
But Rice’s multiple requests to learn the identities of Trump officials discussed in intelligence reports during the transition period does highlight a longstanding concern for civil liberties advocates about U.S. surveillance programs. The standard for senior officials to learn the names of U.S. persons incidentally collected is that it must have some foreign intelligence value, a standard that can apply to almost anything. This suggests Rice’s unmasking requests were likely within the law.
The news about Rice also sheds light on the strange behavior of Nunes in the last two weeks. It emerged last week that he traveled to the White House last month, the night before he made an explosive allegation about Trump transition officials caught up in incidental surveillance. At the time he said he needed to go to the White House because the reports were only on a database for the executive branch. It now appears that he needed to view computer systems within the National Security Council that would include the logs of Rice’s requests to unmask U.S. persons.
The ranking Democrat on the committee Nunes chairs, Representative Adam Schiff, viewed these reports on Friday. In comments to the press over the weekend he declined to discuss the contents of these reports, but also said it was highly unusual for the reports to be shown only to Nunes and not himself and other members of the committee.
Indeed, much about this is highly unusual: if not how the surveillance was collected, then certainly how and why it was disseminated.
White House logs indicate Susan Rice consumed unmasked intel on Trump associates
by Sara Carter and John Solomon
April 3, 2017
Computer logs that former President Obama’s team left behind in the White House indicate his national security adviser Susan Rice accessed numerous intelligence reports during Obama’s last seven months in office that contained National Security Agency intercepts involving Donald Trump and his associates, Circa has learned.
Intelligence sources said the logs discovered by National Security Council staff suggested Rice’s interest in the NSA materials, some of which included unmasked Americans’ identities, appeared to begin last July around the time Trump secured the GOP nomination and accelerated after Trump’s election in November launched a transition that continued through January.
The intelligence reports included some intercepts of Americans talking to foreigners and many more involving foreign leaders talking about the future president, his campaign associates or his transition, the sources said. Most if not all had nothing to do with the Russian election interference scandal, the sources said, speaking only on condition of anonymity given the sensitive nature of the materials.
Ordinarily, such references to Americans would be redacted or minimized by the NSA before being shared with outside intelligence sources, but in these cases names were sometimes unmasked at the request of Rice or the intelligence reports were specific enough that the American’s identity was easily ascertained, the sources said.
The exact national security justifications for Rice accessing the reports isn’t clear and may require additional documentation that the House and Senate intelligence committees have requested from the NSA, America’s lead agency in spying on foreign powers.
How the information was disseminated beyond Rice will also be a potential focus of congressional oversight, since lawmakers may want to know if it was briefed to Obama or shared with members of her larger circle of advisers, like deputy Ben Rhodes.
Rice has not returned repeated calls for comment from Circa. But in an interview with PBS recently, she said she had no idea what House Intelligence Committee chairman Devin Nunes was talking about when he said Obama officials were monitoring Trump associates after the election.
One intelligence professional with detailed knowledge of how the NSA and other intelligence agencies share information with the White House during transitions told Circa that U.S. intelligence reporting on foreign leaders’ perceptions of Trump spiked after his unexpected election win in November, creating a trove of information that could be accessed by the outgoing White House.
“There’s always intelligence reporting on an incoming president and how the world is reacting but this election was not like others, and that reporting spiked,” the source said. “Whether and how it was used by the Obama team will have to be evaluated separate of the fact that the reporting this time around was richer and more robust because of the circumstances of the election.”
Both the Republican chairman and Democratic vice chairman of the Housing Intelligence Committee have been shown the documents discovered by the NSC over the last 10 days.
The NSA can legally intercept foreigners’ conversations without court permission under Section 702 of the Foreign Intelligence Surveillance Act, but it cannot target Americans’ conversations overseas. If an American is accidentally intercepted or two foreigners are caught talking about an American, that name is supposed to be redacted in intelligence reports and replaced by a description like “U.S. citizen 1.”
But Circa reported last week that Obama opened the door for his political aides like Rice to more easily gain access to unmasked Americans’ names in NSA intercepts through a series of rule changes beginning in 2011.
Obama adviser Ben Rhodes claims Obama didn’t spy on Americans — instantly receives brutal fact check
Chris Enloe Apr 1, 2017 5:45 pm
President Donald Trump took to Twitter early on Saturday to bash NBC News anchor Chuck Todd for reporting on the investigation into alleged collusion between Trump’s campaign and Russia instead of focusing on “Obama surveillance.”
However, Twitter was quick to hit back at Rhodes, given the Obama administration’s record of surveillance — which isn’t the best. Under Obama’s leadership, domestic spying became a key issue after they were caught spying on journalists from the Associated Press and Fox News correspondent James Rosen.
The Obama administration was even forced to weather a massive NSA spying scandal after NSA contractor Edward Snowden leaked thousands of NSA documents, which revealed government collection programs like PRISM.
The extent to which the media reports have responsibly informed the public is disputed. In January 2014, Obama said that “the sensational way in which these disclosures have come out has often shed more heat than light” and critics such as Sean Wilentz have noted that many of the Snowden documents released do not concern domestic surveillance. In its first assessment of these disclosures, the Pentagon concluded that Snowden committed the biggest “theft” of U.S. secrets in the history of the United States. Sir David Omand, a former director of GCHQ, described Snowden’s disclosure as the “most catastrophic loss to British intelligence ever”.
“Taken together, the revelations have brought to light a global surveillance system that cast off many of its historical restraints after the attacks of Sept. 11, 2001. Secret legal authorities empowered the NSA to sweep in the telephone, Internet and location records of whole populations.”
The disclosure revealed specific details of the NSA’s close cooperation with U.S. federal agencies such as the Federal Bureau of Investigation (FBI) and the Central Intelligence Agency (CIA) in addition to the agency’s previously undisclosed financial payments to numerous commercial partners and telecommunications companies, as well as its previously undisclosed relationships with international partners such as Britain, France Germany, and its secret treaties with foreign governments that were recently established for sharing intercepted data of each other’s citizens. The disclosures were made public over the course of several months since June 2013, by the press in several nations from the trove leaked by the former NSA contractor Edward J. Snowden, who obtained the trove while working for Booz Allen Hamilton.
The NSA was also getting data directly from telecommunications companies codenamed Artifice, Lithium, Serenade, SteelKnight, and X. The real identities of the companies behind these codenames were not included in the Snowden document dump because they were protected as Exceptionally Controlled Information which prevents wide circulation even to those (like Snowden) who otherwise have the necessary security clearance.
Although the exact size of Snowden’s disclosure remains unknown, the following estimates have been put up by various government officials:
As a contractor of the NSA, Snowden was granted access to U.S. government documents along with top secret documents of several allied governments, via the exclusive Five Eyes network. Snowden claims that he is currently not in physical possession of any of these documents, after having surrendered all copies to the journalists he met in Hong Kong.
In the aftermath of Snowden’s revelations, The Pentagon concluded that Snowden committed the biggest theft of U.S. secrets in the history of the United States. In Australia, the coalition government described the leaks as the most damaging blow dealt to Australian intelligence in history. Sir David Omand, a former director of GCHQ, described Snowden’s disclosure as the “most catastrophic loss to British intelligence ever”.
In May 2013, Snowden went on temporary leave from his position at the NSA, citing the pretext of receiving treatment for his epilepsy. Towards the end of May, he traveled to Hong Kong. Greenwald, Poitras and the Guardian’s defence and intelligence correspondent Ewen MacAskill flew to Hong Kong to meet Snowden.
After the U.S.-based editor of The Guardian, Janine Gibson, held several meetings in New York City, it was decided that Greenwald, Poitras and the Guardian‘s defence and intelligence correspondent Ewen MacAskill would fly to Hong Kong to meet Snowden. On June 5, in the first media report based on the leaked material,The Guardian exposed a top secret court order showing that the NSA had collected phone records from over 120 million Verizon subscribers. Under the order, the numbers of both parties on a call, as well as the location data, unique identifiers, time of call, and duration of call were handed over to the FBI, which turned over the records to the NSA. According to The Wall Street Journal, the Verizon order is part of a controversial data program, which seeks to stockpile records on all calls made in the U.S., but does not collect information directly from T-Mobile US and Verizon Wireless, in part because of their foreign ownership ties.
On June 6, 2013, the second media disclosure, the revelation of the PRISM surveillance program (which collects the e-mail, voice, text and video chats of foreigners and an unknown number of Americans from Microsoft, Google, Facebook, Yahoo, Apple and other tech giants), was published simultaneously by The Guardian and The Washington Post.
Slide from a 2008 NSA presentation about XKeyscore, showing a worldmap with the locations of XKeyscore servers
From 2001 to 2011, the NSA collected vast amounts of metadata records detailing the email and internet usage of Americans via Stellar Wind, which was later terminated due to operational and resource constraints. It was subsequently replaced by newer surveillance programs such as ShellTrumpet, which “processed its one trillionth metadata record” by the end of December 2012.
The NSA follows specific procedures to target non-U.S. persons and to minimize data collection from U.S. persons. These court-approved policies allow the NSA to:
keep data that could potentially contain details of U.S. persons for up to five years;
retain and make use of “inadvertently acquired” domestic communications if they contain usable intelligence, information on criminal activity, threat of harm to people or property, are encrypted, or are believed to contain any information relevant to cybersecurity;
access the content of communications gathered from “U.S. based machine[s]” or phone numbers in order to establish if targets are located in the U.S., for the purposes of ceasing further surveillance.
According to Boundless Informant, over 97 billion pieces of intelligence were collected over a 30-day period ending in March 2013. Out of all 97 billion sets of information, about 3 billion data sets originated from U.S. computer networks and around 500 million metadata records were collected from German networks.
In August 2013, it was revealed that the Bundesnachrichtendienst (BND) of Germany transfers massive amounts of metadata records to the NSA.
Der Spiegel disclosed that Germany is the most targeted country of the 27 members of the European Union due to the NSA systematic monitoring and storage of Germany’s telephone and Internet connection data. According to the magazine the NSA stores data from around half a billion communications connections in Germany each month. This data includes telephone calls, emails, mobile-phone text messages and chat transcripts.
On June 11, 2013, The Guardian published a snapshot of the NSA’s global map of electronic data collection for the month of March 2013. Known as the Boundless Informant, the program is used by the NSA to track the amount of data being analyzed over a specific period of time. The color scheme ranges from green (least subjected to surveillance) through yellow and orange to red (most surveillance). Outside the Middle East, only China, Germany, India, Kenya, Colombia, the United Kingdom, and the United States are colored orange or yellow
The NSA gained massive amounts of information captured from the monitored data traffic in Europe. For example, in December 2013, the NSA gathered on an average day metadata from some 15 million telephone connections and 10 million Internet datasets. The NSA also monitored the European Commission in Brussels and monitored EU diplomatic Facilities in Washington and at the United Nations by placing bugs in offices as well as infiltrating computer networks.
The U.S. government made as part of its UPSTREAM data collection program deals with companies to ensure that it had access to and hence the capability to surveil undersea fiber-optic cables which deliver e-mails, Web pages, other electronic communications and phone calls from one continent to another at the speed of light.
According to the Brazilian newspaper O Globo, the NSA spied on millions of emails and calls of Brazilian citizens, while Australia and New Zealand have been involved in the joint operation of the NSA’s global analytical system XKeyscore. Among the numerous allied facilities contributing to XKeyscore are four installations in Australia and one in New Zealand:
According to Edward Snowden, the NSA has established secret intelligence partnerships with many Western governments. The Foreign Affairs Directorate (FAD) of the NSA is responsible for these partnerships, which, according to Snowden, are organized such that foreign governments can “insulate their political leaders” from public outrage in the event that these global surveillance partnerships are leaked.
In an interview published by Der Spiegel, Snowden accused the NSA of being “in bed together with the Germans”. The NSA granted the German intelligence agencies BND (foreign intelligence) and BfV (domestic intelligence) access to its controversial XKeyscore system. In return, the BND turned over copies of two systems named Mira4 and Veras, reported to exceed the NSA’s SIGINT capabilities in certain areas. Every day, massive amounts of metadata records are collected by the BND and transferred to the NSA via the Bad Aibling Station near Munich, Germany. In December 2012 alone, the BND handed over 500 million metadata records to the NSA.
In a document dated January 2013, the NSA acknowledged the efforts of the BND to undermine privacy laws:
“The BND has been working to influence the German government to relax interpretation of the privacy laws to provide greater opportunities of intelligence sharing”.
According to an NSA document dated April 2013, Germany has now become the NSA’s “most prolific partner”. Under a section of a separate document leaked by Snowden titled “Success Stories”, the NSA acknowledged the efforts of the German government to expand the BND’s international data sharing with partners:
“The German government modifies its interpretation of the G-10 privacy law … to afford the BND more flexibility in sharing protected information with foreign partners.”
In addition, the German government was well aware of the PRISM surveillance program long before Edward Snowden made details public. According to Angela Merkel’s spokesman Steffen Seibert, there are two separate PRISM programs – one is used by the NSA and the other is used by NATO forces in Afghanistan. The two programs are “not identical”.
The Guardian revealed further details of the NSA’s XKeyscore tool, which allows government analysts to search through vast databases containing emails, online chats and the browsing histories of millions of individuals without prior authorization. Microsoft “developed a surveillance capability to deal” with the interception of encrypted chats on Outlook.com, within five months after the service went into testing. NSA had access to Outlook.com emails because “Prism collects this data prior to encryption.”
In addition, Microsoft worked with the FBI to enable the NSA to gain access to its cloud storage service SkyDrive. An internal NSA document dating from August 3, 2012 described the PRISM surveillance program as a “team sport“.
Even if there is no reason to suspect U.S. citizens of wrongdoing, the CIA‘s National Counterterrorism Center is allowed to examine federal government files for possible criminal behavior. Previously the NTC was barred to do so, unless a person was a terror suspect or related to an investigation.
Snowden also confirmed that Stuxnet was cooperatively developed by the United States and Israel. In a report unrelated to Edward Snowden, the French newspaper Le Monde revealed that France’s DGSE was also undertaking mass surveillance, which it described as “illegal and outside any serious control”.
Telecommunication companies who participated were “forced” to do so and had “no choice in the matter”. Some of the companies were subsequently paid by GCHQ for their participation in the infiltration of the cables.According to the SZ, GCHQ has access to the majority of internet and telephone communications flowing throughout Europe, can listen to phone calls, read emails and text messages, see which websites internet users from all around the world are visiting. It can also retain and analyse nearly the entire European internet traffic.
GCHQ is collecting all data transmitted to and from the United Kingdom and Northern Europe via the undersea fibre optic telecommunications cable SEA-ME-WE 3. The Security and Intelligence Division (SID) of Singapore co-operates with Australia in accessing and sharing communications carried by the SEA-ME-WE-3 cable. The Australian Signals Directorate (ASD) is also in a partnership with British, American and Singaporean intelligence agencies to tap undersea fibre optic telecommunications cables that link Asia, the Middle East and Europe and carry much of Australia’s international phone and internet traffic.
The U.S. runs a top-secret surveillance program known as the Special Collection Service (SCS), which is based in over 80 U.S. consulates and embassies worldwide. The NSA hacked the United Nations’ video conferencing system in Summer 2012 in violation of a UN agreement.
The NSA is not just intercepting the communications of Americans who are in direct contact with foreigners targeted overseas, but also searching the contents of vast amounts of e-mail and text communications into and out of the country by Americans who mention information about foreigners under surveillance. It also spied on the Al Jazeera and gained access to its internal communications systems.
The NSA has built a surveillance network that has the capacity to reach roughly 75% of all U.S. Internet traffic. U.S. Law-enforcement agencies use tools used by computer hackers to gather information on suspects. An internal NSA audit from May 2012 identified 2776 incidents i.e. violations of the rules or court orders for surveillance of Americans and foreign targets in the U.S. in the period from April 2011 through March 2012, while U.S. officials stressed that any mistakes are not intentional.
The FISA Court that is supposed to provide critical oversight of the U.S. government’s vast spying programs has limited ability to do so and it must trust the government to report when it improperly spies on Americans. A legal opinion declassified on August 21, 2013, revealed that the NSA intercepted for three years as many as 56,000 electronic communications a year of Americans not suspected of having links to terrorism, before FISA court that oversees surveillance found the operation unconstitutional in 2011. Under the Corporate Partner Access project, major U.S. telecommunications providers receive hundreds of millions of dollars each year from the NSA. Voluntary cooperation between the NSA and the providers of global communications took off during the 1970s under the cover name BLARNEY.
A letter drafted by the Obama administration specifically to inform Congress of the government’s mass collection of Americans’ telephone communications data was withheld from lawmakers by leaders of the House Intelligence Committee in the months before a key vote affecting the future of the program.
The NSA paid GCHQ over £100 Million between 2009 and 2012, in exchange for these funds GCHQ “must pull its weight and be seen to pull its weight.” Documents referenced in the article explain that the weaker British laws regarding spying are “a selling point” for the NSA. GCHQ is also developing the technology to “exploit any mobile phone at any time.” The NSA has under a legal authority a secret backdoor into its databases gathered from large Internet companies enabling it to search for U.S. citizens’ email and phone calls without a warrant.
The Privacy and Civil Liberties Oversight Board urged the U.S. intelligence chiefs to draft stronger US surveillance guidelines on domestic spying after finding that several of those guidelines have not been updated up to 30 years. U.S. intelligence analysts have deliberately broken rules designed to prevent them from spying on Americans by choosing to ignore so-called “minimisation procedures” aimed at protecting privacy and used the NSA’s agency’s enormous eavesdropping power to spy on love interests.
After the U.S. Foreign Secret Intelligence Court ruled in October 2011 that some of the NSA’s activities were unconstitutional, the agency paid millions of dollars to major internet companies to cover extra costs incurred in their involvement with the PRISM surveillance program.
In 2013, it was further revealed that the NSA had made a £17.2 million financial contribution to the project, which is capable of vacuuming signals from up to 200 fibre-optic cables at all physical points of entry into Great Britain.
The Guardian and The New York Times reported on secret documents leaked by Snowden showing that the NSA has been in “collaboration with technology companies” as part of “an aggressive, multipronged effort” to weaken the encryption used in commercial software, and GCHQ has a team dedicated to cracking “Hotmail, Google, Yahoo and Facebook” traffic.
Germany’s domestic security agency Bundesverfassungsschutz (BfV) systematically transfers the personal data of German residents to the NSA, CIA and seven other members of the United States Intelligence Community, in exchange for information and espionage software. Israel, Sweden and Italy are also cooperating with American and British intelligence agencies. Under a secret treaty codenamed “Lustre“, French intelligence agencies transferred millions of metadata records to the NSA.
The Obama Administration secretly won permission from the Foreign Intelligence Surveillance Court in 2011 to reverse restrictions on the National Security Agency’s use of intercepted phone calls and e-mails, permitting the agency to search deliberately for Americans’ communications in its massive databases. The searches take place under a surveillance program Congress authorized in 2008 under Section 702 of the Foreign Intelligence Surveillance Act. Under that law, the target must be a foreigner “reasonably believed” to be outside the United States, and the court must approve the targeting procedures in an order good for one year. But a warrant for each target would thus no longer be required. That means that communications with Americans could be picked up without a court first determining that there is probable cause that the people they were talking to were terrorists, spies or “foreign powers.” The FISC extended the length of time that the NSA is allowed to retain intercepted U.S. communications from five years to six years with an extension possible for foreign intelligence or counterintelligence purposes. Both measures were done without public debate or any specific authority from Congress.
A special branch of the NSA called “Follow the Money” (FTM) monitors international payments, banking and credit card transactions and later stores the collected data in the NSA’s own financial databank “Tracfin”. The NSA monitored the communications of Brazil’s president Dilma Rousseff and her top aides. The agency also spied on Brazil’s oil firm Petrobras as well as French diplomats, and gained access to the private network of the Ministry of Foreign Affairs of France and the SWIFT network.
In the United States, the NSA uses the analysis of phone call and e-mail logs of American citizens to create sophisticated graphs of their social connections that can identify their associates, their locations at certain times, their traveling companions and other personal information. The NSA routinely shares raw intelligence data with Israel without first sifting it to remove information about U.S. citizens.
In an effort codenamed GENIE, computer specialists can control foreign computer networks using “covert implants,” a form of remotely transmitted malware on tens of thousands of devices annually. As worldwide sales of smartphones began exceeding those of feature phones, the NSA decided to take advantage of the smartphone boom. This is particularly advantageous because the smartphone combines a myriad of data that would interest an intelligence agency, such as social contacts, user behavior, interests, location, photos and credit card numbers and passwords.
An internal NSA report from 2010 stated that the spread of the smartphone has been occurring “extremely rapidly”—developments that “certainly complicate traditional target analysis.” According to the document, the NSA has set up task forces assigned to several smartphone manufacturers and operating systems, including Apple Inc.‘s iPhone and iOS operating system, as well as Google‘s Android mobile operating system. Similarly, Britain’s GCHQ assigned a team to study and crack the BlackBerry.
An NSA presentation called “Your target is using a BlackBerry? Now what?” shows an intercepted Mexican government e-mail.
Under the heading “iPhone capability”, the document notes that there are smaller NSA programs, known as “scripts”, that can perform surveillance on 38 different features of the iOS 3 and iOS 4 operating systems. These include the mapping feature, voicemail and photos, as well as Google Earth, Facebook and Yahoo! Messenger.
On September 9, 2013, an internal NSA presentation on iPhone Location Services was published by Der Spiegel. One slide shows scenes from Apple’s 1984-themed television commercial alongside the words “Who knew in 1984…”; another shows Steve Jobs holding an iPhone, with the text “…that this would be big brother…”; and a third shows happy consumers with their iPhones, completing the question with “…and the zombies would be paying customers?”
On October 4, 2013, The Washington Post and The Guardian jointly reported that the NSA and GCHQ had made repeated attempts to spy on anonymous Internet users who have been communicating in secret via the anonymity network Tor. Several of these surveillance operations involved the implantation of malicious code into the computers of Tor users who visit particular websites. The NSA and GCHQ had partly succeeded in blocking access to the anonymous network, diverting Tor users to insecure channels. The government agencies were also able to uncover the identity of some anonymous Internet users.
The Australian Federal Government knew about the PRISM surveillance program months before Edward Snowden made details public.
The NSA gathered hundreds of millions of contact lists from personal e-mail and instant messaging accounts around the world. The agency did not target individuals. Instead it collected contact lists in large numbers that amount to a sizable fraction of the world’s e-mail and instant messaging accounts. Analysis of that data enables the agency to search for hidden connections and to map relationships within a much smaller universe of foreign intelligence targets.
The NSA monitored the public email account of former Mexican president Felipe Calderón (thus gaining access to the communications of high-ranking cabinet members), the emails of several high-ranking members of Mexico’s security forces and text and the mobile phone communication of current Mexican president Enrique Peña Nieto. The NSA tries to gather cellular and landline phone numbers—often obtained from American diplomats—for as many foreign officials as possible. The contents of the phone calls are stored in computer databases that can regularly be searched using keywords.
The NSA has been monitoring telephone conversations of 35 world leaders. The U.S. government’s first public acknowledgment that it tapped the phones of world leaders was reported on October 28, 2013, by the Wall Street Journal after an internal U.S. government review turned up NSA monitoring of some 35 world leaders.GCHQ has tried to keep its mass surveillance program a secret because it feared a “damaging public debate” on the scale of its activities which could lead to legal challenges against them.
The Guardian revealed that the NSA had been monitoring telephone conversations of 35 world leaders after being given the numbers by an official in another U.S. government department. A confidential memo revealed that the NSA encouraged senior officials in such Departments as the White House, State and The Pentagon, to share their “Rolodexes” so the agency could add the telephone numbers of leading foreign politicians to their surveillance systems. Reacting to the news, German leader Angela Merkel, arriving in Brussels for an EU summit, accused the U.S. of a breach of trust, saying: “We need to have trust in our allies and partners, and this must now be established once again. I repeat that spying among friends is not at all acceptable against anyone, and that goes for every citizen in Germany.” The NSA collected in 2010 data on ordinary Americans’ cellphone locations, but later discontinued it because it had no “operational value.”
The mobile phone of German Chancellor Angela Merkel might have been tapped by U.S. intelligence. According to the Spiegel this monitoring goes back to 2002 and ended in the summer of 2013, while The New York Times reported that Germany has evidence that the NSA’s surveillance of Merkel began during George W. Bush‘s tenure. After learning from Der Spiegel magazine that the NSA has been listening in to her personal mobile phone, Merkel compared the snooping practices of the NSA with those of the Stasi. It was reported in March 2014, by Der Spiegel that Merkel had also been placed on an NSA surveillance list alongside 122 other world leaders.
A highly sensitive signals intelligence collection program known as Stateroom involves the interception of radio, telecommunications and internet traffic. It is operated out of the diplomatic missions of the Five Eyes (Australia, Britain, Canada, New Zealand, United States) in numerous locations around the world. The program conducted at U.S. diplomatic missions is run in concert by the U.S. intelligence agencies NSA and CIA in a joint venture group called “Special Collection Service” (SCS), whose members work undercover in shielded areas of the American Embassies and Consulates, where they are officially accredited as diplomats and as such enjoy special privileges. Under diplomatic protection, they are able to look and listen unhindered. The SCS for example used the American Embassy near the Brandenburg Gate in Berlin to monitor communications in Germany’s government district with its parliament and the seat of the government.
Under the Stateroom surveillance programme, Australia operates clandestine surveillance facilities to intercept phone calls and data across much of Asia.
In France, the NSA targeted people belonging to the worlds of business, politics or French state administration. The NSA monitored and recorded the content of telephone communications and the history of the connections of each target i.e. the metadata. The actual surveillance operation was performed by French intelligence agencies on behalf of the NSA. The cooperation between France and the NSA was confirmed by the Director of the NSA, Keith B. Alexander, who asserted that foreign intelligence services collected phone records in “war zones” and “other areas outside their borders” and provided them to the NSA.
The French newspaper Le Monde also disclosed new PRISM and Upstream slides (See Page 4, 7 and 8) coming from the “PRISM/US-984XN Overview” presentation.
In Spain, the NSA intercepted the telephone conversations, text messages and emails of millions of Spaniards, and spied on members of the Spanish government. Between December 10, 2012 and January 8, 2013, the NSA collected metadata on 60 million telephone calls in Spain.
According to documents leaked by Snowden, the surveillance of Spanish citizens was jointly conducted by the NSA and the intelligence agencies of Spain.
The New York Times reported that the NSA carries out an eavesdropping effort, dubbed Operation Dreadnought, against the Iranian leader Ayatollah Ali Khamenei. During his 2009 visit to Iranian Kurdistan, the agency collaborated with GCHQ and the U.S.’s National Geospatial-Intelligence Agency, collecting radio transmissions between aircraft and airports, examining Khamenei’s convoy with satellite imagery, and enumerating military radar stations. According to the story, an objective of the operation is “communications fingerprinting”: the ability to distinguish Khamenei’s communications from those of other people in Iran.
The same story revealed an operation code-named Ironavenger, in which the NSA intercepted e-mails sent between a country allied with the United States and the government of “an adversary”. The ally was conducting a spear-phishing attack: its e-mails contained malware. The NSA gathered documents and login credentials belonging to the enemy country, along with knowledge of the ally’s capabilities for attacking computers.
According to the British newspaper The Independent, the British intelligence agency GCHQ maintains a listening post on the roof of the British Embassy in Berlin that is capable of intercepting mobile phone calls, wi-fi data and long-distance communications all over the German capital, including adjacent government buildings such as the Reichstag (seat of the German parliament) and the Chancellery (seat of Germany’s head of government) clustered around the Brandenburg Gate.
Operating under the code-name “Quantum Insert”, GCHQ set up a fake website masquerading as LinkedIn, a social website used for professional networking, as part of its efforts to install surveillance software on the computers of the telecommunications operator Belgacom. In addition, the headquarters of the oil cartel OPEC were infiltrated by GCHQ as well as the NSA, which bugged the computers of nine OPEC employees and monitored the General Secretary of OPEC.
For more than three years GCHQ has been using an automated monitoring system code-named “Royal Concierge” to infiltrate the reservation systems of at least 350 upscale hotels in many different parts of the world in order to target, search and analyze reservations to detect diplomats and government officials. First tested in 2010, the aim of the “Royal Concierge” is to track down the travel plans of diplomats, and it is often supplemented with surveillance methods related to human intelligence (HUMINT). Other covert operations include the wiretapping of room telephones and fax machines used in targeted hotels as well as the monitoring of computers hooked up to the hotel network.
Carrying the title “3G impact and update”, a classified presentation leaked by Snowden revealed the attempts of the ASD/DSD to keep up to pace with the rollout of 3G technology in Indonesia and across Southeast Asia. The ASD/DSD motto placed at the bottom of each page reads: “Reveal their secrets—protect our own.”
Under a secret deal approved by British intelligence officials, the NSA has been storing and analyzing the internet and email records of UK citizens since 2007. The NSA also proposed in 2005 a procedure for spying on the citizens of the UK and other Five-Eyes nations alliance, even where the partner government has explicitly denied the U.S. permission to do so. Under the proposal, partner countries must neither be informed about this particular type of surveillance, nor the procedure of doing so.
Towards the end of November, The New York Times released an internal NSA report outlining the agency’s efforts to expand its surveillance abilities. The five-page document asserts that the law of the United States has not kept up with the needs of the NSA to conduct mass surveillance in the “golden age” of signals intelligence, but there are grounds for optimism because, in the NSA’s own words:
“The culture of compliance, which has allowed the American people to entrust NSA with extraordinary authorities, will not be compromised in the face of so many demands, even as we aggressively pursue legal authorities…”
The report, titled “SIGINT Strategy 2012–2016″, also said that the U.S. will try to influence the “global commercial encryption market” through “commercial relationships”, and emphasized the need to “revolutionize” the analysis of its vast data collection to “radically increase operational impact”.
On November 23, 2013, the Dutch newspaper NRC Handelsblad reported that the Netherlands was targeted by U.S. intelligence agencies in the immediate aftermath of World War II. This period of surveillance lasted from 1946 to 1968, and also included the interception of the communications of other European countries including Belgium, France, West Germany and Norway. The Dutch Newspaper also reported that NSA infected more than 50,000 computer networks worldwide, often covertly, with malicious spy software, sometimes in cooperation with local authorities, designed to steal sensitive information.
LARGE CABLE—20 major points of accesses, many of them located within the United States
FORNSAT—an abbreviation for “Foreign Satellite Collection”. It refers to intercepts from satellites that process data used by other countries such as Britain, Norway, Japan, and the Philippines.
According to the classified documents leaked by Snowden, the Australian Signals Directorate (ASD), formerly known as the Defence Signals Directorate, had offered to share intelligence information it had collected with the other intelligence agencies of the UKUSA Agreement. Data shared with foreign countries include “bulk, unselected, unminimised metadata” it had collected. The ASD provided such information on the condition that no Australian citizens were targeted. At the time the ASD assessed that “unintentional collection [of metadata of Australian nationals] is not viewed as a significant issue”. If a target was later identified as being an Australian national, the ASD was required to be contacted to ensure that a warrant could be sought. Consideration was given as to whether “medical, legal or religious information” would be automatically treated differently to other types of data, however a decision was made that each agency would make such determinations on a case-by-case basis. Leaked material does not specify where the ASD had collected the intelligence information from, however Section 7(a) of the Intelligence Services Act 2001 (Commonwealth) states that the ASD’s role is “…to obtain intelligence about the capabilities, intentions or activities of people or organisations outside Australia…”. As such, it is possible ASD’s metadata intelligence holdings was focused on foreign intelligence collection and was within the bounds of Australian law.
The Washington Post revealed that the NSA has been tracking the locations of mobile phones from all over the world by tapping into the cables that connect mobile networks globally and that serve U.S. cellphones as well as foreign ones. In the process of doing so, the NSA collects more than five billion records of phone locations on a daily basis. This enables NSA analysts to map cellphone owners’ relationships by correlating their patterns of movement over time with thousands or millions of other phone users who cross their paths.
The Washington Post also reported that both GCHQ and the NSA make use of location data and advertising tracking files generated through normal internet browsing (with cookies operated by Google, known as “Pref”) to pinpoint targets for government hacking and to bolster surveillance.
The Norwegian Intelligence Service (NIS), which cooperates with the NSA, has gained access to Russian targets in the Kola Peninsula and other civilian targets. In general, the NIS provides information to the NSA about “Politicians”, “Energy” and “Armament”. A top secret memo of the NSA lists the following years as milestones of the Norway–United States of America SIGINT agreement, or NORUS Agreement:
1952 – Informal starting year of cooperation between the NIS and the NSA
The NSA considers the NIS to be one of its most reliable partners. Both agencies also cooperate to crack the encryption systems of mutual targets. According to the NSA, Norway has made no objections to its requests from the NIS.
On December 5, Sveriges Television reported the National Defence Radio Establishment (FRA) has been conducting a clandestine surveillance operation in Sweden, targeting the internal politics of Russia. The operation was conducted on behalf of the NSA, receiving data handed over to it by the FRA. The Swedish-American surveillance operation also targeted Russian energy interests as well as the Baltic states. As part of the UKUSA Agreement, a secret treaty was signed in 1954 by Sweden with the United States, the United Kingdom, Canada, Australia and New Zealand, regarding collaboration and intelligence sharing.
As a result of Snowden’s disclosures, the notion of Swedish neutrality in international politics was called into question. In an internal document dating from the year 2006, the NSA acknowledged that its “relationship” with Sweden is “protected at the TOP SECRET level because of that nation’s political neutrality.” Specific details of Sweden’s cooperation with members of the UKUSA Agreement include:
The FRA has been granted access to XKeyscore, an analytical database of the NSA.
Since January 2013, a counterterrorism analyst of the NSA has been stationed in the Swedish capital of Stockholm
The NSA, GCHQ and the FRA signed an agreement in 2004 that allows the FRA to directly collaborate with the NSA without having to consult GCHQ. About five years later, the Riksdag passed a controversial legislative change, briefly allowing the FRA to monitor both wireless and cable bound signals passing the Swedish border without a court order, while also introducing several provisions designed to protect the privacy of individuals, according to the original proposal. This legislation was amended 11 months later, in an effort to strengthen protection of privacy by making court orders a requirement, and by imposing several limits on the intelligence-gathering.
During the 2010 G-20 Toronto summit, the U.S. embassy in Ottawa was transformed into a security command post during a six-day spying operation that was conducted by the NSA and closely coordinated with the Communications Security Establishment Canada (CSEC). The goal of the spying operation was, among others, to obtain information on international development, banking reform, and to counter trade protectionism to support “U.S. policy goals.” On behalf of the NSA, the CSEC has set up covert spying posts in 20 countries around the world.
The NSA has cracked the most commonly used cellphone encryption technology, A5/1. According to a classified document leaked by Snowden, the agency can “process encrypted A5/1” even when it has not acquired an encryption key. In addition, the NSA uses various types of cellphone infrastructure, such as the links between carrier networks, to determine the location of a cellphone user tracked by Visitor Location Registers.
US district court judge for the District of Columbia, Richard Leon, declared on December 16, 2013, that the mass collection of metadata of Americans’ telephone records by the National Security Agency probably violates the fourth amendment prohibition of unreasonable searches and seizures. Leon granted the request for a preliminary injunction that blocks the collection of phone data for two private plaintiffs (Larry Klayman, a conservative lawyer, and Charles Strange, father of a cryptologist killed in Afghanistan when his helicopter was shot down in 2011) and ordered the government to destroy any of their records that have been gathered. But the judge stayed action on his ruling pending a government appeal, recognizing in his 68-page opinion the “significant national security interests at stake in this case and the novelty of the constitutional issues.”
However federal judge William H. Pauley III in New York City ruled the U.S. government’s global telephone data-gathering system is needed to thwart potential terrorist attacks, and that it can only work if everyone’s calls are swept in. U.S. District Judge Pauley also ruled that Congress legally set up the program and that it does not violate anyone’s constitutional rights. The judge also concluded that the telephone data being swept up by NSA did not belong to telephone users, but to the telephone companies. He further ruled that when NSA obtains such data from the telephone companies, and then probes into it to find links between callers and potential terrorists, this further use of the data was not even a search under the Fourth Amendment. He also concluded that the controlling precedent is Smith v. Maryland: “Smith’s bedrock holding is that an individual has no legitimate expectation of privacy in information provided to third parties,” Judge Pauley wrote. The American Civil Liberties Union declared on January 2, 2012 that it will appeal Judge Pauley’s ruling that NSA bulk the phone record collection is legal. “The government has a legitimate interest in tracking the associations of suspected terrorists, but tracking those associations does not require the government to subject every citizen to permanent surveillance,” deputy ACLU legal director Jameel Jaffer said in a statement.
In recent years, American and British intelligence agencies conducted surveillance on more than 1,100 targets, including the office of an Israeli prime minister, heads of international aid organizations, foreign energy companies and a European Union official involved in antitrust battles with American technology businesses.
The Tailored Access Operations (TAO) division of the NSA intercepted the shipping deliveries of computers and laptops in order to install spyware and physical implants on electronic gadgets. This was done in close cooperation with the FBI and the CIA. NSA officials responded to the Spiegel reports with a statement, which said: “Tailored Access Operations is a unique national asset that is on the front lines of enabling NSA to defend the nation and its allies. [TAO’s] work is centred on computer network exploitation in support of foreign intelligence collection.”
On December 4, 2013, The Washington Post released an internal NSA chart illustrating the extent of the agency’s mass collection of mobile phone location records, which amounts to about five billion on a daily basis. The records are stored in a huge database known as FASCIA, which received over 27 terabytes of location data within seven months.
The NSA is working to build a powerful quantum computer capable of breaking all types of encryption. The effort is part of a US$79.7 million research program known as “Penetrating Hard Targets”. It involves extensive research carried out in large, shielded rooms known as Faraday cages, which are designed to prevent electromagnetic radiation from entering or leaving. Currently, the NSA is close to producing basic building blocks that will allow the agency to gain “complete quantum control on two semiconductorqubits“. Once a quantum computer is successfully built, it would enable the NSA to unlock the encryption that protects data held by banks, credit card companies, retailers, brokerages, governments and health care providers.
According to The New York Times, the NSA is monitoring approximately 100,000 computers worldwide with spy software named Quantum. Quantum enables the NSA to conduct surveillance on those computers on the one hand, and can also create a digital highway for launching cyberattacks on the other hand. Among the targets are the Chinese and Russian military, but also trade institutions within the European Union. The NYT also reported that the NSA can access and alter computers which are not connected with the internet by a secret technology in use by the NSA since 2008. The prerequisite is the physical insertion of the radio frequency hardware by a spy, a manufacturer or an unwitting user. The technology relies on a covert channel of radio waves that can be transmitted from tiny circuit boards and USB cards inserted surreptitiously into the computers. In some cases, they are sent to a briefcase-size relay station that intelligence agencies can set up miles away from the target. The technology can also transmit malware back to the infected computer.
Channel 4 and The Guardian revealed the existence of Dishfire, a massive database of the NSA that collects hundreds of millions of text messages on a daily basis. GCHQ has been given full access to the database, which it uses to obtain personal information of Britons by exploiting a legal loophole.
Each day, the database receives and stores the following amounts of data:
Geolocation data of more than 76,000 text messages and other travel information
About 200 million text messages from around the world
The database is supplemented with an analytical tool known as the Prefer program, which processes SMS messages to extract other types of information including contacts from missed call alerts.
The Privacy and Civil Liberties Oversight Board report on mass surveillance was released on January 23, 2014. It recommends to end the bulk telephone metadata, i.e., bulk phone records – phone numbers dialed, call times and durations, but not call content collection – collection program, to create a “Special Advocate” to be involved in some cases before the FISA court judge and to release future and past FISC decisions “that involve novel interpretations of FISA or other significant questions of law, technology or compliance.”
According to a joint disclosure by The New York Times, The Guardian, and ProPublica, the NSA and GCHQ have begun working together to collect and store data from dozens of smartphoneapplication software by 2007 at the latest. A 2008 GCHQ report, leaked by Snowden asserts that “anyone using Google Maps on a smartphone is working in support of a GCHQ system”. The NSA and GCHQ have traded recipes for various purposes such as grabbing location data and journey plans that are made when a target uses Google Maps, and vacuuming up address books, buddy lists, phone logs and geographic data embedded in photos posted on the mobile versions of numerous social networks such as Facebook, Flickr, LinkedIn, Twitter and other services. In a separate 20-page report dated 2012, GCHQ cited the popular smartphone game “Angry Birds” as an example of how an application could be used to extract user data. Taken together, such forms of data collection would allow the agencies to collect vital information about a user’s life, including his or her home country, current location (through geolocation), age, gender, ZIP code, marital status, income, ethnicity, sexual orientation, education level, number of children, etc.
A GCHQ document dated August 2012 provided details of the Squeaky Dolphin surveillance program, which enables GCHQ to conduct broad, real-time monitoring of various social media features and social media traffic such as YouTube video views, the Like button on Facebook, and Blogspot/Blogger visits without the knowledge or consent of the companies providing those social media features. The agency’s “Squeaky Dolphin” program can collect, analyze and utilize YouTube, Facebook and Blogger data in specific situations in real time for analysis purposes. The program also collects the addresses from the billions of videos watched daily as well as some user information for analysis purposes.
The Communications Security Establishment Canada (CSEC) has been tracking Canadian air passengers via free Wi-Fi services at a major Canadian airport. Passengers who exited the airport terminal continued to be tracked as they showed up at other Wi-Fi locations across Canada. In a CSEC document dated May 2012, the agency described how it had gained access to two communications systems with over 300,000 users in order to pinpoint a specific imaginary target. The operation was executed on behalf of the NSA as a trial run to test a new technology capable of tracking down “any target that makes occasional forays into other cities/regions.” This technology was subsequently shared with Canada’s Five Eyes partners – Australia, New Zealand, Britain, and the United States.
On January 27, 2014, The New York Times released an internal NSA document from a 2010 meeting that details the extent of the agency’s surveillance on smartphones. Data collected include phone settings, network connections, Web browsing history, buddy lists, downloaded documents, encryption usage, and user agents. Notice the following line of text at the bottom – “TOP SECRET//COMINT//REL TO USA, FVEY” – which is used to indicated that this top secret document is related to communications intelligence (COMINT), and can be accessed by the USA and its Five Eyes (FVEY) partners in Australia, Britain, Canada, and New Zealand
According to research by Süddeutsche Zeitung and TV network NDR the mobile phone of former German chancellor Gerhard Schröder was monitored from 2002 onwards, reportedly because of his government’s opposition to military intervention in Iraq. The source of the latest information is a document leaked by Edward Snowden. The document, containing information about the National Sigint Requirement List (NSRL), had previously been interpreted as referring only to Angela Merkel‘s mobile. However Süddeutsche Zeitung and NDR claim to have confirmation from NSA insiders that the surveillance authorisation pertains not to the individual, but the political post – which in 2002 was still held by Schröder. According to research by the two media outlets, Schröder was placed as number 388 on the list, which contains the names of persons and institutions to be put under surveillance by the NSA.
The NSA Section 215 bulk telephony metadata program which seeks to stockpile records on all calls made in the U.S. is collecting less than 30 percent of all Americans’ call records because of an inability to keep pace with the explosion in cellphone use according to the Washington Post. The controversial program permits the NSA after a warrant granted by the secret Foreign Intelligence Surveillance Court to record numbers, length and location of every call from the participating carriers.
The Intercept reported that the U.S. government is using primarily NSA surveillance to target people for drone strikes overseas. In its report The Intercept author detail the flawed methods which are used to locate targets for lethal drone strikes, resulting in the deaths of innocent people. According to the Washington Post NSA analysts and collectors i.e. NSA personnel which controls electronic surveillance equipment use the NSA’s sophisticated surveillance capabilities to track individual targets geographically and in real time, while drones and tactical units aimed their weaponry against those targets to take them out.
An unnamed US law firm, reported to be Mayer Brown, was targeted by Australia’s ASD. According to Snowden’s documents, the ASD had offered to hand over these intercepted communications to the NSA. This allowed government authorities to be “able to continue to cover the talks, providing highly useful intelligence for interested US customers”.
NSA and GCHQ documents revealed that the anti-secrecy organization WikiLeaks and other activist groups were targeted for government surveillance and criminal prosecution. In particular, the IP addresses of visitors to WikiLeaks were collected in real time, and the US government urged its allies to file criminal charges against the founder of WikiLeaks, Julian Assange, due to his organization’s publication of the Afghanistan war logs. The WikiLeaks organization was designated as a “malicious foreign actor”.
Quoting an unnamed NSA official in Germany, Bild am Sonntag reported that whilst President Obama’s order to stop spying on Merkel was being obeyed, the focus had shifted to bugging other leading government and business figures including Interior Minister Thomas de Maiziere, a close confidant of Merkel. Caitlin Hayden, a security adviser to President Obama, was quoted in the newspaper report as saying, “The US has made clear it gathers intelligence in exactly the same way as any other states.”
The Intercept reveals that government agencies are infiltrating online communities and engaging in “false flag operations” to discredit targets among them people who have nothing to do with terrorism or national security threats. The two main tactics that are currently used are the injection of all sorts of false material onto the internet in order to destroy the reputation of its targets; and the use of social sciences and other techniques to manipulate online discourse and activism to generate outcomes it considers desirable.
The Guardian reported that Britain’s surveillance agency GCHQ, with aid from the National Security Agency, intercepted and stored the webcam images of millions of internet users not suspected of wrongdoing. The surveillance program codenamed Optic Nerve collected still images of Yahoo webcam chats (one image every five minutes) in bulk and saved them to agency databases. The agency discovered “that a surprising number of people use webcam conversations to show intimate parts of their body to the other person”, estimating that between 3% and 11% of the Yahoo webcam imagery harvested by GCHQ contains “undesirable nudity”.
The NSA has built an infrastructure which enables it to covertly hack into computers on a mass scale by using automated systems that reduce the level of human oversight in the process. The NSA relies on an automated system codenamed TURBINE which in essence enables the automated management and control of a large network of implants (a form of remotely transmitted malware on selected individual computer devices or in bulk on tens of thousands of devices). As quoted by The Intercept, TURBINE is designed to “allow the current implant network to scale to large size (millions of implants) by creating a system that does automated control implants by groups instead of individually.” The NSA has shared many of its files on the use of implants with its counterparts in the so-called Five Eyes surveillance alliance – the United Kingdom, Canada, New Zealand, and Australia.
Among other things due to TURBINE and its control over the implants the NSA is capable of:
breaking into targeted computers and to siphoning out data from foreign Internet and phone networks
infecting a target’s computer and exfiltrating files from a hard drive
covertly recording audio from a computer’s microphone and taking snapshots with its webcam
launching cyberattacks by corrupting and disrupting file downloads or denying access to websites
exfiltrating data from removable flash drives that connect to an infected computer
The TURBINE implants are linked to, and relies upon, a large network of clandestine surveillance “sensors” that the NSA has installed at locations across the world, including the agency’s headquarters in Maryland and eavesdropping bases used by the agency in Misawa, Japan and Menwith Hill, England. Codenamed as TURMOIL, the sensors operate as a sort of high-tech surveillance dragnet, monitoring packets of data as they are sent across the Internet. When TURBINE implants exfiltrate data from infected computer systems, the TURMOIL sensors automatically identify the data and return it to the NSA for analysis. And when targets are communicating, the TURMOIL system can be used to send alerts or “tips” to TURBINE, enabling the initiation of a malware attack. To identify surveillance targets, the NSA uses a series of data “selectors” as they flow across Internet cables. These selectors can include email addresses, IP addresses, or the unique “cookies” containing a username or other identifying information that are sent to a user’s computer by websites such as Google, Facebook, Hotmail, Yahoo, and Twitter, unique Google advertising cookies that track browsing habits, unique encryption key fingerprints that can be traced to a specific user, and computer IDs that are sent across the Internet when a Windows computer crashes or updates.
The CIA was accused by U.S. Senate Intelligence Committee Chairwoman Dianne Feinstein of spying on a stand-alone computer network established for the committee in its investigation of allegations of CIA abuse in a George W. Bush-era detention and interrogation program.
A voice interception program codenamed MYSTIC began in 2009. Along with RETRO, short for “retrospective retrieval” (RETRO is voice audio recording buffer that allows retrieval of captured content up to 30 days into the past), the MYSTIC program is capable of recording “100 percent” of a foreign country’s telephone calls, enabling the NSA to rewind and review conversations up to 30 days and the relating metadata. With the capability to store up to 30 days of recorded conversations MYSTIC enables the NSA to pull an instant history of the person’s movements, associates and plans.
On March 21, Le Monde published slides from an internal presentation of the Communications Security Establishment Canada, which attributed a piece of malicious software to French intelligence. The CSEC presentation concluded that the list of malware victims matched French intelligence priorities and found French cultural reference in the malware’s code, including the name Babar, a popular French children’s character, and the developer name “Titi”.
The French telecommunications corporation Orange S.A. shares its call data with the French intelligence agency DGSE, which hands over the intercepted data to GCHQ.
The NSA has spied on the Chinese technology company Huawei. Huawei is a leading manufacturer of smartphones, tablets, mobile phone infrastructure, and WLAN routers and installs fiber optic cable. According to Der Spiegel this “kind of technology […] is decisive in the NSA’s battle for data supremacy.” The NSA, in an operation named “Shotgiant”, was able to access Huawei’s email archive and the source code for Huawei’s communications products. The US government has had longstanding concerns that Huawei may not be independent of the People’s Liberation Army and that the Chinese government might use equipment manufactured by Huawei to conduct cyberespionage or cyberwarfare. The goals of the NSA operation were to assess the relationship between Huawei and the PLA, to learn more the Chinese government’s plans and to use information from Huawei to spy on Huawei’s customers, including Iran, Afghanistan, Pakistan, Kenya, and Cuba. Former Chinese President Hu Jintao, the Chinese Trade Ministry, banks, as well as telecommunications companies were also targeted by the NSA.
The Intercept published a document of an NSA employee discussing how to build a database of IP addresses, webmail, and Facebook accounts associated with system administrators so that the NSA can gain access to the networks and systems they administer.
At the end of March 2014, Der Spiegel and The Intercept published, based on a series of classified files from the archive provided to reporters by NSA whistleblower Edward Snowden, articles related to espionage efforts by GCHQ and NSA in Germany. The British GCHQ targeted three German internet firms for information about Internet traffic passing through internet exchange points, important customers of the German internet providers, their technology suppliers as well as future technical trends in their business sector and company employees. The NSA was granted by the Foreign Intelligence Surveillance Court the authority for blanket surveillance of Germany, its people and institutions, regardless whether those affected are suspected of having committed an offense or not, without an individualized court order specifying on March 7, 2013. In addition Germany’s chancellor Angela Merkel was listed in a surveillance search machine and database named Nymrod along with 121 others foreign leaders. As The Intercept wrote: “The NSA uses the Nymrod system to ‘find information relating to targets that would otherwise be tough to track down,’ according to internal NSA documents. Nymrod sifts through secret reports based on intercepted communications as well as full transcripts of faxes, phone calls, and communications collected from computer systems. More than 300 ‘cites’ for Merkel are listed as available in intelligence reports and transcripts for NSA operatives to read.”
Towards the end of April, Edward Snowden said that the United States surveillance agencies spy on Americans more than anyone else in the world, contrary to anything that has been said by the government up until this point.
An article published by Ars Technica shows NSA’s Tailored Access Operations (TAO) employees intercepting a Cisco router.
The Intercept and WikiLeaks revealed information about which countries were having their communications collected as part of the MYSTIC surveillance program. On May 19, The Intercept reported that the NSA is recording and archiving nearly every cell phone conversation in the Bahamas with a system called SOMALGET, a subprogram of MYSTIC. The mass surveillance has been occurring without the Bahamian government’s permission. Aside from the Bahamas, The Intercept reported NSA interception of cell phone metadata in Kenya, the Philippines, Mexico and a fifth country it did not name due to “credible concerns that doing so could lead to increased violence.” WikiLeaks released a statement on May 23 claiming that Afghanistan was the unnamed nation.
In a statement responding to the revelations, the NSA said “the implication that NSA’s foreign intelligence collection is arbitrary and unconstrained is false.”
Through its global surveillance operations the NSA exploits the flood of images included in emails, text messages, social media, videoconferences and other communications to harvest millions of images. These images are then used by the NSA in sophisticated facial recognition programs to track suspected terrorists and other intelligence targets.
Vodafone revealed that there were secret wires that allowed government agencies direct access to their networks. This access does not require warrants and the direct access wire is often equipment in a locked room. In six countries where Vodafone operates, the law requires telecommunication companies to install such access or allows governments to do so. Vodafone did not name these countries in case some governments retaliated by imprisoning their staff.Shami Chakrabarti of Liberty said “For governments to access phone calls at the flick of a switch is unprecedented and terrifying. Snowden revealed the internet was already treated as fair game. Bluster that all is well is wearing pretty thin – our analogue laws need a digital overhaul.” Vodafone published its first Law Enforcement Disclosure Report on June 6, 2014. Vodafone group privacy officer Stephen Deadman said “These pipes exist, the direct access model exists. We are making a call to end direct access as a means of government agencies obtaining people’s communication data. Without an official warrant, there is no external visibility. If we receive a demand we can push back against the agency. The fact that a government has to issue a piece of paper is an important constraint on how powers are used.” Gus Hosein, director of Privacy International said “I never thought the telcos would be so complicit. It’s a brave step by Vodafone and hopefully the other telcos will become more brave with disclosure, but what we need is for them to be braver about fighting back against the illegal requests and the laws themselves.”
Above-top-secret documentation of a covert surveillance program named Overseas Processing Centre 1 (OPC-1) (codenamed “CIRCUIT”) by GCHQ was published by The Register. Based on documents leaked by Edward Snowden, GCHQ taps into undersea fiber optic cables via secret spy bases near the Strait of Hormuz and Yemen. BT and Vodafone are implicated.
The Danish newspaper Dagbladet Information and The Intercept revealed on June 19, 2014, the NSA mass surveillance program codenamed RAMPART-A. Under RAMPART-A, ‘third party’ countries tap into fiber optic cables carrying the majority of the world’s electronic communications and are secretly allowing the NSA to install surveillance equipment on these fiber-optic cables. The foreign partners of the NSA turn massive amounts of data like the content of phone calls, faxes, e-mails, internet chats, data from virtual private networks, and calls made using Voice over IP software like Skype over to the NSA. In return these partners receive access to the NSA’s sophisticated surveillance equipment so that they too can spy on the mass of data that flows in and out of their territory. Among the partners participating in the NSA mass surveillance program are Denmark and Germany.
Former NSA official and whistleblower William Binney spoke at a Centre for Investigative Journalism conference in London. According to Binney, “at least 80% of all audio calls, not just metadata, are recorded and stored in the US. The NSA lies about what it stores.” He also stated that the majority of fiber optic cables run through the U.S., which “is no accident and allows the US to view all communication coming in.”
The Washington Post released a review of a cache provided by Snowden containing roughly 160,000 text messages and e-mails intercepted by the NSA between 2009 and 2012. The newspaper concluded that nine out of ten account holders whose conversations were recorded by the agency “were not the intended surveillance targets but were caught in a net the agency had cast for somebody else.” In its analysis, The Post also noted that many of the account holders were Americans.
On July 9, a soldier working within Germany’s Federal Ministry of Defence (BMVg) fell under suspicion of spying for the United States. As a result of the July 4 case and this one, the German government expelled the CIA station chief in Germany on July 17.
On July 18, former State Department official John Tye released an editorial in The Washington Post, highlighting concerns over data collection under Executive Order 12333. Tye’s concerns are rooted in classified material he had access to through the State Department, though he has not publicly released any classified materials.
The Intercept reported that the NSA is “secretly providing data to nearly two dozen U.S. government agencies with a ‘Google-like’ search engine” called ICREACH. The database, The Intercept reported, is accessible to domestic law enforcement agencies including the FBI and the Drug Enforcement Administration and was built to contain more than 850 billion metadata records about phone calls, emails, cellphone locations, and text messages.
Based on documents obtained from Snowden, The Intercept reported that the NSA and GCHQ had broken into the internal computer network of Gemalto and stolen the encryption keys that are used in SIM cards no later than 2010. As of 2015, the company is the world’s largest manufacturer of SIM cards, making about two billion cards a year. With the keys, the intelligence agencies could eavesdrop on cell phones without the knowledge of mobile phone operators or foreign governments.
In January 2015, the DEA revealed that it had been collecting metadata records for all telephone calls made by Americans to 116 countries linked to drug trafficking. The DEA’s program was separate from the telephony metadata programs run by the NSA. In April, USA Today reported that the DEA’s data collection program began in 1992 and included all telephone calls between the United States and from Canada and Mexico. Current and former DEA officials described the program as the precursor of the NSA’s similar programs. The DEA said its program was suspended in September 2013, after a review of the NSA’s programs and that it was “ultimately terminated.”
This section needs expansion. You can help by adding to it. (January 2016)
Prime Minister David Cameron warned journalists that “if they don’t demonstrate some social responsibility it will be very difficult for government to stand back and not to act.”Deputy Prime MinisterNick Clegg emphasized that the media should “absolutely defend the principle of secrecy for the intelligence agencies”.
Foreign Secretary William Hague claimed that “we take great care to balance individual privacy with our duty to safeguard the public and UK national security.” Hague defended the Five Eyes alliance and reiterated that the British-U.S. intelligence relationship must not be endangered because it “saved many lives”.
Former Prime Minister Tony Abbott stated that “every Australian governmental agency, every Australian official at home and abroad, operates in accordance with the law”. Abbott criticized the Australian Broadcasting Corporation for being unpatriotic due to its reporting on the documents provided by Snowden, whom Abbott described as a “traitor”. Foreign Minister Julie Bishop also denounced Snowden as a traitor and accused him of “unprecedented” treachery. Bishop defended the Five Eyes alliance and reiterated that the Australian–U.S. intelligence relationship must not be endangered because it “saves lives”.
Lawyers and judges protest boundless monitoring at PRISM debate in Germany, 18 November 2013
In July 2013, Chancellor Angela Merkel defended the surveillance practices of the NSA, and described the United States as “our truest ally throughout the decades”. After the NSA’s surveillance on Merkel was revealed, however, the Chancellor compared the NSA with the Stasi. According to The Guardian, Berlin is using the controversy over NSA spying as leverage to enter the exclusive Five Eyes alliance.
Interior Minister Hans-Peter Friedrich stated that “the Americans take our data privacy concerns seriously.” Testifying before the German Parliament, Friedrich defended the NSA’s surveillance, and cited five terrorist plots on German soil that were prevented because of the NSA. However, in April 2014, another German interior minister criticized the United States for failing to provide sufficient assurances to Germany that it had reined in its spying tactics. Thomas de Maiziere, a close ally of Merkel, told Der Spiegel: “U.S. intelligence methods may be justified to a large extent by security needs, but the tactics are excessive and over-the-top.”
Interior Minister Ronald Plasterk apologized for incorrectly claiming that the NSA had collected 1.8 million records of metadata in the Netherlands. Plasterk acknowledged that it was in fact Dutch intelligence services who collected the records and transferred them to the NSA.
The Danish Prime Minister Helle Thorning-Schmidt has praised the American intelligence agencies, claiming they have prevented terrorist attacks in Denmark, and expressed her personal belief that the Danish people “should be grateful” for the Americans’ surveillance. She has later claimed that the Danish authorities have no basis for assuming that American intelligence agencies have performed illegal spying activities towards Denmark or Danish interests.
Review of intelligence agencies
In July 2013, the German government announced an extensive review of Germany’s intelligence services.
In August 2013, the U.S. government announced an extensive review of U.S. intelligence services.
In October 2013, the British government announced an extensive review of British intelligence services.
In December 2013, the Canadian government announced an extensive review of Canada’s intelligence services.
In January 2014, U.S. President Barack Obama said that “the sensational way in which these disclosures have come out has often shed more heat than light” and critics such as Sean Wilentz claimed that “the NSA has acted far more responsibly than the claims made by the leakers and publicized by the press.” In Wilentz’ view “The leakers have gone far beyond justifiably blowing the whistle on abusive programs. In addition to their alarmism about [U.S.] domestic surveillance, many of the Snowden documents released thus far have had nothing whatsoever to do with domestic surveillance.”Edward Lucas, former Moscow bureau chief for The Economist, agreed, asserting that “Snowden’s revelations neatly and suspiciously fits the interests of one country: Russia” and citing Masha Gessen‘s statement that “The Russian propaganda machine has not gotten this much mileage out of a US citizen since Angela Davis‘s murder trial in 1971.”
Bob Cesca objected to The New York Times failing to redact the name of an NSA employee and the specific location where an al Qaeda group was being targeted in a series of slides the paper made publicly available.
Russian journalist Andrei Soldatov argued that Snowden’s revelations had had negative consequences for internet freedom in Russia, as Russian authorities increased their own surveillance and regulation on the pretext of protecting the privacy of Russian users. Snowden’s name was invoked by Russian legislators who supported measures forcing platforms such as Google, Facebook, Twitter and Gmail and YouTube to locate their servers on Russian soil or install SORM black boxes on their servers so that Russian authorities could control them. Soldatov also contended that as a result of the disclosures, international support for having national governments take over the powers of the organizations involved in coordinating the Internet’s global architectures had grown, which could lead to a Balkanization of the Internet that restricted free access to information. The Montevideo Statement on the Future of Internet Cooperation issued in October 2013, by ICANN and other organizations warned against “Internet fragmentation at a national level” and expressed “strong concern over the undermining of the trust and confidence of Internet users globally due to recent revelations”.
In late 2014, Freedom House said “[s]ome states are using the revelations of widespread surveillance by the U.S. National Security Agency (NSA) as an excuse to augment their own monitoring capabilities, frequently with little or no oversight, and often aimed at the political opposition and human rights activists.”
Newly elected chairman of the Democratic National Committee Tom Perez became unhinged during an event in New Jersey on Friday, where he claimed that President Donald Trump “didn’t win” last year’s presidential election.
During a short speech at an event hosted by the New Jersey Working Families Alliance in Newark on Friday, Perez hailed Democratic opposition to the Republican plan to replace Obamacare and declared that although Jan. 20 — the day Trump became president — was historic, Jan. 21 was even more important because that’s the day “the resistance took over,” while lauding protesters across the nation.
“They marched all over the world and said, “Donald Trump, you don’t stand for our values…Donald Trump you didn’t win the election,’” Perez claimed.
Later in his speech, Perez bashed Trump for “wanting his name on everything,” citing Trump Tower and “Trump steaks,” but noted that when it came to the GOP health care repeal plan, Trump didn’t want to put his name on it.
That’s when Perez made an unbelievable claim.
“Republicans don’t give a sh*t about people,” he said when talking about the GOP health care plan. “That’s what it’s about.”
Perez’s comment incited a thunderous applause and cheers from the crowd.
Prior to being elected DNC chairman earlier this year, Perez served as the labor secretary under former President Barack Obama.
TheBlaze has reached out to the DNC for comment and will update if we receive a response.
Tom Perez won’t apologize for insulting Trump and GOP leaders. Here’s why.
By David WeigelApril 2 at 6:17 PM
On Friday, Democratic National Committee Chairman Tom Perez told activists in New Jersey that their protests were hitting the Trump administration where it hurt. He pointed to Jan. 21, the day of the Women’s March, as the start of a resistance that had been more effective than critics ever expected.
“Women marched all over the world and said: Donald Trump, you don’t stand for our values!” Perez said. “That’s what they said. Donald Trump, you didn’t win this election!” If anyone didn’t want to hear this, Perez had an answer: “I don’t care, because they don’t give a s— about people.”
Hours later, the conservative Daily Caller posted clips of Perez’s remarks for a story that was shared on Facebook more than 18,000 times. Ronna Romney McDaniel, the new chair of the Republican National Committee, demanded an apology for the “dangerous” remarks, snarking that Perez “needs a lesson on how the electoral college works.”
But Perez did not apologize. On Saturday, in Texas, he said exactly the same thing. In an email, Perez spokeswoman Xochitl Hinojosa explained that the DNC chair was not going to stop belittling Trump’s victory.
“Tom has not only pointed out that the Russians interfered in this election to help Donald Trump get elected, but Hillary Clinton won the popular vote by nearly 3 million people,” Hinojosa said. “Since before Trump stepped foot in the Oval Office, his divisive and destructive views had already been rejected by a vast majority of the American people.”
Perez’s speeches, which made news on conservative websites all weekend, reflected the tonal shift — perhaps a permanent one — that Democrats have undergone since their 2016 defeat. Covering Perez’s campaign for DNC chair, I saw firsthand how the affable former labor secretary grew more and more aggressive in the ways he mocked and decried the Trump administration.
That sometimes involved four-letter words. At a speech in Detroit, Perez said Trump graduated from “Makin’ S— Up University,” and at several live-streamed candidate forums, he described the administration’s executive orders on labor rules as “bulls—t.” The New Jersey and Texas speeches were the latest in a string of fiery Perez open mics; they were just the first to cross the radar of conservative media.
Democrats don’t mind the attention. Their new, harsher tone came after Clinton and the entire Democratic Party tried, and failed, to brand Trump as too crude to serve in the White House. As a post-election study by the Wesleyan Media Project found, Clinton’s ad campaign was historically negative and light on policy, with 90 percent of its TV commercials focusing on Trump’s personality. The upshot of those ads was that a President Trump would embarrass Americans. In “Role Models,” viewers saw bewildered children watch Trump on TV as he shoots off insults.
In “Captain Khan,” a well-made ad that dazzled pundits, the father of a Muslim U.S. soldier who had been killed in action in Iraq reflected on how Trump’s insults and threat to ban Muslims from entering the United States made him feel unwelcome in a country he now calls home.
We can cut to the chase: These ads did not work. Compelling, and designed in part to keep educated suburbanites in Clinton’s camp, they were predicated on the theory that voters would see Trump as unacceptable and overcome doubts to vote for the Democrat. In key states, even though majorities of voters viewed Trump unfavorably, pluralities picked him anyway.
The long tail of that experience is that progressives stopped caring about the tone of politics. They felt that Clinton, by failing to strip the bark off Trump’s record and policies, had blown an advantage with voters who saw her as more qualified to be president. In the moment, Michelle Obama’s saying that “when they go low, we go high” mirrored what progressives felt about the campaign. As soon as Clinton lost, it felt like a giant strategic error. (And it never took into account the rumors, fed in conservative media for decades, that Clinton was a foul-mouthed tyrant when the cameras were off.)
Clinton’s approach was summed up in the second presidential debate, which Trump entered at a serious disadvantage, bleeding support after the release of the “Access Hollywood” tape in which he bragged about sexually assaulting a woman. Trump’s solution: bring four women who had accused Bill Clinton of sexual assault to the debate and deflect a question about his own scandal by attacking his opponent’s husband.
Hillary Clinton responded by invoking Trump’s insults.
When I hear something like that, I am reminded of what my friend Michelle Obama advised us all. When they go low, you go high. And, look, if this were just about one video, maybe what he is saying tonight would be understandable. But everyone can draw their own conclusions at this point about whether or not the man in the video or the man on the stage respects women. But he never apologizes for anything to anyone. He never apologized to Mr. And Mrs. Khan, the Gold Star family whose son, Captain Khan, died in the line of duty in Iraq, and Donald insulted and attacked them for weeks over their religion. He never apologized to the distinguished federal judge who was born in Indiana, but Donald said he couldn’t be trusted to be a judge because his parents were “Mexican.” He never apologized to the reporter that he mimicked and mocked on national television and our children were watching. And he never apologized for the racist lie that President Obama was not born in the United States of America. He owes the president an apology and he owes our country an apology and he needs to take responsibility for his actions and his words.
Again, in the moment, this was exactly what Democrats wanted to hear — and what they thought voters wanted to hear. It was inconceivable that the man who perpetuated the “birther” lie could take the presidency. But since then, they’ve seen Trump get away with plenty more insults. More important, they’ve reflected on how Clinton made her response personal, instead of tying Trump to the Republican Party and its policies. And one result was watching Trump take the White House.
This has not just curdled political rhetoric in general; it has emboldened Democrats to make fun of the increasingly unpopular president, and to portray Republicans as dishonest and heartless. One might argue that they’ve always said that about Republicans, but again, the Clinton campaign tried to “go high” about this stuff. In her August 2016 speech condemning the “alt-right,” Clinton noted that House Speaker Paul D. Ryan (R-Wis.) had condemned Trump’s insult of the judge handling his university fraud case and attacked Stephen K. Bannon for his criticism of Ryan’s “social-justice Catholicism.”
Clinton’s reward? Ryan would demand that she fire Catholic staffers whose conversation criticizing right-wing elements in the church was stolen by hackers and released by WikiLeaks. In my coverage of the left, Clinton’s occasional attempts to separate Trump from the broader, “reasonable” Republican Party are remembered as massive strategic errors.
Perez, who endorsed Clinton for president, has more or less embraced that view. Asked whether he would apologize for the “give a s—” line, Hinojosa said Perez stood by his comment completely.
“Tom Perez has said repeatedly, including in New Jersey, that Republican leaders like Donald Trump, Paul Ryan and others in Congress have shown us that they don’t care about the American people, especially when it comes to providing families with affordable health insurance,” she said in the email. “The Republican health-care bill would have taken away coverage from 24 million people, imposed an age tax, and made Americans pay more money for less care. Republicans are making it harder to save for retirement, and one of the first acts under President Trump was to make it harder for homebuyers to afford a mortgage. These actions and many others are further proof that Republican leaders in Washington don’t care about the American people and are only looking out for their wealthy friends.”
There were fewer four-letter words in that statement, but it’s part of a continuum of Trump-era Democratic rhetoric. In 2016, the party learned that voters really did not mind if a candidate was rough or profane. It cost a few voters; to more, it came across as toughness. Democrats no longer shame voters for putting up with Trump’s rhetoric. They portray him as a phony who didn’t earn his victory and is betraying the voters who trusted him. They don’t know if this will work. But they’re sure as s— going to try.
Story 1: Two Party Interference In Health Care Insurance Industry With Federal Regulation and Taxation Is A Big Government Failure — Time for New Independent Constitutional Limited Government Party — Bring Back Free Market Competition For Health Care Insurance — Lower Premiums and Deductibles and More Choice of Plans With National Competition — Leave The American People and Business Alone! — Videos —
Gohmert: ObamaCare Replacement Bill Was ‘Based on a Lie’
WATCH LIVE Speaker Paul Ryan speaks after House pulls ‘Obamacare’ repeal bill before Friday’s planning
President Trump Speaks After Pulling Healthcare Bill plan 3/24/17 3/24/2017 video
Mark Levin interviews Sen. Mike Lee about the upcoming vote on Obamacare replacement (March 22 2017)
RAND PAUL REACTS TO THE GOP HEALTHCARE BILL GETTING PULLED
Mike Lee Says GOP Healthcare Bill will Fail. Rebuts Paul Ryan, Bigtime
Trump tastes failure as U.S. House healthcare bill collapses
By David Lawder and Steve Holland
ReutersMarch 25, 2017
By David Lawder and Steve Holland
WASHINGTON (Reuters) – President Donald Trump suffered a stunning political setback on Friday in a Congress controlled by his own party when Republican leaders pulled legislation to overhaul the U.S. healthcare system, a major 2016 election campaign promise of the president and his allies.
House of Representatives leaders yanked the bill after a rebellion by Republican moderates and the party’s most conservative lawmakers left them short of votes, ensuring that Trump’s first major legislative initiative since taking office on Jan. 20 ended in failure. Democrats were unified against it.
House Republicans had planned a vote on the measure after Trump late on Thursday cut off negotiations with Republicans who had balked at the plan and issued an ultimatum to vote on Friday, win or lose. But desperate lobbying by the White House and Republican House Speaker Paul Ryan was unable to round up the 216 votes needed for passage.
“We learned a lot about loyalty. We learned a lot about the vote-getting process,” Trump told reporters at the White House, although he sought to shift the blame to the Democrats even though his party controls the White House, the House and the Senate.
With Friday’s legislative collapse, Democratic former President Barack Obama’s signature domestic policy achievement, the 2010 Affordable Care Act – known as Obamacare – remains in place despite seven years of Republican promises to dismantle it.
The healthcare failure called into question not only Trump’s ability to get other key parts of his agenda, including tax cuts and a boost in infrastructure spending, through Congress, but the Republican Party’s capacity to govern effectively.
Neither Trump nor Ryan indicated any plans to try to tackle healthcare legislation again anytime soon. Trump said he would turn his attention to getting “big tax cuts” through Congress, another tricky proposition.
Republican supporters said the legislation would achieve their goal of rolling back the government’s “nanny state” role in healthcare. The White House made undoing Obamacare its top priority when Trump took office two months ago.
But the White House and House leaders were unable to come up with a plan that satisfied the clashing interests of moderates and conservatives, despite Trump’s vaunted image as a deal maker.
Amid a chaotic scramble for votes, Ryan, who championed the bill, met with Trump at the White House. Ryan said he recommended that it be withdrawn from the House floor because he did not have the votes to pass it, and Trump agreed.
“We were just probably anywhere from 10 to 15 votes short,” Trump said. “With no Democrat support we couldn’t quite get there.”
Senate Democratic leader Chuck Schumer said the bill failed “because of two traits that have plagued the Trump presidency since he took office: incompetence and broken promises.”
Democrats said the bill would take away medical insurance from millions of Americans and leave the more-than-$3 trillion U.S. healthcare system in disarray.
And some moderate Republicans opposed the bill because of worries that millions of America would be hurt.
“There were things in this bill that I didn’t particularly like,” Trump added, without specifying what those were, but expressed confidence in Ryan’s leadership.
“Perhaps the best thing that could happen is exactly what happened today, because we’ll end up with a truly great healthcare bill in the future after this mess known as Obamacare explodes,” said Trump, who had posted multiple tweets throughout March proclaiming that “Obamacare is imploding” and repeatedly saying that Republicans were coming together to pass the bill.
Friday’s events cast doubt on whether Ryan can get major legislation approved by fractious Republican lawmakers.
“I will not sugarcoat this. This is a disappointing day for us. Doing big things is hard,” Ryan said at a news conference, adding that his fellow Republicans are experiencing what he called “growing pains” transitioning from an opposition party to a governing party.
“Obamacare’s the law of the land,” Ryan added. “We’re going to be living with Obamacare for the foreseeable future.”
Members of the Freedom Caucus, the House’s most conservative members, were instrumental in the bill’s failure, opposing it among other reasons because they considered parts too similar to Obamacare.
Trump said he was disappointed and “a little surprised” with the Freedom Caucus opposition.
The nonpartisan Congressional Budget Office said under the Republican legislation 14 million people would lose medical coverage by next year and more than 24 million would be uninsured in 2026.
News that the bill had been pulled before a final vote was greeted initially with a small sigh of relief by U.S. equity investors, who earlier in the week had been fretful that an outright defeat would damage Trump’s other priorities, such as tax cuts and infrastructure spending.
Benchmark U.S. stock market indexes ended the session mixed after rallying back from session lows following the news. The S&P 500 Index ended fractionally lower, the blue chip Dow Jones Industrial Average slipped about 0.3 percent and the Nasdaq Composite Index rose about 0.2 percent.
Shares of hospital operators finished sharply higher, with the S&P healthcare facilities index up 2.7 percent, while the S&P 500 healthcare sector edged down 0.03 percent. The dollar strengthened modestly on the news, and U.S. Treasury bond yields edged up from session lows.
Trump said he would be “totally open” to working with Democrats on healthcare “when they all become civilized.” House Democratic leader Nancy Pelosi said working to lower prescription drug prices was one area of possible cooperation with Republicans.
Republican Representative Dana Rohrabacher said before the bill was pulled that voting it down would be “neutering Trump” while empowering his opponents.
“You don’t cut the balls off a bull and then expect that he can go out and get the job done,” Rohrabacher told Reuters. “This will emasculate Trump and we can’t do that. … If we bring this down now, Trump will have lost all of his leverage to pass whatever bill it is, whether it’s the tax bill or whatever reforms that he wants.”
Representative Joe Barton of Texas, when asked why his fellow Republicans were so united over the past seven years to dump Obamacare only to fall apart when they actually do something about it, said, “Sometimes you’re playing fantasy football and sometimes you’re in the real game.”
Obamacare boosted the number of Americans with health insurance through mandates on individuals and employers, and income-based subsidies. About 20 million Americans gained insurance coverage through the law.
The House plan would have rescinded a range of taxes created by Obamacare, ended a penalty on people who refuse to obtain health insurance, and ended Obamacare’s income-based subsidies to help people buy insurance while creating less-generous age-based tax credits
It also would have ended Obamacare’s expansion of the Medicaid state-federal insurance program for the poor, cut future federal Medicaid funding and let states impose work requirements on some Medicaid recipients.
House leaders agreed to a series of last-minute changes to try to win over disgruntled conservatives, including ending the Obamacare requirement that insurers cover certain “essential benefits” such as maternity care, mental health services and prescription drug coverage.
Failure on health bill also hurts prospects for tax overhaul
FILE – In this Feb. 22, 2017, file photo photo, Treasury Secretary Steven Mnuchin listens at right… Read more
WASHINGTON (AP) — House Republicans’ failure to repeal Barack Obama’s health care law deals a serious blow to another big part of President Donald Trump’s agenda: tax reform.
Trump and House Speaker Paul Ryan, R-Wis., say they will soon turn their attention to the first major re-write of the tax code in more than 30 years. But they will have to do it without the momentum of victory on health care.
Just as important, the loss on health care will deprive Republicans of $1 trillion in tax cuts.
The GOP health plan would have repealed nearly $1 trillion in taxes enacted under Obama’s Affordable Care Act. The bill coupled the tax cuts with spending cuts for Medicaid, so it wouldn’t add to the budget deficit.
Without the spending cuts, it will be much harder for Republicans to cut taxes without adding to the federal government’s red ink.
“Yes this does make tax reform more difficult,” said Ryan. “But it does not in any way make it impossible.”
“That just means the Obamacare taxes stay with Obamacare. We’re going to go fix the rest of the tax code,” he added.
House Republicans couldn’t round up enough votes Friday to repeal and replace a law they despise, raising questions about their ability to tackle other tough issues.
“Doing big things is hard,” Ryan conceded as he vowed to press on.
Rep. Jodey Arrington, R-Texas, acknowledged that Friday’s turn of events made him doubtful about the Republicans’ ability to tackle major legislation.
“This was my first big vote and our first big initiative in the line of things to come like tax reform,” said the freshman. “I think this would have given us tremendous momentum and I think this hurts that momentum.”
Rep. Mike Kelly, R-Pa., said, “You always build on your last accomplishment.”
Nevertheless, Treasury Secretary Steven Mnuchin said Friday the administration plans to turn quickly to tax reform with the goal of getting an overhaul approved by Congress by August.
“Health care is a very complicated issue,” Mnuchin said. “In a way, tax reform is a lot simpler.”
Don’t tell that to House Republicans who have been struggling with the issue for years.
The general goal for Republicans is to lower income tax rates for individuals and corporations, and make up the lost revenue by reducing exemptions, deductions and credits.
Overhauling the tax code is hard because every tax break has a constituency. And the biggest tax breaks are among the most popular.
For example, nearly 34 million families claimed the mortgage interest deduction in 2016, reducing their tax bills by $65 billion.
Also, more than 43 million families deducted their state and local income, sales and personal property taxes from their federal taxable income last year. The deduction reduced their federal tax bills by nearly $70 billion.
Mnuchin said he had been overseeing work on the administration’s tax bill for the past two months. He said it would be introduced soon.
Mnuchin said the White House plan would cut individual and corporate tax rates, though he didn’t offer specifics.
House Republicans have released a blueprint that outlines their goals for a tax overhaul. It would lower the top individual income tax rate from 39.6 percent to 33 percent, and reduce the number of tax brackets from seven to three.
The House plan retains the mortgage interest deduction but repeals the deduction for state and local taxes.
On the corporate side, the plan would repeal the 35 percent corporate income tax and replace it with a 20 percent tax on profits from selling imports and domestically produced goods and services consumed in the U.S.
Exports would be exempt from the new tax, called a border adjustment tax.
The new tax has drawn opposition from Republicans in the Senate. Mnuchin would not reveal whether the administration will include the border adjustment tax in the White House proposal. He was speaking at a public interview event with the news site Axios.
Republicans often complained that they couldn’t do a tax overhaul when Obama was president. Now, Republicans control the House, the Senate and the White House, and they see a great opportunity.
They plan to use a complicated Senate rule that would prevent Democrats from blocking the bill. But there’s a catch: Under the rule, the package cannot add to long-term budget deficits.
That means every tax cut has to be offset by a similar tax increase or a spending cut. That’s why the loss on health care was so damaging to the effort to overhaul taxes.
Ryan made this case to fellow House Republicans in his failed effort to gain support for the health plan.
“That was part of the calculation of why we had to take care of health care first,” said Rep. Tom Reed, R-N.Y.
Associated Press writers Kevin Freking and Martin Crutsinger contributed to this report.
Mike Lee: Senate parliamentarian told me it’s possible to push harder on repealing Obamacare regulations
By PHILIP KLEIN(@PHILIPAKLEIN)•3/22/17 5:18 PM
Sen. Mike Lee, R-Utah, said on Wednesday that the Senate parliamentarian has told him that it may be possible for Republicans to push harder on repealing Obamacare’s regulations than the current House bill, which contradicts the assertion by House leadership that the legislation goes after Obamacare as aggressively as possible under Senate rules.
“What I understood her to be saying is that there’s no reason why an Obamacare repeal bill necessarily could not have provisions repealing the health insurance regulations,” Lee said in an interview with the Washington Examiner, relating a conversation with parliamentarian Elizabeth MacDonough about reconciliation he had on Tuesday.
Lee also said that the parliamentarian told him it wasn’t until very recently, after the unveiling of the House bill, that any Republican even asked her about the possibility of repealing regulations with a simple majority.
With a House vote currently expected on Thursday, Republican leadership is scrambling for votes, trying to stave off a backlash from conservatives that could sink the bill. One of the issues conservatives have raised is that the House bill leaves most of the regulations in place, thus not combatting one of the main complaints about Obamacare – its skyrocketing premiums and limited choice.
Because Republicans don’t have 60 Senate seats to kill a filibuster, they have to pass a healthcare bill through a procedure known as reconciliation, which allows the majority party to pass legislation with a simple majority, assuming it meets a certain set of requirements, including that all provisions be primarily budgetary in nature.
Conservatives such as Lee have argued that Republicans should fight harder to argue that the regulations, which have a clear budgetary impact, can be passed through reconciliation. But House leadership and supporters of the bill have countered that the legislation already goes as far as possible. House Speaker Paul Ryan spokeswoman AshLee Strong, when asked about this by the WashingtonExaminer last week, said “We’ve worked closely with the Senate to carefully craft the bill to repeal and replace the law to the full extent allowed under the rules.”
But having met with the parliamentarian, who plays a key role in advising the presiding officer of the Senate over what’s in bounds during reconciliation, Lee is more convinced than ever that this is not true.
“One of the things we’ve been told over and over again is the bill was no more aggressive than it has been… in part because of Senate rules,” Lee said. “And the Senate rules are something those defending the bill have repeatedly pointed to in defense of why they wrote it the way they wrote it. The parliamentarian said, there’s not necessarily any reason that would categorically preclude you from doing more, both on the repeal front and the replacement front, all sorts of things are possible.”
He continued, “What matters is how it’s done, how it’s written up. There are ways it’s written up that perhaps make it not subject to passage through reconciliation, but there are other ways you could write it that might make it work.”
On his radio show Wednesday evening, Conservative Review Editor-in-Chief Mark Levin interviewed Senator Mike Lee, R-Utah, about a recent conversation the lawmaker had with the Senate parliamentarian. The discussion: whether or not Obamacare’s regulations could be repealed via reconciliation, which only needs a simply majority to pass.
As previously reported by the Washington Examiner, Lee says that he was told by the parliamentarian (who interprets the rules of the Senate) that, despite claims from House leadership, the current “repeal and replace” legislation could do much more to undo Obamacare’s harmful mandates — if so desired.
“I honestly believe that the Republican establishment does not want to repeal the entirety of Obamacare,” Levin said. “I think you have Republican governors … who like the expanded Medicaid, so they’ve already sold out. There’s a lot of that going on.”
As it stands now, the current RINOcare version would repeal several taxes and mandates, but it leaves in place the major regulations that are the primary drivers of America’s skyrocketing health insurance premiums. One of the major reasons that these have been left in place, GOP leaders have said, is that the Byrd Rule in the Senate would prohibit them from repealing them in a budget bill.
But this doesn’t appear to be the case, Sen. Mike Lee says, who says he found out in his meeting with the parliamentarian that nobody from leadership so much as asked how much of Obamacare could be gutted in the budget process.
“She pointed out that it’s not necessarily true what we’ve been told [by leadership],” Lee said.
“I think this is very distressing,” Sen. Lee concluded. “Because a whole lot of congressmen have been told a whole lot of times that this is the best we can do under the Senate’s reconciliation rules. And it’s not true.”
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